Proposed Rule2026-08392
Revising Central Nonprofit Agencies' Requirements To Charge Fees and Clarifying the Permissibility of Subcontracting Within the AbilityOne Program
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Published
April 30, 2026
Issuing agencies
Committee for Purchase From People Who Are Blind or Severely Disabled
Abstract
This notice proposes to amend the Committee regulation at 41 CFR 51-3.5 to formally codify the congressionally mandated requirements set forth in the Consolidated Appropriations Act of 2016, Public Law 114-113, Division H, Title IV, 129 Stat. 2639, December 18, 2015, which requires the central nonprofit agencies to enter into a written agreement with the Committee before charging fees to nonprofit agencies. This notice also proposes to amend the Committee's regulation at 41 CFR 51-4.4 to clarify the definition of subcontracting within the AbilityOne Program, amend and reduce regulatory requirements to subcontract, streamline the approval process for use of subcontracting, and lessen the administrative burdens for selecting subcontractors.
Full Text
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<title>Federal Register, Volume 91 Issue 83 (Thursday, April 30, 2026)</title>
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[Federal Register Volume 91, Number 83 (Thursday, April 30, 2026)]
[Proposed Rules]
[Pages 23221-23228]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-08392]
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COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR SEVERELY DISABLED
41 CFR Parts 51-3.5 and 51-4.4
RIN 3037-AA24
Revising Central Nonprofit Agencies' Requirements To Charge Fees
and Clarifying the Permissibility of Subcontracting Within the
AbilityOne Program
AGENCY: Committee for Purchase From People Who Are Blind or Severely
Disabled.
ACTION: Notice of proposed rulemaking; request for comments.
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SUMMARY: This notice proposes to amend the Committee regulation at 41
CFR 51-3.5 to formally codify the congressionally mandated requirements
set forth in the Consolidated Appropriations Act of 2016, Public Law
114-113, Division H, Title IV, 129 Stat.
[[Page 23222]]
2639, December 18, 2015, which requires the central nonprofit agencies
to enter into a written agreement with the Committee before charging
fees to nonprofit agencies. This notice also proposes to amend the
Committee's regulation at 41 CFR 51-4.4 to clarify the definition of
subcontracting within the AbilityOne Program, amend and reduce
regulatory requirements to subcontract, streamline the approval process
for use of subcontracting, and lessen the administrative burdens for
selecting subcontractors.
DATES: The Commission must receive comments on these proposed revisions
30 days after publication, by June 1, 2026.
ADDRESSES: Comments must be submitted via the Federal eRulemaking
Portal at <a href="http://regulations.gov">regulations.gov</a>. where you can also find a plain language
summary of the proposed rule. Information on using <a href="http://regulations.gov">regulations.gov</a>,
including instructions for finding a rule on the site and submitting
comments, is available on the site under ``FAQ.'' Follow the
instructions for submitting comments. Please be advised that comments
received will be posted without change to <a href="https://www.regulations.gov">https://www.regulations.gov</a>,
including any personal information provided.
Accessible Format: Individuals with disabilities can obtain this
document, as well as the comments or other documents in the public
rulemaking record for the proposed regulations, in an alternative
accessible format by contacting the individual listed in the FOR
FURTHER INFORMATION section of this document.
Electronic Access to This Document: The official version of this
document is the document published in the Federal Register. You may
access the official edition of the Federal Register and the Code of
Federal Regulations at <a href="http://www.govinfo.gov">www.govinfo.gov</a>. You may also access documents
of Commission published in the Federal Register by using the article
search feature at: <a href="http://www.federalregister.gov">www.federalregister.gov</a>.
FOR FURTHER INFORMATION CONTACT: Cassandra Assefa, Attorney-Adviser,
Office of General Counsel, Committee for Purchase From People Who Are
Blind or Severely Disabled, 355 E Street SW, Suite 325, Washington, DC
20024; telephone: 202-430-9886; <a href="/cdn-cgi/l/email-protection#e281839191878483a283808b8e8b969b8d8c87cc858d94"><span class="__cf_email__" data-cfemail="90f3f1e3e3f5f6f1d0f1f2f9fcf9e4e9fffef5bef7ffe6">[email protected]</span></a>. If you are
deaf, hard of hearing, or have a speech disability and wish to access
telecommunications relay services, please dial 7-1-1.
SUPPLEMENTARY INFORMATION:
I. Background
A. 41 CFR 51-3.5 (Program Fee)
1. Cooperative Agreements and the Consolidated Appropriations Act of
2016
The Committee for Purchase From People Who Are Blind or Severely
Disabled, operating as the U.S. AbilityOne Commission (Commission)
oversees the AbilityOne Program (Program). The Commission is authorized
by the Javits-Wagner-O'Day Act (JWOD) and its implementing regulations
\1\ to administer the Program. The Program creates employment
opportunities for individuals who are blind or who have other
significant disabilities primarily by requiring Government agencies to
purchase selected products and services from nonprofit agencies
employing such individuals.
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\1\ 41 U.S.C. Chapter 85, Committee For Purchase From People Who
Are Blind or Severely Disabled.
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The JWOD Act directs the Commission to designate central nonprofit
agencies (CNAs) to facilitate, by direct allocation, subcontract, or
any other means, the distribution of Government orders of products and
services among nonprofit agencies (NPAs) employing individuals who are
blind or have severe disabilities.\2\ The Commission has designated
National Industries for the Blind (NIB) and SourceAmerica as the
nonprofits that perform the CNA roles and responsibilities.\3\
Additionally, under the Commission's regulations, 41 CFR 51-3.5, the
CNAs are able to collect a program fee for facilitating the NPAs'
participation in the program.\4\
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\2\ 41 U.S.C. 8503(c).
\3\ 41 CFR 51-3.1. The existing regulation references the
National Industries for the Severely Handicapped (NISH). In 2013
NISH began operating as SourceAmerica.
\4\ 41 CFR 51-3.5.
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In 2013, the U.S. Government Accountability Office (GAO) conducted
an audit of the AbilityOne Program to determine how the Commission:
``(1) directs and oversees the CNAs; (2) adds products and services to
the program and assigns affiliates to provide them; and (3) prices
program projects.'' \5\ The GAO noted that the existing structure did
not require the CNAs to take certain action and often had to ``seek
[the CNAs] voluntary cooperation'' to carryout Commission
directives.\6\ GAO concluded that the Commission lacked sufficient
authority and procedures to help ensure the effectiveness, efficiency,
and integrity of CNA operations and that the lack of a written
agreement was a key factor contributing to the voluntariness of the
parties' relationship.\7\ To strengthen the Commission's oversight of
the Program, the GAO recommended that the parties enter into ``a
written agreement with each CNA that specifies key expectations for the
CNA and mechanisms for the Commission to oversee their
implementation.'' \8\ The Commission agreed with the GAO's
recommendation to enter into a written agreement; however, no such
agreement was reached.
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\5\ Report to the Committee on Oversight and Government Reform,
House of Representatives, Employing People With Blindness Or Severe
Disabilities: Enhanced Oversight of the AbilityOne Program Needed,
GAO 13-457 (2013).
\6\ Id. at 13.
\7\ Id. at 33.
\8\ Id.
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Subsequently, in 2016, Congress intervened and mandated changes to
AbilityOne Program through the Consolidated Appropriations Act of 2016
(2016 CAA). These changes included Congressional reporting requirements
and the creation of an Office of Inspector General.\9\ Particularly,
relevant to this rulemaking, the CNAs were required to enter into
written agreements with the Commission.\10\ The 2016 CAA did not
specify the type of agreement, but it did state that ``a fee may not be
charged under section 51-3.5 of title 41, Code of Federal Regulations,
unless such a fee is under the terms of the written agreement between
the Committee and any such central nonprofit agency.'' \11\
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\9\ Consolidated Appropriations Act, 2016, Public Law 114-113
(2015).
\10\ Prior to this mandate, no written agreement existed between
the Commission and CNAs.
\11\ Id. at Division H, Title IV, Sec. Sec. 01-402, 129 Stat.
2242, 2639.
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Congress also directed that the written agreements establish
expectations for each CNA and mechanisms for Commission oversight.
These required elements included: (1) formalizing the roles and
responsibilities of the Commission and CNAs in project assignment
procedures, including decision-making processes; (2) expenditures of
funds; (3) performance goals and targets; (4) governance standards to
prevent fraud, waste, and abuse; (5) access to data and records; (6)
consequences for not meeting expectations; (7) periodic evaluations and
audits on affiliates; (8) periodic review and updates on pricing
information define the measures of accountability used to evaluate the
CNAs; and (9) provisions for updating the agreement.\12\
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\12\ House of Representatives; Congressional Record Vol. 161,
No. 184, page H10292.
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[[Page 23223]]
2. Cooperative Agreements and the Applicability of 2 CFR Part 200
In the Summer of 2016, the Commission entered into written
agreements (first-generation cooperative agreements) with both CNAs to
govern their relationships with the Commission, establish measurable
performance metrics, and satisfy the mandates established in the 2016
CAA.\13\ Although these agreements were characterized as ``cooperative
agreements,'' the agreements lacked the formality and administrative
framework typically found in a cooperative agreement. This was largely
due to the ambiguity surrounding how to properly characterize the
program fee. More specifically, unlike other types of Federal awards or
financial assistance, the Committee does not directly provide the
program fee to the CNAs. Instead, through regulation, it authorizes
CNAs to collect a fee from its affiliated NPAs contracted with the
Federal government. The NPAs are expected to pass this fee on to the
Federal government as an allowable expense under the contract.\14\
Nevertheless, the parties were able to finalize operative agreements by
adopting portions of 2 CFR 200 and Federal Acquisition Regulation (FAR)
based principles, without specifically relying on any authoritative
source. In essence, the first-generation cooperative agreements
functioned more like memoranda of understanding with quasi-contractual
requirements than cooperative agreements. The first-generation
cooperative agreements were extended several times but were finally set
to expire in December of 2024. On July 8, 2024, the Commission
established an Ad Hoc Commission Panel for Cooperative Agreements to
better align the CNA's mission with the objectives of the Commission's
most recent 5-year Strategic Plan.\15\ Rather than the ad hoc framework
used in the first-generation cooperative agreements, the Commission
included the Uniform Administrative Requirements, Cost principles, and
Audit Requirements (2 CFR part 200) in the second-generation
cooperative agreements.\16\ The parties finalized and signed the
second-generation agreements in December 2024.
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\13\ Agreements can be found at <a href="https://www.abilityone.gov/laws,_regulations_and_policy/foia_reading_room.html">https://www.abilityone.gov/laws,_regulations_and_policy/foia_reading_room.html</a>.
\14\ There is no statutory authorization for a central nonprofit
agency (CNA) to collect ``Program Fee'' from contracting activities
who purchase products and services from nonprofit agencies (NPA) who
sell products and services to the Federal government. See 41 U.S.C.
8503(c). The Commission's regulation at 41 CFR 51-2.2(f) authorizes
the Commission to first designate a fee, and then to set
``appropriate ceilings on fee paid to ``these nonprofit agencies
selling items under the AbilityOne Program . . .'' The Commission's
regulation at 41 CFR 51-3.5 authorizes a CNA to charge fees to an
NPA for facilitating their participation in the AbilityOne Program.
See 41 CFR 51-3.2(a). Commission Policy 51.601, Sec. 6(d),
effective August 8, 2025, categorizes Program Fee as an allowable
cost for the NPA to deliver a product or service under the
AbilityOne Program.
\15\ U.S. AbilityOne Commission Strategic Plan for Fiscal Years
2022-2026.
\16\ 31 U.S.C. 6301 et seq. See 31 U.S.C. 6301(2). Although
Congress did not specifically direct that the Commission use a
cooperative agreement, the citations following each Congressionally
required element track 2 CFR 200. Roles and responsibilities on the
part of the Commission and the CNA in project assignment procedures,
including decision making processes; Expenditures of funds (2 CFR
200.1), including policy governing reserve levels (Sec.
200.433(b)); Performance goals and targets (Sec. 200.201(b)(1));
Governance standards and other internal controls to prevent fraud,
waste, and abuse (Sec. 200.303), including conflict of interest
(Sec. 200.112) disclosures (such as the names of CNA board members
who have an affiliation with nonprofits receiving contracts) and
reports of alleged misconduct; Access to data and records (Sec.
200.315); Consequences for not meeting expectations (Sec. 200.339);
Periodic evaluations and audits on affiliates (Sec. 200.501 &
Subpart F); Periodic review and updates on pricing information
(Sec. 200.201), and Provisions for updating the agreement (Sec.
200.309).
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The Office of Management and Budget (OMB) issued 2 CFR part 200 to
ensure consistent and uniform government-wide policies and procedures
for the management of Federal agencies' grants of Federal awards to
non-Federal entities and cooperative agreements and it governs all
grants and cooperative agreements issued by the U.S. Government and
applies to all Federal funding in its entirety.\17\ Under the Federal
Grant and Cooperative Agreement Act (FGCAA), an executive agency shall
use a cooperative agreement as the legal instrument reflecting a
relationship between the United States Government and a recipient,
defined as a recipient authorized to receive United States Government
assistance or procurement contracts, when the principal purpose of the
relationship is to transfer a thing of value to the recipient to carry
out a public purpose of support or stimulation authorized by a law of
the United States.\18\ The FGCAA does not define, characterize, or
limit the ``thing of value'' to appropriated funds. Instead, the FGCAA
defines assistance as ``anything of value for a public purpose of
support or stimulation authorized by a law of the United States.'' \19\
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\17\ See generally 2 CFR 200 and 200.100(a). CFR 1.200. 2 CFR
200 describes requirements from pre- through post-award, including
property standards; procurement standards; performance and financial
monitoring and reporting; subrecipient monitoring and management;
record retention and access; remedies for non-compliance with an
award or subaward; and award closeout and post-closeout
responsibilities. It also sets forth cost principles, including
specific guidance on selected items of cost, to guide recipients and
subrecipients in their use of Federal funds.
\18\ Public Law 95-224, 92 Stat. 3 (1978); 31 U.S.C. 6305
(emphasis added). The definition of and applicability of the use of
a cooperative agreement as an instrument is even more expansive
under 2 CFR 200. It specifically states that cooperative agreements
are [u]sed to enter into a relationship the principal purpose of
which is to transfer anything of value to carry out a public purpose
authorized by a law of the United States.
\19\ 31 U.S.C. 6101(3). The definition of federal award and
financial assistance within the 2 CFR 200 is broad enough to apply
to the program fee and the terms ``federal award'' and ``financial
assistance'' are used interchangeably throughout the regulation.
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Accordingly, under the JWOD Act, Commission regulations, and the
2016 CAA, the program fee can be construed to serve as a ``federal
award'' or a form of ``financial assistance'' that the CNA is
authorized to collect for facilitating NPA participation in the
AbilityOne Program. Specifically, under the existing 41 CFR 51-3.5, the
Commission authorizes the CNAs to charge the NPAs a fee from
procurement contracts and allows that fee to be a cost to the Federal
customer on the products and services sold to the government.\20\ The
NPAs, by extension, are required by regulation and policy to remit this
fee to the CNA. The NPA, however, is not expected to absorb this
expense. Instead, the NPA may treat it as an allocable expense under a
Federal contract that it can pass on to the Federal government. By
authorizing the CNA to collect fees and directing NPAs to remit fees,
the Commission is, by regulation, transferring a thing of value to the
CNA to which the CNA otherwise has no claim, right, entitlement, or
title.\21\ If the Commission did not authorize the collection of the
fee, the services provided by the CNAs would function as an ``unfunded
mandate,'' or it would be forced to rely on the voluntary contributions
of the NPAs within their networks. To ensure that CNAs are properly
compensated for carrying out responsibilities under the statute and
Commission regulation, the Program Fee was formally mandated via
Commission regulation in 1991.\22\ However, no substantive changes have
been made to Sec. 51-3.5 since then.
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\20\ See 31 U.S.C. 6101(3); 41 CFR 51-3.5.
\21\ Id.
\22\ 56 FR 48979, Sept. 26, 1991.
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3. Comments on Program Fee
The primary purpose of the program fee is to foster the creation of
employment opportunities for participating employees through the use of
Federal procurement as set forth in the Commission's regulations,
policy, and the cooperative agreements. The
[[Page 23224]]
Commission is responsible for setting the ceiling for the program
fee.\23\
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\23\ Supra, note 14.
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Since the Program's creation, the program fee ceiling has always
been set as a percentage of sales. From 1938 to 1974, NIB served as the
sole CNA in the Program, and its affiliated NPAs contributed 2% of
sales to NIB to finance the CNA's operating expenses. In 1966, the
program fee was increased to 3% and again in 1968 to 4%. In 1974,
SourceAmerica was established, and the ceiling remained at 4% for both
CNAs until 2007. Since 2007, the ceiling has ranged from 3.9% to 3.75%
and, at times, the Commission has established separate ceilings for
each CNA.\24\ The current program fee is set at 3.75% for both CNAs and
this ceiling has been in place since 2020.
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\24\ On July 1, 2013, National Industries for the Severely
Handicapped (NISH) changed their name to SourceAmerica. From 2007 to
2020, the program fee was set at different rates from SourceAmerica
and NIB.
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Therefore, as part of this proposed rulemaking, the Commission is
also seeking public feedback on the current program fee to determine if
it is the most cost-effective way to achieve the Program's employment
mission. When providing comments, please consider providing responses
to the following questions:
1. Does the current program fee strike the right balance between
ensuring that the CNAs are properly resourced to accomplish their
statutory mission and reducing the overall cost burden to the Federal
government?
2. Should the Commission explore other ways to set that program fee
that would have the overall effect of lowering it, such as adopting a
tiered system of fees or a flat fee not based on a percentage of sales?
B. 41 CFR 51-4.4 (Subcontracting)
The JWOD Act authorizes the Commission to determine which products
or services are suitable for sole-source procurement and placed on the
Procurement List (PL). Once an item is placed on the PL, it is deemed a
mandatory source to supply the product or service. The significance of
being a mandatory source is two-fold. First, Federal agencies do not
follow normal competitive procedures when acquiring products or
services on the PL. Instead, Federal agencies are required to procure
the listed item from the authorized NPA (and only that NPA) identified
on the PL. Second, a PL addition serves as a catalyst for job creation
for individuals who are blind or have severe disabilities.\25\ In
fiscal year 2025, NPAs under the AbilityOne Program employed
approximately 41,000 significantly disabled and blind individuals in
support of nearly $4 billion in government contracts.
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\25\ See FAR subpart 8.7.
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The AbilityOne Program is first and foremost an employment program,
but in order to maintain and increase job growth, NPAs must be able and
willing to provide timely and professional contract performance. In
most cases, the NPA is able to identify qualified workers from the pool
of significantly disabled and blind individuals able and willing to
work. Other times, however, it will need to engage one or more
subcontractors to contribute niche, technical, or specialized skills to
satisfy requirements under a Federal contract. Under the Commission's
existing subcontracting regulation, NPAs are required to seek broad
competition, inform the Commission through their CNA of multiyear
subcontracts, and maximize the amount of subcontracting with other NPAs
in the Program to further the Commission's mission. However, the
Commission's current regulatory language regarding limitations on
subcontracting to protect employment for individuals in the Program is
vague and limited. For example, the existing regulatory language at
subsection (c) allows NPAs to subcontract portions of production or
services on the PL so long as the NPA's retained portion generates
employment for individuals who are blind or are significantly
disabled.\6\ Currently, the only explicit limitations on subcontracting
in the regulation are that (1) NPAs may not subcontract entire
production for all or a portion of a contracting activity order without
the Commission's approval and (2) NPAs must identify routine
subcontracting that would be part of production of, or performance of,
a PL requirement at the time the requirement is proposed for addition
to the PL and subsequent Commission approval. This regulatory guidance
has not been updated since 1997. In addition to the regulatory
guidance, the Commission issued Operations Memorandum Number 21 in 2006
to clarify and provide some implementing guidance for approving an
NPA's request to subcontract.\26\
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\26\ See Operations Memorandum No. 21: Guidance on Nonprofit
Agency Establishment of Subcontract Relationships for Current or
Potential Procurement List Projects.
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II. Need for Rulemaking
A. 41 CFR 51-3.5 (Program Fee)
The Commission's use of a cooperative agreement as the written
instrument between the Commission and the CNAs complies with the
visibility and transparency the GAO recommended in 2013, and the
elements required by Congress in the 2016 CAA and affirmed in the
Further Appropriations Act of 2024.\27\ Furthermore, the Commission's
reliance on the regulatory framework of 2 CFR part 200 for the
cooperative agreements more properly aligns the Commission's oversight
role and the CNAs' responsibilities with the uniform administrative
requirements, cost principles, commonality of terms, business
processes, and audit requirements utilized across the Federal
government. This proposed rulemaking consolidates and codifies existing
guidance and formalizes the use of a ``cooperative agreement'' as the
legal instrument to satisfy the ``written agreement'' mandate of the
2016 CAA. This rulemaking also makes it clear that although the Program
Fee is collected from NPAs, it is also an allowable cost included in
the Commission's Fair Market Price (FMP), and the final contract price.
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\27\ Supra note 5, 9, and 11; Further Appropriations Act of
2024, Public Law 118-47 (2024). The Further Appropriations Act
affirmed the written agreement requirement in order for CNAs to
perform requirements under the JWOD Act and to collect a fee as well
as stating no less than $3,150,000 be available for the OIG office,
an increase from the CAA 2016 level that insured funding was no less
than $750,000.
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B. 41 CFR 51-4.4 (Subcontracting)
Subcontracting will continue to be an integral part of the
AbilityOne Program, but it should never be used in a manner that
diminishes the employment goals of the Program. Instead, subcontracting
should be used only when it complements the employment prospects of
individuals who are blind or significantly disabled and/or enhances the
capabilities of an NPA in furtherance of contract performance. The
proposed rule is designed to clarify the distinction between prohibited
and permissible subcontracting. This proposed rulemaking clearly
defines what a subcontractor is and how to calculate the percentage of
subcontracting for a given project. Lastly, the rulemaking will make it
easier for NPAs to leverage subcontracting on a nonroutine basis when
it makes sense to do so, without incurring unnecessary administrative
burdens.
III. Specific Proposed Changes to 41 CFR Part 51
A. 41 CFR 51-3.5
The Commission is proposing to amend the regulation governing
[[Page 23225]]
program fee to include that the CNAs meet certain requirements prior to
collecting a program fee from an NPA. Specifically, the proposed
revision will require the CNAs to have a cooperative agreement with the
Commission. Moreover, the cooperative agreement must be consistent with
the framework of 2 CFR part 200, Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards.
Current Regulation: Under 41 CFR 51-3.5, CNAs may collect a fee
from NPAs to subsidize the overall administration of the Program. The
regulation provides that fees must be calculated based on NPA sales to
the Federal customer and that the fees cannot exceed the limit approved
by the Commission.
Rationale for Proposed Change: The proposed regulatory language
revises the Commission's regulations regarding charging fees, which
have not been substantively updated since its creation in 1991. The
changes described here are meant to align the Commission's regulations
with the controlling Federal statute, by mandating that the CNAs enter
into a cooperative agreement with the Commission prior to collecting
fees.
Under the first-generation cooperative agreements, only fragments
of 2 CFR part 200 were incorporated in the agreement between the
Commission and CNAs. The second-generation cooperative agreements focus
on what the CNAs need to run the Program, projected expenses and sales,
and adjust the fee to reflect these principles. Additionally, the
second-generation cooperative agreement incorporates 2 CFR part 200 in
its entirety with Commission determined exceptions, based on agency
needs, requirements under federal law, and feedback from the relevant
CNAs, in accordance with 2 CFR 200.102.\28\ Some of the specific
exceptions include: limiting advertising and public relations to the
costs incurred to promote the Program generally and enhance awareness
of AbilityOne initiatives across the Federal government and the
capabilities of the NPAs and participating employees (2 CFR 200.421);
bad debt incurred from an NPA's failure to remit the required program
fee (2 CFR 200.426); and contributions that are financial assistance to
the NPAs in support of specific Program objectives (2 CFR 200.434).\29\
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\28\ See Commission Policy 51.302, Attachment B.
\29\ Supra, note 13 and 26. The full list of exceptions can be
found in Commission Policy 51.302.
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The proposed regulatory language unambiguously states that the
written instrument will be a ``cooperative agreement.'' As discussed
above, 2 CFR part 200 is applicable to all cooperative agreements in
its entirety, except where portions have been excepted by Federal
statute, other regulations, or by the Commission in accordance with 2
CFR 200.102(c). The above language explicitly calls out the
applicability of 2 CFR part 200 while also emphasizing that the
Commission has the authority to except those parts of the regulation
that conflict with how the program fee is used within the AbilityOne
Program.\30\
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\30\ During the second-generation cooperative agreements, the
Commission worked with the CNAs in a collaborative manner to
identify which portions of 2 CFR part 200 should be excepted or
amended on a case-by-case basis. All exceptions took into account
the unique nature of Program Fee and the relationship of the CNAs to
the AbilityOne Commission.
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These proposed regulatory changes emphasize the importance of
having a cooperative agreement in place as a precondition for
collecting a fee. However, it ensures that a CNA is properly
compensated for expenses it incurred prior to the agreement ending and
for performing Program responsibilities such as evaluating the
qualifications and capabilities of the NPA and obtaining information
from Federal contracting activities to help the Committee determine
suitability for a requirement on the PL and establish fair market price
(FMP), distributing orders from the contracting activities among its
NPAs, and exploring new and emerging lines of business that will expand
the Program and opportunities for individuals who are blind or
significantly disabled.\31\
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\31\ 41 CFR 51-3.2; Commission Policies 51.301 Procurement List
and the NPA Selection Framework and 51.301-02 Publication,
Evaluation, and the CNA Recommendations.
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The primary purpose of the AbilityOne Program is to provide
employment and career development opportunities for individuals that
are blind or significantly disabled. CNAs are awarded a program fee
based on a percentage of the sales the NPA receives from providing
products or services to Federal agencies to the extent that CNAs are
supporting the type of work that maximize opportunities for
participating employees. The purpose of this language is to clarify
that the CNA is entitled to collect fees only from the portion of the
contract performed by the NPA, but not the portion that has been
subcontracted to a for-profit entity. The Committee may make exceptions
through policy and procedures for de minimus or ad hoc subcontracting
or subcontracting opportunities that are specifically designed to
support career development for NPA employees performing on AbilityOne
contracts.
In some instances, it may be necessary for a CNA to serve as a
prime contractor and distribute orders to an authorized NPA as a
subcontractor.\32\ Under that arrangement, the CNA would be permitted
to collect a fee from the NPA subcontractor. This scenario would most
likely occur when there are multiple NPAs supporting a single PL
requirement, and the CNA is made prime to more easily manage orders
from Federal agencies. Put another way, the NPAs are performing 100
percent of the work required under the contract, while the CNA is
functionally a ``administrator,'' put in place to serve as a AbilityOne
Program facilitator rather than as a typical prime contractor with
affirmative responsibilities under the contract. There are other
scenarios where the CNA may serve as prime, but has numerous
responsibilities connected with contract management and performance.
Under this scenario, the CNA would be responsible for negotiating its
administrative expenses with the contracting activity, but it would not
be permitted to collect a separate fee from NPAs serving as its
subcontractors. Instead, it is assumed that the CNA has captured its
administrative expenses through the course of normal contract
negotiations, obviating the need to collect additional fees from the
subcontracted NPAs.
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\32\ See 41 CFR 51-3.2(k).
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Proposed Regulation: The proposed amendments to Sec. 51-3.5
satisfy the written agreement mandate of the 2016 CAA for the CNA to
collect a program fee and rules regarding cooperative agreements
governed by 31 U.S.C. 63 and 2 CFR part 200. New subparagraph (a) makes
it explicit that Program Fee is an allowable expense included in the
fair market price approved by the Committee and the final contract
price. Consistent with 2 CFR 200.102(c), that allows a Federal agency
to except some requirements to 2 CFR part 200, new subparagraph (b)
affirms the Commission's authority and flexibility to except
subsections of 2 CFR part 200 that conflict with how the fee is used
within the Program on a case-by-case basis. The proposed regulation
also adds new subparagraphs (c), (d), and (e) that: prohibit collection
of fees if a CNA's designation has been terminated or a cooperative
agreement with the Commission expires but guarantees compensation for
expenses incurred during a valid agreement by allowing for collection
of fees for those expenses
[[Page 23226]]
even after termination of an agreement (proposed Sec. 51-3.5(c));
explain that the fee must be calculated based on actual sales of PL
requirements to the Federal Government but not on any portion of work
subcontracted, unless allowed by the Commission and clarify that the
CNA is entitled to collect fees only from the portion of the contract
performed by the NPA and not from any portion subcontracted to a for-
profit entity (proposed Sec. 51-3.5(d)); and allow the CNA to collect
a fee when serving as the prime on a contract when an NPA serves as the
source for the PL requirement, unless administrative or indirect costs
have already been negotiated (proposed Sec. 51-3.5(e)).
A. 41 CFR 51-4.4
Current Regulation: Under Commission regulation 41 CFR 51-4.4,
subcontracting is generally permitted, but NPAs are required to select
potential subcontractors through a competitive process. The regulation
also requires that NPAs maximize subcontracting with other NPAs. The
regulation also requires NPAs to notify the Commission of intention for
routine subcontracting at the time of PL addition and requires
Commission approval for any amount of subcontracting as well as any
significant changes to subcontracting.
Rationale for Proposed Change: Subcontracting will continue to be
an integral part of the AbilityOne Program, but the proposed changes
are meant to better align its use with the employment goals of the
Program. More specifically, subcontracting should be used only when it
complements the employment prospects of significantly disabled or blind
individuals and/or enhances the capabilities of a NPA in furtherance of
contract performance.
While NPAs are subject to the FAR rules on subcontracting,
currently, the only explicit limitations on subcontracting in the
regulation are that NPAs may not subcontract entire production for all
or a portion of a contract without the Commission's approval, and that
NPAs must identify routine subcontracting that would be part of
production of, or performance of, a PL requirement at the time it is
proposed for addition to the PL, and subsequent changes to that
subcontracting must have Commission approval.
The proposed regulatory language is designed to define
subcontracting, clarify the distinction between prohibited and
permissible subcontracting, address how subcontracting is measured, and
make it easier for NPAs to leverage subcontracting on a nonroutine
basis when it makes sense to do so, without incurring unnecessary
administrative burdens. The proposed regulation still encourages NPAs
to use competitive practices to the maximum extent practicable but
removes the existing requirement for broad competition to allow NPAs to
select subcontractors in a manner that is most consistent with meeting
its performance objectives under the contract.
The proposed regulatory language also more clearly explains when
subcontracting is expressly permissible and those circumstances where
it is not. It also continues to emphasize the Commission's position
that subcontracting should be used to facilitate the Program mission of
employment of individuals who are blind or significantly disabled and
that when subcontracting is necessary, NPAs should first look within
the NPA community before considering for-profit sources.
Moreover, the existing regulation does not explicitly state how
subcontracting is measured. Therefore, the proposed change is meant to
explain how to do so in the case of services and products. To lessen
the regulatory burdens on NPAs, the proposed rule amends the existing
regulation to reduce when an NPA must notify or seek Commission
approval to subcontract, limiting it to only when it exceeds certain
thresholds.
As previously noted, the primary purpose of the AbilityOne Program
is to provide employment opportunities for individuals who are blind or
have significant disabilities. To ensure the Commission provides
appropriate Program oversight while allowing NPAs to make prompt
business decisions when a small amount of ad hoc subcontracting is
needed, the proposed rule now emphasizes that the notice and approval
requirements largely apply only to routine subcontracting and
nonroutine subcontracting that exceeds defined thresholds of greater
than twenty-five percent of the direct labor hours on a Government
order for services and greater than ten percent of the total value
earned from Government orders for commodities.
There are many instances where an NPA may serve as a subcontractor
to another NPA or a for-profit prime contractor, but it is not
technically an authorized NPA for that PL requirement. In those
situations, the NPA's rights and obligations are limited to the
contractual agreement binding the parties. However, when an NPA
subcontractor is also an authorized source, it has both contractual and
Program rights and obligations. For instance, if an NPA is an
authorized source, it has the right to serve as a mandatory source and
may not be replaced with another subcontractor without first
coordinating with the CNA and the Commission. Therefore, the proposed
rule reinforces the fact that the rights and obligations of a mandatory
source flow through the Committee's authorization, rather than how it
contracts with a Federal agency or a prime contractor.
Proposed Regulation: The proposed regulatory language addresses the
following not currently included in the existing regulation: (1) the
definition of subcontracting as assigning or outsourcing a portion of
NPAs Federal contract work to another party, (2) acceptable and
unacceptable types of subcontracting and how to measure it, (3) when
the Commission must be notified and/or approve of subcontracting and
subsequent changes, and (4) the rights and obligations of NPAs that
serve as subcontractors on the furnishing of a requirement on the PL.
Specifically, proposed revisions to Sec. 51-4.4(a) define
subcontracting as assigning or outsourcing a portion of an NPA's
Federal contract work to another party but excludes acquisition of raw
or finished materials or ancillary products needed to produce or
perform the PL requirement.
Proposed Sec. 51-4.4(b) explicitly makes subcontracting
permissible when it facilitates the career development or employment of
individuals who are blind or have significant disabilities, and when it
is used to meet niche or specialized contract requirements. It also
more clearly states that the subcontracting may not be used to avoid
the statutory required seventy-five percent direct labor hour ratio
requirements.
The proposed rule replaces Sec. 51-4.4(c) and (d) with more
specific thresholds on subcontracting that would trigger Commission
notification and approval. Specifically, the Commission proposes to
establish a ``de minimis'' threshold at 10% of the government order for
products and 25% of direct labor hours needed for services to for-
profit entities. Any subcontracting to for-profit entities above those
levels triggers a requirement for Commission notification and approval.
Proposed new Sec. 51-4.4(e) specifies that when the amount of
subcontracting to a for-profit entity exceeds a certain amount, the NPA
must provide a good explanation for doing so and receive Commission
approval before use of the amount of for-profit subcontracting is
permitted. Moreover, the proposed rule specifies that when
subcontracting with a for-profit entity is below a certain
[[Page 23227]]
amount (twenty-five percent for services and ten percent for products),
the affected NPA need only notify the Commission that it is using a
subcontractor for a new PL addition or it intends to increase the level
of subcontracting for an ongoing effort (proposed Sec. 51-4.4(e)).
Additionally, if routine subcontracting is intended to be a part of a
provision of a PL requirement at the levels that are below the
threshold described above, proposed Sec. 51-4.4(e) requires only
notification to the Commission at the time of the requirement addition
to the PL; and requires notifying the Commission before effectuation of
the intent to increase the amount of subcontracting only if the
increase does not exceed the de minimis levels described above. Lastly,
proposed Sec. 51-4.4(e) requires only notifying the Commission of
routine subcontracting to other NPAs, and is subject to no de minimis
limits.
The Commission further proposes to limit Commission notification
and approval requirements by exempting any ad hoc or nonroutine
subcontracting needed to supplement temporary workforce shortfalls or
to meet a surge in government requirements, so long as it is below the
de minimis levels described under proposed Sec. 51-4.4(c) and (d)
(proposed Sec. 51-4.4(f)).
Finally, the Commission proposes to amend the regulation by
affirming that an authorized NPA retains the same rights and
obligations as any other Program mandatory source when directed to
serve as a subcontractor to support a PL requirement (proposed Sec.
51-4.4(g)).
IV. Executive Orders 12866 (Regulatory Planning and Review) and 13563
(Improving Regulation and Regulatory Review)
Executive Orders (E.O.) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
The Office of Information and Regulatory Affairs in the Office of
Management and Budget has determined this to be 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.
A. Expected Impact of Proposed Rule
As discussed above, since 2016 the Commission and CNAs implemented
the Congressional mandate for a written agreement in order for the CNAs
to collect a fee. The Commission expects the proposed regulation to
create no new administrative burden. As a result, the Commission does
not anticipate increased burden or cost. Moreover, the proposed
regulation will help to reduce confusion as to the applicability of
Program Fee and permissible subcontracting within the Program.
Secondly, the Commission believes that there are potential reductions
in the overall administrative burden on the CNAs and the Commission by
using a uniform regulatory framework rather than the parties using an
ad hoc approach each time a new written agreement is negotiated.
Furthermore, the proposed changes to formally codify the use of 2
CFRSec. 200 will help to ensure the Commission's effective stewardship
of the Program and prevent the perception of waste, fraud, and abuse as
intended by Congress. Ultimately, the proposed changes to Sec. 51-3.5
do not add any new administrative burden for the Commission or CNAs.
This rule simply codifies in the Commission's regulation the existing
Congressional requirement that the Commission and CNAs have been
implementing since 2016.
Additionally, the proposed changes to Sec. 51-4.4 will make it
easier for NPAs to leverage subcontracting on a nonroutine basis when
it makes sense to do so. As discussed above, under the current
regulation, NPAs must notify the Commission or seek approval for all
types of subcontracting. However, the proposed regulation reduces the
requirements for NPAs to notify and seek Commission approval in part by
eliminating the requirement for NPAs to seek Commission approval for
all subcontracting. Instead, the proposed regulation reduces
notification and Commission approval requirements for the NPAs to only
when the subcontracting levels exceed a de minimis thresholds described
above. The Commission expects this to significantly reduce the NPA's
administrative burden and enable NPAs to make more efficient business
decisions. The Commission does not anticipate any increased cost as a
result of the proposed changes.
B. Executive Order 14192
This proposed rule, if finalized, is expected to be an E.O. 14192
deregulatory action, as described above.
C. Regulatory Flexibility Act
The Commission does not expect these proposed rules to have a
significant economic impact on a substantial number of small entities
within the meaning of the Regulatory Flexibility Act, at 5 U.S.C. 601,
et seq. These changes do not include any new reporting, recordkeeping,
or other compliance requirements for small entities. These proposed
rules also do not duplicate, overlap, or conflict with any other
Federal rules. However, it has not yet been certified as to whether it
is subject to the Regulatory Flexibility Act (5 U.S.C. 601).
D. Paperwork Reduction Act
These proposed rules do 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.
List of Subjects in 41 CFR Parts 51-3 and 51-4
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 discussed in the preamble, the Commission proposes to
amend 41 CFR parts 51-3 and 51-4 as follows:
PART 51--COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR
SEVERELY DISABLED
0
1. The authority citation for parts 51-3 and 51-4 are revised to read
as follows:
Authority: 41 U.S.C. 8501-8506.
0
2. Amend Sec. 51-3.5 by revising the existing text to be designated as
paragraph (a); and adding paragraphs (b), (c), (d) and (e) to read as
follows:
Sec. 51-3.5 Program Fees.
(a) A program fee is an allowable expense included in the Fair
Market Price approved by the Committee and the final contract price
with a federal agency. A central nonprofit agency may collect program
fees from nonprofit agencies to facilitate its statutory
[[Page 23228]]
responsibilities set forth in the JWOD Act and Committee regulations.
(b) Program fees collected shall not exceed the ceiling set by the
Committee pursuant to section 2.2(f) of this chapter. Prior to
collecting program fees, a central nonprofit agency shall enter into a
cooperative agreement with the Committee, which shall be governed by 31
U.S.C., chapter 63, and Subtitle A, Title 2 Part 200, Code of Federal
Regulations, subject to any exceptions approved by the Committee in
accordance with 2 CFR 200.102(c).
(c) Generally, program fees cannot be collected by a central
nonprofit agency if its designation has been severed, or its
cooperative agreement with the Commission expires. The central
nonprofit agency may, however, collect program fees after the end of a
designation or the expiration of an existing agreement if those program
fees are accrued prior to the date of termination.
(d) Program fees designated under section 2.2(f) shall be
calculated based on the dollar value of nonprofit agency sales of their
commodities or services to the Federal Government under the AbilityOne
Program, but sales of commodities and services shall not include the
value or costs of the subcontracting of any part of the commodity or
service, unless permitted by Committee policy or procedure.
(e) When serving as a prime contractor, the central nonprofit
agency may collect a program fee from a nonprofit agency subcontractor
serving as an authorized source for the underlying Procurement List
requirement. It may not, however, collect a program fee if it has
already negotiated general administrative and/or indirect expenses with
the contracting activity for the prime contract.
0
3. Amend Sec. 51-4.4 by replacing paragraphs (a), (b), (c), and (d),
and adding paragraphs (e), (f), and (g) to read as follows:
Sec. 51-4.4 Subcontracting.
(a) Subcontracting is the act of assigning or outsourcing a portion
of the nonprofit agencies' obligations or tasks under a Federal
contract to another party. Subcontracting does not include the
acquisition of raw or finished materials to manufacture commodities or
the purchase of any ancillary commodities needed to perform a service.
(b) Subcontracting is permissible when it facilitates the career
development or employment of individuals who are blind or significantly
disabled. It is also permissible when used to procure capabilities
necessary to meet niche or specialized contract requirements.
Subcontracting is not permissible when used to circumvent statutory
direct labor hour ratio requirements or to outsource tasks that could
otherwise be performed by significantly disabled or blind individuals.
If the Committee approves subcontracting, each nonprofit agency shall
accomplish the maximum amount of subcontracting with other nonprofit
agencies before considering for-profit sources unless it is authorized
to do so by Committee policy or procedures.
(c) For Services. Under no circumstances may a nonprofit agency
subcontract to a for-profit entity at an amount greater than twenty-
five percent of the direct labor hours needed to fulfill a government
order without good cause and the Committee's prior approval. The
percentage of subcontracting is determined by the number of direct
labor hours performed by the subcontractor(s) in relation to the direct
labor hours performed by the nonprofit agency serving as the prime
contractor.
(d) For Commodities. Under no circumstances may a nonprofit agency
subcontract to a for-profit entity at an amount greater than ten
percent of the total value earned from the government order without
good cause and the Committee's prior approval. The percentage of
subcontracting is determined by the total contract value received by
the subcontractor(s) in relation to the amount earned by the nonprofit
agency serving as the prime contractor.
(e) Notification. Subcontracting intended to be a routine part of
the production of a product or provision of a service, but less than
the percentage thresholds at paragraphs (c) and (d), shall be
identified to the Committee at the time the product or service is
proposed for addition to the Procurement List. If a nonprofit agency
intends to increase the amount of subcontracting after a requirement
has been added to the Procurement List, but that amount is less than
the percentage thresholds at paragraphs (c) and (d), it shall notify
the Committee before the change can be effectuated. Routine
subcontracting to other nonprofit agencies requires only Committee
notice regardless of ratio or dollar amounts; therefore, this type of
subcontracting is not subject to the conditions described at paragraphs
(c) and (d).
(f) Ad hoc or nonroutine subcontracting needed to supplement
temporary workforce shortfalls or to meet increased government
requirements but accounting for less than the percentage thresholds at
paragraphs (c) and (d) do not require prior Committee notification or
approval.
(g) When a nonprofit agency, authorized in accordance with section
51-5.2(a), has been directed to serve as a subcontractor in support of
a product or service on the Procurement List, it retains the same
rights and obligations as any other AbilityOne mandatory source.
[FR Doc. 2026-08392 Filed 4-29-26; 8:45 am]
BILLING CODE 6353-01-P
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