[Federal Register Volume 60, Number 189 (Friday, September 29, 1995)]
[Notices]
[Pages 50556-50557]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-24328]



=======================================================================
-----------------------------------------------------------------------

COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR SEVERELY DISABLED


Procurement List; Addition

AGENCY: Committee for Purchase From People Who Are Blind or Severely 
Disabled.

ACTION: Addition to the Procurement List.

-----------------------------------------------------------------------

SUMMARY: This action adds to the Procurement List a finger bleeding 
lancet to be furnished by nonprofit agencies employing persons who are 
blind or have other severe disabilities.

EFFECTIVE DATE: October 30, 1995.

ADDRESSES: Committee for Purchase From People Who Are Blind or Severely 
Disabled, Crystal Square 3, Suite 403, 1735 Jefferson Davis Highway, 
Arlington, Virginia 22202-3461.

FOR FURTHER INFORMATION CONTACT: Beverly Milkman (703) 603-7740.

SUPPLEMENTARY INFORMATION: On July 14, 1995, the Committee for Purchase 
From People Who Are Blind or Severely Disabled published notice (60 
F.R. 36266) of proposed addition to the Procurement List. The Committee 
received comments from the current contractor in response to its 1995 
and 1994 proposals to add the lancets to the Procurement List. The 
contractor indicated that it is a considerably smaller entity than the 
Committee deemed it to be, and addition of the lancet to the 
Procurement List would have a severe impact on that entity, including 
loss of jobs and of the opportunity to recoup the entity's investment 
in equipment, possibly resulting in the entity going out of business.
    The contractor also questioned whether people with severe 
disabilities are capable of producing the lancets, and whether the 
nonprofit agency which will produce them is in compliance with Food and 
Drug Administration (FDA) requirements for the production of medical 
instruments. The contractor was particularly concerned about the 
nonprofit agency's ability to avoid certain critical defects identified 
by the FDA in the production of lancets. The contractor also questioned 
the nonprofit agency's compliance with the statutory direct labor ratio 
requirement as it applies to lancet production, and indicated that the 
Committee's pricing mechanism is not in accordance with law.
    As the result of a 1986 merger, the contractor's Medical Supply 
Division, which provides the lancets to the Government and other 
customers, is part of the same corporate entity as the administrative 
holding company for the contractor's various business ventures. This 
corporate entity reports its sales and income for tax purposes 
separately from its subsidiary corporations.
    In situations like this, it has long been the Committee's policy to 
look at impact on the total business of the contractor affected by a 
decision to add a commodity or service to the Procurement List. This 
policy was specifically incorporated in the Committee's regulations as 
part of a regulatory revision which became effective December 16, 1994 
(59 F.R. 59338, Nov. 16, 1994). In this case, the Committee's policy is 
especially appropriate. A review of the various documents submitted by 
the contractor, including its Form 10-K report for 1993 filed with the 
Securities and Exchange Commission, revealed a large interlocking 
financial enterprise controlled by the contractor, with substantial 
identity of officers, board members, and ownership for the various 
corporations in the enterprise. The lancets are even made for the 
contractor by one of its subsidiaries, in a building near the 
contractor's headquarters which the contractor bought from the same 
subsidiary and leases back to the subsidiary.
    The contractor's sales of the lancets to the Government are only a 
very small percentage of the sales of the total enterprise. The 
Committee does not consider loss of such a small percentage to 
constitute severe adverse impact on the contractor. The contractor's 
ability to transfer assets and employees between various parts of the 
enterprise should allow it to absorb any employees who may be displaced 
by the Committee's action and any manufacturing equipment, which it can 
continue to use in producing lancets for the commercial market. Because 
no contractor is guaranteed to continue receiving Government contracts 
for an item under the competitive bidding system, the contractor 
assumed a risk of losing the use of this equipment when it entered the 
Government market.
    The Committee's conclusion that people with severe disabilities 
employed by the designated nonprofit agency will be capable of 
producing the lancets to fill Government orders is based on findings by 
the Committee's industrial engineer and an assessment by the 
engineering staff of the authorized central nonprofit agency for this 
action. The Committee's engineer reviewed production plans with the 
nonprofit agency and a central nonprofit agency engineer to address 
each of the contractor's capability contentions in 

[[Page 50557]]
the course of making a capability determination.
    The nonprofit agency has met all FDA requirements for producing 
lancets. Contrary to what the contractor implied, there is no FDA list 
of critical defects for lancets. FDA guidelines merely reflect general 
good manufacturing practices for medical devices, which the nonprofit 
agency will follow.
    The specific defects the contractor mentioned, including reversed 
or overly long needles in the lancets, appear to be a factor in the 
operation of the contractor's automated manufacturing process. The 
nonprofit agency plans to load the needles by hand, which will avoid 
these defects. The more manually intensive manfacturing process to be 
used will also be easier and safer for people with severe disabilities. 
The process is consistent with injection molding operations which have 
been successfully used by other nonprofit agencies to produce items 
under the Committee's program.
    The contractor questioned the nonprofit agency's ability to produce 
acceptable lancets on short notice, based on the contractor's 
``learning curve'' to produce the lancets. The nonprofit agency does 
not intend to start at a high volume of production, but to have a pilot 
production period to perfect its production methods. In addition, 
initial orders will come from individual Government medical centers, 
which will allow the nonprofit agency to ensure that it will not 
receive more orders than it is capable of filling during the startup 
period.
    Contrary to the contractor's contention, the Committee's statute 
requires qualified nonprofit agencies to have an overall 75 percent 
direct labor ratio for the work they do on all commodities and services 
they produce. The ratio requirement does not apply to all work which 
must be done to produce each Government item. The nonprofit agency will 
be using well above this percentage in the work they will do on the 
lancets. Inspection is considered indirect labor which is not counted 
in determining compliance with the requirement.
    The contractor did not challenge the initial fair market price for 
the lancets, which was based on bids submitted on the last competitive 
procurement, in accordance with the Committee procedures.
    The contractor's contention that the Committee's fair market 
pricing procedure is inconsistent with the Committee's statute 
challenges the ``price change exception'' procedure, which the 
contractor claims insulates the Committee's prices from changes in the 
market. However, as its name implies, this procedure is used only on an 
exceptional basis. The procedure allows a price change to be based on 
actual cost experience rather than changes in a producer price index. 
Where the exception is used, the Committee believes that commercial 
users would experience similar cost changes, so the price change 
exception procedure would have a relation to the market.
    After consideration of the material presented to it concerning 
capability of qualified nonprofit agencies to provide the commodity, 
fair market price, and impact of the addition on the current or most 
recent contractors, the Committee has determined that the commodity 
listed below are suitable for procurement by the Federal Government 
under 41 U.S.C. 46-48c and 41 CFR 51-2.4.
    I certify that the following action will not have a significant 
impact on a substantial number of small entities. The major factors 
considered for this certification were:
    1. The action will not result in any additional reporting, 
recordkeeping or other compliance requirements for small entities other 
than the small organizations that will furnish the commodity to the 
Government.
    2. The action does not appear to have a severe economic impact on 
current contractors for the commodity.
    3. The action will result in authorizing small entities to furnish 
the commodity to the Government.
    4. There are no known regulatory alternatives which would 
accomplish the objectives of the Javits-Wagner-O'Day Act (41 U.S.C. 46-
48c) in connection with the commodity proposed for addition to the 
Procurement List.

    Accordingly, the following commodity is hereby added to the 
Procurement List:

Lancet, Finger Bleeding
Special Item B-11
(Requirements for the Department of Veterans Affairs under the Multiple 
Award Schedule FSC Group 65, Part II, Section B)

    This action does not affect current contracts awarded prior to the 
effective date of this addition or options exercised under those 
contracts.
Beverly L. Milkman,
Executive Director.
[FR Doc. 95-24328 Filed 9-28-95; 8:45 am]
BILLING CODE 6820-33-P