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VA Tiered Evaluation: Loophole or Solution to Kingdomware?

For veteran-owned small businesses (“VOSBs”) that hold a Federal Supply Schedule (“FSS”), the 2016 Supreme Court Kingdomware decision was supposed to be a major coup against the VA. The Supreme Court reversed a lower court decision to hold that the “Rule of Two” is mandatory – when it comes to orders off the FSS, contracting officers are required to set them aside for VOSBs if, after conducting market research, they have a “reasonable expectation that two or more. . . VOSBS. . . will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.” 38 U.S.C. 8127(d). The VA utilizes the hierarchy set forth at VAAR Subpart 819.70, which entails first attempting to set aside a contract for SDVOSBs, then for VOSBs, then small businesses, and finally, other-than-small businesses.

And what is “market research?” According to a July 2016 policy memorandum that was issued to implement Kingdomware, contracting officers must:

  • Search the VetBiz VIP database by NAICS code.
  • Determine if two or more SDVOSBs/VOSBs are listed by the NAICS code.
  • Determine if these identified SDVOSBs/VOSBs are capable of performing the work and likely to submit an offer/quote at a fair and reasonable price that offers the best value to the government.

Ever since the Kingdomware decision came down, VOSBs have been complaining that the VA has not been following it. On the VA’s end, the complaint is that it can’t get a “fair and reasonable price” by setting aside solicitations for VOSBs and SDVOSBs.

Now, the VA’s solution is tiered evaluation, which it presented at the National Veteran Small Business Engagement in December and expounded upon in a June 20 town hall presentation held by Tom Leney, the executive director of the VA’s Office of Small & Disadvantaged Business Utilization.

As explained by Mr. Leney, tiered evaluation is used to ensure that the VA receives a “fair and reasonable price” and to prevent the time and expense of re-soliciting a contract (due to not receiving two or more offers from SDVOSBs or VOSBs, or receiving a fair and reasonable price).

There are three different types of tiered evaluation, all of which utilize the same process for evaluating offers: the VA will open competition to all categories identified (noting that it is utilizing tiered evaluation), and consider offers by order of preference, moving down to the next tier if it is unable to make an award at a fair and reasonable price:

  • Tiered evaluations limited to SDVOSBs and VOSBs.
  • Tiered evaluations limited to SDVOSBs, VOSBs, and small businesses.
  • Tiered evaluations including large business concerns.

This makes sense, to a degree. If the VA is encountering trouble making an award at a “fair and reasonable price,” it saves the VA time and effort to use tiered evaluation. However, as Mr. Leney pointed out, whether a price is “fair and reasonable” is determined by comparing it to the Independent Government Cost Estimate (“IGCE”). Okay fine, but what about that IGCE? What if it’s out of date? What if the scope of work has changed? What if it’s two percent less than the price offered by an SDVOSB? Can the VA make the award? What about three percent? Where are the guidelines for evaluating prices compared with the IGCE? If the veteran companies’ prices are one percent higher than the IGCE, can the VA use tiered evaluation to justify making the award to a small business or a large business instead?

Mr. Leney also noted that if found that the IGCE is not realistic, the VA could then cancel the solicitation. However, there was no information provided as to how the VA would make that determination or the path forward.

If the intent and effect is truly to prevent re-solicitations due to the VA setting aside work to SDVOSBs and VOSBs but ultimately not being able to make the award, great. But right now, tiered evaluation is concerning because of the lack of firm guidance or parameters for the VA to follow. And without firm guidance or parameters, the worry is that tiered evaluation is more of a loophole than a solution.

What do you think?

Like this cake, VA tiered evaluation has four layers: SDVOSB, VOSB, small, and other-than-small.

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