NOTICE: This opinion is subject to
formal revision before publication in the preliminary print of the
United States Reports. Readers are requested to notify the Reporter
of Decisions, Supreme Court of the United States, Washington,
D. C. 20543, of any typographical or other formal errors, in
order that corrections may be made before the preliminary print
goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 14–916
_________________
KINGDOMWARE TECHNOLOGIES, INC., PETITIONER
v. UNITED STATES
on writ of certiorari to the united states
court of appeals for the federal circuit
[June 16, 2016]
Justice Thomas delivered the opinion of the
Court.
Petitioner Kingdomware Technologies, Inc., a
veteran-owned small business, unsuccessfully vied for a federal
contract from the Department of Veterans Affairs to provide
emergency-notification services. Kingdomware sued, arguing that the
Department violated a federal law providing that it “shall award”
contracts to veteran-owned small businesses when there is a
“reasonable expectation” that two or more such businesses will bid
for the contract at “a fair and reasonable price that offers best
value to the United States.” 38 U. S. C. §8127(d). This
provision is known as the Rule of Two.
In this case, we consider whether the Department
must use the Rule of Two every time it awards contracts or whether
it must use the Rule of Two only to the extent necessary to meet
annual minimum goals for contracting with veteran-owned small
businesses. We conclude that the Department must use the Rule of
Two when awarding contracts, even when the Department will
otherwise meet its annual minimum contracting goals.
I
This case concerns the interplay between
several federal statutes governing federal procurement.
A
In an effort to encourage small businesses,
Congress has mandated that federal agencies restrict competition
for some federal contracts. The Small Business Act thus requires
many federal agencies, including the Department of Veterans
Affairs, to set aside contracts to be awarded to small businesses.
The Act requires each agency to set “an annual goal that presents,
for that agency, the maximum practicable opportunity” for
contracting with small businesses, including those “small business
concerns owned and controlled by service-disabled veterans.” 15
U. S. C. §644(g)(1)(B). And federal regulations set forth
procedures for most agencies to “set aside” contracts for small
businesses. See,
e.g., 48 CFR §19.502–2(b) (2015).
In 1999, Congress expanded small-business
opportunities for veterans by passing the Veterans Entrepreneurship
and Small Business Development Act, 113Stat. 233. That Act
established a 3% governmentwide contracting goal for contracting
with service-disabled veteran-owned small businesses. 15
U. S. C. §644(g)(1)(A)(ii).
When the Federal Government continually fell
behind in achieving these goals, Congress tried to correct the
situation. Relevant here, Congress enacted the Veterans Benefits,
Health Care, and Information Technology Act of 2006, §§502, 503,
120Stat. 3431–3436 (codified, as amended, at 38 U. S. C.
§§8127, 8128). That Act requires the Secretary of Veterans Affairs
to set more specific annual goals that encourage contracting with
veteran-owned and service-disabled veteran-owned small businesses.
§8127(a). The Act’s “Rule of Two,” at issue here, provides that the
Department “shall award” contracts by restricting competition for
the contract to service-disabled or other veteran-owned small
businesses. To restrict competition under the Act, the contracting
officer must reasonably expect that at least two of these
businesses will submit offers and that “the award can be made at a
fair and reasonable price that offers best value to the United
States.” §8127(d).[
1]
Congress provided two exceptions to the Rule.
Under those exceptions, the Department may use noncompetitive and
sole-source contracts when the contracts are below specific dollar
amounts. Under §8127(b), a contracting officer “may use procedures
other than competitive procedures” to award contracts to
veteran-owned small businesses when the goods or services that are
the subject of such contracts are worth less than the simplified
acquisition threshold. 38 U. S. C. §8127(b); 41
U. S. C. §134 (establishing a “ ‘simplified
acquisition threshold’ ” of $100,000); see also §1908
(authorizing adjustments for inflation); 75 Fed. Reg. 53130
(codified at 48 CFR §2.101 (2010)) (raising the amount to
$150,000). And under 38 U. S. C. §8127(c), a contracting
officer “may award a contract to a [veteran-owned small business]
using procedures other than competitive procedures” if the contract
is worth more than the simplified acquisition threshold but less
than $5 million, the contracting officer determines that the
business is “a responsible source with respect to performance of
such contract opportunity,” and the award can be made at “a fair
and reasonable price.” 38 U. S. C. §8127(c).
In finalizing its regulations meant to implement
the Act, the Department stated in a preamble that §8127’s
procedures “do not apply to [Federal Supply Schedule] task or
delivery orders.” VA Acquisition Regulation, 74 Fed. Reg. 64624
(2009). The Federal Supply Schedule (FSS) generally is a
streamlined method for Government agencies to acquire certain
supplies and services in bulk, such as office supplies or food
equipment. 48 CFR §8.402(a) (2015). Instead of the normal bidding
process for each individual order, FSS contracts are ordinarily
pre-negotiated between outside vendors and the General Services
Administration, which negotiates on behalf of various Government
agencies. See §8.402(b);
Sharp Electronics Corp. v.
McHugh, 707 F. 3d 1367, 1369 (CA Fed 2013). Under FSS
contracts, businesses agree to provide “[i]ndefinite delivery” of
particular goods or services “at stated prices for given periods of
time.” §8.402(a)
. Agencies receive a list of goods and
services available through the FSS. Because the terms of purchasing
these goods and services have already been negotiated, contracting
officers can acquire these items and services simply by issuing
purchase orders.
B
Kingdomware Technologies, Inc., is a
service-disabled veteran-owned small business. Around January 2012,
the Department decided to procure an Emergency Notification Service
for four medical centers.[
2] In
an emergency, this service sends important information to
Department personnel. The Department sent a request for a price
quotation to a non-veteran-owned company through the FSS system.
That company responded with a favorable price, which the Department
accepted around February 22, 2012. The agreement was for one year,
with an option to extend the agreement for two more. The Department
exercised the one option to extend the time, and performance was
completed in May 2013. Decl. of Corydon Ford Heard III ¶8.
Kingdomware challenged the Department’s decision
to award the contract to a non-veteran-owned company by filing a
bid protest with the Government Accountability Office (GAO). See 31
U. S. C. §3552(a). Kingdomware alleged that the
Department procured multiple contracts through the FSS without
restricting competition using the Rule of Two, as required by
§8127. Kingdomware contended that the Department could not award
the contracts at issue here without first checking to see whether
at least two veteran-owned small businesses could perform the work
at a fair and reasonable price. The GAO issued a nonbinding
determination that the Department’s failure to employ the Rule of
Two was unlawful and recommended that the Department conduct market
research to determine whether there were two veteran-owned
businesses that could fulfill the procurement. The Department
dis-agreed with the recommendation.
Petitioner then filed suit in the Court of
Federal Claims and sought declaratory and injunctive
relief.[
3] The Court of Federal
Claims granted summary judgment to the Department. 107 Fed. Cl. 226
(2012).
A divided panel of the Federal Circuit affirmed.
754 F. 3d 923 (2014). In the majority’s view, §8127 did not
require the Department to use the Rule of Two in all contracting.
Id., at 933–934. Instead, the court concluded, mandatory
application of the Rule of Two was limited to contracts necessary
to fulfill its statutory purpose—to provide a means of satisfying
the Department’s annual contracting goals described in §8127(a).
Id., at 934
. Thus, so long as those goals were
satisfied, the Court of Appeals concluded, the Department need not
apply the Rule of Two any further.
Ibid. Judge Reyna
dissented, arguing that §8127 employs mandatory language that
“could not be clearer” in requiring the Department to apply the
Rule of Two in every instance of contracting.
Id., at
935.
We granted certiorari to decide whether §8127(d)
requires the Department to apply the Rule of Two in all
contracting, or whether the statute gives the Department some
discretion in applying the rule. 576 U. S. ___ (2015).
II
Before we reach the merits, we must assess our
jurisdiction. Article III of the Constitution limits federal courts
to deciding “Cases” and “Controversies,” and “an actual controversy
must exist not only at the time the complaint is filed, but through
all stages of the litigation.”
Already, LLC v.
Nike,
Inc., 568 U. S. ___, ___ (2013) (slip op., at 3–4)
(internal quotation marks omitted).
Here, no live controversy in the ordinary sense
remains because no court is now capable of granting the relief
petitioner seeks. When Kingdomware filed this suit four years ago,
it sought a permanent injunction and declara-tory relief with
respect to a particular procurement. The services at issue in that
procurement were completed in May 2013. And the two earlier
procurements, which Kingdomware had also protested, were complete
in September 2012. See Decl. of Corydon Ford Heard III ¶¶6–8. As a
result, no court can enjoin further performance of those services
or solicit new bids for the performance of those services. And
declaratory relief would have no effect here with respect to the
present procurements because the services have already been
rendered.
Although a case would generally be moot in such
circumstances, this Court’s precedents recognize an exception to
the mootness doctrine for a controversy that is “ ‘capable of
repetition, yet evading review.’ ”
Spencer v.
Kemna, 523 U. S. 1, 17 (1998) . That exception applies
“only in exceptional situations,” where (1) “the challenged
action [is] in its duration too short to be fully litigated prior
to cessation or expiration,” and (2) “there [is] a reasonable
expectation that the same complaining party [will] be subject to
the same action again.”
Ibid. (internal quotation marks
omitted; brackets in original).
That exception applies to these short-term
contracts. First, the procurements were fully performed in less
than two years after they were awarded. We have previously held
that a period of two years is too short to complete judicial review
of the lawfulness of the procurement. See
Southern Pacific
Terminal Co. v.
ICC, 219 U. S. 498 –516 (1911).
Second, it is reasonable to expect that the Department will refuse
to apply the Rule of Two in a future procurement for the kind of
services provided by Kingdomware. If Kingdomware’s interpretation
of §8127(d) is correct, then the Department must use restricted
competition rather than procure on the open market. And
Kingdomware, which has been awarded many previous contracts, has
shown a reasonable likelihood that it would be awarded a future
contract if its interpretation of §8127(d) prevails. See Decl. of
Corydon Ford Heard III ¶¶11–15 (explaining that the company
continues to bid on similar contracts). Thus, we have jurisdiction
because the same legal issue in this case is likely to recur in
future controversies between the same parties in circumstances
where the period of contract performance is too short to allow full
judicial review before performance is complete. Our interpretation
of §8127(d)’s requirements in this case will govern the
Department’s future contracting.
III
On the merits, we hold that §8127 is
mandatory, not discretionary. Its text requires the Department to
apply the Rule of Two to all contracting determinations and to
award contracts to veteran-owned small businesses. The Act does not
allow the Department to evade the Rule of Two on the ground that it
has already met its contracting goals or on the ground that the
Department has placed an order through the FSS.
A
In statutory construction, we begin “with the
language of the statute.”
Barnhart v.
Sigmon Coal
Co., 534 U. S. 438, 450 (2002) . If the statutory language
is unambiguous and “the statutory scheme is coherent and
consistent”—as is the case here—“[t]he inquiry ceases.”
Ibid.
We hold that §8127(d) unambiguously requires the
Department to use the Rule of Two before contracting under the
competitive procedures. Section 8127(d) requires that “a
contracting officer of the Department
shall award contracts”
to veteran-owned small businesses using restricted competition
whenever the Rule of Two is satisfied, “[e]xcept as provided in
subsections (b) and (c).” (Emphasis added.) Subsections (b) and (c)
provide, in turn, that the Department “may” use noncompetitive
procedures and sole-source contracts for lower value acquisitions.
§§8127(b), (c). Except when the Department uses the noncompetitive
and sole-source contracting procedures in subsections (b) and (c),
§8127(d) requires the Department to use the Rule of Two before
awarding a contract to another supplier. The text also has no
exceptions for orders from the FSS system.
Congress’ use of the word “shall” demonstrates
that §8127(d) mandates the use of the Rule of Two in all
contracting before using competitive procedures. Unlike the word
“may,” which implies discretion, the word “shall” usually connotes
a requirement. Compare
Lexecon Inc. v.
Milberg Weiss
Bershad Hynes & Lerach, 523 U. S. 26, 35 (1998)
(recognizing that “shall” is “mandatory” and “normally creates an
obligation impervious to judicial discretion”), with
United
States v.
Rodgers, 461 U. S. 677, 706 (1983)
(explaining that “[t]he word ‘may,’ when used in a statute, usually
implies some degree of discretion”). Accordingly, the Department
shall (or
must) prefer veteran-owned small businesses
when the Rule of Two is satisfied.
The surrounding subsections of §8127 confirm
that Congress used the word “shall” in §8127(d) as a command. Like
§8127(d), both §8127(b) and §8127(c) provide special procedures
“[f]or purposes of meeting the goals under [§8127(a)].” §§8127(b),
(c). But, in contrast to §8127(d), those latter two provisions
state that “a contracting officer of the Department
may use”
(or, for §8127(c), “
may award”) such contracts. §§8127(b),
(c) (emphasis added). When a statute distinguishes between “may”
and “shall,” it is generally clear that “shall” imposes a mandatory
duty. See
United States ex rel. Siegel v.
Thoman, 156
U. S. 353 –360 (1895). We see no reason to depart from the
usual inference here.
We therefore hold that, before contracting with
a non-veteran owned business, the Department must first apply the
Rule of Two.[
4]
B
The Federal Circuit and the Department offered
several reasons for their alternative reading of §8127(d) as a
discretionary provision that the Department can disregard for at
least some contracting decisions. We disagree with them.
To hold that §8127(d) is discretionary, the
Federal Circuit relied on §8127(d)’s prefatory clause. 754
F. 3d, at 933. That clause declares that the Rule of Two is
designed “for the purposes of” meeting the annual contracting goals
that the Department is required to set under §8127(a). The
Department originally made a similar argument before changing
arguments in its briefing on the merits. Compare Brief in
Opposition 13–15 with Brief for United States 24–25.
But the prefatory clause has no bearing on
whether §8127(d)’s requirement is mandatory or discretionary. The
clause announces an objective that Congress hoped that the
Department would achieve and charges the Secretary with setting
annual benchmarks, but it does not change the plain meaning of the
operative clause, §8127(d). See
Yazoo & Mississippi Valley
R. Co. v.
Thomas, 132 U. S. 174, 188 (1889)
(explaining that prefatory clauses or preambles cannot change the
scope of the operative clause).
The Federal Circuit’s interpretation also would
produce an anomaly. If the Federal Circuit’s understanding of
§8127(d)’s prefatory clause were correct, then §§8127(b) and (c),
which also contain “[f]or purposes of meeting the goals” clauses,
would cease to apply once the Department meets the Secretary’s
goal, and the Department would be required to return to competitive
bidding. If we interpreted the “purposes” clause of §8127(d) to
mean that its mandate no longer applies if the goals are met, then
the identical “purposes” clauses of §§8127(b) and (c) would also
render those clauses’ permissive mandates inapplic-able. This would
require the Department, once the goals are met, to award bids using
the default contracting procedures rather than to use the
noncompetitive and single-source provisions in §§8127(b) and
(c).
Second, the Department argues that the mandatory
provision does not apply to “orders” under “pre-existing FSS
contracts.” Brief for United States 25. The Department failed to
raise this argument in the courts below, and we normally decline to
entertain such forfeited arguments. See
OBB Personenverkehr
AG v.
Sachs, 577 U. S. ___, ___ (2015) (slip op.,
at 10). But the Department’s forfeited argument fails in any event.
Section 8127(d) applies when the Department “award[s] contracts.”
When the Department places an FSS order, that order creates
contractual obligations for each party and is a “contract” within
the ordinary meaning of that term. See,
e.g., Black’s Law
Dictionary 389 (10th ed. 2014) (“[a]n agreement between two or more
parties creating obligations that are enforce-able or otherwise
recognizable at law”). It also creates a “contract” as defined by
federal regulations, namely, a “mutually binding legal relationship
obligating the seller to furnish the supplies or services
. . . and the buyer to pay for them,” including “all
types of commitments that obligate the Government to an expenditure
of appropriated funds and” (as a general matter) “are in writing.”
48 CFR §2.101 (2015). An FSS order creates mutually binding
obligations: for the contractor, to supply certain goods or
services, and for the Government, to pay. The placement of the
order creates a new contract; the underlying FSS contract gives the
Government the option to buy, but it does not require the
Government to make a purchase or expend funds. Further confirming
that FSS orders are contracts, the Government is not completely
bound by the FSS contract’s terms; to the contrary, when placing
orders, agencies may sometimes seek different terms than are listed
in the FSS. See §8.405–4 (permitting agencies to negotiate some new
terms, such as requesting “a price reduction,” when ordering from
the FSS).
Third, the Department contends that our
interpretation fails to appreciate the distinction between FSS
orders and contracts. The Department maintains that FSS orders are
only for simplified acquisitions, and that using the Rule of Two
for these purchases will hamper mundane purchases like “griddles or
food slicers.” Brief for United States 21.
But this argument understates current practices
under the FSS. The Department has expanded use of the FSS well
beyond simple procurement. See Brief for Iraq and Afghanistan
Veterans of America as
Amicus Curiae 14–16. This case proves
the point: the contract at issue here concerned complex information
technology services over a multiyear period. Moreover, the
Department may con-tinue to purchase items that cost less than the
simplified acquisition threshold (currently $150,000) through the
FSS, if the Department procures them from a veteran-owned small
business. See 38 U. S. C. §8127(b).
Finally and relatedly, the Department asks us to
defer to its interpretation that FSS “orders” are not “contracts.”
See
Chevron U. S. A. Inc. v.
Natural Resources
Defense Council, Inc., 467 U. S. 837 –844 (1984)
(establishing deference to an agency’s interpretation of an
ambiguous statute). Even assuming,
arguendo, that the
preamble to the agency’s rulemaking could be owed
Chevron
deference, we do not defer to the agency when the statute is
unambiguous. See
id., at 842–843. For the reasons already
given, the text of §8127(d) clearly imposes a mandatory duty. Thus,
we decline the Department’s invitation to defer to its
interpretation.
* * *
We hold that the Rule of Two contracting
procedures in §8127(d) are not limited to those contracts necessary
to fulfill the Secretary’s goals under §8127(a). We also hold that
§8127(d) applies to orders placed under the FSS. The judgment of
the Court of Appeals for the Federal Circuit is reversed, and the
case is remanded for further proceedings consistent with this
opinion.
It is so ordered.
