Statute A tells you to solve Problem X one way. Statute B tells you solve Problem X a completely different way. How to reconcile these two conflicting mandates? The Federal Circuit encountered this exact problem in 2018, and in response to its holding, the VA has now issued a class deviation to reflect its decision, confirming that the Rule of Two has priority over the AbilityOne Procurement List.

In PDS Consultants, Inc. v. United States, 907 F.3d 1345 (Fed. Cir. 2018),  which we discussed previously on the blog, the court found that the Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. § 8127 (the “VA Act”), requires the VA to undertake a Rule of Two analysis before awarding a contract to another entity. If two or more veteran-owned small businesses can do the job for a fair and reasonable price, then the VA must give preference to VOSBs.

The problem? The Javits-Wagner-O’Day Act of 1938, 41 U.S.C. § 8504 (“JWOD”) requires all government agencies – including the VA — to procure products and services from an approved nonprofit agency for the blind or significantly disabled before awarding a contract to another entity if the product or service is on the list managed by the Committee for Purchase from People Who Are Blind or Severely Disabled, known as the AbilityOne list, or provided by Federal Prison Industries, Inc.

The Federal Circuit decided the case using textbook principles of statutory interpretation: when two statutes conflict, the more specific statute prevails. Because the VA Act applies only to the VA, it is more specific and controls over the JWOD, which is more general because it applies to all federal agencies.

In response to the PDS Consultants decision, the VA issued it class deviation on May 20, 2019. The class deviation closely mirrors the holding of PDS Consultants: contracting officers must apply the rule of two before awarding contracts to AbilityOne non-profits.

Until now, the VAAR’s policies “state[d] that supplies and services on the AbilityOne Procurement List and supplies provided by Federal Prison Industries, Inc.” must be sought from these sources first, even before turning to VOSBs. Effectively, the deviation finally ensures that the VA turns to “Veterans First” by applying the Rule of Two before looking to other procurement avenues, in accordance with the VA’s longstanding policy.  

This deviation will be in effect until the VA updates its regulations to entrench this priority rule into the standard regulations. If you have any questions about the deviation, the Rule of Two, or any impact either may have on your business, contact Koprince Law.

*This blog post was preliminarily researched and drafted by Koprince Law’s excellent new Law Clerk, Ariel Rhines. Ariel began her work with Koprince Law this May.  Ariel is a rising 3rd year law student at the University of Kansas School of Law in Lawrence, Kansas, where she is the Managing Editor of the Kansas Journal of Law & Public Policy and Legal Intern to the Spencer Museum of Art. In her free time, Ariel enjoys wrangling her three-toed Rottweiler, Maximus (who is a lap dog at heart). Welcome to SmallGovCon, Ariel!

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