I. Introduction
The AbilityOne program was created to provide employment opportunities for individuals with disabilities through government procurement. Within this program, federal entities contract with nonprofits that hire individuals with disabilities to provide services or products. In addition to employment, nonprofits within this program typically provide a number of other services to individuals with disabilities, such as educational or recreational services. As such, it is essential that these nonprofits retain funding through the AbilityOne program, an objective that may be frustrated with recent changes to the program.
Currently, in the AbilityOne program, price is not an evaluation factor until after a nonprofit is selected to fulfill a contract. In recent years, the AbilityOne Commission has proposed that nonprofits be selected for contracts with the added evaluation factor of price. This change to the AbilityOne program is likely to negatively impact smaller nonprofits, which will be unable to offer the same competitive pricing as their larger counterparts. Likely, if these small nonprofits attempt to offer lower and competitive bids, they will have to subvert funding from other programs and services and/or decrease employment for individuals with disabilities. Without funding from the AbilityOne program to sustain programs and employment for individuals with disabilities, these small nonprofits and the individuals they aid are likely to suffer immensely.
This Note examines the history of the AbilityOne program and the likely consequences of the implementation of price competition and explores how, in light of this change, smaller nonprofits can retain funding under the program. To do so, this Note will first outline the origin, structure, and procurement process of the AbilityOne program. Next, this Note will explain the history of price competition in this program, as well as what the Court of Federal Claims opined about the early stages of its implementation. It will then address the concerns that commentators have posed about the introduction of price competition and how the AbilityOne Commission addressed those concerns in its final rule. Finally, this Note will propose a solution, inspired by the Small Business Administration’s 8(a) Program, that will establish a program for small nonprofits within the AbilityOne program. This Note argues that such a program, with set-aside and sole-source contracts, will retain funding for smaller nonprofits, incentivize more participation in the AbilityOne program, and, in line with the purpose of the program at its inception, benefit individuals with disabilities.
II. Background
A. History of the Javits-Wagner-O’Day Act
Historically, individuals with disabilities have been denied many opportunities, including—and especially—employment. Before and during the twentieth century, individuals with disabilities were encouraged to operate identically to their nondisabled peers in the workplace or to find work in limited fields. Around World War I, “veterans with disabilities demanded that the U.S. [g]overnment provide rehabilitation in exchange for their service to the nation,” which sparked the creation of laws that instituted rehabilitative programs for veterans. These laws excluded individuals with developmental disabilities until the Rehabilitation Act Amendments of 1954.
During this period, there were primarily two models to view individuals with disabilities: the medical model and the charity model. The medical model operated under the assumption that individuals with disabilities had something inherently wrong with them that had to be fixed, whereas the charity model viewed individuals with disabilities as pitiful and, thus, deserving of aid.
It was within this societal context that President Franklin D. Roosevelt signed the Wagner-O’Day Act into law in 1938. This Act was designed to create employment opportunities for individuals who were blind through a federal procurement program. In 1971, the Wagner-O’Day Act was renamed the Javits-Wagner-O’Day Act (JWOD Act) and was amended to create the AbilityOne Program, which provided employment opportunities to all individuals with significant disabilities, not just the blind.
Unfortunately, many individuals with disabilities were unable to participate in the AbilityOne program in the early twentieth century because they lacked access to “public buildings and transportation” and faced other accessibility issues. The Civil Rights movement in the 1960s and the eventual creation of the Americans with Disabilities Act in 1990 resolved some of these issues, but the majority of individuals with disabilities remain unemployed today.
This is not to say that the AbilityOne Commission has not attempted to enable employment in recent years. Notably, the AbilityOne Commission issued a rule prohibiting subminimum wages, instituted a Quality Work Environment initiative, and announced an environmental initiative. Further, in 2017, the Commission launched initiative for veterans and wounded warriors.
To fully understand the capability of the AbilityOne program and further these initiatives and increase employment opportunities for individuals with disabilities today, it is vital to first understand its structure.
B. The Structure of the AbilityOne Program
Currently, the AbilityOne program employs “more than 37,000 people who are blind or have significant disabilities” and approximately “2,500 veterans, including wounded warriors.” Overall, the AbilityOne program supplies around four billion dollars of products and services to federal entities annually. The AbilityOne program is made up of the AbilityOne Commission, which is made up fifteen presidential nominees, as well as the Central Nonprofit Agencies (CNAs), non-profit agencies (NPAs), and purchasing federal entities, all of which play vital roles.
Within the AbilityOne program, the federal entity operates as the required purchaser of AbilityOne products or services. The definition of “federal entity” is expansive and includes any “entity of the legislative or judicial branch, a military department or executive agency . . . the United States Postal Service . . . [and/or] a nonappropriated fund instrumentality under the jurisdiction of the Armed Forces.”
Connectedly, the NPAs are the nonprofit agencies that provide products and/or services to the purchasing federal entity. To qualify as an NPA under the JWOD Act, a nonprofit must (1) operate in the interest of severely disabled individuals or the blind; (2) comply “with health and safety standards prescribed by the Secretary of Labor,”; and (3) employ blind or severely disabled individuals for at least seventy-five percent of the direct labor hours “in the production of products and in the provision of services.”
NPAs are partially overseen and selected by CNAs, which are chosen by the AbilityOne Commission. As required by the JWOD Act, CNAs “facilitate the distribution . . . of orders of the Federal Government for products and services on the procurement list among qualified” NPAs. To do so, the CNAs work with the contracting federal entity to determine exactly what product and/or service is needed and then obtain relevant information pertaining to the suitability of each interested NPA in supplying this product and/or service. The CNAs also oversee the operations of the NPAs and provide technical assistance when requested by an NPA. Further, CNAs review the contract performance of the NPAs, conducting either Technical Assistance Visits or Regulatory Review Assistance Visits.
Currently, the Commission has designated SourceAmerica as the CNA to oversee NPAs who focus on employing those with significant disabilities and the National Industries for the Blind (NIB) to oversee NPAs who focus on employing those who are blind. There are currently 360 NPAs affiliated with SourceAmerica and 60 NPAs affiliated with NIB.
Altogether, the Commission, NPAs, CNAs, and the federal entity play an integral role in the procurement process. In short, the federal entity is the purchaser, the CNA is the investigator/selector, the NPA is the provider, and the Commission is the overseer.
C. The Procurement Process
Procurements through the AbilityOne program are deemed “other than competitive” under the JWOD Act; thus, full and open competition is not required under the Competition in Contracting Act (CICA). Rather, the Commission publishes a list of services and products (procurement list) that shall be purchased by federal entities from an NPA so long as the products or services are available during the period required. The procurement list includes products like wrenches, hammers, and gloves as well as custodial, food, and laundry services. In total, around 19,068 products and 2,850 services are on the procurement list.
When a federal entity identifies a product or service that is not yet on the procurement list that it would like to purchase through the AbilityOne program, instead of through full and open competition, it informs the AbilityOne Commission. If the Commission determines that the product or service is suitable for the program, it informs the CNAs (SourceAmerica and NIB). The CNAs then inform interested NPAs. If a qualifying NPA wants to be considered as a supplier of the product or service, it submits a technical proposal that excludes price, which is subsequently evaluated by the CNA. The CNA then chooses a qualified NPA based on the highest technical rating and past performance. Next, the federal entity and the selected NPA agree on a fair market price.
With input from the CNA, the fair market price is determined by bilateral negotiations between the selected NPA and the federal entity. A deviation from this procedure is permitted, so long as the NPA and the federal entity both agree. Once the federal entity and the selected NPA agree on a price, the CNA then recommends to the Commission what it believes to be the most qualified NPA. At the same time, it informs the Commission of the agreed-upon fair market price, which the Commission is able to revise “where appropriate,” subject to the ultimate approval of the negotiating parties. When all parties agree on the fair market price and the Commission approves the NPA selection, the product or service is added to the procurement list and published in the Federal Register. The designated NPA is authorized as a source for the federal entities that procures that service or product indefinitely. At this point, the federal entity may award the contract to the NPA. Overall, when a federal entity procures through the AbilityOne program, it must do so in accordance with the regulations of the Commission.
It is important to note that a CNA may deem more than one NPA qualified to supply a product or service. If multiple NPAs are selected to supply the same product or service, the CNA is required to distribute orders from federal entities “among those nonprofit agencies in a fair and equitable manner.”
III. The History of Price Competition
A. The Need for Transparency
In the early twenty-first century, the AbilityOne program began enduring criticism from NPAs and people with disabilities, many of whom asserted that this program severely misunderstood and misidentified those with disabilities, lacked transparency regarding costs and procedures, and perpetuated disability segregation in the workforce.
In 2013, the Government Accountability Office (GAO) took notice of this criticism and urged Congress to increase oversight of the AbilityOne Commission due to finding a lack of transparency, direction, and efficiency within the program. A few years later, in 2016, there were allegations of “corruption, financial fraud, and legal violations with SourceAmerica,” which was the CNA chosen by the AbilityOne Commission to oversee and select NPAs to fulfill orders on the AbilityOne procurement list. These allegations promptly sparked an investigation by the Department of Defense. The mounting criticism of the program signaled to Congress that some serious oversight and improvement were necessary.
In 2017, Congress created the Panel on Department of Defense and AbilityOne Contracting Oversight, Accountability, and Integrity (898 Panel) to review the Department of Defense’s purchases from nonprofit agencies under the AbilityOne program. The panel was to submit four annual reports to Congress with findings and recommendations for the AbilityOne program. During its tenure, the 898 Panel’s “main consideration . . . was the impact on the AbilityOne employment mission of creating jobs for individuals who are blind or have significant disabilities.”
In 2018, the 898 Panel submitted its first annual report to Congress which suggested the AbilityOne Commission mandate “source selection procedures that CNAs will follow that require a best value trade-off similar to other Federal source selection procedures.” Consequently, the 898 Panel suggested the use of a price competition pilot program, to assess whether price competition would benefit the AbilityOne program. “Congress did not act on the Section 898 Panel’s recommendations,” but the AbilityOne Commission nonetheless implemented interim procedures to instigate a competition pilot program.
The pilot test was conducted by reallocating a “project already on the procurement list” to a new NPA. The interested NPAs were to submit technical proposals and, for the first time, prices. The CNA was to then recommend a qualified NPA to the Commission in consideration of price, past performance, and technical capability. If the Commission approved the CNA’s recommendation, that NPA would be added as a supplier to the procurement list. The Commission asserted its authority to institute these procedures because of its regulatory power to revise prices and reallocate work where appropriate.
B. Melwood Horticultural Training Center, Inc. v. United States
An NPA, Melwood, questioned the AbilityOne Commission’s authority to orchestrate a pilot program in the bid protest case, Melwood Horticultural Training Center, Inc. v. United States, arguing that such a procedure contravened the text and purpose of the JWOD Act.
In May of 2021, the U.S. Court of Federal Claims (COFC) agreed with Melwood and articulated that the JWOD Act mandates bilateral price negotiations between the NPA designated by the CNA and the federal entity to establish a fair market price, unless “other methodologies” were agreed upon by both parties. The COFC stressed that the JWOD Act mandates that the price determinations of the parties “be submitted jointly” to the CNA after they have conducted bilateral negotiations or other agreed upon procedures. Thus, requiring the NPAs to submit prices prior to a designation by the CNA contravenes the explicit procedures within the JWOD Act.
The AbilityOne Commission argued that it should be entitled to request price submissions as a means of price discovery because the JWOD Act states that “the Committee is [ultimately] responsible for determining fair market prices.” The Commission asserted that this provision permits them to establish a fair market price by any means necessary, including weighing the NPA’s price submissions. The COFC disagreed, stating that 41 CFR § 51-2.7(c) only permitted the Commission to revise the fair market price if the NPA “as well as the other relevant entities . . . agree[d] on the changes in price or pricing procedure.” Thus, the COFC asserted that the Commission’s argument was “paper thin” and that such an interpretation of the statute undermines the clear procedure of collaborative price determination mandated by the statute.
The COFC was additionally unpersuaded by the government’s assertion that price competition was not a central component of the selection criteria, because the introduction of lowest-price-available terminology was not the issue, but rather that price was being considered prior to the selection of an NPA. Nonetheless, the COFC asserted that price becomes “inherently . . . centric” when proposals of equal past performance or technicality are introduced.
Lastly, the COFC stressed that the interim price competition pilot program offended the decision of Congress in drafting the JWOD Act to “exclude[] . . . a price component” and “fundamentally changes how AbilityOne contracts are bid, forcing nonprofit agencies . . . to balance providing opportunities for its most severely disabled employees with cutting expenses to offer a low bid.”
C. Implementing Price as a Consideration
Approximately seven months after Melwood, in December 2021, the 898 Panel published its fourth and final report to Congress. In this report, the 898 Panel acknowledged that, currently, the CNAs only recommend an NPA based on past performance and highest technical rating and that price is not set until after such determination. The 898 Panel suggested that this process should be altered to allow price as a consideration “for service contracts valued at $10 million or greater annually . . . [that are] performed on Federal installations/properties” and that are being recompeted. Relying on a legal theory that somewhat differed from Melwood, the 898 Panel asserted that the Commission had the authority to “reassign or reallocate work . . . when it is in the best interest of the Government,” and that the introduction of price when contracts are being recompeted is thus statutorily justified.
The 898 Panel stated that this process will focus on the best value “with trade-off analysis that will consider a social impact proposal, a Technical proposal, Past Performance, and Price.” The social impact proposal may include factors such as “NPA size, percentage of disabled labor hours, Quality Work Environment (QWE) certification, mentorship, program participation, etc.” When the CNA receives these NPA submissions, it “will evaluate the Social Impact Proposal,” while the federal entity/customer will evaluate “the Technical proposal, Past Performance, and Price.” The results of the analysis will then be provided to the AbilityOne Commission, which will then complete the recommendation process. The 898 Panel stressed that price competition is a viable additive to the AbilityOne program because it would increase transparency, allow for more customer involvement, and maximize job opportunities.
In March of 2023, the AbilityOne Commission issued a notice of proposed rulemaking titled “Supporting Competition in the AbilityOne program,” which would implement price competition in the AbilityOne program for the first time. The Commission acknowledged the Melwood decision but stressed that the COFC misunderstood the JWOD Act, which “unambiguously authorizes the Commission, not the negotiating parties, to establish the FMP and to revise it in accordance with changing market conditions.” Accordingly, the Commission announced the three significant changes that it intended to make to the AbilityOne program in order to formally implement price competition.
First, the Commission wished to amend the language of 41 C.F.R. § 51-2.7 to say that “the [fair market] price can be based on . . . price competition, or any other methodology specified in Committee policies and procedures.” This provision substantially differs from the current language of 41 C.F.R. 51-2.7, which requires negotiating parties to agree on a fair market price. This change would permit the Commission to establish a fair market price independently, without “agreement by the [negotiating] parties.”
Second, the Commission recommended procedural changes to competition within the program. Under this proposed change, for new and existing procurement list services “that are expected to exceed $10 million in total contract value, the Federal customer may request, subject to the Commission’s approval, that the procurement be distributed on a competitive basis among all authorized NPAs,” otherwise known as a competitive distribution. For service contracts that are equal to or less than $10 million in total contract value, the Commission may still “direct a competitive distribution . . . in instances where good faith sole source negotiations” have reached an impasse. A competitive distribution request, if granted by the Commission, means that the “CNA recommends, and the Commission approves, at least two qualified NPAs to function as authorized sources.” The service will then be allocated to the “NPA [or NPAs] that can provide the ‘best overall solution’ to the Federal customer.” In analyzing which NPA can provide the best solution, the CNA and the Commission will consider “technical capability, past performance,” and, for the first time, “price.” In the proposed rule, the Commission states that, in requesting a competitive distribution, a federal customer must provide its “rationale for competition, whether it will provide resources to support the process, the estimated cost, any information pertaining to performance by any independent contractor, and such other information as is requested by the Committee.”
Third, the Commission asserts it has the “authority [under § 51-5.2] to authorize and deauthorize NPAs and . . . add[] additional protections to employees when work is transferred between NPAs.” Thus, when an NPA performs poorly, the proposed rule would allow the CNA to make a reallocation amongother authorized NPAs. The proposed rule does not define what specific criteria warrants deauthorization, nor discusses potential remedies to the NPA who is deauthorized.
D. Issues Raised with the Notice of Proposed Rulemaking
After the AbilityOne Commission suggested the implementation of price competition, commentators stressed extreme concern. Of the many comments posted in response to the proposed rule, only a few supported the introduction of price competition. In sum, commentators in opposition argue four points: the proposed rule contravenes the purpose of the JWOD Act, fails to include social impact proposals, expands the amount of contracts susceptible to price competition, and lacks criteria/clarification throughout.
First, commentators stress that the introduction of price competition juxtaposes the purpose of the JWOD Act to ensure employment opportunities for those who are blind and/or have significant disabilities. As the COFC asserted in Melwood, the implementation of price as a consideration could contravene the express intent of Congress in the JWOD Act to utilize collaborative procedures to establish a fair market price after an NPA is selected by a CNA. Further, price competition may impede the purpose of the statute by requiring NPAs “to balance providing opportunities for its most severely disabled employees with cutting expenses to offer a low bid.” Commentators worry that this change will result in forced layoffs of their least efficient employees, which could very well be those uniquely disadvantaged by disabilities. Such a result, NPAs assert, contravenes the purpose of the AbilityOne program to ensure employment for such individuals.
Second, commentators have criticized the proposed rulemaking for failing to implement the social impact proposals that the 898 Panel recommended. With this recommendation eliminated, the new procurement process would permit the CNA to merely consider technical capability, past performance, and price. Despite what the 898 Panel urged, factors like the NPA’s size, “percentage of disabled labor hours, Quality Work Environment (QWE) certification, mentorship, [or] program participation” will not be considered prior to the selection of an NPA. Requiring the CNA to consider social impact factors in selecting an NPA could have deemphasized price and provided smaller NPAs, who are unable to offer competitive prices, the opportunity to be selected for contracts regardless. As one NPA, Didlake, Inc., noted in its comment, price competition “may adversely affect small and medium NPAs not equipped to manage competition, potentially undermining their stability and capacity to serve those with the highest employment barriers.” Many other NPAs echoed this sentiment, particularly concerned about job loss and that “funds would potentially be redirected from spending on the social mission.”
Third, commentators stress that the Commission is vastly expanding price competition by applying it to all service contracts with a valuation of $10 million and above, not just for service contracts that have an annual valuation of $10 million and are performed on federal installations/properties, which is what the 898 Panel recommended. This deviation from the 898 Panel recommendations vastly expands the breadth of price competition from 46 contracts to 346 contracts, meaning that even NPAs who have been awarded smaller contracts will be subject to this change. Small NPAs have objected to this expansion, stressing that this adversely affects their operations. For example, one small NPA stressed that recompetition on even one contract “would impose negative results across the organization thereby hindering the services for those working on the contract and all other departments.” Subjecting these smaller NPAs to more frequent price competition could also exacerbate the aforementioned issues of employment and resource loss that could result from fund subversion.
Lastly, commentators struggle with the Commission’s lack of clarification throughout the notice of proposed rulemaking, mainly within three sections. First, commentators express concern over the lack of criteria that warrants competitive distribution/redistribution and how often this can occur. NPAs stress that without clear criteria, federal entities may request the competitive distribution option frequently and unjustly. Second, commentators expressed concern over the AbilityOne Commission’s cost-benefit analysis, which they believe to severely underestimate the costs of price competition. Third, commentators drew attention to the failure of the Commission to define what an “impasse” of bilateral negotiations quantified. Without such specifications, commentators allege that a federal entity could declare an impasse and seek competitive distribution without any rhyme or reason.
E. The Final Rule
On March 22, 2024, a year after publishing its notice of proposed rulemaking supporting the implementation of price competition in the AbilityOne program, the AbilityOne Commission published a final rule. The final rule, which evolved from the notice of proposed rulemaking, addressed the four major concerns that commentators had.
First, in response to commentators, the Commission asserted that price competition does not contravene the purpose of the JWOD Act. The Commission reiterates that the COFC in Melwood narrowly construed the JWOD Act, failing to recognize that the Commission has the authority to establish the fair market price independently without collaboration from the negotiating parties. The COFC and commentators have already rejected this interpretation, instead asserting that Congress mandates collaboration when establishing a fair market price. The Commission also argued that it did not contravene the purpose of the statute because price would not be the dominant consideration when awarding contracts. However, as aforementioned in Melwood, price becomes “inherently” centric when proposals of equal past performance or technicality are introduced.
Second, the Commission addressed the rule’s omission of the 898 Panel’s recommended social impact proposals. The Commission responded to such comments by requiring CNAs to consider an NPA’s “training and placements, and employment opportunities” when awarding a contract. Notably, unlike what the 898 Panel recommended, CNAs are still not required to consider “percentage of disabled labor hours, Quality Work Environment (QWE) certification, mentorship, [or] program participation.”
Third, the Commission defended its choice to apply price competition to all service contracts with a valuation of $10 million and above, not just for service contracts that have an annual valuation of $10 million and are performed on federal installations/properties, which is what the 898 Panel recommended. The Commission argued that this expansion was necessary given a minority of survey responses from federal entities that denoted displeasure with the AbilityOne program. However, the Commission did limit the scope of price competition by distinguishing non-Department of Defense (non-DoD) agencies from DoD agencies, making the price competition threshold “$50 million for DoD agencies and $10 million for non-DoD agencies.” This change “reduces the percentage of NPAs potentially impacted [by the final rule] . . . to 15 percent.” Notably, the changed rule may still prevent small NPAs that will likely to be unable to offer the same prices as their larger counterparts, from acquiring contracts over $10 million for non-DoD contracts and $50 million for DoD contracts.
Fourth and last, the Commission addressed concerns about the lack of criteria governing what warrants a competitive distribution and how frequently a federal entity can make such request. The Commission did require that they cannot approve a competitive distribution request resulting from a failed good-faith bilateral negotiation if the service-project valuation is under $1 million or if the parties failed to exhaust all other administrative remedies. The Commission also stated that, in the future, it will publish a list of considerations that it must weigh when deciding whether to approve a competitive distribution. However, these changes neither limit the amount of times that a federal entity can request a competitive distribution nor establish criteria that a project must meet before the federal entity can request a competitive distribution.
Overall, the Commission did not ease some of the main concerns raised by commentators. Notably, the Commission did not implement the 898 Panel’s recommendations regarding the scope of price competition or social impact proposals. Furthermore, the Commission did not limit the number of times a federal entity can request the competitive distribution, establish criteria that a project must meet before the competitive distribution option can be exercised, conduct another cost-benefit analysis, nor define what an “impasse” of bilateral negotiations is.
IV. The Small Business Administration’s 8(a) Program
Implementing a program like the Small Business Administration’s (SBA) 8(a) program within the AbilityOne program could resolve some of issues raised by commentators by further reducing the scope of price competition, protecting small NPAs from baseless reallocations, retaining funds, implementing social impact proposals, and adhering to the purpose of the AbilityOne Program. Before analyzing the structure and merits of such a hypothetical program, it is vital to first explore the structure and background of its inspiration, the SBA’s 8(a) program.
A. The 8(a) Program’s Structure and Background
The Small Business Act, enacted in 1953, created the SBA to “aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns” and ensure that small businesses earn a “fair proportion” of federal contracts.
To qualify for an 8(a) certification, a certified small business must be operating for at least two years, be at least “51% owned and controlled by U.S. citizens who are socially and economically disadvantaged,” have a certain net worth, demonstrate good character and the potential for success, and be a first-time participant in the program. The SBA defines socially disadvantaged as those who are “subjected to racial or ethnic prejudice or cultural bias because of their identity.” Some racial groups are automatically considered socially disadvantaged, such as “Black Americans, Hispanic Americans, [and] Native Americans,” “although individuals who do not belong to these groups may prove they are socially disadvantaged.”
If a business meets the SBA’s criteria, the 8(a) certification lasts for a maximum of nine years. This program provides a surplus of benefits to qualifying businesses, such as development assistance, mentorship, the ability to qualify and receive “federal surplus property on a priority basis,” free training, loans, and more.
One of the main advantages 8(a) certified businesses receive from their participation in the program is the ability to receive sole-source contracts and to compete for set-aside contracts. Since the federal government has a goal to “award five percent of all prime and subcontracting dollars to small disadvantaged businesses each year,” contracting officers are permitted to use sole-source contracts and set-aside contracts.
Contracting officers are entitled to use competitive set-aside contracts so long as they “have a reasonable expectation that at least two qualified 8(a) small businesses will submit offers,” the contract can be awarded at a fair market price, “[t]he government estimate exceeds $7 million for manufacturing requirements or $4.5 million for all other requirements,” and the contract “hasn’t already been accepted by the SBA as a sole-source 8(a) award.” Contracts that are at or below $250,000 are automatically set aside for small businesses and may be set aside for programs like 8(a) as well, so long as they meet the above requirements.
To use sole-source contracts, the contracting officer must determine that the contractor is responsible, the contract can be awarded for a fair market price, and “[t]he government estimate doesn’t exceed $7 million for manufacturing requirements or $4.5 million for all other requirements.” In either scenario, contracting officers must explain their rationale for using a sole-source or set-aside contract. In fiscal year 2020, “8(a) firms were awarded $34.0 billion in federal contracts, including $9.3 billion in 8(a) set-aside awards and $11.1 billion in 8(a) sole-source awards.”
Other small businesses in certain socioeconomic categories are permitted to bid on set-aside contracts alike the 8(a) program, such as HUBZone, Women-Owned Small Businesses, and Service-Disabled Veteran-Owned Businesses. Currently, these programs do not permit nonprofit participation because such entities are not “organized for profit.”
V. Analysis: Addressing the Implementation of Price Competition
As addressed throughout this Note, the purpose of the AbilityOne program is to serve individuals who are blind and/or have significant disabilities. As noted in the Melwood case and by other commentators, the inclusion of price competition may very well contravene the purpose of the JWOD Act, subvert funding from other valuable disability programs, and/or lower the number of those with “significant disabilities” who are employed. These consequences are more likely to affect smaller NPAs that are unable to compete with the prices offered by larger NPAs. This Note strongly opposes the imposition of price competition in the AbilityOne program but offers a solution with the understanding that this change will, nonetheless, occur.
Based on Congress’s intent to accommodate those with disabilities and the COFC’s interpretation of the JWOD Act in Melwood, this Note suggests that the AbilityOne Commission adopt a program like the 8(a) program for small NPAs. This program would be similar to the 8(a) program in that it would provide sole-source and set-aside contracts, but the criteria for qualification will differ. To assess the merits of such a solution, we must first outline its structure.
A. The Structure of the Small NPA Program
To qualify for the small NPA program, NPAs should first submit social impact proposals that include their employees, size, and nonprofit’s net worth. Further, as the 898 Panel recommended, the social-impact proposal should include the NPA’s “percentage of disabled labor hours, Quality Work Environment (QWE) certification, mentorship program participation . . . teaming opportunities, contributions to the community, and the quality of the employment of individuals with disabilities.” To encourage community outreach and aid, these factors should be considered in a manner that tilts the analysis in favor of awarding the NPA small NPA status if it has a higher than required percentage of disabled labor hours, a Quality Work Environment certification, mentorship program participation, teaming opportunities, contributions to the community, and/or offers of quality employment to individuals with disabilities. NPAs should also be encouraged to submit a cost-benefit analysis of how price competition would impact their operations.
After analyzing the submitted social impact proposals, the AbilityOne Commission should assess whether the nonprofit should be afforded small NPA status. Such analysis should focus on whether, because of its size and composition, the NPA would be unable to offer the same prices as a larger NPA and whether, to have a competitive proposal, it would be forced to subvert funding from other valuable programs and/or decrease employment.
Similar to the SBA’s 8(a) program, the Commission could require the CNAs, SourceAmerica and NIB to ensure that a percentage of AbilityOne contracts go to small NPAs. Thus, to meet this goal, the Commission could set aside or sole-source certain AbilityOne contracts for small NPAs. The Commission would be statutorily permitted to use this format because, as aforementioned, AbilityOne contracts are considered other than competitive.
Like the 8(a) program, the Commission could establish a dollar threshold that, if a contract estimate is at or below, the contract is automatically set aside for small NPAs. Since the AbilityOne Commission has stated that all non-DoD contracts that have an annual valuation at or above $10 million and all DoD contracts that have an annual valuation at or above $50 million may be subject to price competition, the contracts that fall below that amount could automatically be set aside for small NPAs. Further, so long as a contract does not exceed a certain dollar threshold, there is a reasonable expectation that two or more qualified small NPAs will submit offers, that the contract was not already devised to a sole source, and that a fair market price can be established, a CNA should be able to set aside such contract to meet the small-NPA percentage requirement.
Similarly, the Commission can implement sole-source contracts. Like the 8(a) program, this could only be used if the CNA determines the NPA to be responsible, the contract does not exceed a certain dollar threshold, and a reasonable expectation exists that a fair market price can be established. For both set-aside and sole-source contracts, the Commission, like the SBA, can mandate that each time a CNA attempts to use them, it provide a detailed rationale for the Commission to review.
B. The Merits of the Small NPA Program
Programs like the 8(a) program have been criticized in that they prohibit full and open competition or may be propping up small businesses that are destined to fail. While it is true that socioeconomic programs frustrate full and open competition, Congress has deemed AbilityOne Contracts other than competitive. The purpose of the program has been to encourage employment and resources for persons with disabilities, a premise that Congress believed would have been frustrated with the inclusion of full and open competition. Thus, creating the small NPA program would not frustrate, but rather fulfill, Congress’s social mission to “level [the] playing field” the same way that it has for small businesses.
Furthermore, NPAs within the AbilityOne program rely on profit from AbilityOne contracts to fund services for individuals with disabilities. For example, Melwood, an aforementioned NPA that relies on AbilityOne funding, provides camps, equestrian activities, training programs, retreats, etc. to individuals with disabilities. These NPAs contribute invaluable social, vocational, recreational, and educational services to their communities which are, in turn, reliant on them. Thus, in consideration of Congress’s ultimate mission to aid individuals with disabilities, it is important to ensure that these nonprofits retain funding through the AbilityOne program.
Moreover, small NPAs like Employment Horizon are often dependent on income from even one contract. Thus, the AbilityOne Commission, through the small NPA program, could ascertain criteria that must occur before a deauthorization, a competitive distribution, or an impasse of bilateral negotiations occurs. Doing so would protect small NPAs from arbitrary or baseless reallocations and detrimental deauthorizations.
Additionally, the AbilityOne Commission could use the small NPA program to allocate resources to small NPAs in need. In its final report, the 898 Panel noted that “[m]ost of the smaller NPAs do not have sufficient training for personnel in order to establish a formal training, certification, and validation program,” which the Commission could aid. This program would benefit the Commission by clearly identifying which NPAs require additional assistance.
Lastly, the small NPA program could increase involvement in the AbilityOne Program. In its final report, one of the 898 Panel’s goals was to “[c]reate incentives for inclusion and mentoring of smaller NPAs,” which seemingly acknowledged the decreasing participation in the program. In 2019, there were more than 550 participating NPAs, whereas today, the AbilityOne Commission cites the number as around 420. One NPA stated: “What does [the decreasing amount of NPA participation] tell us? I know that this is not decreasing because people with significant disabilities do not need the help of the AbilityOne program any longer.” Creating a small NPA classification within the AbilityOne program would incentivize small nonprofits to join the program, thus creating more job opportunities for individuals with disabilities.
VI. Conclusion
The implementation of price competition in the AbilityOne program is likely to frustrate small NPAs that will be unable to offer the same prices as their larger counterparts. If smaller NPAs nonetheless choose to remain in the program, they will likely be forced to decrease employment or subvert their funding from other invaluable services to offer competitive prices. To prevent this result, the AbilityOne Commission should create a small NPA sector within the AbilityOne program. This program would retain the funding necessary for small NPAs to provide their services to their communities while maintaining their participation in the AbilityOne program. It would also incentivize more nonprofits to join the program, especially because of the additional resources and protections that would be available. Most importantly, adopting a small NPA program would retain and increase the vocational, social, recreational, and educational opportunities available for individuals with disabilities in America.
