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Rule2024-05717

Supporting Competition in the AbilityOne Program

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Published

March 22, 2024

Effective

April 22, 2024

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), is publishing a final rule that clarifies the Commission's authority to consider different pricing methodologies to establish the initial Fair Market Price (FMP) for Procurement List (PL) additions and changes to the FMP. The final rule also permits the central nonprofit agency (CNA) to distribute certain high-dollar services orders on a competitive basis to the authorized nonprofit agency (NPA) after considering price and non-price factors. Lastly, the final rule further clarifies the Commission's authority to authorize and deauthorize NPAs as mandatory sources and require all NPAs to provide the right of first refusal of employment to the current employees of an incumbent NPA who are blind or have other significant disabilities for positions for which they are qualified.

Full Text

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<title>Federal Register, Volume 89 Issue 57 (Friday, March 22, 2024)</title>
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[Federal Register Volume 89, Number 57 (Friday, March 22, 2024)]
[Rules and Regulations]
[Pages 20324-20340]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-05717]

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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: Final rule.

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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), is publishing a final rule that clarifies the
Commission's authority to consider different pricing methodologies to
establish the initial Fair Market Price (FMP) for Procurement List (PL)
additions and changes to the FMP. The final rule also permits the
central nonprofit agency (CNA) to distribute certain high-dollar
services orders on a competitive basis to the authorized nonprofit
agency (NPA) after considering price and non-price factors. Lastly, the
final rule further clarifies the Commission's authority to authorize
and deauthorize NPAs as mandatory sources and require all NPAs to
provide the right of first refusal of employment to the current
employees of an incumbent NPA who are blind or have other significant
disabilities for positions for which they are qualified.

DATES: This final rule is effective April 22, 2024.

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#e083819393858681a08182898c8994998f8e85ce878f96"><span class="__cf_email__" data-cfemail="385b594b4b5d5e5978595a5154514c4157565d165f574e">[email&#160;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.

SUPPLEMENTARY INFORMATION:

I. Background

A. The Javits-Wagner-O'Day (JWOD) Act and the Commission

The JWOD Act, 41 U.S.C. 8501, et seq., leverages the purchasing
power of the Federal Government to create employment opportunities
through the AbilityOne Program for individuals who are blind or have
significant disabilities. The Program is administered by the 15-member,
presidentially appointed Commission that, as an independent Federal
agency, maintains a PL of products and services that Federal agencies
must purchase from participating NPAs who employ individuals who are
blind or have significant disabilities. See 41 U.S.C.8503 and 8504.
CNAs are responsible for distributing orders to Commission-approved
NPAs to provide products and services to Federal agencies. See 41 CFR
parts 51-2.4(a)(3) & 51-3.4. NPAs must meet initial qualification
requirements and maintain those qualifications throughout their
participation in the AbilityOne Program. See 41 CFR parts 51-4.2 and
51-4.3.
The Commission has five roles stated in the JWOD Act. First, the
Commission decides on the addition or removal of products and services
on the PL. See 41 U.S.C. 8503(a). Second, the Commission sets the FMP
that the Federal Government will pay for the products or services. See
41 U.S.C. 8503(b). Third, the Commission designates nonprofit agencies
to serve as CNAs, who are responsible for ``facilitating the
distribution of orders'' for products or services among participating
NPAs. See 41 U.S.C. 8503(c). Fourth, the Commission promulgates
regulations ``on other matters as necessary'' to carry out the JWOD
Act. See 41 U.S.C. 8503(d)(1). Fifth, the Commission engages in a
``continuing study and evaluation of its activities'' to ensure
effective administration of the JWOD Act. See 41 U.S.C. 8503(e).
At present, pursuant to the JWOD Act, the Commission has designated
National Industries for the Blind (NIB) and SourceAmerica as the CNAs
responsible for distributing orders to participating NPAs. See 41 CFR
51-1.3 (definition of CNA); see also 41 CFR 51-3.2 (describing duties
of a CNA). The CNAs provide information to the Commission as needed and
otherwise assist the Commission in implementing the Commission's
regulations. NPAs associated with NIB primarily employ individuals who
are blind or visually impaired; NPAs associated with SourceAmerica
primarily employ individuals with other significant disabilities,
including intellectual and developmental disabilities (IDD). As of
September 30, 2023, NIB represents 58 NPAs participating in the
AbilityOne Program, and SourceAmerica represents 355 NPAs.
In making its determination on whether to add a product or service
to the PL, the Commission assesses four suitability criteria. See 41
CFR 51-2.4. First, the Commission considers whether there is the
potential for the NPA to employ enough individuals who are blind or
have significant disabilities as needed to carry out the contract.

[[Page 20325]]

Second, the Commission determines whether the recommended NPAs meet all
the qualification requirements set forth in 41 CFR part 51-4. Third,
the Commission assesses the capability of the recommended NPAs to
provide the product or service, including the required labor
operations, Government quality standards, and delivery schedules.
Finally, if there is a current contractor providing the product or
service, the Commission determines if there would be an adverse impact
on that contractor if the proposed requirement is placed on the PL.

B. The Need for Rulemaking

The 898 Panel
Section 898(a)(1) of the National Defense Authorization Act (NDAA)
for Fiscal Year 2017 [Hereinafter referred to as the Act] \1\ directed
the Secretary of Defense to establish a panel of senior level
representatives from the Department of Defense (DoD) agencies, the
Commission, and other Federal Government agencies to address the
effectiveness and internal controls of the AbilityOne Program related
to DoD contracts [Hereafter referred to as the Panel]. The Panel
consisted of representatives from the Office of the Secretary of
Defense and its DoD Inspector General, the Commission, and the
Commission's 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, the General Services
Administration, the Department of Education, and the Defense
Acquisition University.
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\1\ National Defense Authorization Act for Fiscal Year 2017,
Public Law 114-328, sec. 898(a)(1) (2016).
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The primary mission of the Panel was to identify both
vulnerabilities and opportunities in DoD contracting within the
AbilityOne Program and, at a minimum, recommend improvements in the
oversight, accountability, and integrity of the Program. Of specific
relevance to this rulemaking, the Panel was directed to make
recommendations for increasing employment opportunities for individuals
who are blind or have significant disabilities, especially service-
disabled veterans, and recommend ways to explore opportunities for
competition among qualified NPAs to ensure equitable selection in work
allocations. The Panel was required to provide an annual report to
Congress on its activities not later than September 30, 2017, and
annually thereafter for the next three years.\2\
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\2\ 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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The first annual report from the Panel was submitted to Congress in
July 2018 and its final report was submitted in January 2022. During
its four-year tenure, the Panel established seven subcommittees that
aligned with the duties described in Section 898(c), with the
Acquisition and Procurement subcommittee, also known as Subcommittee
Six, addressing the acquisition and procurement duties. Subcommittee
Six identified ten findings that led to initial recommended actions for
implementation.
The most germane finding from Subcommittee Six called on the
Commission to implement price-inclusive NPA selection procedures and
conduct pilot tests that include DoD and Commission-led evaluations and
recommendations.
Although the Panel's recommendations were not binding on the
Commission, subsection (f)(2) of the Act directed the Commission to
make a good faith effort to implement its recommendations.\3\ If the
Commission unduly delayed or ignored the Panel's recommendations, the
Secretary of Defense was given the authority to ``suspend compliance
with the requirement to procure a product or service in Section 8504 of
title 41, United States Code.'' \4\ Currently, DoD procurements
represent more than half of the Program's annual sales, which creates
procurement opportunities that employ over 18,275 individuals with
significant disabilities or who are blind.\5\ If the DoD were to
withdraw from the Program, or even reduce participation, the results
would greatly harm the objectives of the Commission.
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\3\ Supra note 1. Since the Panel sunset when it submitted its
final report to Congress in accordance with (IAW) part (j) of the
Act, it is debatable as to whether the Secretary of Defense
continues to retain the authority to invoke the authority described
at (f)(2). However, in the fourth and final report to Congress the
Panel identified numerous recommendations that remained incomplete,
such as the recommendation related to competition (Recommendations
10 & 11).
\4\ Supra note 1 at (g)(1)(A).
\5\ Employment numbers are based on estimates from SourceAmerica
(15,600) and the National Industries for the Blind (2,675) at the
close of fiscal year 2023. These numbers include employees working
under service and product contracts.
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Pilot Tests at Fort Bliss and Fort Meade
In October 2018, the Commission partnered with officials from the
Army's Mission Installation Contracting Command (MICC) and Installation
Management Command (IMCOM) to work on a competitive NPA selection
process incorporating the key aspects of recommendations from
Subcommittee Six.\6\ The parties selected the Facility Support and
Operations Service (FSOS) contract at Fort Bliss, TX, for the first
pilot and selected a second pilot, for similar services, at Fort Meade,
MD, the following year. At the time, the Fort Bliss FSOS contract,
valued at over $300 million in total contract value, was the highest
dollar value contract in the AbilityOne Program.\7\ The Fort Meade
requirement had a total contract value of approximately $98 million.
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\6\ The MICC is a subordinate Command of the Army Contracting
Command (ACC) and is responsible for the procurement of products and
services for thirty-two Army Installations located throughout the
Continental United States. IMCOM is a subordinate Command of the
U.S. Army Materiel Command and is responsible for the day-to-day
management of Army Installations around the globe. Currently, at
least 18,000 AbilityOne workers support DoD contracts and a vast
majority of work on contracts administered by the MICC for IMCOM
installations.
\7\ Report on the 2018-2019 Competition Pilot Test for
AbilityOne Program Nonprofit Agencies Facility Support and
Operations Services Contract Fort Bliss, Texas. AbilityOne
Commission Report on Competition Pilot Test at Fort Bliss, Texas
2018-2019
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The Commission had three objectives for conducting both pilots:
first, to test a way to include price as a factor in the NPA selection
process; second, to determine how to integrate personnel and resources
from the requesting Federal agency into the NPA evaluation process; and
third, to explore ways to compete, and potentially authorize a
different NPA to perform on an existing PL requirement.\8\ Both pilots
were instructive in providing positive insights to the subcommittee and
the Commission as to the last two questions. But the pilot at Fort
Meade provided another equally valid insight to the first question,
when the Commission was enjoined from completing the competitive pilot
at Fort Meade due to a successful challenge at the Court of Federal
Claims (COFC).\9\
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\8\ ``Social impact'' was a term of art that was prevalent at
the time, but the first attempt to operationalize that component was
in the context of the Fort Knox pilot described below.
\9\ Melwood Horticultural Training Center, Inc. v. United
States, 153 Fed. Cl. 723, 737 (2021). The AbilityOne Commission
decided to implement, through an interim policy, a pilot program to
use competitive procedures for a base support contract at Fort
Meade. The pilot program included price as part of the competition
selection criteria. Melwood challenged the Commission's ability to
undertake a pilot without having previously gone through the
rulemaking process. The court ultimately enjoined the Commission
from implementing this type of change to the procurement process
through an interim policy.
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The petitioner raised several arguments against the permissibility
of conducting the Fort Meade pilot, but the

[[Page 20326]]

COFC focused on a narrow provision at 41 CFR part 51.2-7(a) of the
regulatory language that signaled a preference for bilateral
negotiations. The same regulation permitted use of other pricing
methodologies, but COFC opined that other pricing methodologies could
only be used ``if agreed to by the negotiating parties.'' The COFC
further reasoned that the negotiating parties were limited to the NPA,
the contracting activity, and the central nonprofit agency. As a result
of this reading, the COFC found that the price component at issue in
that case conflicted with the ``collaborative pricing process''
contemplated under 41 CFR part 51-2.7. The Commission posits that such
an interpretation is not consistent with the Commission's statutory
authority to establish the FMP, or the general thrust of the
regulation. The JWOD Act unambiguously authorizes the Commission, not
the negotiating parties, to establish the FMP and to revise it ``in
accordance with changing market conditions.'' \10\
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\10\ 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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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 it
is not limited to an agreement between the parties when the Commission
utilizes other pricing methodologies to establish or change the
FMP.\11\ In the Fourth Panel Report to Congress, the Commission
Chairperson acknowledged the regulatory impasse created by the COFC
decision, but explained that the Commission would be taking steps ``to
strengthen its authority in this area.'' \12\ This rulemaking is an
effort to carry out that pledge.
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\11\ It should also be noted that the regulatory language
discussed in the ruling was only added as the result of a regulatory
change in 1999. The Commission posits that the purpose of that
change was to signal a preference for bilateral negotiations. It was
not intended to limit the Commission's authority to consider and use
other pricing methodologies.
\12\ Supra note 2 at Appendix A.
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Despite some setbacks, the Commission was encouraged by the results
of the pilots because each test demonstrated that including price as a
factor, coupled with a ``customer focused'' NPA selection ethos, can
provide promising results for the Federal customer and the Program.
However, the Commission was also mindful of the COFC decision and the
need to ensure that competition within the Program does not frustrate
other modernization initiatives and the Commission's ability to
encourage employment growth for employees who have significant
disabilities and who are blind.\13\
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\13\ The AbilityOne Program is an employment program, but the
Commission does not create jobs. Jobs are created through Federal
contracts performed by NPAs in the Program. Competition may or may
not result in greater job growth for any individual contract, but by
carrying out a primary objective of the Panel, it should help to
retain existing work and make the Program a more attractive option
for Federal customers.
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The Commission's Five-Year Strategic Plan
The Notice of Proposed Rule Making (NPRM) explained how this
rulemaking was also heavily informed by the Commission's Strategic Plan
for Fiscal Year (FY) 2022-2026, issued in June 2022.\14\ The Strategic
Plan, a policy road map for next five years, is anchored by four
Strategic Objectives:
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\14\ AbilityOne Strategic Plan for FY 2022-2026.
<a href="http://www.abilityone.gov/commission/documents/AbilityOne%20Strategic%20Plan%20FY%202022-2026%20Final.pdf">www.abilityone.gov/commission/documents/AbilityOne%20Strategic%20Plan%20FY%202022-2026%20Final.pdf</a>.
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(1) Expand competitive integrated employment (CIE) for people who
are blind or have other significant disabilities.
(2) Identify, publicize, and support the increase of good jobs and
optimal jobs in the AbilityOne Program.\15\
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\15\ Id. The Commission defines a ``good job'' in the AbilityOne
Program as having four attributes: 1. Individuals with disabilities
are paid competitive wages and benefits; 2. The job matches the
individual's interests and skills (``job customization''); 3.
Individuals with disabilities are provided with opportunities for
employment advancement comparable to those provided to individuals
without disabilities; and 4. Individuals are covered under
employment laws. An ``optimal job'' as one that includes the four
attributes of a ``good job,'' but also allows AbilityOne employees
to work side-by-side with employees without disabilities doing the
same or similar work.
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(3) Ensure effective governance across the AbilityOne Program.
(4) 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.\16\ The Commission realizes that some reforms will require
specific legislative actions to fully implement, such as potential
changes to the seventy-five percent direct labor hour ratio
requirement. See 41 U.S.C. 8501(6)(C) & (7)(C). Other reforms, however,
can be made by updating existing regulations and policies. For example,
in November 2023, the Commission finalized Commission Policy 51.400,
which introduced the long-term objective of providing job
individualizations, employee career plans, and career advancement
programs.\17\ The Commission has also made numerous regulatory changes
throughout its history, the most recent being the elimination of 14(c)
certificates within the Program in 2022.\18\
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\16\ Id.
\17\ <a href="http://www.abilityone.gov/laws,_regulations_and_policy/documents/Commission%20Policy%2051.400%20AbilityOne%20Commission%20Compliance%20Program%20-%20Jan%201,%202024%20-%20signed%20-%20508.pdf">www.abilityone.gov/laws,_regulations_and_policy/documents/Commission%20Policy%2051.400%20AbilityOne%20Commission%20Compliance%20Program%20-%20Jan%201,%202024%20-%20signed%20-%20508.pdf</a>.
\18\ <a href="https://www.federalregister.gov/documents/2022/07/21/2022-15561/prohibition-on-the-payment-of-subminimum-wages-under-14c-certificates-as-a-qualification-for">https://www.federalregister.gov/documents/2022/07/21/2022-15561/prohibition-on-the-payment-of-subminimum-wages-under-14c-certificates-as-a-qualification-for</a>.
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Other Reasons for This Rulemaking
Although Section 898 authorizes the Secretary of Defense to suspend
compliance with the Program if the Commission does not substantially
implement the Panel recommendations, that isn't the only risk the
Program faces.\19\ Even if the DoD does not withdraw from the Program,
it has other alternatives even for existing AbilityOne requirements.
Increased competition can help to serve as a countermeasure to better
protect existing PL work from other procurement actions or
insourcing.\20\ According to a 2018 Government Accountability Office
(GAO) study, the DoD ``budgets about $25 billion annually to operate
its installations,'' but it has been under pressure since 1997 to
``reduce its installation support cost.'' \21\ The GAO further noted
that the ``DoD needed to show measurable and sustained progress in
reducing installation support costs and achieving efficiencies in
installation support.'' \22\ In 2013, Congress provided military
services the authority to enter into Intergovernmental Support
Agreements (IGSAs) with local and state governments to receive and
provide or share installation support services.\23\ The Army, with a
current portfolio of approximately 122 IGSAs, routinely uses IGSAs as a
procurement tool to

[[Page 20327]]

reduce administrative burdens and achieve greater cost savings as
compared to traditional government contracting.\24\ Although the DoD
has placed some local policy limitations on the use of IGSAs to
displace a contract in the AbilityOne Program,\25\ those limitations
are not absolute.\26\
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\19\ Supra note 1.
\20\ See Sec. 51-6.12(d). With 90-days' notice, a Federal
agency could elect to perform work with Government employees if it
determines it is more cost effective to do so (or any other reason),
rather than continue contract performance with an AbilityOne NPA.
\21\ <a href="https://www.gao.gov/assets/gao-19-4.pdf">https://www.gao.gov/assets/gao-19-4.pdf</a>.
\22\ Id.
\23\ See the National Defense Authorization Act for Fiscal Year
2013, Public Law 112--239, Sec. 331 (2013). In the Carl Levin and
Howard P. ``Buck'' McKeon National Defense Authorization Act for
Fiscal Year 2015, Public Law 113--291, Sec. 351 (2014) (codified as
amended at 10 U.S.C. 2679), Congress clarified the authority to
enter into an IGSA, and transferred the provision from 10 U.S.C.
2336 to 10 U.S.C. 2679.
\24\ See <a href="https://www.army.mil/article/263529/historic_statewide_intergovernmental_support_agreement_signed">https://www.army.mil/article/263529/historic_statewide_intergovernmental_support_agreement_signed</a>.
\25\ Panel on Department of Defense and AbilityOne Contracting
Oversight, Accountability, and Integrity 2018 First Annual Report to
Congress, footnote 38.
\26\ Id.
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For example, in 2017, the Army and the incumbent NPA were embroiled
in a dispute over the price of the follow-on AbilityOne contract for
installation support at Fort Polk (renamed Fort Johnson effective June
13, 2023) in Louisiana. The Army estimated the new contract price at
$75 million over five years, whereas the NPA's price estimate was
approximately $115 million. After eight months of unsuccessful
negotiations, the Army stated they were considering the conversion of
the Fort Polk requirement to an IGSA with the City of Leesville, LA.
Only after direct intervention by the Deputy Assistant Secretary of the
Army for Procurement (DASA(P)), were the two sides able to agree on a
price.\27\ A new contract was awarded on May 31, 2018, for a price of
$75,984,926 over five years--thus averting the conversion to an IGSA.
The Commission believes that for certain high dollar contracts it is
far more advantageous for the Government to create a competitive
environment where NPAs are competing against other NPAs, rather than
risk the Federal customer converting an existing requirement within the
Program to performance under an IGSA. Simply put, when competition
leads to the addition of a new requirement to the Program or the
retention of an existing requirement, it is a gain. When the lack of
competition leads the DoD to move an existing requirement to an IGSA,
it is a loss to the Program.
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\27\ Id at 22-23.
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Proof of Concept: The Fort Knox Pilot
In November 2022, using prior pilots, the Commission's Strategic
Plan, and the COFC decision as a roadmap, the Commission authorized the
execution of a pilot at Fort Knox that supported several objectives
described in the Commission's 5-year strategic plan, such as creating
good and optimal jobs while providing the ``best value'' to the Federal
customer.\28\ To accomplish this goal, the pilot was divided into two
distinct, but interdependent phases. Phase I began in mid-January of
2023 with the issuance of an Opportunity Notice (ON),\29\ which fully
explained the ground rules for participation. After responses were
received, SourceAmerica, the responsible CNA, assessed and recommended
two capable nonprofit agencies to the Commission for consideration as
authorized sources. 41 CFR 51-3.2(d). Phase I ended when the
Commission, after considering the suitability criteria at Sec. 51-2.4,
authorized both NPAs to compete in Phase II. The decision to authorize
the NPAs was based on both NPAs meeting or exceeding the necessary
management capability, experience, demonstration of employment
potential through proposed placement program participation,\30\ and
having an effective workforce integration plan.\31\
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\28\ The contract, covering 109,054 acres and 2,326 buildings,
is to provide Total Facility Maintenance (TFM) across several
functional areas, such as building and structure maintenance, snow
and ice removal, landscaping services, utility system maintenance,
and other maintenance.
\29\ The ON acts as a solicitation from the CNA 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.
\30\ Placement Program criteria include evaluation factors
related to the NPA's ability to promote upward mobility and/or
placement of individuals with disabilities outside the AbilityOne
Program. Such factors include but are not limited to training,
qualifications of the NPA's personnel supporting placements,
placement support services, and/or leveraging referral sources to
support placements.
\31\ Integrated Work Environment criteria include evaluation
factors related to how the NPA plans to achieve and maintain an
integrated work environment.
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On June 5, 2023, Phase II commenced. In Phase II, SourceAmerica was
directed to select the NPA providing the best value to the Federal
customer, after considering technical capability, past performance, and
price. Although price was a selection factor, the Commission directed
SourceAmerica to ensure that price did not have greater weight than the
non-price factors in the final NPA selection decision.\32\ For the
evaluation, the Army provided technical expertise to assist with all
evaluation factors, and SourceAmerica made its selection on October 19,
2023. After the NPA selection, the Commission received the pricing
information and a recommendation from SourceAmerica for the FMP. In
early November, the Commission established the FMP, principally relying
on the results of the Phase II price competition to support its
determination.\33\
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\32\ 88 FR 17553 (2023).
\33\ Commission Decision Document, voted and approved on May 25,
2023. The Commission approved the following actions: (1) Approval to
transfer the Commission's authority to perform the Fort Knox,
Kentucky, Total Facilities Maintenance (TFM) Procurement List (PL)
service (Procurement List #/Project #: 2004789/121674) from
SourceAmerica to a qualified, capable nonprofit agency (NPA) at a
Fair Market Price (FMP). (2) Authorization of Skookum and PCSI to
serve in tandem as mandatory sources. (3) Authorize the use of a
multi-factor process (with a price component) for final selection of
the NPA that will perform the TFM. (4) Approve an NPA project-level
ratio of less than 75 percent (but greater than 40 percent) for the
5-year pilot test period. (5) Approve the use of price competition
as the methodology for establishing the Fair Market Price (FMP)--to
be completed in Phase II.
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The execution and results of this test pilot illustrate one of
several potential approaches to address the Panel objectives. The NPA
selected for the Total Facilities Maintenance (TFM) contract will
create nearly fifty percent more jobs for individuals who have
significant disabilities than the predecessor contractor.\34\ The other
NPA in the competition would have created approximately the same number
of jobs for individuals with significant disabilities, but at a
somewhat higher cost than the selected NPA.\35\
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\34\ The previous requirement earmarked 34 positions for
individuals who have significant disabilities under the total
facilities maintenance requirement (30 were filled at the time of
the competition). The newly selected NPA is expected to fill 45 of
its available positions with individuals who have significant
disabilities.
\35\ NPA selection information on file with the Commission. The
final rule adopts some of the lessons from the Fort Knox pilot,
although it adds the component of assessing an NPA's capacity to
provide training and placements at the final stage of determining
the NPA that will receive the contract.
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Like the previous two pilots, Fort Knox was identified and executed
after senior leader coordination and approval from the Army and the
AbilityOne Commission.\36\ This approach ensured excellent lines of
communication and robust responsiveness from the early stages of
requirement development to NPA selection and contract award. Once this
rule is finalized, similar coordination, collaboration, and approval
will be a critical component for implementing this rule.
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\36\ Memorandum of Understanding between the MICC, IMCOM,
SourceAmerica, and the Commission, executed on September 14, 2022.
On file with the Commission.
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C. Notice of Proposed Rulemaking (NPRM)

On March 13, 2023, the Commission issued an NPRM in the Federal
Register.\37\ The proposed rule clarified the Commission's authority to
consider different pricing methodologies in establishing the FMP for PL
additions and changes to the FMP; defined the parameters for conducting
competitive distributions among multiple qualified

[[Page 20328]]

NPAs; clarified the Commission's authority to authorize or deauthorize
a NPA; and provided a right of first refusal of employment to the
current employees of an incumbent NPA who are blind or have other
significant disabilities for positions for which they are qualified.
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\37\ 88 FR 15360 (2023).
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The initial comment period was open for 60 days but was extended
another 30 days for additional comments. After the comment period
closed on June 12, 2023, the Commission had received 95 comments from
various stakeholders and interested parties.\38\ Comments were received
from NPAs (50), both CNAs (2), private individuals (27), disability
rights organizations (2), NPA advocacy groups (3), and anonymous
commenters (11). The level of support also varied, with 6 commenters
supporting the rule unconditionally, 40 others supported the rule
subject to certain conditions, 45 commenters opposed the rule, and 4
comments were neutral or administerial in nature. One additional
comment was received during the interagency review period from a
disability rights advocacy group opposing the rule.
---------------------------------------------------------------------------

\38\ There were 100 total comments received, but 5 were
duplicates.
---------------------------------------------------------------------------

Of the 50 responding NPAs, 16 NPAs provided a comment signaling
complete opposition to the proposed rule. The most significant concern
for most commenters was the proposed rule's deviation from the Panel's
recommendations. Commenters pointed out the proposed rule's lower
threshold to trigger competition of $10 million total contract
value,\39\ not limiting competitions to government owned facilities/
properties, not limiting competition to once every ten years, and the
lack of consideration of a social impact factor in the NPA selection
decision for a competitive distribution.
---------------------------------------------------------------------------

\39\ The Panel recommended that new work to the program and re-
competition for service contracts valued at $10 million or greater
annually and performed on Federal installations/properties would
automatically be competed, unless the requiring activity provided a
compelling reason why competition is unnecessary.
---------------------------------------------------------------------------

There were several commenters who also stated concerns about
potential job losses due to competition. These commenters stated that
if price is included in the NPA selection process, NPAs will cut costs
at the expense of employees who are blind and have significant
disabilities. In fact, nearly all private individuals who responded to
the NPRM are employed by NPAs and feared that increased competition
might cause them to lose their job. The disability rights advocacy
group that offered a comment during the interagency review period,
voiced a similar concern.

D. Changes From the NPRM

Section II provides a detailed explanation of the scope of comments
received and the changes made in response. In summary, the most
significant changes are as follows:
<bullet> The threshold to trigger competition has been bifurcated.
For DoD and its components, the threshold at which the Commission may
consider a request for competition under this regulation will apply to
projects valued at greater than $50 million. The threshold at which the
Commission may consider a request for competition under this regulation
by civilian agencies remains at greater than $10 million total project
value in recognition of the lower base value of their contracts.\40\
---------------------------------------------------------------------------

\40\ The term contract is replaced with project because the
threshold is tied to a specific requirement on the PL rather than a
contract with several requirements or one large project under
multiple contracts.
---------------------------------------------------------------------------

<bullet> As recommended, the final rule now states that if a
competitive distribution is approved by the Commission, the CNA shall
not permit price to have greater weight than the non-price factors when
making an NPA selection decision.
<bullet> The final rule does not adopt the term ``social impact,''
but, in response to NPA comments, it now directs the CNA to consider
criteria or subcriteria related to training and placements, and
employment opportunities for all competitive distribution decision
approved in accordance with Sec. 51-3.4(d).
<bullet> The final rule requires that a competition shall not be
approved by the Commission due to failed good faith bilateral price
negotiations (price impasse), until the parties have exhausted all
administrative remedies required by the Commission's pricing policies
and procedures. The final rule also limits those impasse related
competitions to service requirements that exceed $1 million in total
project value.
<bullet> The final rule clarifies that all requests for competition
must come from a Federal agency Senior Executive or Flag or General
Officer and must be approved by the Commission. The rule also explains
that the Commission must, at a minimum, consider the criteria under
Sec. 51-2.4 before approving a competitive distribution.
<bullet> The final rule is reorganized, and terms are amended to
ensure consistency throughout the rule, where appropriate.

II. Public Comments on the NPRM

The Commission carefully considered all of the comments related to
this rulemaking. We summarized the commenters' views and, where
appropriate, responded to all significant issues raised by the
commenters that were within the scope of this rule. This means that we
did not respond to every aspect of every comment. Instead, we focused
on the most significant comments that related to the essential thrust
of this rule; namely, use of a price component in the NPA selection
process and the use of price competition for establishing the FMP. We
also did not summarize or respond to comments that were administerial
or outside the scope of the proposed rule. An analysis of the public
comments received and of the changes in the regulations since
publication of the NPRM follows.

A. Withdraw the NPRM and Replace It With an Advanced Notice of Proposed
Rulemaking (ANPRM)

Comments: Several commenters requested that the Commission withdraw
the NPRM and substitute it with an ANPRM and requested a public hearing
to allow for greater dialogue, outreach, and a more detailed analysis
on the costs, benefits, and alternatives to competition. Some who made
similar comments to withdraw the NPRM also requested a public hearing
to discuss the proposed rule further. Other commenters cited Executive
Order (E.O.) 12866 which requires proactive engagement of interested or
affected parties to inform the development of regulatory agendas and
plans and stated that the Commission has not complied with the E.O.
because there had not been adequate engagement with stakeholders.
Discussion: There is no requirement for a Federal agency to issue
an ANPRM before a NPRM, especially when, as in this case, the agency's
decision has been informed by the four-years of work conducted by a
Congressionally mandated Panel and a 5-year Strategic Plan that
specifically called for these changes.\41\ The purpose of an ANPRM is
to gauge the public's interest in a rule and to help the Federal agency
decide if a new rule is necessary.\42\ As noted earlier, the main
reason for this rule change was to address the basis for the COFC's
enjoinment to the Commission's interim policies and previous efforts to
introduce competition into the

[[Page 20329]]

Program.\43\ As such, there was no doubt that the agency needed to
amend its regulations to carry out the Panel's recommendations and the
guidance set forth in the Commission's 5-year Strategic Plan.
Nevertheless, it has been the practice of this agency to consider
stakeholders' interests and to actively engage the public whenever
there is a significant change to the way the Commission administers the
Program.
---------------------------------------------------------------------------

\41\ OIRA's website states an agency uses an ANPRM only when an
agency believes it needs to gather more information before issuing
an NPRM.
\42\ Id.
\43\ Supra note 9.
---------------------------------------------------------------------------

For this rulemaking, the use of an NPRM provided a sufficient
avenue for comment on the proposed changes. We initially granted 60
days to provide comment on the proposed rule. Subsequently, in response
to requests for additional time, we provided an additional 30 days for
public comment. Although the Commission did not hold a public hearing,
members of the Commission staff attended conferences held by both CNAs
to discuss the merits and challenges of introducing a price-inclusive
competition into the Program. Additionally, the Commission routinely
discussed this issue during public meetings and devoted the
Commission's entire July 13, 2023, public meeting to listen to public
concerns and support for the proposed rule. The issues raised during
that public meeting largely mirrored comments received during the
public comment period for the NPRM, but the engagement was useful for
all involved. This is the type of engagement contemplated by E.O.
12866, fulfilled through actively listening to each stakeholder and
making decisions informed by the interests of all involved.
Changes to the Rule: None.

B. Statutory & Rulemaking Authority

Comments: A few commenters stated the proposed rule goes beyond the
scope of the JWOD Act. In particular, NPAs asserted that price
competition is a departure from how Congress intended the Program to
operate, creates potential negative incentives that could harm the
mission of the Program and individuals it intends to serve, and
criticized the lack of consultation with Congress in part due to a
perception that the Commission has offered no methodology for which
contracts would be eligible for competition.
Other commenters in support of the proposed rule disagreed and
acknowledged there is nothing that prevents the AbilityOne Commission
from approving FMPs resulting from price competition.
Discussion: The final regulation addresses many of the concerns
raised by commenters regarding possible adverse impacts from the
proposed rule. In addition, in establishing the Panel, Congress gave
DoD broad authority to suspend compliance with the Program if the
Commission did not substantially implement the recommendations of the
Panel. Not implementing the recommendation, and risking DoD suspension,
would be directly inconsistent with the purpose of the JWOD Act.\44\
The authority to act on the Panel's recommendations, through
regulation, has also been recognized by the COFC.\45\ The court wrote
that ``Congress granted AbilityOne formal rulemaking authority, which
it can and has used to establish the procurement scheme it desires.''
It went on to write ``[g]ranted [the Commission] must submit its rules
to formal notice-and-comment procedures but at the end of the day,
AbilityOne likely has the rulemaking authority to craft procurement
procedures that include a price component.'' \46\ In issuing an NPRM,
receiving and considering public comments, and publishing this final
rule, the Commission has met its obligations under the statute and all
applicable regulations.
---------------------------------------------------------------------------

\44\ Supra note 1 at (g)(1)(A).
\45\ See 41 U.S.C. 8503(d)(1). The JWOD Act gives the Commission
explicit and the sole authority to ``maintain and publish'' a PL.
The Act further states that the Commission ``may prescribe
regulations . . . as necessary to carry out this chapter.''
\46\ See also supra note 9 at pp. 17-18.
---------------------------------------------------------------------------

Changes to the Rule: No substantive changes.

C. Differences From 898 Panel Recommendations

a. $10 Million Total Project Value Competition Threshold
Comments: Many commenters expressed opposition to the proposed
rule's competition threshold of $10 million in total contract value
instead of the Panel's recommendation of $10 million annual value. A
few commenters noted that the Panel focused only on DoD procurements
and that the proposed rule's lower threshold went far beyond the
Panel's focus and recommendations. Of particular concern to many
commenters is the increased number of eligible contracts for
competition from 46 to 346 due to the lower threshold in the proposed
rule. Commenters stated that participating in price competition is
costly for NPAs and lowering the threshold exposes smaller NPAs to
competition that may not have the ability to compete with larger NPAs.
Commenters also argued that over time larger NPAs will dominate these
competitive contracts, resulting in less competition among NPAs in the
Program.
Largely, commenters recommended adopting the Panel's competition
threshold of $10 million annual value, because as one CNA stated, ``the
898 Panel struck the correct compromise in providing an opportunity for
competition on the largest contracts with the greatest opportunity for
savings.'' Alternatively, one NPA recommended a $15 million threshold
for existing contracts to further protect small NPAs, while another
commenter recommended the Commission consider adding an escalation rate
to the contract value that aligns with required minimum wage increase
requirements for Federal contractors under the Executive Order 14026.
The Commission also received comments in support of the proposed
rule's $10 million total contract value threshold for competition. One
commenter, for example pointed out that the Panel's recommended price
competition threshold was mandatory and did not meet civilian Federal
customer needs. The same commenter praised the Commission's decision to
make competition discretionary as opposed to mandatory. Another
supportive commenter believed the proposed rule would create new
opportunities for other NPAs in the Program, thereby creating more jobs
for individuals who are blind or have significant disabilities.
Discussion: Although it is generally true the Panel sought to
create a policy that targeted service requirements valued at $10
million or greater annually, it did not foreclose the possibility of
competing requirements under that threshold. On February 2020,
Subcommittee Six established a policy working group to develop the
proposed framework for executing the NPA selection process.\47\ This
included, but was not limited to, establishing business rules for
competition and assignment of work among AbilityOne Program NPAs. The
policy working group compiled its final analysis and completed a draft
policy shortly before the Panel's sunset in January 2022.\48\ The draft
policy

[[Page 20330]]

expressly stated that competition ``automatically applied to new and
existing Procurement List actions for services estimated to exceed $10
million annually.'' \49\ The policy also permitted the Commission,
through written vote, to allow competition for ``new and existing PL
actions for services with an estimated value less than $10 million.''
\50\ In essence, the Panel's intention was to make competition
mandatory for all requirements greater than $10 million annually, but
discretionary for any service requirement below the threshold. In
contrast, the threshold described in the NPRM is fully discretionary
and limited to those requirements with a total contract value of $10
million or greater, except in the case of a price impasse. Both the
Commission's NPRM and final rule threshold are more targeted and
ultimately less expansive than the Panel's and Subcommittee Six's
intended competition framework, subjecting far fewer service
requirements to potential competition.
---------------------------------------------------------------------------

\47\ Third Annual Report to Congress, p. 33. at <a href="https://www.acq.osd.mil/asda/dpc/cp/policy/docs/a1/Third_Annual_Report_to_Congress_">https://www.acq.osd.mil/asda/dpc/cp/policy/docs/a1/Third_Annual_Report_to_Congress_</a>(Signed_by_the_OUSD_AS_February_4,_20
21).pdf Third Panel Report to Congress, p. 33. <a href="https://www.acq.osd.mil/asda/dpc/cp/policy/docs/a1/Third_Annual_Report_to_Congress_">https://www.acq.osd.mil/asda/dpc/cp/policy/docs/a1/Third_Annual_Report_to_Congress_</a>(Signed_by_the_OUSD_AS_February_4_202
1).pdf.
\48\ See Fourth Panel Report to Congress, p. 29. The report
refers to the draft policy that the Panel would provide to support
the Commission's regulatory update. <a href="https://www.acq.osd.mil/asda/dpc/cp/policy/docs/a1/4%20-%20Fourth%20and%20Final%20Sec%20898%20Panel%20RTC%20">https://www.acq.osd.mil/asda/dpc/cp/policy/docs/a1/4%20-%20Fourth%20and%20Final%20Sec%20898%20Panel%20RTC%20</a>(Dec%202021).pdf#page=29.
\49\ Draft Policy 51.303 is on file with the agency and
available on the agency`s website at FOIA Reading Room. In addition
to the automatic competition trigger for requirements greater than
$10 million annually, the policy permitted the Commission's
executive director to waive a mandatory competition through a
written request to the Commission from the CNA with concurrence from
the Federal customer.
\50\ Id.
---------------------------------------------------------------------------

In setting the $10 million threshold, the Commission sought to make
the Program more responsive to civilian Federal agencies. This decision
was based on balancing the needs of civilian federal agencies and
providing some measure of predictability to service-providing NPAs. For
example, in SourceAmerica's 2022 Federal Customer Survey Final Report,
the surveyed Federal customers reported an average 86% overall Program
satisfaction rate for the five survey periods referenced in the
report.\51\ Over the same period, however, approximately 40.5% of
surveyed Federal customers reported that the Program's products and
services were overpriced when compared to other non-AbilityOne
contractors.\52\ Additionally, 25% of the surveyed customers reported
it was unlikely they would pursue new contract opportunities through
the AbilityOne Program, and 30% of the surveyed customers responded
they were unlikely to expand current contracts with the Program.\53\
When asked what ways the Program could be improved, several survey
participants mentioned pricing, noting that ``similar services with
non-NPAs are much less expensive.'' \54\ The surveyed customers
recommended the Commission provide for competition between NPAs,
because the ability for Federal customers to compare market prices is
not possible when they are compelled to negotiate price with one
vendor.\55\ Comments, recommendations, and survey results like this
have led the Commission to conclude that the desire for competition was
not limited to the DoD and its instrumentalities, thereby supporting a
need for a lower requesting threshold for civilian Federal agencies.
Therefore, in addition to the final rule incorporating the work of the
Panel, the Commission determined that it was prudent to retain a
threshold low enough to be responsive to the concerns and needs of
civilian Federal agencies, but not so low that every or most
requirements could be subject to the type of competition described in
this rulemaking.
---------------------------------------------------------------------------

\51\ Source America Federal Customer Survey on file with agency.
The report covered surveys conducted in 2014, 2016, 2018, 2020, and
2022. The numbers used in this rule represents the average over that
period.
\52\ Id.
\53\ Id.
\54\ Id.
\55\ Id.
---------------------------------------------------------------------------

Changes to the Rule: The final rule bifurcates the thresholds to
trigger competition eligibility for non-DoD Federal agencies and the
DoD. The threshold will remain at $10 million total project value for
the former but increased to $50 million total project value for the DoD
and its components. The Commission also notes that the term
``contract'' has been replaced with the word ``project,'' because the
threshold is tied to a specific requirement identified on the PL,
rather than the value of a contract which could contain several
requirements under a single contract, or one large project issued under
multiple contracts.
b. Frequency of Competition
Comments: Commenters expressed concern over how often contracts
would be recompeted, stating that competing contracts too often creates
instability and administrative burden. Many commenters recommended
adding a provision that a contract could not be recompeted for a 10-
year period. Commenters stated longer contract periods allow the NPAs
to extend major purchases over a longer period which provides cost
savings to the Federal customer. One commenter also stated that
recompeting too often potentially makes it harder to partner with
commercial partners who are attracted to long-term contracts,
especially at a time when the Commission has expressed interest in
increasing partnering and subcontracting opportunities to expand
competitive employment options. Some commenters also noted that routine
competitions provide less incentives for NPAs to make major
investments, because the NPA may not recoup the cost of those
investments if it loses the order after the period of performance ends.
Discussion: After an initial competitive distribution has been
completed, there would be little basis for the Commission to authorize
another competition five years later, unless there are persistent
concern(s) that had not been addressed from the last competition or new
problems emerge. Although there is nothing in the rule to preclude a
Federal agency from requesting competition every time a contract is up
for renewal, it is highly unlikely that the Commission would approve
routine requests for the same requirement. The Commission expects most
Federal customers to be highly satisfied with their AbilityOne
contractors and to prefer awarding sole source contracts as permitted
by 10 U.S.C. 3204(a)(5) or 41 U.S.C. 3304(a)(5). Furthermore,
Commission regulations already encourage agencies to ``to use the
longest contract term available by law . . . in order to minimize the
time and expense devoted to formation and renewal of these contracts.''
41 CFR 51-6.3. The Commission will continue to promote the use of long-
term agreements, especially where it provides lower administrative
expenses for the Federal government and the service providing NPA.
As noted previously, the Fort Knox pilot was identified and
executed after senior leader coordination and approval from the Army
and the AbilityOne Commission. This approach ensured excellent lines of
communication and robust responsiveness from the early stages of
requirement development to NPA selection and contract award. Once this
rule is finalized, similar coordination, collaboration, and approval
will be a critical component for implementing this rule. The Commission
also believes that senior level coordination will help to mitigate the
frequency of competition, by requiring request to be vetted by the
requesting Federal agency at least one level above the user level prior
to submission to the Commission.
Changes to the Rule: The Commission has revised the final rule at
Sec. 51-3.4(b) to clarify that a request for competition must come
from members of the Senior Executive Service or Flag or General
Officers in acquiring Federal agencies

[[Page 20331]]

and require approval from the Commission.
c. A Factor for Social Impact
Comments: A significant number of commenters expressed concern that
the proposed rule did not adopt the Panel's recommendation to include
social impact as a factor for selecting an NPA. The commenters stated
that omission of social impact in the proposed rule meant it would not
be a factor in the competition process of selecting an NPA and that
this would lead to a race to the lowest price at the expense of the
mission of the Program. In large part, these commenters suggested that
the Commission adopt the Panel's recommendation and make clear in the
final rule that the best value trade-off includes an analysis of social
impact in the final selection of an NPA to provide the requirement.
Some commenters also recommended adding explicit weighting criteria
for each factor, with a handful of commenters requesting that social
impact be the most heavily weighted factor and price be the least
heavily weighted factor. Other commenters recommended prioritizing all
non-price factors above price but did not recommend that social impact
be the most heavily weighted factor. The purpose of these approaches,
as described by the commenters, was to protect the Program's mission of
employing individuals who are blind or have significant disabilities
and ensuring that actions by NPAs to provide career development for
employees were taken into account as a positive factor.
Additionally, multiple commenters recommended that the social
impact include consideration of such things as maximizing job
opportunities for individuals who are blind or have significant
disabilities, direct labor ratios, NPA size, Quality Work Environment
(QWE) certification, mentorship programs, teaming opportunities, and
quality of employment. Other commenters suggested alternative criteria
that should be considered under social impact, specifically, retention
of employees who previously earned subminimum wage and potential
disruption to the current workforce if there was a change in the NPA
selected for the project. Other social impact factors recommended for
consideration included the creation of impact-oriented safeguards to
protect AbilityOne employees, such as no loss of seniority, no benefit
changes, transportation to and from the job site, and preservation of
career ladders and upward mobility.
Discussion: The term ``social impact'' is not used in the
AbilityOne Program. It is an umbrella term created by Subcommittee Six
to account for various Program-specific priorities described as
follows:

The results of the new proposed process will maximize
competition within the Program and ensure equitable selection and
allocation of work. This includes maximizing job opportunities for
persons with disabilities, including veterans with disabilities,
through the Social Impact proposal that will identify participation
levels for these individuals. It will also consider the size of the
NPA, mentorship programs, teaming opportunities, contributions to
the community, and the quality of the employment of individuals with
disabilities.\56\
---------------------------------------------------------------------------

\56\ Supra note 47, page 32.

The Commission considered using the term ``social impact'' and
creating a definition but concluded that even if it were to do so,
social impact is a broad idea that might mean many different things to
the different members of the Federal acquisition community as well as
other Program stakeholders. The Federal Acquisition Regulation (FAR)
lists guiding principles for the Federal Acquisition System (FAR
1.102). One of these guiding principles is fulfilling public policy
objectives. Nearly every single public policy objective is about having
a positive social impact.
As examples, Federal acquisition seeks a social impact in promoting
economic resiliency through the Buy America Act, Trade Agreements Act,
and local purchasing during major disasters under the Stafford Act.
Another set of public policy objectives with a social impact are in the
sustainable purchasing space. Examples include Bio-based purchasing
through USDA and EPA's Comprehensive Procurement Guidelines. Federal
acquisition seeks a social impact in supporting small businesses and
underserved socio-economic communities through a host of efforts
including set-asides for small, disadvantaged, woman-owned small
businesses, purchases to service-disabled veteran-owned small
businesses, etc. There are many more examples. Out of concern that it
is too broad of an umbrella term which would never be understood, the
Commission did not adopt or attempt to define the term social impact.
However, a clearly stated social policy objective of the Program is
to increase training, employment and placement opportunities for
individuals who are blind or have other severe disabilities through the
purchase of commodities and services from qualified nonprofit agencies
employing persons who are blind or have other severe disabilities. 41
CFR 51-1.1. Strategic Objective II of the Commission's Strategic Plan
for FY 2022-2026 reinforces this policy objective by seeking an
increase in the number of ``good jobs'' and ``optimal jobs,'' as
defined in the Strategic Plan, throughout the Program.\57\ The
Commission's work on updating its compliance policies, following
issuance of the Strategic Plan, further solidified the Commission's
commitment to enhancing the employment aspects of the Program. For
example, in November 2023, the Commission finalized Commission Policy
51.400, which introduced the long-term objective of providing job
individualizations, employee career plans, and career advancement
programs.\58\
---------------------------------------------------------------------------

\57\ See supra note 14.
\58\ <a href="http://www.abilityone.gov/laws,_regulations_and_policy/documents/Commission%20Policy%2051.400%20AbilityOne%20Commission%20Compliance%20Program%20-%20Jan%201,%202024%20-%20signed%20-%20508.pdf">www.abilityone.gov/laws,_regulations_and_policy/documents/Commission%20Policy%2051.400%20AbilityOne%20Commission%20Compliance%20Program%20-%20Jan%201,%202024%20-%20signed%20-%20508.pdf</a>.
---------------------------------------------------------------------------

Until the Commission updates its regulations with terminology
addressing the activities described above,\59\ the Commission has
determined that the most appropriate way to promote these types of
activities is to use existing regulatory language regarding training
and placements opportunities.\60\ The rule makes clear that the
Commission will approve criteria or subcriteria in support of these
types of opportunities.
---------------------------------------------------------------------------

\59\ The Commission's Regulatory Agenda anticipates an update of
regulation Sec. 51-2.4 regarding suitability criteria. Amendments
to the regulation are likely to include enumerated workforce
development elements or broadly require adherence to Commission
policies on employee training and career development initiatives.
<a href="https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202310&RIN=3037-AA21">https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202310&RIN=3037-AA21</a>.
\60\ The rewording emphasizes the policy goal of the Federal
government described at Commission regulations 41 CFR 51-1.1. It
also makes explicit reference to an NPA's responsibility to maintain
an ongoing placement program under Commission regulation 41 CFR 51-
4.3(b)(8).
---------------------------------------------------------------------------

The final rule also requires that the selection official consider
criteria or subcriteria related to employment opportunities for each
competitive distribution.\61\ This addresses the concern of many
commenters that price competition between NPAs might reduce the number
of individuals who are blind or have significant disabilities who are
hired or may result in the substitution of employees whose disabilities
are not as significant as those of other employees.
---------------------------------------------------------------------------

\61\ Id.
---------------------------------------------------------------------------

Finally, the rule makes clear that an NPA's capacity to create good
and

[[Page 20332]]

optimal jobs will be taken into account early in the competition
process as well. If the Commission decides that a competitive
distribution is appropriate, it will authorize at least two nonprofit
agencies to serve as mandatory sources. In determining these
authorizations, the Commission will apply the suitability criteria
described at Sec. 51-2.4. As the Commission made clear during the July
2023 public meeting, the ``special considerations'' referenced in
Commission Policy 51.301 may include an NPA's record and capability in
providing elements of employee training and career development. Indeed,
these factors were considered during the Fort Knox pilot project.
Changes to the Rule: The final rule now directs the CNA to consider
the capability of the NPA to provide training and placement, as well as
employment opportunities, in making the selection decision. The rule
also explains that the Commission must consider the criteria under
Sec. 51-2.4 before approving a competitive distribution and
authorizing NPAs for the distribution.
d. Limiting Competition To Work Performed on Federal Property
Comments: Several commenters recommended adopting the Panel's
recommendation that competition be limited to work performed on Federal
property or at government owned facilities. Commenters raised the
concern that the proposed rule did not consider the significant
investment in infrastructure required when services are performed at an
NPA location and are not portable or easily moved to another NPA
location without significant unfavorable consequences.
Discussion: The Commission is aware that many NPAs have made
significant investments in equipment, supplies, facilities, and
personnel to perform work at NPA-owned or NPA-leased facilities. That
was the principal reason this rule excludes products, because of the
significant capital investments required to start and maintain a
production line.
The Commission believes some of the future growth of the Program
will come in knowledge-based jobs or in other jobs which can be
performed remotely. Limiting this regulation to jobs which will be
performed from a Government facility does not reflect the changing
nature of many jobs.
Changes to the Rule: None.

D. Concerns About Price Being a Dominant Factor in Making the NPA
Selection Decision

Comments: Several commenters expressed concern that there is
nothing in the proposed rule that would prevent a requirement from
simply going to the NPA offering the lowest price and that approach
would lead to a ``race to the bottom.'' NPAs were concerned that if
price becomes the deciding factor or the sole differentiator among
technically capable bidders, the results of a competition could cause
irreparable harm to the Program and the individuals who depend on it
for support.
Other commenters raised similar concerns, such as stating that the
proposed rule promoted price competition alone without considering
other factors such as accommodating disabilities, productivity levels,
costs of workforce integration and empowering individuals with
disabilities, and costs of transitioning employees with disabilities
into the private sector.
Commenters recommended a variety of guardrails to reduce the
possibility of Lowest Price Technically Acceptable (LPTA)
determinations. These recommendations included: requiring the Federal
customer and incumbent NPA to engage in good faith bilateral
negotiations prior to requesting price competition, not allowing re-
competition if quality of service is not a factor, incorporating a best
value tradeoff social impact criterion, and including language in the
proposed rule that addresses when the LPTA is acceptable, similar to
language in the FAR.\62\
---------------------------------------------------------------------------

\62\ See FAR 15.101-2(c).
---------------------------------------------------------------------------

Discussion: To address the concerns raised by commenters, the
Commission has added language in the final rule to ensure that price
will not have greater weight than the non-price factors for competitive
distributions. It should also be noted that limiting the weight that
price might have in a competitive distribution is a departure from the
Panel's recommendation. The Panel left open the possibility of price
having equal weight than the non-price factors. However, the final rule
departs from this recommendation, which will serve as a signal to the
NPA community and Federal agencies that price can be ``a'' factor, but
it must be subordinate to the non-price factors for NPA selection.
Lastly, but most importantly, nothing in this rulemaking is intended to
supplant the Commission's statutory authority and responsibility to set
the FMP.\63\ For instance, if the Commission determines that the price
resulting from a competition is dangerously low or out of synch with
other Commission priorities, it retains the authority to adjust the
final price or allow for additional price protections as necessary.
---------------------------------------------------------------------------

\63\ 41 U.S.C. 8503(b).
---------------------------------------------------------------------------

Changes to the Rule: Under Sec. 51-3.4(d), the final rule now
states that if a competitive distribution is approved by the
Commission, the CNA shall not permit price to have greater weight than
the non-price factors (combined) when making an NPA selection decision.

E. Job Losses

Comments: Several commenters were concerned about the downward
effect of price competition on jobs in the Program, fearing individuals
who are blind or have significant disabilities would be negatively
impacted by the reduction of labor positions in response to their NPA
providing competitive pricing. One of the CNAs argued that the proposed
rule touted the benefits of competition without addressing the
potential impact on employees with disabilities and that ``increased
competition may force NPAs to evaluate who they can hire to support
lower contract costs and greater efficiency.'' Several NPAs similarly
stated that price competition incentivizes NPAs to focus on achieving
the lowest price by hiring the most efficient workers with less
significant disabilities, subcontracting out work, hiring on a part-
time basis rather than employing individuals with the most significant
disabilities, or transitioning individuals who are blind or have
significant disabilities into employment outside of the Program. A few
commenters also expressed concern about competition causing
consolidation of NPAs which could also negatively impact jobs for
individuals with disabilities. Two commenters requested there be a
post-final-rule study on the impact on job loss for individuals with
disabilities.
Discussion: The rule changes described in this rulemaking open the
potential for attracting new and emerging jobs from Federal agencies.
The changes also contain a number of protections to ensure a robust
review before any competitions are accepted, discussed above. Finally,
the rule now includes a requirement that the CNA consider training,
placements, and employment opportunities in making the selection
decision.
Changes to the Rule: The final rule directs the CNA to consider NPA
capability of providing training, placements, and placement, as well as
employment opportunity, as criteria or subcriteria for each NPA
selection decision. In addition, as discussed

[[Page 20333]]

above, the changes ensure a robust review before requests for
competition are accepted.

F. Directed Competition Due to Price Impasse

Comments: Several commenters disagreed with the provision allowing
competition due to a price impasse. A primary concern voiced was that
it gives the Federal customer little to no reason to avert impasse and
as one NPA argued ``any contract could be approved for competition
under the proposed rule . . . effectively opening the door for any
government customer to prefer impasse as a means to render the contract
eligible for competition.'' Commenters also expressed concern about the
lack of criteria for when price competition would be directed and that
the mere threat of competition would cause NPAs to accept prices below
fair market value to the detriment of the NPA and employees. Many
commenters that opposed the provision asked the Commission to remove
the option from the proposed rule and leave the current impasse
procedures in place.
Conversely, two commenters in support of the provision requested
the price impasse provision only apply when other conditions are
satisfied such as limiting it to contracts valued at $10 million
annually and services operating on government-owned sites/facilities.
Discussion: During fiscal year 2023, the Commission oversaw the
resolution of three price disputes between an NPA and a Federal agency
using the Commission's current price impasse procedures. None of those
impasse actions were for service contracts.\64\ This is consistent with
the annual average of two to three price impasse decisions over the
last five years. The Commission does not expect the number of impasses
to increase because of this rule change, since Federal agencies will
still be required to exhaust the Commission's existing administrative
procedures before a competitive option is considered. Even then, a
competitive distribution would only be directed for requirements
exceeding $1 million in total project value and when other methods for
resolving a price impasse have proven ineffective.
---------------------------------------------------------------------------

\64\ There was one service requirement referred to the
Commission for a price impasse decision, but the request for impasse
was withdrawn before the Commission rendered a decision.
---------------------------------------------------------------------------

Changes to the Rule: We have modified and reorganized Sec. 51-3.4.
First, we moved the impasse provision in the final rule from paragraph
(c) to (e). We also added language clarifying that the Commission shall
not direct a competition because of a price impasse until bilateral
price negotiations consistent with Sec. 51-2.7(b) are attempted in
good faith, and that a Federal agency may not request competition until
the parties have exhausted all administrative remedies required by the
Commission's pricing policies and procedures. Lastly, we added language
to the final rule that limits those impasse related competitions to
service requirements that exceed $1 million in total project value.

G. Competition Will Drive Up NPA Costs

Comments: Several commenters expressed concern that the proposed
rule did not include an adequate cost benefit analysis to the NPA
community. Commenters largely argued that the proposed rule
underestimated the costs to the NPA network to prepare bids, the cost
to the Program for competition and re-competition, and the costs of
stranded assets and trying to recapture those costs over a 5-year
period. They further argued that the money to prepare the bids and
proposals to compete would take funds away from NPAs spending to
support their social mission.
Commenters argued the proposed rule did not adequately consider the
impact and interaction with other simultaneous changes in the Program's
policies and the new requirements upon NPAs that may impose additional
costs. These commenters expressed concern that the proposed rule did
not address the impact on an incumbent NPA, particularly when the NPA
loses a contract that makes up a significant portion of the NPA's total
revenue and the impact on subcontracting NPAs if the incumbent loses
the contract.
A few commenters recommended the Commission evaluate using the
Program Fee collected by the CNAs to mitigate the costs for the NPAs,
with one commenter specifically recommending that the responsible CNA
share in the increased cost burden by modifying the fees collected when
competition occurs to help mitigate costs, while another commenter
recommended eliminating the CNA Program Fee after the fifth year of a
service contract on contracts valued at more than $10 million.
Discussion: The cost to prepare a response to an Opportunity Notice
(proposal) may not be an insignificant matter for a competitive
distribution. However, the Commission has, on balance, determined that
any additional costs associated with competition are offset by the
potential cost savings benefit Federal Government and the ability to
attract new work performed by employees who are blind or have
significant disabilities and retain existing requirements in the
Program.
If an incumbent NPA is displaced by a competitive distribution,
such displacement would result in a net loss to the outgoing NPA, but
not to the Program. In addition, as noted throughout, Federal agencies
may request a competitive distribution, but it will ultimately be up to
the Commission to decide whether competition will occur. Commission
discretion coupled with the relative infrequency of competitions,
should result in an overall net gain for the Program and the ordering
agency. Simply put, competitions will not be approved simply for the
sake of competing, but when the overall benefits of competing
reasonably outweigh other options.
Lastly, the Commission will continue to study the results of
previous and future pilots, to best gauge how to offset unnecessary
cost burdens associated with competition. However, comments related to
mitigating cost through changes in CNA Program Fees is beyond the scope
of this rulemaking.
With regard to the impact and interaction between this rule and
other simultaneous changes in the Program's policies, the final rule
requires the CNA to consider the NPA's activities in making some of
these changes.
Changes to the Rule: The Commission has revised the final rule
language at Sec. 51-3.4(d) to limit frequency of competition through
an approval process and inclusion of NPA capability regarding training
and placements, as well as employment opportunities.

H. Criticisms of Pilots & Cost-Savings Projections

Comments: Several commenters claimed that the cost savings achieved
by the pilots were exaggerated, costs to workers were ignored, and the
results of two pilots were not sufficient information on which to base
long-term changes to the Program. These commenters argued that cost
savings and results did not capture or include the effect competition
had on the incumbent NPA's retention of jobs or availability of
training. One commenter noted that the pilot at Fort Bliss cost 60 jobs
for people with significant disabilities and the curtailment of social
impact support services and other programs designed to benefit the
workforce.
Additionally, a few commenters contended that the discussion of the
pilot savings was misleading and that the existing performance work
statements (PWSs) and contractual

[[Page 20334]]

vehicles were significantly different from the original PWS and
contracts issued in the competition. Commenters claimed these scope
reductions and other substantial changes lowered the price regardless
of price competition. Other commenters argued the blocked Fort Meade
pilot resulted in bilateral negotiations which saved the Federal
customer more money than the projected pilot savings.
Discussion: Like any complex Government requirement in which there
are almost always changes from one year to the next, we agree that
there were changes made to the PWSs for the pilot test requirements.
Such changes are especially likely when the Government restructures a
follow-on contract from the prior effort. Some commenters have asserted
that changes to the requirement, rather than the impact of a price-
inclusive NPA selection, are the reason for the cost savings from the
pilots described in the NPRM. We disagree with this characterization.
The Commission believes the best measure for the savings achieved with
the pilots is seen when the price of the successful (or would be
successful) NPA is compared to the Independent Government Cost Estimate
(IGCE) and the proposed prices of the other NPAs involved in the
competition.\65\ When compared to the IGCE, the cost savings for Fort
Bliss were approximately 12.7 percent. The NPRM stated that the cost
savings were 12 percent. For Fort Meade, the savings were 14 percent
when compared to the IGCE. The NPRM erroneously stated the cost savings
were 17 percent, but the NPRM correctly stated the applicable totals;
namely, $19.6 million estimated annual contract value compared to the
$16.8 million annual contract value offered by NPA 4 (14 percent).
---------------------------------------------------------------------------

\65\ One commenter noted that the new PWS for the Fort Bliss
FSOS eliminated two requirements that were required under the
predecessor effort (i.e., service order desk and reduced reporting
requirements). These requirements were not priced into the IGCE,
because the IGCE was based off of the revised PWS, not the incumbent
contract.
---------------------------------------------------------------------------

Under an IGSA, the DoD already has authority to use an alternative
to the AbilityOne Program. Ensuring the DoD has a means to give it
confidence that its use of the AbilityOne Program will result in good
service at a fair market price is critical to ensuring the DoD's future
use of the Program. The true benefit of the competition process,
regardless of cost savings, was the requirement remained with
AbilityOne.
Another point raised by some commenters was the claim that the
price-inclusive competition at Fort Bliss caused 60 workers with
significant disabilities to lose employment. The Commission rejects
this assertion. First, the same commenter noted that the cost savings
at Fort Bliss were the result of reductions in the scope of the
requirement. As noted above, every contract undergoes changes in scope
from one contract period of performance to the next. Sometimes the
scope of work increases, and the contractor will need to employ a
larger workforce to accomplish the mission. On other occasions, the
scope is reduced, necessitating a reduction in the number of workers
performing on the contract. In any event, if the loss in jobs was the
result of a reduction in scope (i.e., less work) the loss in jobs
cannot be attributed to the competition. In fact, another commenter
noted that it was able to achieve greater cost savings for the Federal
agency through bilateral negotiations, but the commenter did not
indicate that those cost savings adversely impacted AbilityOne
employees.
Second, the Fort Bliss competitive pilot concluded in 2019.\66\
Since that time, the entire nation experienced one of the most life-
altering events in the history of the world--the COVID-19 pandemic. The
pandemic not only caused a reduction in certain service requirements
across the Federal Government, but many employees, those with and
without disabilities, were fearful about returning to work. The
pandemic caused unprecedented job losses across the country and
employers in the AbilityOne Program and throughout the nation have
struggled to bring employment levels back up to pre-pandemic levels. As
such, it does not follow that every worker that is no longer working at
Fort Bliss (or elsewhere) is not working because of the competition
pilot in 2019.\67\ There are numerous reasons impacting employee
participation in the workforce, and employees in the AbilityOne Program
are no exception.\68\ In fact, the Commission authorized the selected
NPA for the Fort Knox pilot to operate at a lower project level ratio
not only to encourage the creation of integrated work environments, but
to also address the challenges NPAs are experiencing in recruiting
qualified personnel with disabilities in the current job market.\69\
---------------------------------------------------------------------------

\66\ Report on the 2018-2019 Competition Pilot Test for
AbilityOne Program Nonprofit Agencies Facility Support and
Operations Services Contract Fort Bliss, Texas. AbilityOne
Commission Report on Competition Pilot Test at Fort Bliss, Texas
2018-2019.
\67\ See U.S. Bureau of Labor Statistics article at <a href="https://www.bls.gov/opub/mlr/2021/article/covid-19-ends-longest-employment-expansion-in-ces-history.htm">https://www.bls.gov/opub/mlr/2021/article/covid-19-ends-longest-employment-expansion-in-ces-history.htm</a>. The article states that ``[a]ccording
to data from the U.S. Bureau of Labor Statistics (BLS) Current
Employment Statistics (CES) survey, nonfarm payroll employment in
the United States declined by 9.4 million in 2020, the largest
calendar-year decline in the history of the CES employment series.''
\68\ See U.S. Department of Commerce report at <a href="https://www.uschamber.com/workforce/understanding-americas-labor-shortage">https://www.uschamber.com/workforce/understanding-americas-labor-shortage</a>.
The report states, ``[r]ight now, the labor force participation rate
is 62.7%, down from 63.3% in February 2020. There's not just one
reason that workers are sitting out, but several factors have come
together to cause the ongoing shortage.''
\69\ See Id. The report notes that ``[r]ight now, the latest
data shows that we have 9.5 million job openings in the U.S., but
only 6.5 million unemployed workers.''
---------------------------------------------------------------------------

Lastly, although it is permissible to use profits from an
AbilityOne contract to finance social endeavors to support employees
who are blind or have significant disabilities, it is generally not
permissible to treat such costs as directly chargeable to the
Government. With that said, the Commission does not dictate to an NPA
how it should use its net proceeds. However, an NPA's decision to
discontinue or reduce workforce development activities for workers who
are blind or have significant disabilities will have a detrimental
effect on its ability to compete for AbilityOne work in the future.
Changes to the Rule: None.

I. Right of First Refusal

Comments: A few commenters commended the Commission for protecting
the jobs of employees who are blind or have significant disabilities by
including a right of first refusal. However, other commenters raised
concerns that this provision was not sufficient to protect employees.
Commenters argued that even with this provision, there is concern that
employees will lose their jobs due to pressure to reduce operating
costs. Additional concerns were raised such as the same vocational
supports the employee received not being available from the successful
contractor, the disruptive nature of changing employers for some
employees, and the NPA not having the primary opportunity to retain the
employee.
These commenters asked that the rule include how these individuals
will be supported, as well as specifications and funding for
appropriate assistance and training to help displaced individuals with
disabilities find new employment opportunities. Commenters also made
recommendations that included using Executive Order 14055
Nondisplacement of Qualified Workers Under Service Contracts as a guide
and revising the proposed rule to include

[[Page 20335]]

specifications and funding for the provision of appropriate assistance
and training to help displaced individuals with disabilities find new
employment opportunities. One commenter suggested expansion of the
right of first refusal provision to all projects on the PL regardless
of project type. In contrast, another commenter recommended applying
proposed Sec. 51-5.1(f) to only service contracts, while another
commenter recommended including a requirement that the employee only
have the right of refusal if the employee decided to move to the new
NPA and/or the losing NPA does not have an equal or better opportunity
for continued employment for that individual.
Discussion: The right of first refusal is not limited to those
authorizations where the change in NPA is the result of a competitive
distribution. Any instance where an NPA is replaced by another NPA
would trigger a participating employee's right of first refusal (for
products or services). Although providing employee accommodations and
supports are beyond the scope of this rule, there are other Commission
policies and procedures aimed to ensure that there is standardized
level of support NPAs are expected to provide to their AbilityOne
workforce. This means that once a new NPA assumes responsibility for
the existing workforce of an AbilityOne requirement it should be just
as conscientious in supporting its inherited workforce as the
incumbent. However, the Commission does recognize that there may be
some instances where some NPAs are better at providing specific types
of support to a given workforce than another. There is nothing in this
rule that would preclude an incumbent NPA from offering an individual
another job to retain his or services with its NPA. However, the right
of first refusal is an employee's right that they may choose to
exercise if they do not choose to seek other opportunities elsewhere.
Lastly, this regulatory change is designed to work in concert with
Executive Order 14055 or any other Executive Order or rule aimed at
protecting an incumbent workforce. The significance of this rule is
that it directs NPAs to prioritize incumbent workers who are blind or
have significant disabilities over all others when the work is being
performed under a PL requirement. Although the potential funding needs
of individual employees are beyond the scope of this rulemaking, the
Commission will continue to collect and review data to determine if
there is an unmet workforce need that might require additional funding
to rectify.
Changes to the Rule: None.

J. Strain on Commission and CNA Resources

Comments: Several commenters expressed concern that the Commission
and CNAs do not have the resources or the staff to handle the potential
volume of competitions with a lower threshold and re-competitions due
to the price impasse provision. Commenters also argued that the
proposed rule lacked sufficient guardrails to limit the number of
competitions to protect Commission and CNA resources. One commenter
argued that the Commission and CNA do not have the expertise to conduct
price competitions. This commenter recommended the procuring Federal
agencies should be delegated authority to conduct the price
competition, like the Small Business Act (SBA) competitive 8(a) Program
at FAR 19.800, and that the Commission or CNAs should only provide the
``pool'' of qualified NPA candidates. One commenter recommended
identifying and approving new distributions at least 24 months out so
that the Commission, CNAs, and NPAs would have enough lead time to plan
and execute.
Another commenter argued that while the NPRM stated that price
competition would only be utilized in complex projects or cases that
had unique requirements, the history of the pilot projects suggests
that price competition is not intended for a select few items on the PL
and that price competition is likely to be broadly applied and
overwhelm Commission resources.
Discussion: Approving and managing competitive distributions,
especially for existing requirements, may increase the workload for CNA
and Commission staff. This means that the process for implementing
changes will need to be done in a deliberate manner from initial
approval to execution. The Commission currently has an existing
framework for identifying and granting approval for complex projects.
Complex projects must generally be identified and approved 24 months
before project execution. A similar approach could be used for
identifying and approving candidates for competition.
It is true that the Fort Bliss and Fort Meade pilots created
additional workload for the Commission staff. The Fort Knox pilot was
significantly less burdensome for Commission staff, but in turn
required more work from the CNAs and the Federal customer in terms of
overall management and evaluative support. Both CNAs have indicated
that this additional workload would not come without cost in terms of
time and other resources. The Commission recognizes planning will be
important, as well as deliberate coordination with CNAs and Federal
agencies desirous of pursuing a price-inclusive competitive option. The
Federal customer provided expertise in pricing and technical support
for all three pilots. When the final rule is implemented, the Federal
customer will be expected to provide similar support. Lastly, the
Commission believes the fact that approval of a competitive
distribution is discretionary will allow the Commission to manage the
workload of the number of requests approved on an annual basis.
Changes to the Rule: The Commission revised Sec. 51-3.4(b) to
clarify that requests for competition must come from members of the
Senior Executive Service or Flag or General Officers in acquiring
Federal agencies and that the Commission determines whether to approve
the request. Availability of resources to conduct the competition is
appropriately part of the decision process.

K. Alternative Methods to Price Competition

Comments: Several commenters recommended the Commission consider
alternative methods to price competition to address the Federal
customers' needs.
These same commenters provided the following alternatives to
competition: analysis of supply schedules, approved indirect rate or a
safe harbor based on the audit with a default rate, pricing
methodologies that account for accommodations, use of FAR 15.404-
1(b)(2) which includes guidance on factors to consider in determining
``fair and reasonable'' price outside of competition and which lists
price analysis techniques, and use of an AbilityOne Supply Schedule.
Additional recommendations included modernizing the Commission's and
CNA's pricing methods and processes, training NPAs and contracting
officers in best practices for bilateral negotiations and using the
Contractor Performance Assessment Reporting System (CPARS) to improve
contractor performance. One commenter noted that all agencies are
exempt from the use of CPARS except DoD and suggested this exemption
should be removed and thoroughly explored before engaging in re-
competition.
Alternatively, another commenter suggested, rather than using price
competition to establish the FMP, the Commission should improve the
price impasse process. In addition to similar recommendations as above,
the

[[Page 20336]]

commenter recommended strict time limits to prevent years-long impasses
and a single appeal process where the Commission decides the price. The
NPA would then accept the price or pass on the opportunity, and a
competitive process that excludes price competition between NPAs would
occur to replace the NPA. Another commenter stated that if the
Commission's concerns about price relate to overhead and general and
administrative (G&A) rates, then mechanisms already existed to control
these concerns such as adding audited/accepted/certified indirect
rates.
In contrast, one NPA proposed a procedure to address price or
performance concerns not in lieu of competition, but as a prerequisite
before the Commission would authorize a re-competition. This
recommended process would require the contracting officer to submit a
formal request to the Commission for a review at the mid-point of the
contract period and the Federal customer would either document specific
shortcomings for performance-based concerns or provide an IGCE or other
price analysis for price-based concerns. The Commission would then
authorize the CNA to conduct an independent pricing analysis or best
practices assessment and conduct sessions with the Federal customer and
NPA to address concerns with the NPA, submitting a plan to address
these concerns. Only then would the Commission have the option to
authorize a re-competition.
Discussion: The inclusion of price competition at Sec. 51-2.7 as a
tool for establishing the fair market price is just one option of the
numerous options already available to the Commission. In fact, the most
significant change in this rulemaking is to clarify the pricing tools
available to the Commission. The Commission's current procedures
encourage bilateral price negotiations between the NPA and contracting
agency to establish price reasonableness. Currently, the Commission
relies almost exclusively on these negotiations. The existing
regulation also stated that other methodologies can be used, ``if
agreed to by the negotiating parties.'' In interpreting this provision,
the COFC found that, absent a change in the regulation, the Commission
cannot consider other methodologies unless the NPA and contracting
activity also agree.\70\ The changes to Sec. 51-2.7 eliminate this
ambiguity and clarify the statutory authority of the Commission. The
larger point here is that the changes proposed in this rulemaking
provide the Commission with the flexibility to use price competition,
in concert with other methodologies, for distribution decisions covered
under this section.
---------------------------------------------------------------------------

\70\ Supra note 9.
---------------------------------------------------------------------------

Changes to the Rule: None.

L. Fair and Equitable

Comments: A small number of commenters also took issue with the
removal of the phrase ``fair and equitable'' from Sec. 51.3-4 in the
proposed rule, believing that the removal meant prioritizing the needs
of the requesting Federal agency would come at the expense of the NPA's
equity interest.
Discussion: In most instances, only one NPA will be authorized to
provide a good or service, based on the Commission's public policy
objectives at the time a requirement is added to the PL. When a
competition is requested, the CNA will still be expected to make
recommendation decisions in a manner that is ``fair and equitable'' to
the NPAs responding to the Opportunity Notice. For instance, there may
be times when it might be advantageous to limit an Opportunity Notice
to NPAs of a specific size, geographical area, or other special
considerations approved by the Commission. Once a recommendation is
made, the Commission will also consider the equity interest of each NPA
when making an authorization decision. Again, in most instances the
Commission will only be authorizing a single NPA to serve as a
mandatory source. The change in language at Sec. 51-3.4 was only meant
to distinguish how CNAs will distribute orders when more than one NPA
is authorized. However, for clarity, the Commission is adopting this
comment and retaining the ``fair and equitable'' language from the
existing Sec. 51-3.4 into Sec. 51-3.4(a) of the final rule.
Changes to the Rule: The Commission has moved ``fair and
equitable'' language from the existing Sec. 51-3.4 into Sec. 51-
3.4(a) of the final rule and makes clear that the distribution will
also provide the best value for the requiring Federal agency and for
the mission of the Program.

M. Deauthorization of an NPA

Comments: Some commenters took issue with the change in Sec. 51-
5.2 that clarified the Commission's authority to authorize and
deauthorize mandatory sources.
Discussion: Only the Commission can authorize an NPA, and once an
NPA is authorized, it naturally stands that the Commission has the
authority to deauthorize an NPA if it has a legitimate basis for doing
so. For example, this may occur if an NPA fails to maintain
qualifications, no longer desires or is no longer capable of providing
products or services to the Government, or is otherwise not performing
up to the standards of the Commission or the Federal customer.
Changes to the Rule: None.

Regulatory Procedures

Executive Orders 12866 (Regulatory Planning and Review) and 13563
(Improving Regulation and Regulatory Review)

Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives. E.O. 13563
directs agencies to propose or adopt a regulation only upon a reasoned
determination that its benefits justify its costs; tailor the
regulation to impose the least burden on society, consistent with
achieving the regulatory objectives; and in choosing among alternative
regulatory approaches, select those approaches that maximize net
benefits (including potential economic, environmental, public health
and safety, and other advantages). E.O. 13563 emphasizes the importance
of quantifying both costs and benefits, of reducing costs, of
harmonizing rules, and promoting flexibility. E.O. 13563 further
recognizes that some benefits are difficult to quantify and provided
that, where appropriate and permitted by law, agencies may consider and
discuss qualitative values that are difficult or impossible to
quantify, including equity, human dignity, fairness, and distributive
impacts. The Office of Information and Regulatory Affairs in the Office
of Management and Budget has determined that this is a significant
regulatory action and, therefore, was subject to review under Section
6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30,
1993.

Impact of Final Rule

In the NPRM, the Commission acknowledged that the proposed rule
changes were applicable to all NPAs and estimated the proposed rule
change would have the most impact on 27 percent of NPAs, approximately
122 out of 450 NPAs. However, the final rule bifurcates the price
competition threshold from $10 million in total project value for all
service requirements on the PL to $50 million for DoD agencies and $10
million for non-DoD agencies. This change from the NPRM significantly
reduces the final rule's impact and scope by over 50 percent, from
approximately 346 to 155 PL service requirements. Additionally, the
final rule's bifurcated price

[[Page 20337]]

competition threshold substantially reduces the percentage of NPAs
potentially impacted to 15 percent, approximately 63 NPAs.\71\
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\71\ This calculation is based on a total of 413 NPAs in the
program as of September 30, 2023.
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As discussed in the NPRM, an average of one-fifth of all applicable
AbilityOne service contracts would be eligible for price competition in
any given year. With the changes to the total annual contract value
threshold, a maximum of approximately 31 contracts per year would be
eligible for competitive distribution on an annualized basis. The exact
number of price competitions will still be based on how many requests
for price competition the Commission receives and ultimately approves.
In SourceAmerica's 2022 Federal Customer Survey Final Report, the
surveyed Federal customers reported satisfaction ranged from on average
approximately 84% to 89% of Federal customers who responded to the
survey were overall satisfied with their AbilityOne contractor.\72\
Therefore, based on this data, of the 155 PL service requirements
eligible for competition under this rule, the Commission generally
anticipates that 11%-16% or 17-25 requirements may yield a request for
competition over a 5-year period. As a result, the Commission estimates
that the number of requests for price-inclusive competitions will
likely fall somewhere between 3 to 5 per year in the first several
years of implementation. This number could increase with the inclusion
of the price impasse trigger. But as previously noted, the Commission
receives an average of 2 price impasse requests on an annual basis, and
a vast majority of those are for products which are outside the scope
of this regulatory change.
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\72\ Supra note 51.
---------------------------------------------------------------------------

The Commission believes the benefits of introducing a price
component into the competitive distribution process includes increasing
transparency in the NPA selection process, engaging the Federal
customer in the process, and incentivizing better NPA performance and
more competitive pricing. Most PL service requirements above the $10
million threshold are DoD contracts. Therefore, as discussed above, in
response to public comments regarding the number of service
requirements subject to potential price competition, the potential
negative impact on smaller NPAs, and requests to align the rule's
threshold to the Panel recommendation, the Commission raised the final
rule's threshold to $50 million total project value for DoD agencies.
However, the final rule preserves a lower threshold of $10 million
total project value for non-DoD agencies and allows the Commission to
remain responsive to the needs of civilian Federal agencies and the
Commission's Strategic Plan.

Costs of the Final Rule

As discussed earlier in response to comments, competition is not
mandatory, and the Commission's determination to approve a competition
will be done on a case-by-case and informed basis. For both new and
existing PL additions, if the Commission ultimately approves a request
for a competitive distribution, authorized NPAs will incur the cost of
preparing a competitive proposal. An incumbent NPA may also incur
transition costs if it loses a competitive distribution, however,
transition costs may be reimbursable under the existing Federal
contract. Additionally, the competitive distribution process means an
incumbent NPA is at risk of losing the revenue from a service
requirement. However, the Commission notes that while the lost revenue
is a cost for the incumbent NPA, the revenue would remain within the
Program because the service requirement would go to another authorized
NPA. For new PL additions, the cost of preparing a proposal is
significantly outweighed by the new revenue stream into the Program.
SourceAmerica initially reported it would need 14 full-time
equivalents (FTEs) in additional staff or $1.5 million annually to
handle 336 potential price-inclusive competitive allocations. However,
under the final rule's bifurcated threshold, CNAs would incur costs
based on the approximately 155 service requirements that are eligible
for a price competitive distribution, 150 of which fall under
SourceAmerica. Based on this new reduced scope, if the Commission
approved every request for a competitive distribution, SourceAmerica
would need six full-time equivalents FTEs in additional staff or
$670,000. But as noted above, approval of all 150 possible competitions
over the 5-year period is highly improbable, based on available
customer satisfaction data and the fact that Commission approval lies
at the heart of every request. Additionally, even when a competition is
approved, the CNAs' costs would likely be offset by the Federal
customer's involvement and support. For instance, in support of each
pilot, the requesting agency provided several FTEs of assistance in the
form of price analyst, technical evaluators, and other subject matter
experts.
Once the final rule is implemented, the Commission expects that if
the Federal customer requests a competitive distribution, it will
provide personnel to assist with the evaluation of technical
capability, past performance, and price analysis. The cost to the
Federal customer will ultimately vary based on how much support it
provides to the Commission and applicable CNA. The Federal customer may
also incur costs due to the disruption in contract performance or
administrative costs associated with replacing an incumbent contractor,
however, that is a calculation the Federal customer must make prior to
requesting a competitive distribution.
The Commission initially estimated that it will need an additional
budget of $1.75 million annually to support a competitive
allocation.\73\ Like the CNA estimate, these numbers were based on the
worst-case scenario of 336 possible competitions. However, due to the
reduced scope and the expectation that the Commission would likely
process no more than 3 to 5 request per year, the cost to the agency
would be no greater than a fourth of the original estimate or 3 to 4
additional FTEs (i.e., a competition lead, a contract specialist, and
up to two additional price analysts).
---------------------------------------------------------------------------

\73\ See The Third Annual 898 Report to Congress, dated January
2021 at p. 33. This is based on analysis from the first two pilot
tests conducted by the Commission, which called for hiring an
additional 8-12 FTEs, benefits, equipment, and IT support.
---------------------------------------------------------------------------

As discussed throughout this rulemaking, subsection (f)(2) of the
Act directed the Commission to make a good faith effort to implement
the Panel's recommendations. If the Commission unduly delayed or
ignored the Panel's recommendations, in subsection (g)(1)(A) of the
Act, the Secretary of Defense was given the authority to ``suspend
compliance with the requirement to procure a product or service in
Section 8504 of title 41, United States Code.'' Currently, DoD's
spending represents over half of the Program's $4 billion portfolio,
which creates tens of thousands of jobs for individuals with
significant disabilities or who are blind. Introducing competition
prevents DoD's withdrawal from, or reduced participation in, the
Program, thereby protecting the jobs and objectives of the Program.
The Commission believes that the potential costs from
implementation of the final rule are greatly outweighed by the benefits
to the NPA community, the CNAs, and the Federal customer. As noted
elsewhere, making the Program responsive to the Panel's recommendations
will help to secure the jobs the Program currently creates and increase
the agency's prospects of adding more opportunities.

[[Page 20338]]

Regulatory Flexibility Analysis

Under the Regulatory Flexibility Act (RFA),\74\ an agency can
certify a rule if the rulemaking does not have a significant economic
impact on a substantial number of small entities. This final rule only
imposes a burden on NPAs with contracts that fall within the bifurcated
threshold of $50 million in total project value for DoD agencies and
$10 million in total project value for non-DoD agencies. In total,
approximately 63 NPAs out of 413 participating NPAs have applicable
contracts that may be impacted by this rule. This number, however, is
only applicable if every possible contract is competed and, as
discussed above, competition is not mandatory and is at the discretion
of the Commission. Moreover, this rule only establishes business rules
to improve the AbilityOne Program processes and does not require any
new reporting, recordkeeping, or other compliance requirements for
small entities.
---------------------------------------------------------------------------

\74\ 5 U.S.C. 605.
---------------------------------------------------------------------------

Accordingly, the Commission certifies this rule will not have a
significant economic impact on a substantial number of small entities,
and, therefore, no final regulatory flexibility analysis has been
prepared.

Unfunded Mandate Reform

This final 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.

Paperwork Reduction Act

This final rule does not contain an information collection
requirement subject to the Paperwork Reduction Act of 1995 (44 U.S.C.
3501 et seq.). Accordingly, it does not impose any burdens under the
Paperwork Reduction Act and does not require further OMB approval.

Small Business Regulatory Enforcement Fairness Act of 1996

This final rule would not constitute a major rule as defined by
section 804 of the Small Business Regulatory Enforcement Fairness Act
of 1996. This final 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.
Accessible Format: On request to the program contact person listed
under FOR FURTHER INFORMATION CONTACT, individuals with disabilities
can obtain this document and a copy of the application package in an
accessible format. The Commission will provide the requestor with an
accessible format that may include Rich Text Format (RTF) or text
format (txt), a thumb drive, an MP3 file, braille, large print,
audiotape, or compact disc, or other accessible format.
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>. At this site you can view this
document, as well as all other documents of this Commission published
in the Federal Register, in text or PDF. To use PDF you must have Adobe
Acrobat Reader, which is available at no cost to the user at the site.
You may also access documents of the Department published in the
Federal Register by using the article search feature at:
<a href="http://www.federalregister.gov">www.federalregister.gov</a>. Specifically, through the advanced search
feature at this site, you can limit your search to documents published
by the Department.

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.

The Executive Director of the Commission, Kimberly M. Zeich, having
reviewed and approved this document, is delegating the authority to
electronically sign this document to Michael R. Jurkowski, for purposes
of publication in the Federal Register.

Michael R. Jurkowski,
Director, Business Operations.

For reasons set forth in the preamble, the Commission amends 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. 8501-8506.

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, where
applicable, 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, where
applicable, bilateral negotiations between contracting activities and
authorized 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 price 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. 8501-8506.

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 in a manner that is fair and

[[Page 20339]]

equitable to each authorized nonprofit agency, and that provides the
best value for the requiring Federal agency and best meets the mission
of the Program.
(b) For new and existing Procurement List services that are
estimated to exceed $10 million in total project value for a Federal
agency, other than the Department of Defense and its components, or $50
million in total project value for the Department of Defense and its
components, inclusive of the base period and all option periods, a
Federal agency may, at the Senior Executive Service or Flag or General
Officer level, request that the procurement be distributed to an
authorized nonprofit agency on a competitive basis among all authorized
nonprofit agencies. In addition to the requirements described at part
51-6 of this chapter, the requesting Federal agency shall advise the
Committee of the rationale for competition, whether it will provide
resources to support the competitive process, the independent
government cost estimate of the contract being competed or of the
resources to support the competitive process, any information
pertaining to performance, and such other information as is requested
by the Committee. The Committee will answer a request within 60 days of
receipt unless additional information is needed.
(c) If the Committee accepts a request from a Federal agency for
competitive distribution, the action will be forwarded to the
responsible central nonprofit agency for assessment in accordance with
Sec. 51-3.2(b) through (d). Upon receipt of a recommendation from the
central nonprofit agency, the Committee will determine whether a
competitive distribution is appropriate after considering the
suitability criteria described at Sec. 51-2.4 of this chapter and
applicable Committee policies and procedures. If the Committee decides
that a competitive distribution is appropriate and authorizes at least
two nonprofit agencies to serve as mandatory sources, a competitive
distribution may commence upon notification in the Federal Register.
(d) After notification, the responsible central nonprofit agency
shall select the authorized nonprofit agency that it determines
provides the best value for the ordering Federal agency and meets the
mission of the Program in accordance with the Committee's policies and
procedures. The selection decision shall be based on criteria approved
by the Committee, such as technical capability, past performance, and
price. The selection decision may also consider any other criteria or
subcriteria specific to the service requirement. In addition, each
selection decision shall consider criteria or subcriteria that address
the nonprofit agency's capability to provide opportunities related to
training and placements, as well as employment, for individuals who are
blind or have significant disabilities. Criteria may be weighted, but
price shall not have greater weight than the non-price factors when
combined, except for competitive distributions directed by the
Committee in accordance with paragraph (e) of this section.
(e) The Committee may also direct a competitive distribution in
accordance with paragraph (c) of this section for any service
requirement already on the Procurement List that exceeds a total
project value of $1 million, if bilateral negotiations described at
Sec. 51-2.7(b) of this chapter are attempted in good faith but fail to
produce a recommendation to the Committee for revising the fair market
price. A Federal agency may not request, and the Committee shall not
direct a competitive distribution based solely on failed price
negotiations, until the parties have exhausted all available remedies
established within the Committee's pricing policies and procedures.
(f) Any dispute arising out of a competitive distribution decision
described at paragraph (d) 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
resolution, 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 resolution decision, and only a nonprofit agency
that participated in the competitive distribution process described at
paragraph (c) of this section may file an 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. 8501-8506.

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 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 in accordance with the Committee's
policies and procedures. To meet the needs of the ordering Federal
agency, the central nonprofit agencies may distribute the commodity or
service to one or more nonprofit agencies in accordance with Sec. 51-
3.4(a) of this chapter.
(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, Department of Veterans
Affairs, 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 orders 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

[[Page 20340]]

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 for a successor nonprofit agency to offer the right of
first refusal also applies to an authorized nonprofit agency that is no
longer serving as the mandatory source because of a competitive
distribution under Sec. 51-3.4(d) of this chapter.

[FR Doc. 2024-05717 Filed 3-21-24; 8:45 am]
BILLING CODE P

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