[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]
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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.
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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