Proposed Rule2023-04939
Supporting Competition in the AbilityOne Program
Primary source
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Published
March 13, 2023
Issuing agencies
Committee for Purchase From People Who Are Blind or Severely Disabled
Abstract
The Committee for Purchase From People Who Are Blind or Severely Disabled (Committee), operating as the U.S. AbilityOne Commission (Commission), proposes to amend the Commission's regulations to incorporate specific recommendations from the "Panel on Department of Defense and AbilityOne Contracting Oversight, Accountability, and Integrity" (the Panel) review mandated by section 898 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017. The mission of the Panel, in part, was to assess the overall effectiveness and internal controls of the AbilityOne Program related to Department of Defense (DoD) contracts and provide recommendations for changes in business practices. Although the Panel focused on DoD-related procurements, the Commission's proposed revisions will apply to all Procurement List (PL) additions. The proposed revisions will clarify the Commission's authority to consider different pricing methodologies in establishing the Fair Market Price (FMP) for PL additions and changes to the FMP; better define the parameters for conducting fair and equitable competitive allocations amongst multiple qualified Nonprofit Agencies (NPAs); and clarify the responsibilities and procedures associated with authorizing and deauthorizing NPAs.
Full Text
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[Federal Register Volume 88, Number 48 (Monday, March 13, 2023)]
[Proposed Rules]
[Pages 15360-15368]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-04939]
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COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR SEVERELY DISABLED
41 CFR Parts 51-2, 51-3, and 51-5
RIN 3037-AA14
Supporting Competition in the AbilityOne Program
AGENCY: Committee for Purchase From People Who Are Blind or Severely
Disabled.
ACTION: Notice of proposed rulemaking (NPRM).
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SUMMARY: The Committee for Purchase From People Who Are Blind or
Severely Disabled (Committee), operating as the U.S. AbilityOne
Commission (Commission), proposes to amend the Commission's regulations
to incorporate specific recommendations from the ``Panel on Department
of Defense and AbilityOne Contracting Oversight, Accountability, and
Integrity'' (the Panel) review mandated by section 898 of the National
Defense Authorization Act (NDAA) for Fiscal Year 2017. The mission of
the Panel, in part, was to assess the overall effectiveness and
internal controls of the AbilityOne Program related to Department of
Defense (DoD) contracts and provide recommendations for changes in
business practices. Although the Panel focused on DoD-related
procurements, the Commission's proposed revisions will apply to all
Procurement List (PL) additions. The proposed revisions will clarify
the Commission's authority to consider different pricing methodologies
in establishing the Fair Market Price (FMP) for PL additions and
changes to the FMP; better define the parameters for conducting fair
and equitable competitive allocations amongst multiple qualified
Nonprofit Agencies (NPAs); and clarify the responsibilities and
procedures associated with authorizing and deauthorizing NPAs.
DATES: The Commission must receive comments on these proposed revisions
no later than May 11, 2023.
ADDRESSES: You may submit your comments, identified by ``RIN 3037-
AA14,'' by using the following method: internet--Federal eRulemaking
Portal. Electronic comments may be submitted through <a href="https://www.regulations.gov">https://www.regulations.gov</a>. To locate the proposed rule, use RIN 3037-AA14.
Follow the instructions for submitting comments. Please be advised that
comments received will be posted without change to <a href="https://www.regulations.gov">https://www.regulations.gov</a>, including any personal information provided.
Accessible Format: Individuals with disabilities can obtain this
document, as well as the comments or other documents in the public
rulemaking record for the proposed regulations, in an alternative
accessible format by contacting the individual listed in the FOR
FURTHER INFORMATION CONTACT section of this document.
Electronic Access to This Document: The official version of this
document is the document published in the Federal Register. You may
access the official edition of the Federal Register and the Code of
Federal Regulations at <a href="http://www.govinfo.gov">www.govinfo.gov</a>. You may also access
[[Page 15361]]
documents of Commission published in the Federal Register by using the
article search feature at: <a href="http://www.federalregister.gov">www.federalregister.gov</a>.
FOR FURTHER INFORMATION CONTACT: Cassandra Assefa, Regulatory and
Policy Attorney, Office of General Counsel, U.S. AbilityOne Commission,
355 E Street SW, Suite 325, Washington, DC 20024; telephone: (202) 430-
9886; email: <a href="/cdn-cgi/l/email-protection#d6b5b7a5a5b3b0b796b7b4bfbabfa2afb9b8b3f8b1b9a0"><span class="__cf_email__" data-cfemail="9efdffededfbf8ffdefffcf7f2f7eae7f1f0fbb0f9f1e8">[email protected]</span></a>. If you are deaf, hard of hearing,
or have a speech disability and wish to access telecommunications relay
services, please dial 7-1-1.
During and after the comment period, you may inspect all public
comments about the proposed regulations by accessing <a href="http://Regulations.gov">Regulations.gov</a>.
SUPPLEMENTARY INFORMATION:
I. Background
A. The AbilityOne Program
The Commission is an independent agency of the Federal Government
that consists of a 15-member, Presidentially- appointed Commission, and
a career civil service staff. The 15-member Commission consists of four
(4) private citizen members and 11 other senior-level government
employees from various cabinet-level departments of the Government. The
Commission administers the AbilityOne Program (AbilityOne or the
Program) authorized by the Javits-Wagner-O'Day Act (JWOD Act) and its
implementing regulations.\1\
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\1\ 41 U.S.C. chapter 85, Committee For Purchase From People Who
Are Blind or Severely Disabled and Code of Federal Regulations,
title 41, chapter 51, Committee for Purchase From People Who Are
Blind or Severely Disabled.
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The JWOD Act directs the Commission to designate Central Nonprofits
Agencies (CNAs) to facilitate, by direct allocation, subcontract, or
any other means, the distribution of government orders of commodities
\2\ and services among NPAs employing individuals who are blind or have
significant disabilities. The Commission has designated National
Industries for the Blind (NIB), for NPAs that employ individuals who
are blind, and SourceAmerica, for NPAs that employ individuals with
other significant disabilities, as the national nonprofit organizations
that perform the CNA roles and responsibilities.\3\ Each CNA has a
Cooperative Agreement to govern its relationship with the Commission
and to establish measurable performance metrics for each CNA.\4\
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\2\ The Commission recognizes that the Federal Acquisition
Regulation (FAR) uses the term ``products.'' However,
``commodity(ies)'' is more consistent with the Commission's existing
regulations (41 CFR chapter 51).
\3\ 41 CFR 51-3.1.
\4\ Agreements can be found at <a href="https://www.abilityone.gov/laws,_regulations_and_policy/foia_reading_room.html">https://www.abilityone.gov/laws,_regulations_and_policy/foia_reading_room.html</a>.
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The JWOD Act authorizes the Commission to determine which
commodities or services are suitable for sole-source procurement by the
Federal Government and placed on the PL. 41 U.S.C. 8503. Once an item
is placed on the PL, only the NPA sources authorized by the Commission
may supply the commodity or service to Federal agencies. 41 CFR 51-
1.2(a). The significance of being a mandatory source for items on the
PL is two-fold. First, Federal agencies do not have to follow normal
competitive procedures when acquiring items on the PL. Instead, Federal
agencies are required to procure the listed item from the qualified
NPAs (and only those NPAs) identified on the PL. Second, a PL addition
provides a steady stream of income for NPAs and a catalyst for job
creation for individuals who are blind or have other significant
disabilities. Currently, the PL generates approximately $4 billion in
revenue for about 450 NPAs in the AbilityOne Program, creating or
sustaining approximately 40,000 jobs for individuals who are blind or
have other significant disabilities.
B. The 898 Panel
Section 898 of the Fiscal Year 2017 NDAA \5\ directed the Secretary
of Defense to establish a panel of senior level representatives from
DoD agencies, the Commission, and other Federal agencies and
organizations to address the effectiveness and internal controls of the
Program related to DoD contracts.\6\ The primary mission of the Panel
was to identify vulnerabilities and opportunities in DoD contracting
with the AbilityOne Program and, at a minimum, to recommend
improvements in the oversight, accountability, and integrity of the
Program. The Panel established seven subcommittees to fulfill its
duties. The Panel was required to provide annual reports to Congress on
its activities, starting no later than September 30, 2017, and annually
thereafter for the next three years and a final report in 2022.\7\ Of
specific relevance to the proposed rule, the Panel formed an
Acquisition and Procurement and U.S. AbilityOne Contracting Oversight
subcommittee (also known as Subcommittee Six) to address procurement-
specific concerns.
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\5\ Pub. L. 114-328, sec. 898 (2016).
\6\ The Panel consisted of representatives of the Office of the
Secretary of Defense and the DoD Inspector General, the U.S.
AbilityOne Commission, and the U.S. AbilityOne Commission Inspector
General, as statutory members. The Panel's membership also consisted
of senior leaders and representatives from the military service
branches, Department of Justice, Department of Veterans Affairs,
Department of Labor, Department of Education, the General Services
Administration, and the Defense Acquisition University.
\7\ Each report can be found at <a href="https://www.acq.osd.mil/asda/dpc/cp/policy/abilityone.html">https://www.acq.osd.mil/asda/dpc/cp/policy/abilityone.html</a>.
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Before the Panel's sunset in December 2021, Subcommittee Six made
eleven recommendations. The Commission implemented several of those
recommendations. The following four recommended actions are now being
proposed through this notice of proposed rulemaking (NPRM):
<bullet> Require CNAs to consider price, technical capability, and
past performance when making an NPA allocation decision.
<bullet> Establish policy and business rules for competition and
re-competition of the PL within the AbilityOne Program.
<bullet> Revise 41 CFR part 51 to include information regarding
deauthorization of NPAs as the authorized source on the PL.
<bullet> Protect, to the maximum extent practicable, the jobs of
incumbent employees who are blind or have other significant
disabilities if an NPA is deauthorized and its work is reallocated
within the AbilityOne.
The Commission found significant utility in the Panel's work and
agreed with many of its recommendations. For instance, even though the
Panel's efforts were focused on the interplay between AbilityOne and
DoD procurements, the Commission recognized that many of the Panel's
findings applied to the entire Program. Specifically, the Panel raised
numerous concerns about the lack of transparency and perceptions of an
unequal playing field in the NPA authorization process. The Commission
acknowledges that the process to recommend and authorize an NPA may
appear opaque from an outsider perspective. These proposed regulatory
changes make affirmative steps toward clarifying the process and
modifying the NPA selection process with the goal of best meeting the
needs of the Federal customer.
In June 2022, the Commission issued its Strategic Plan for fiscal
year (FY) 2022-2026. The document incorporated much of the work of the
Panel and serves as a policy road map for the Program over the next
five years. The plan is anchored by four Strategic Objectives:
<bullet> Expand competitive integrated employment (CIE) for
individuals who are blind or have other significant disabilities.
[[Page 15362]]
<bullet> Identify, publicize, and support the increase of good jobs
and optimal jobs in the AbilityOne Program.
<bullet> Ensure effective governance across the AbilityOne Program.
<bullet> Partner with Federal agencies and AbilityOne stakeholders
to increase and improve CIE opportunities for individuals who are blind
or have other significant disabilities.
These four objectives represent a deliberate shift to align the
Program with contemporary disability policy and modern business
practices.\8\ Objective III, Outcome Goal 2, describes how the
Commission will ``support the mission by providing best value through
contract performance.'' This goal is consistent with the Panel's work
and the purpose of the proposed rules described herein.
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\8\ AbilityOne Strategic Plan for FY 2022-2026. <a href="https://www.abilityone.gov/commission/strategicplan.html">https://www.abilityone.gov/commission/strategicplan.html</a>.
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II. Need for Rulemaking
Every item procured on behalf of the Federal Government originates
as a requirement for a Federal agency. Under the Program's current
framework, CNAs are responsible for identifying which requirements are
``suitable'' for the Program and making a recommendation to the
Commission for addition to the PL. A suitability recommendation also
includes identifying qualified NPAs capable of serving as authorized
sources.
In most cases, the CNAs work with Federal agencies to determine
which requirements are best suited for a PL addition given the agency's
needs, available funding, and time frame. This initial identification
can be made by the Federal agency or by the CNA in search of potential
opportunities. After the parties agree that a requirement may be
suitable for a PL addition, the CNA issues an opportunity notice (ON)
to its network of NPAs. The ON acts as a solicitation to the NPA
community, which describes, at a minimum, the requirements, necessary
NPA qualifications, the period of performance, and any other special
consideration established by the CNA or Commission. If multiple NPAs
respond to the ON, the responsible CNA will engage in a NPA selection
process to determine which NPA can offer the best overall solution to
the Federal agency. NPA selection normally consists of an evaluation of
each NPA's technical capabilities and past performance information.
Price, however, is never a consideration at this pre-selection stage.
After the CNA identifies the most qualified NPA, it provides a
recommendation to the Commission along with all other information
pertaining to the overall suitability of the proposed PL addition and
enough supporting data to substantiate an initial FMP. The FMP data is
generally the byproduct of bilateral negotiations between the NPA and
the Federal agency. The Commission staff will often scrutinize the
proposed FMP to determine if it is, in fact, a fair price. The FMP is
not the lowest or the highest price that could be paid. Instead, the
FMP is a reasonable price based on the needs of the Federal agency,
market conditions, and the quality of the goods and/or services being
provided by the NPA. If the Commission staff concurs with the FMP, the
CNA's recommendation and proposed FMP is forwarded to the Commissioners
for a vote. If a majority of the Commissioners concur with the
recommendation, the suitability determination is affirmed and the
initial FMP is established. The Commission then adds the requirement to
the PL and authorizes a single NPA to serve as the mandatory source to
receive orders from Federal customers. Once the requirement is on the
PL, it will normally remain there until no Federal agency needs the
requirement or there is no NPA in the Program capable of providing the
commodity or service. If, however, there is an ongoing need, Federal
agencies must procure the commodity or service from the NPA authorized
by the Commission.
The proposed regulatory changes leave the existing NPA
recommendation and allocation framework in place, with three modest
modifications. First, Sec. 51-2.7 (fair market price) proposes to
clarify the Commission's authority to use price competition as a means
of determining, establishing, and changing the initial FMP. Second,
Sec. 51-3.4 (distribution of orders) proposes to provide a mechanism
for Federal agencies to increase their involvement in the allocation
process by requesting a competitive distribution. A request for a
competitive distribution means the responsible CNA recommends, and the
Commission approves, at least two qualified NPAs to function as
authorized sources. After which, an allocation would then be issued on
a competitive basis to the NPA that can provide the ``best overall
solution'' to the Federal customer. Lastly, proposed Sec. 51-5.2
(mandatory source requirement) clarifies the Commission's authority to
authorize and deauthorize NPAs and adds additional protections to
employees when work is transferred between NPAs.\9\ These changes are
intended to modernize the Program and to better align it with the needs
of the Federal customer.
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\9\ The Commission acknowledges the Panel's additional
recommendations; however, this proposed rule is intended only to
address the Panel's recommendation related to competition and is not
meant to address all recommendations.
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III. Specific Proposed Changes to 41 CFR Parts 51-2, 51-3, and 51-5
A. Section 51-2.7 (Fair market price). Section 8503(b) of the JWOD
Act states that the Commission ``shall determine the fair market price
of commodities and services contained on the [PL] that are offered for
sale to the Federal Government by a qualified nonprofit agency for the
blind or a qualified nonprofit agency for other severely disabled.'' As
noted above, the current process only calls for considering an NPA's
Program-specific qualifications, technical rating, and past
performance. Price, however, is only considered and negotiated after an
NPA has been selected. 41 CFR 51-2.7. This is prudent in many
situations, especially when there is sufficient market data to validate
the sufficiency of those negotiations. However, in some instances, the
complexity, varied market conditions, and/or uniqueness of the
requirement make bilateral negotiations less feasible for establishing
the FMP. In those instances, using competitive market forces as a
factor for establishing the FMP would be more beneficial to the
Commission in meeting its statutory obligation.
To test the efficiency of considering price on a competitive basis,
the Commission pilot-tested two procurements that included price in the
NPA recommendation process. The pilot tests demonstrated that including
price as a factor, coupled with a ``customer-focused'' selection ethos,
can provide promising results for the Federal customer and the
AbilityOne Program.\10\ It also provided the Commission a reliable
baseline on which the Commission could rely in establishing the FMP.
The inclusion of price as an evaluation factor was not used as an
attempt by the Commission to prioritize price over all other factors.
Instead, price was subordinate to performance history to emphasize the
Federal agency's desire to identify NPAs with a strong performance
record, and a commitment to customer satisfaction. Again, a fair market
price is not the lowest price or the highest price the market will
bear, but rather the fairest price supported by adequate research and
market considerations.
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\10\ Information on file at the AbilityOne Commission (available
upon request).
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Current Regulation: The Commission's current regulations
[[Page 15363]]
permit bilateral price negotiations between the NPA and contracting
agency rather than leveraging competitive market forces. The regulation
states, in part, that ``other methodologies'' (like price competition)
can be used, ``if agreed to by the negotiating parties.'' The
regulation also states, in relevant part, that ``[p]rices are revised
in accordance with changing market conditions which include
negotiations between contracting activities and producing nonprofit
agencies, assisted by central nonprofit agencies, or the use of
economic indices, changes in nonprofit agency costs, or other
methodologies permitted under these procedures'' (Sec. 51.2-7(b)) and
that ``recommendations for initial fair market prices, or changes
thereto, shall be submitted jointly by the contracting activities and
nonprofit agencies concerned to the appropriate central nonprofit
agency'' (Sec. 51-2.7(c)).
Rationale for Proposed Change: The Commission is concerned that the
provision ``if agreed to by the negotiating parties'' in Sec. 51.2-
7(a) could be misinterpreted to mean that the Commission cannot
consider other methodologies (such as price competition) in
establishing the initial FMP unless the NPA and contracting activity
also agree. Such a reading is not consistent with the Commission's
statutory authority to establish the FMP or the general thrust of the
regulation.\11\ In fact, a recent decision at the Court of Federal
Claims (COFC) held the following:
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\11\ See, e.g., Melwood Horticultural Training Center, Inc. v.
United States, 153 Fed. Cl. 723, 737 (2021).
This is not to say that introducing a price component can never
be utilized in AbilityOne procurements, nor that use of competitive
pricing may not be advantageous to the United States. On the
contrary, the Court only holds that the agency may not depart from
its enabling statutes and its own regulations by adopting policies
that conflict with the statutory and regulatory scheme.\12\
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\12\ Melwood Horticultural Training Center, Inc. v. United
States, 153 Fed. Cl. 723, 737 (2021).
The COFC found that the price component at issue in this case
conflicted with the ``collaborative pricing process'' contemplated
under 41 CFR 51-2.7 (negotiations with the nonprofit contractor, the
contracting activity, and the central nonprofit agency). The COFC added
that ``other methodologies'' (aside from negotiations) are permissible,
but only if the parties agree to a deviation from this process. Sec.
51-2.7(a). The JWOD Act, however, unambiguously authorizes the
Commission to establish the FMP and to revise it ``in accordance with
changing market conditions.'' \13\ As such, the Commission believes it
has the discretion to use the most appropriate pricing methodology when
it initially establishes or changes the FMP and is not limited solely
to an agreement of the negotiating parties as interpreted by the Court.
The proposed changes to Sec. 51-2.7 are intended to harmonize the
statute and regulation to eliminate any ambiguity surrounding the
Commission's authority to establish the FMP, by making it clear that an
agreement between the parties is not required for the Commission to
utilize other pricing methodologies (including price competition) to
establish or change the FMP.
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\13\ 41 U.S.C. 8503(b). It should be noted that a
``collaborative pricing process'' is not contemplated under the
statute. The authority to establish the FMP rests solely with the
Commission.
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Proposed Regulation: The proposed changes to Sec. 51-2.7 eliminate
the ambiguity surrounding the Commission's authority to establish the
FMP. The proposed regulation amends paragraph (a) by removing ``if
agreed to by the negotiating parties'' and replacing the existing text
with ``the price can be based on market research, comparing the
previous price paid, price competition, or any other methodology
specified in Committee policies and procedures.'' This change makes
clear that agreement by the parties is not required in establishing the
FMP and adds examples of other bases upon which FMP can be based. The
proposed regulation also amends paragraph (b) to state that the FMP may
be revised in accordance with methodologies established by the
Committee, which include the addition of price competition. Lastly, the
proposed rule removes the language currently at Sec. 51-2.7(c)
requiring the initial FMP, or changes thereto, to be submitted jointly
by contracting activities and NPAs to the CNA (Sec. 51-2.7(c)). The
contracting activities and NPAs may still submit prices jointly as a
matter of Commission policy, but such a requirement would only be
applicable if bilateral negotiations is the method the Commission
chooses to use to determine the FMP.
B. Section 51-3.4 (Distribution of orders)--CNAs have explicit
statutory authority ``to facilitate the distribution, by direct
allocation, subcontract, or any other means, of orders of the Federal
Government for commodities and services on the procurement list among
qualified nonprofit agencies for the blind or qualified nonprofit
agencies for other severely disabled.'' 41 U.S.C. 8503(c). A
distribution can only occur, however, after the Commission has
authorized at least one NPA to serve as a mandatory source.
Current Regulation: The current regulation states that the CNA
``shall distribute orders from the government only to nonprofit
agencies which the Committee has approved,'' and, ``[w]hen the
Committee has approved two or more nonprofit agencies to furnish a
specific commodity or service,'' the CNA shall distribute the order
``in a fair and equitable manner.''
Rationale for Proposed Change: Under the current structure, the
CNAs typically recommend a single NPA to provide a commodity or service
to the Federal customer. The CNAs consider numerous factors before
recommending an NPA to the Commission, but the priorities of the
Federal customer aren't always effectively articulated throughout the
recommendation process.\14\ Nevertheless, once that recommendation is
made and the Commission authorizes the recommended NPA to serve as a
mandatory source, the CNA must distribute orders to that NPA and only
that NPA as long as the commodity or service remains on the PL. Since
NPAs in the Program vary in sophistication and technical expertise,
where two or more NPAs have been approved to provide a service, the
competitive distribution option will be limited to only services
contracts where the total contract value exceeds $10 million \15\ or in
instances where bilateral negotiations have failed. The proposed
language emphasizes the priorities of the Federal customer for specific
allocations and creates a framework for the Federal agency to utilize
the competitive distribution option for any service contract with a
total contract value exceeding $10 million. This rule proposes to allow
the Commission to opt for a competitive allocation for services
contracts with a total contract value at or below $10 million due to an
impasse in bilateral negotiations regarding price. It is important to
emphasize that the competitive distribution option may only be utilized
for services contracts, not contracts for commodities. These changes
are intended to provide all Federal agencies access to competitive
distributions while also allowing the Commission to have the
flexibility to approve requests and tailor execution consistent with
the Commission's available resources,
[[Page 15364]]
personnel, and the needs of the Program.
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\14\ Supra note 5.
\15\ Total contract value consists of the base period plus all
option periods.
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Proposed Regulation: The process for recommending, authorizing, and
distributing orders to NPAs will continue to be done in a ``fair and
equitable manner,'' but each allocation will be made to the NPA that
provides the ``best overall solution'' for the Federal customer. This
rule proposes to amend Sec. 51-3.4 to impose new requirements as to
how a CNA must distribute orders for certain services contracts among
two or more approved NPAs. First, this rule proposes to remove the
language requiring CNAs to distribute orders to NPAs in a ``fair and
equitable manner'' and replace the existing text with ``in a manner
that provides the best overall solution for the Federal customer.''
This rule also proposes to add new paragraphs (b), (c), (d), and (e),
which impose additional requirements for new and existing PL additions.
For service requirements 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 (proposed Sec. 51-3.4(b)).
For service requirements equal to or less than $10 million in total
contract value, the Commission may direct a competitive distribution
for an existing PL service requirement in instances where good faith
sole source negotiations have failed to produce an agreeable price
(proposed Sec. 51-3.4(c)). Finally, this rule also proposes to provide
guidance for NPA selection and the Federal customer's obligations in
requesting a competitive distribution (Sec. 51-3.4(d)) and establishes
a framework for resolving a dispute arising out of a competitive
distribution decision (Sec. 51-3.4(e)).
C. Section 51-5.2 (Mandatory source requirement)--The Commission is
responsible for placing and removing items from the PL and authorizing
and deauthorizing qualified NPAs to serve as mandatory sources. 41 CFR
51-2.2(b).
Current Regulation: The current regulation states, in relevant
part, that ``[n]onprofit agencies designated by the Committee are
mandatory sources of supply for all entities of the Government for
commodities and services included on the Procurement List'' (Sec. 51-
5.2(a)), ``[p]urchases of commodities on the Procurement List by
entities of the Government shall be made from sources authorized by the
Committee'' (Sec. 51-5.2(b)), ``[c]ontracting activities shall require
other persons providing commodities which are on the Procurement List
to entities of the Government by contract to order these commodities
from the sources authorized by the Committee'' (Sec. 51-5.2(c)), and
``[c]ontracting activities procuring services which have included
within them services on the Procurement List shall require their
contractors for the larger service requirement to procure the included
Procurement List services from nonprofit agencies designated by the
Committee'' (Sec. 51-5.2(e)).
Rationale for Proposed Regulation: Before an item is added to the
PL, the Commission must find that the commodity or service is
``suitable'' for addition. 41 CFR 51-2.4. The Commission's regulations
require that the suitability of a commodity or service be evaluated on
four criteria: (1) employment potential, (2) the qualifications of the
proposed NPA(s), (3) the capability of the proposed NPA(s), and (4) the
level of impact on the current contractor. 41 CFR 51-2.4(a). Under the
Commission's regulations, the suitability determination ``approves'' a
commodity or service for PL addition and ``authorizes'' at least one
NPA to serve as a mandatory source. The current regulation at Sec. 51-
5.2 does not explicitly assert the Commission's authority to authorize
or deauthorize an NPA.\16\ It is also silent on an NPA's
responsibilities for the incumbent workforce when work is transferred
from one NPA to another. This rule proposes changes to Sec. 51-5.2 to
clarify the Commission's authority to authorize and deauthorize NPAs
and add additional protections for incumbent employees when work is
transferred between NPAs.
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\16\ 41 CFR 51-2.2(b) provides that the Committee has the power
and responsibility to authorize and deauthorize central nonprofit
agencies and nonprofit agencies to accept orders from contracting
activities for the furnishing of specific commodities and services
on the PL.
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Proposed Regulation: The proposed changes clarify the Commission's
authority to authorize and deauthorize NPAs to serve as mandatory
sources and to transfer work within the Program. The Commission
proposes to amend the text of paragraph (a) to state that the Committee
may authorize one or more NPAs to provide a requirement on the PL; that
NPAs authorized as mandatory sources remain on the PL until the NPA has
been deauthorized by the Committee; and that CNAs may allocate to one
or more NPAs a commodity or service on the PL. This rule also proposes
to amend paragraph (b) to state that the Committee will authorize the
most capable NPA as a mandatory source and paragraph (c) to clarify
that contracting activities shall require that their contract with
others, such as prime vendors, providing commodities already on the PL
to the Federal agency, must order these commodities from Committee
authorized sources. We also propose to change the language in paragraph
(e) to state that contracting activities procuring services must
procure included PL commodities in addition to services from the NPA
``authorized'' in lieu of ``designated'' by the Committee. Lastly, the
proposed changes also include a new paragraph that includes an
affirmative requirement to protect and retain employees who are blind
or have other significant disabilities when a project is transferred to
another NPA within the Program (proposed Sec. 51-5.2(f)).
VI. Regulatory Procedures
A. Applicability of E.O. 12866 and 13563
Executive Orders (E.O.) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
The Office of Information and Regulatory Affairs in the Office of
Management and Budget has determined that this will be a significant
regulatory action and, therefore, is subject to review under section
6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30,
1993.
B. Expected Impact of Proposed Rule
While the proposed changes are applicable to all NPAs, the
Commission estimates that they would have the most impact on
approximately 27 percent or 122 of the 450 NPAs currently qualified to
participate in the Program.\17\ This group of NPAs performs
approximately 346 services contracts, which total an annual revenue of
roughly $3.07 billion.\18\ Half of that amount ($1.63 billion), is
concentrated amongst 23 qualified NPAs.\19\ In addition, these rule
[[Page 15365]]
changes would apply equally across all Federal agencies, but the
Department of Defense (DoD) would be impacted the most, accounting for
approximately 79 percent of the $3.07 billion ($2.41 billion) in
AbilityOne service contracts annually.
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\17\ This number is based on the total number of NPAs within the
Program that have at least one contract that exceeds $10 million in
total contract value. These estimates do not account for impasse
occurrences which historically are rare with an average of two each
year based on data from the last five years. Information on file at
the AbilityOne Commission (available upon request).
\18\ Information on file at the AbilityOne Commission (available
upon request).
\19\ Id.
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Lastly, service contracts are typically renewed once every five
years. This means that, on average, up to one-fifth of all applicable
AbilityOne service contracts (69 per year) would be subject to the
proposed changes in any given year. In terms of dollar amount, this
would subject approximately $614 million in contract dollars to a
possible competitive distribution on an annualized basis.\20\ The exact
amount for any given year would be based on the number of requests
received and approved by the Commission.
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\20\ Based on an extrapolation of available data and estimated
contract expiration dates, the number of possible requests would be
28, 69, 99, 79, and 69 for FY 2021, FY 2022, FY 2023, FY 2024, and
FY 2025, respectively. The Commission believes, for purposes of this
proposed rule, using the average number is appropriate.
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Benefits of Proposed Rule <SUP>21</SUP>
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\21\ The changes discussed in this rulemaking are separate and
distinguishable, but collectively all three rules are designed to
enhance competition within the Program. The benefits in this section
address the impact on all three proposed changes collectively.
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Both CNAs already use a competitive approach when recommending NPAs
to the Commission to serve as mandatory sources for a vast majority of
new PL additions.\22\ The largest criticism to current practice is the
perceived lack of transparency in the NPA selection process, a
perception of NPA complacency after receiving an authorization, and the
inability to consider price on a competitive basis when selecting an
NPA.\23\ The proposed regulatory changes will directly address each
concern by providing greater customer involvement in NPA selection,
creating a mechanism to incentivize better performance, and encouraging
more competitive pricing.
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\22\ Supra note 12.
\23\ Available at, <a href="https://abilityone.oversight.gov/reports/2022/898-panel-issues-fourth-and-final-annual-report-congress">https://abilityone.oversight.gov/reports/2022/898-panel-issues-fourth-and-final-annual-report-congress</a>, pp
26-27.
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i. Increased Transparency--For PL additions of more than $10
million in total contract value, inclusive of the base period and all
options periods, the proposed changes provide Federal agencies the
option to request a competitive allocation. A significant component of
that request requires the Federal agency to state ``whether it will
provide resources to support the process.'' The Federal agency is not
required to provide resources, but the Commission has found great
utility in involving the Federal customer in assisting with evaluating
NPA technical capabilities, past performance, and pricing. In 2019 and
2021, the Commission conducted competitive NPA selection pilot tests,
leveraging the resources of the Federal agency's responsible
contracting activity.\24\ In both instances, the Federal agency
provided an invaluable mix of engagement and expertise throughout the
entire process. However, the ultimate decision for selecting the
servicing NPA always fell within the purview of the Commission's
authority and will remain within the purview of the Commission under
the proposed rule.
---------------------------------------------------------------------------
\24\ Information on file at the AbilityOne Commission (available
upon request).
---------------------------------------------------------------------------
ii. Incentivize Better Performance--The AbilityOne Program was
created to allow Federal agencies to issue orders on a sole-source
basis to qualified NPAs. The competitive procedures proposed herein
will not change that. In fact, service requirements below the threshold
will not be significantly impacted by the proposed changes and
commodities are not subject to the changes for competitive
distributions. However, NPAs involved in servicing higher dollar
requirements will have to be more responsive to market forces and
innovative practices to maintain its place as a mandatory source. The
Commission believes that the prospects of a competitive allocation
every five to ten years is an appropriate motivator.
The proposed rules also provide a CNA a more effective means for
replacing a poor performing NPA, without resorting to granting a
Federal agency a purchase exception to procure the requirement outside
the Program. Instead, the proposed changes will encourage CNAs to
identify as many capable NPAs as possible when a PL addition is
initially established. If, in the unlikely event, the originally
selected NPA falls well short of expectations, the responsible CNA can
make a re-allocation amongst the other authorized NPAs.
iii. More Competitive Pricing--The AbilityOne Program has been a
trusted source to Federal agencies since 1938. To remain a trusted
source, qualified NPAs must deliver high-quality commodities and
services in a timely manner at a competitive price. The two test pilots
completed in 2019 and 2021 provide a proof of concept to the potential
cost savings that might be generated through competition. The first
competitive pilot test was conducted for the Ft. Bliss Facilities
Support and Operations Services (FSOS) contract, initially valued at
$66.7 million per year and resulted in a contract award of $59.5
million per year, an annual savings of $7.2 million ($39.6 million over
the entire performance period) or a 12% reduction.\25\ The second pilot
test for the Ft. Meade Maintenance and Repair Services contract was
valued at $19.6 million per year. The new price would have been $16.8
million per year, an annual savings of $2.8 million ($14 million over
the entire performance period) or a 17% reduction.\26\ These results
suggest that price competition at the pre-selection stage, when
compared to bilateral negotiations after NPA selection, can have some
very tangible benefits to the Federal Government through cost savings.
---------------------------------------------------------------------------
\25\ Id.
\26\ Id.
---------------------------------------------------------------------------
Cost of Proposed Rule <SUP>27</SUP>
---------------------------------------------------------------------------
\27\ The changes discussed in this rule making are separate and
distinguishable, but collectively all three rules are designed to
enhance competition within the Program. The costs in this section
address the impact on all three proposed changes collectively.
---------------------------------------------------------------------------
The Commission believes that the potential costs from
implementation of the proposed changes are greatly outweighed by the
benefits to the NPA community, the CNAs, and the Federal Government.
i. Cost to NPAs--The Commission believes that the only additional
cost that might be attributed to these proposed rules for new PL
additions is the cost an NPA would incur if it is required to include
pricing information in its response to an ON. For existing
requirements, the only meaningful cost might be proposal preparation
cost and possible phase-out cost to the incumbent NPAs if they do not
receive a re-allocation after a competitive distribution and must
transfer the incumbent workforce to the new NPA.
a. New PL Additions Without an Incumbent NPA: When a CNA issues an
ON, NPAs are already required to prepare and submit a competitive
response. Responses will provide, at a minimum, information regarding
the NPA's qualifications, technical capabilities, and past performance
information. It does not, however, provide pricing until after the
field has been narrowed down to a single NPA. At that stage, the
successful NPA will enter bilateral price negotiations with the Federal
customer. Under the proposed rule Sec. 51-2.7(a), it is permissible to
include price as a factor as part of the ON. If price is used as a
factor, responding NPAs might incur some cost if required to include
pricing data in the initial response to the ON.
[[Page 15366]]
However, since each responding NPA is already on notice that pricing
information will be needed to ultimately secure a recommendation, this
change would only alter when the NPA must submit it and how it is used.
b. Existing PL Services with an Incumbent NPA: For existing service
requirements, the only meaningful cost might be proposal preparation
cost and possible phase-out expenses to the incumbent NPAs for the
approximately 346 service requirements potentially impacted by a
competitive distribution. Under current practice, an incumbent NPA will
generally only be displaced by another NPA if it cannot meet the
Government's requirements in a satisfactory manner. Otherwise, an NPA
will continue to serve as a mandatory source for the life of an
existing requirement. Under the proposed rule changes, a Federal agency
may request a re-allocation on a competitive basis for a service
requirement exceeding $10 million in total contract value, inclusive of
the base period and all option periods, or the Commission may direct a
competitive re-allocation in instances where bilateral negotiations
have failed. If the Commission approves the Federal agency's request
for a competitive re-allocation, or if the Commission directs
competitive re-allocation after an impasse in negotiations, the
incumbent may incur cost in preparing a competitive proposal. If it is
displaced, it may incur transition costs, but a vast majority of those
costs may be reimbursable under the existing Federal contract. A
displaced incumbent NPA would also lose the revenue from the lost
allocation. However, from a programmatic perspective, the revenue would
remain within the Program because the work would continue to be
performed by another qualified NPA. Secondly, proposed rule Sec. 51-
5.2(f) requires the losing and gaining NPAs to work together to ensure
that any adverse impacts on the incumbent workforce are mitigated to
the maximum extent practicable.
ii. Cost to CNAs--The most significant cost that the CNAs would
incur are the costs for the approximately 346 PL services that might be
selected for a price-inclusive competitive allocation. Of that number,
all but ten would fall to SourceAmerica, which has reported to the
Commission that it would need 14 full-time equivalents (FTEs) in
additional staff or $1.5 million annually to handle the potential
increase in workload. However, such costs assume that the Commission
would approve every eligible PL service for a competitive distribution.
As noted above, the discretionary nature of each request and the
Commission's discretion under the proposed rule to determine whether a
competitive distribution is appropriate provides the Commission the
flexibility to control the number of approved requests based on
resource availability.
While competitive distributions may be more resource intensive for
CNAs than the status quo, the potential additional costs to CNAs may be
offset by increased participation by the Federal customer. For
instance, during the competitive pilot for Fort Bliss, the Federal
customer provided no less than 7 FTEs of general staff and evaluation
support (i.e., technical evaluation, past performance, and pricing). In
any event, the Commission recognizes that competitive distributions
might be more resource intensive than the status quo, but many of those
costs will be offset by increased participation from the Federal
customer and improved customer satisfaction. Additionally, a price
impasse because of failed bilateral price negotiations could take
multiple bridge contracts and hundreds of additional man-hours to
establish the price for a follow-on contract. In those instances, a
competitive allocation would reduce the administrative burden for both
the CNA and Federal customers by allowing market conditions to be a
more determinative factor.
iii. Cost to Federal Customers--The Commission anticipates that the
cost to the Federal customer will vary depending on how much support it
provides to the Commission and the responsible CNA in carrying out a
competitive distribution. In most instances, the Federal customer will
be expected to provide personnel to assist with the technical
evaluation, past performance evaluation, and price analysis.
Additionally, each time an existing PL service requirement is re-
allocated, there may be some disruption to contract performance and
administrative cost associated with replacing an incumbent contractor.
However, this cost would only be incurred if the Federal customer
determines that a re-allocation is more advantageous to the Federal
Government than maintaining the status quo.\28\
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\28\ The cost will vary by Federal agency. The Commission will
have more information from the After Action Response (AAR) on the
Fort Bliss Competitive Pilot test. The results of the pilot will be
posted on our website and will also be available by request.
---------------------------------------------------------------------------
iv. Cost to the AbilityOne Commission--According to analysis
derived from the two pilot tests, the Commission would need to dedicate
additional FTEs consisting of a competition lead, additional attorney
advisors, a contract specialist, and several price analysts.\29\ Absent
additional personnel, the Commission would only be able to support a
small number of competitive distributions. The agency would need to
budget an additional $800,000-$1.2 million annually to account for the
personnel needed to support a competitive allocation for each PL
addition in excess of $10 million in total contract value.\30\ However,
the Commission will largely be able to mitigate additional cost in the
following ways:
---------------------------------------------------------------------------
\29\ Information on file at the AbilityOne Commission (available
upon request).
\30\ This estimate is based on hiring an additional 8-12 FTEs at
an average cost of $100K per person.
---------------------------------------------------------------------------
a. Limited Scope: The Section 898 Panel recommended that a
competitive process apply to those service requirements with an annual
value of $10 million per year. It also recommended that competitive
distributions be mandatory.\31\ The proposed rule changes allow for
competitive distributions on service contracts that are greater than
$10 million in total contract value or in instances where bilateral
negotiations have failed, and application of a competitive distribution
is not mandatory. The discretionary nature of competitive distributions
under the proposed rule provides the Commission the flexibility to
approve requests and tailor execution consistent with the Commission's
available resources, personnel, and the needs of the Program.
---------------------------------------------------------------------------
\31\ Supra note 18.
---------------------------------------------------------------------------
b. Leveraging personnel from the Federal customers: By placing a
vast majority of the resource burden for conducting competitive
distributions on the responsible CNAs and the requesting Federal
agency, the Commission can focus on providing better oversight and
compliance. For CNAs, the resource burden is only slightly more than
the status quo, and for the Federal customer all additional costs are
dedicated to supporting NPA evaluations (i.e., technical experts,
pricing analysis, etc.).
D. Regulatory Flexibility Act--The Committee does not expect this
proposed rule to have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, at 5 U.S.C. 601, et seq., because it does not include
any new reporting, recordkeeping, or other compliance requirements for
small entities. The proposed rule only establishes business rules to
improve the AbilityOne
[[Page 15367]]
Program processes. This proposed rule also does not duplicate, overlap,
or conflict with any other Federal rules. However, it has not yet been
certified as to whether it is subject to the Regulatory Flexibility Act
(5 U.S.C. 601).
E. Unfunded Mandate Reform--This proposed rule will not result in
the expenditure by State, local, and Tribal governments, in the
aggregate, or by the private sector, of $100,000,000 or more in any one
year, and it will not significantly or uniquely affect small
governments.
F. Paperwork Reduction Act--This proposed rule does not contain an
information collection requirement subject to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.).
G. Small Business Regulatory Enforcement Fairness Act of 1996--This
proposed rule would not constitute a major rule as defined by section
804 of the Small Business Regulatory Enforcement Fairness Act of 1996.
This proposed rule will not result in an annual effect on the economy
of $100,000,000 or more; a major increase in costs or prices; or
significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of the United States-based
companies to compete with foreign based companies in domestic and
export markets.
List of Subjects
41 CFR Part 51-2
Government procurement, Individuals with disabilities, Organization
and functions (Government agencies).
41 CFR Parts 51-3 and 51-5
Government procurement, Individuals with disabilities.
For reasons set forth in the preamble, the Commission proposes to
amend 41 CFR parts 51-2, 51-3, and 51-5 as follows:
PART 51-2--COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR
SEVERELY DISABLED
0
1. The authority citation for part 51-2 is revised to read as follows:
Authority: 41 U.S.C. 46-68c.
0
2. Amend Sec. 51-2.7 by:
0
a. Revising the second and third sentences and removing the fourth
sentence of paragraph (a); and
0
b. Revising paragraphs (b) and (c).
The revisions read as follows:
Sec. 51-2.7 Fair market price.
(a) * * * The Committee is responsible for determining fair market
prices, and changes thereto, for commodities and services on the
Procurement List. The initial fair market price may be based on
bilateral negotiations between contracting activities and authorized
nonprofit agencies, market research, comparing the previous price paid,
price competition, or any other methodology specified in Committee
policies and procedures.
(b) The initial fair market price may be revised in accordance with
the methodologies established by the Committee, which include sole
source negotiations between contracting activities and producing
nonprofit agencies assisted by central nonprofit agencies, the use of
economic indices, price competition, or any other methodology permitted
under the Committee's policies and procedures.
(c) After review and analysis, the central nonprofit agency shall
submit to the Committee the recommended fair market prices and, where a
change to the fair market price is recommended, the methods by which
prices shall be changed to the Committee, along with the information
required by Committee pricing procedures to support each
recommendation. The Committee will review the recommendations, revise
the recommended prices where appropriate, and establish a fair market
price, or change thereto, for each commodity or service which is the
subject of a recommendation.
PART 51-3--CENTRAL NONPROFIT AGENCIES
0
3. The authority citation for part 51-3 continues to read as follows:
Authority: 41 U.S.C. 46-48c.
0
4. Revise Sec. 51-3.4 to read as follows:
Sec. 51-3.4 Distribution of orders.
(a) Central nonprofit agencies shall distribute orders from the
Government only to nonprofit agencies which the Committee has
authorized to furnish the specific commodity or service. When the
Committee has authorized two or more nonprofit agencies to furnish a
specific commodity or service, the central nonprofit agency shall
distribute orders among those nonprofit agencies in a manner that
provides the best overall solution for the Federal customer.
(b) For new and existing Procurement List services that are
estimated to exceed $10 million in total contract value, inclusive of
the base period and all option periods, the Federal customer may
request that the procurement be distributed on a competitive basis
among all authorized nonprofit agencies. The Committee will determine
whether a competitive distribution is appropriate. The nonprofit agency
selected through a competitive distribution is the nonprofit agency
that the Committee has determined provides the best overall solution
for the Federal customer after considering such factors as technical
capability, past performance, and price. Depending on the needs of the
Federal customer, factors may be weighted. Price shall not be the only
factor in a distribution decision.
(c) The Commission may also direct a competitive distribution in
accordance with paragraph (b) of this section for any service already
on the Procurement List (regardless of dollar amount) if the sole
source negotiations described at Sec. 51-2.7(b) of this chapter fail
to produce a price acceptable to both parties for a follow-on
procurement.
(d) In addition to the requirements described at part 51-6 of this
chapter, the requesting Federal customer shall advise the Committee of
the 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.
(e) Any dispute arising out of a competitive distribution decision
described at paragraph (b) of this section shall be submitted to the
appropriate central nonprofit agency for resolution. If the affected
nonprofit agency disagrees with the central nonprofit agency's
distribution decision, it may appeal that decision to the Committee for
final resolution. Appeals must be filed with the Committee within five
business days of the nonprofit agency's notification of the central
nonprofit agency's distribution decision, and only a nonprofit agency
that participated in the competitive distribution process described at
paragraph (b) of this section may appeal.
PART 51-5--CONTRACTING REQUIREMENTS
0
5. The authority citation for part 51-5 continues to read as follows:
Authority: 41 U.S.C. 46-48c.
0
6. Amend Sec. 51-5.2 by revising the section heading and paragraphs
(a), (b), (c), and (e) and adding paragraph (f) to read as follows:
Sec. 51-5.2 Authorization/deauthorization as a mandatory source.
(a) The Committee may authorize one or more nonprofit agencies to
provide a commodity or service on the Procurement List. Nonprofit
agencies
[[Page 15368]]
that have been authorized as mandatory sources for a commodity or
service on the Procurement List are the only authorized sources for
providing that commodity or service until the nonprofit agency has been
deauthorized by the Committee. To meet the needs of the Federal
customer, the central nonprofit agencies may allocate the commodity or
service to one or more nonprofit agencies as appropriate.
(b) After a determination of suitability for approving items on the
Procurement List, the Committee will authorize the most capable
nonprofit agencies as the mandatory source(s) for commodities or
services. Commodities and services may be purchased from nonprofit
agencies; central nonprofit agencies; Government central supply
agencies, such as the Defense Logistics Agency and General Services
Administration; and certain commercial distributors. (Identification of
the authorized sources for a particular commodity may be obtained from
the central nonprofit agencies indicated by the Procurement List which
is found at <a href="http://www.abilityone.gov">www.abilityone.gov</a>.)
(c) Contracting activities shall require that their contracts with
other organizations or individuals, such as prime vendors providing
commodities that are already on the Procurement List to Federal
agencies, require that the vendor order these commodities from the
sources authorized by the Committee.
* * * * *
(e) Contracting activities procuring services, which have included
within them services on the Procurement List, shall require their
contractors for the larger service requirement to procure the included
Procurement List services from nonprofit agencies authorized by the
Committee.
(f) If the Committee deauthorizes a nonprofit agency as the
mandatory source, the deauthorized nonprofit agency shall ensure as
many of its employees who are blind or have other significant
disabilities as practicable remain on the job with the new authorized
successor nonprofit agency. The successor nonprofit agency is required
to offer a right of first refusal of employment under the successor
contract to current employees of the deauthorized nonprofit agency who
are blind or have other significant disabilities for positions for
which they are qualified. The deauthorized nonprofit agency shall
disclose necessary personnel records in accordance with all applicable
laws protecting the privacy of the employee to allow the successor
nonprofit agency to conduct interviews with those identified employees.
If selected employees agree, the deauthorized nonprofit agency shall
release them at a mutually agreeable date and negotiate transfer of
their earned fringe benefits and other relevant employment and Program
eligibility information to the successor nonprofit agency. The
requirement to offer the right of first refusal also applies if a
nonprofit agency loses an allocation because of a competitive
distribution under Sec. 51-3.4(b) of this chapter.
Michael R. Jurkowski,
Acting Director, Business Operations.
[FR Doc. 2023-04939 Filed 3-10-23; 8:45 am]
BILLING CODE 6353-01-P
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