The Supreme Court decided Thursday that the Department of Veterans Affairs must set aside more contracts to be filled by veteran-owned small businesses.
The court was unanimous that the department has not fulfilled its obligation to steer more business to small companies owned by veterans or service-disabled veterans simply by meeting its annual goal.
The decision is likely to help more veteran-owned businesses compete for the billions of dollars in contracts the department awards.
The court was considering a law passed by Congress — and then amplified after the legislation failed to produce enough results — to give preference to small businesses owned by veterans. It came up with a “Rule of Two.”
That means that competition for contracts should be limited to veteran-owned small businesses when the contracting officer concludes that at least two such businesses would bid on the contract and “the award can be made at a fair and reasonable price that offers best value to the United States.”
A company called Kingdomware Technologies charged that department officials ignored that mandate when they bought a service that sent emergency information to personnel at four medical centers.
The Court of Federal Claims dismissed the suit, and a divided panel of the U.S. Court of Appeals for the Federal Circuit affirmed the decision. The judges did not read the law as requiring the department to use the Rule of Two for all contracts; the judges said this was mandated only to the extent necessary to meet the goal of awarding 12 percent of contracts to veteran-owned businesses.
But Justice Clarence Thomas, writing for the court, said that was wrong. The law says the department shall award contracts to the veteran businesses under the Rule of Two process, Thomas wrote.
“Unlike the word ‘may,’ which implies discretion, the word ‘shall’ usually connotes a requirement,” Thomas wrote.
That directive does not change just because the department meets its goal, the court decided.
“The court’s ruling means that more veterans will have the opportunities that Congress wanted them to have to build their business through competition before the VA,” Luke McLoughlin, who filed briefs on behalf of veteran-owned business associations, said in a statement.
The case is Kingdomware Technologies v. U.S.
Thomas also wrote the court’s unanimous decision in another case involving business and the government. The court’s ruling gave something to both sides in interpreting the False Claims Act, which imposes penalties on those who defraud the government.
On one hand, the court vacated and sent back for further review a decision by an appeals court that the parents of Yarushka Rivera could sue Universal Health Services under the False Claims Act for services provided her though Medicaid.
But in a move that pleased plaintiffs, the court also settled a dispute in the lower courts by saying that omissions count the same as outright misrepresentations in imposing liability under the act.
“Half-truths — representations that state the truth only so far as it goes, while omitting critical qualifying information — can be actionable misrepresentations,” Thomas said.
Rivera died at 19 after she suffered a seizure at a mental health facility in Massachusetts. Her mother and stepfather, Carmen Correa and Julio Escobar, charged that supervision was minimal at the facility and that employees were not licensed to perform the duties that were represented in the payment forms submitted for reimbursement.
For instance, they charged, the teenager’s medicine was prescribed by a nurse, not a doctor.
The parents still have a chance to pursue their lawsuit, Thomas said, but lower courts must consider whether the alleged misrepresentations were “material” to the government’s decision to pay the claim. He said lower courts should apply a “demanding” standard.
Correa and Escobar may have met that standard, Thomas said. They “have alleged that Universal Health misrepresented its compliance with mental health facility requirements that are so central to the provision of mental health counseling that the Medicaid program would not have paid these claims had it known of these violations,” he wrote.
But he said that is for lower courts to resolve.
The case is Universal Health Services v. United States ex rel. Escobar.