VA SDVOSB Sole Source Contract & Rule of TwoThere is a lot of confusion among small businesses when applying Service Disabled Veteran Owned Small Business SDVOSB sole source and VA Rule of Two Small Business rules versus SDVOSB set aside requirements. As a result, there are many unsuccessful bid protests filed on this matter.

SVOSB Sole Source Contracts

 Generally, an agency contracting officer can award an SDVOSB sole source contract if:

  • If the requirement is not exempted from SDVOSB contracting and cannot be set-aside.
  • He does not have a reasonable expectation that at least two responsible SDVOSB ‘s will submit offers.
  • The anticipated award price of the contract, including options, will not exceed:
    • $5.0 M for manufacturing requirements
    • $3.0 M for all other requirements
    • Award can be made at a fair market price.

Congressional Intent for SDVOSB set aside requirements: Congress amended the Small Business Act in 2003 to focus on SDVOSBs. The 2003 Act grants discretionary authority (“a contracting officer may award”) to contracting officers, Government-wide, to award  SDVOSB sole source contracts of restricted dollar amounts to SDVOSBs if the contracting officer estimates receipt of a fair and reasonable price.

Under the Service Disabled Veteran Owned Small Business SDVOSB Rule of Two, the contracting officer must have a reasonable expectation that not less than two small businesses owned and controlled by service-disabled veterans will submit offers and that the award can be made at a fair market price. See 15 U.S.C.§ 657f.

Exception to Rule of Two in VA Contracts

Discretionary language: For VA acquisitions for amounts less than the simplified acquisition threshold (currently $150,000), § 8127(b) states that “a contracting officer [of the VA] may use procedures other than competitive procedures.” Contracts under $150,000 can be sole sourced to VOSBs and SDVOSBs without regard to the marketplace competitiveness of the price.

Also, under SDVOSB Sole Source and Rule of Two rules, for contracts worth $150,000 up to $5,000,000, VA contracting officers “may” use procedures other than competitive procedures to grant sole-source contracts to VOSBs and SDVOSBs if the particular business concern:

  1. Is determined to be a responsible source concerning performance of such contract opportunity; and
  2. In the estimation of the contracting officer, the contract award can be made at a fair and reasonable price that offers the best value to the United States. 

Unique authority: The VA has a unique statutory authority to use the exceptions under the Service-Disabled Veteran-Owned  Rule of Two contracting for the purpose of meeting their small business goals. See info on urgent and compelling and justification and approval for Service Disabled Veteran Owned Small Business SDVOSB sole source contracts.

Bid protests challenging the VA’s use of Rule of Two violations must be approached with caution. Sometimes the contracting officer’s assessment under the rule may be flawed if there is no research to justify the record.

For more help with applying the SDVOSB sole source regulations and Rule of Two in VA Contracts, call our government contract small business lawyers at 1-866-601-5518.

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