Erica L. Bakies is an associate in the Government Contracts & Procurement Policy and the International Trade Practice Groups at K&L Gates LLP in Washington, D.C.
Well-settled principles of federal procurement law require agencies to engage in full and open competition, unless a specific exception applies.1 One such exception, dubbed the “Rule of Two,” applies to the Department of Veterans Affairs (VA) in particular.2 The Rule of Two requires the VA’s contracting officers to analyze whether they have a reasonable expectation that two or more veteran-owned small businesses (VOSBs) will submit proposals at reasonable and fair prices in response to the solicitation.3 On the one hand, if the contracting officer determines that she does have such an expectation, then she is required to set aside the procurement exclusively for competition by veteran-owned businesses.4 On the other hand, if the contracting officer determines that she does not have such an expectation, then she may issue the solicitation on an unrestricted basis using full and open competitive procedures.5
The Rule of Two can be onerous in that if, in contrast to her reasonable expectation, the contracting officer does not receive adequate competition in response to a solicitation set aside for VOSBs, then the contracting officer must cancel and reissue the solicitation on an unrestricted basis.6 Not only must the contracting officer expend time and resources conducting her Rule of Two analysis, but ultimate cancellation of the solicitation further delays the award of the contract and the VA’s ability to procure much needed goods and services.
In response to continued disruption and costs associated with cancelling solicitations that failed to receive adequate competition by small businesses, the VA appears to be increasing its use of an evaluation methodology that the Small Business Administration (SBA) and the U.S. Department of Housing and Urban Development (HUD) developed two decades ago, called a “cascading” or “tiered”7 evaluation.8 Instead of issuing a solicitation set aside exclusively for small business concerns, cascading evaluations establish “tiers” of different socioeconomic types of small businesses.9 For example, the first tier could include all service-disabled veteran-owned small businesses (SDVOSBs), the second tier could include all VOSBs, the third tier could include all other types of small businesses, and the final tier could include all other-than-small businesses.10 If an agency received insufficient competition at a particular tier, then the evaluation “cascades” down to the next tier.11 This process would continue until the evaluation reaches the last tier, that is, large business concerns.12 Because the final-tier evaluation considers proposals from large business concerns, the VA would not have to cancel and reissue the solicitation in the face of insufficient competition from small business concerns.
While cascading evaluations clearly allow the VA to save time and money, it is not clear that the VA has the statutory authority to use this particular evaluation methodology.13 This article endeavors to review and analyze the Competition in Contracting Act of 1984 (CICA) and its exceptions to determine whether the VA has authority to use cascading evaluations in its procurements. Part II of this article provides background on CICA’s permitted exceptions to the requirement to employ full and open competition as well as the regulations applying those exceptions. Part III discusses the origin of cascading evaluations and their current utilization among agencies and, in particular, the VA. Part IV analyzes whether cascading evaluations meet the requirements outlined in CICA’s exceptions and their corresponding regulations. Additionally, Part V identifies a potential alternative evaluation methodology to cascading evaluations that is consistent with CICA’s exceptions and their associated regulations. Finally, Part VI concludes that, based on the analysis provided for in the article, the VA likely does not have the statutory authority necessary to permit its contracting officers to include cascading evaluations in solicitations.
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