Supreme Court of the United States

Kingdomware Technologies, Inc., Petitioner v. United States

June 16, 2016579 U.S. 162

Summary

The Supreme Court held that 38 U.S.C. § 8127(d) — the 'Rule of Two' — unambiguously requires the Department of Veterans Affairs to restrict competition to veteran-owned small businesses in all contracting determinations, including orders placed under the Federal Supply Schedule, and not merely to the extent necessary to meet annual contracting goals. Before reaching the merits, the Court sustained jurisdiction under the capable-of-repetition-yet-evading-review exception because the short-term procurements were fully performed before litigation could conclude and the same dispute was likely to recur between the same parties. The Court rejected the Federal Circuit's goals-limited reading, declined to defer to the agency's contrary rulemaking preamble, reversed, and remanded.

Holding

  • Mootness and jurisdiction. The case is not moot: the capable-of-repetition-yet-evading-review exception applies because the protested procurements were fully performed within roughly two years — too short to complete judicial review — and there is a reasonable expectation that the Department will again bypass the Rule of Two for the same kind of services and that Kingdomware will bid on and be awarded such contracts.
  • Mandatory character of the Rule of Two. Section 8127(d) unambiguously requires the Department to apply the Rule of Two before contracting with a non-veteran-owned business; the word 'shall' imposes a mandatory duty to restrict competition to veteran-owned small businesses whenever the Rule of Two is satisfied, except as provided in subsections (b) and (c).
  • Effect of the prefatory goals clause. The prefatory clause 'for purposes of meeting the goals under subsection (a)' does not render the Rule of Two applicable only until the Department meets its annual goals; the clause announces an objective and charges the Secretary with setting annual benchmarks but does not alter the plain meaning of the operative clause in § 8127(d).
  • Federal Supply Schedule orders as contracts. An order placed under the Federal Supply Schedule is a 'contract' within the meaning of § 8127(d): placing the order creates mutually binding obligations — the contractor must furnish the goods or services and the Government must pay — and therefore creates a new contract subject to the Rule of Two.
  • Deference to the agency's interpretation. No Chevron deference is owed to the Department's interpretation that FSS orders fall outside § 8127(d); even assuming arguendo that the preamble to the agency's rulemaking could receive such deference, deference is inappropriate where the statute is unambiguous.

Docket 14-916

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