[Federal Register Volume 61, Number 165 (Friday, August 23, 1996)]
[Notices]
[Pages 43524-43527]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21548]



[[Page 43524]]

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COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR SEVERELY DISABLED

Procurement List Additions

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

ACTION: Additions to the Procurement List.

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

EFFECTIVE DATE: September 23, 1996.

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 August 4, 1995, the Committee for 
Purchase From People Who Are Blind or Severely Disabled published 
notice (60 FR 39946) of proposed additions to the Procurement List. 
Comments were received from the current contractor for the portion of 
the Government's requirement for the cold weather drawers which is 
procured from commercial sources and from a former contractor. Comments 
were also received from four local organizations, three Members of 
Congress, and a State legislator, all writing in support of the two 
contractors.
    The current contractor has indicated that it is entirely dependent 
on Government purchases of its products. Loss of the ability to sell 
the drawers to the Government would cause it to lay off some of its 
workers and would cause the irretrievable loss of an investment in 
equipment and training. The current contractor also cited the impacts 
on it of the Committee's addition of other clothing items to the 
Procurement List, including chemical protective undergarments, cold 
weather undershirts, and a physical fitness uniform.
    In its initial comments, in August 1995, the current contractor 
indicated that it had a larger number of Government contracts than 
usual, and anticipated that the ultimate impact of the Committee's 
action on the company would be greater than apparent at that time 
because its Government business would return to the normal level. In a 
later comment, submitted in June 1996, the current contractor indicated 
that the predicted decline had occurred, and further contended that all 
the impacts the Committee's actions have had on the current contractor 
over the years should be taken into account in assessing the impact of 
the proposed addition of the remaining Government requirement for the 
drawers on the current contractor. The current contractor also noted 
that the nonprofit agencies can already bid on the part of the 
Government requirement which is procured commercially, while the 
current contractor cannot bid on the portion reserved for the nonprofit 
agencies, so it would not be fair to add the commercially procured part 
of the Government requirement to the Procurement List.
    The current contractor challenged the fair market prices the 
Committee has set for the drawers and for another similar clothing item 
as not being fair prices under the Committee guidelines. The current 
contractor also challenged the compliance of the nonprofit agency 
designated to produce the drawers with the Committee's disabled direct 
labor ratio and other program requirements, and the nonprofit agency's 
ability to achieve the required ratio on this project, given the 
current contractor's assessment of the productivity of the workers with 
disabilities involved in the project.
    Based on its review of Committee records received in response to a 
Freedom of Information Act (FOIA) request, the current contractor 
claimed that decisions on impact of the proposed addition to the 
Procurement List on the current contractor and capability of the 
nonprofit agency to produce the drawers had been made outside the 
prescribed process. The current contractor also claimed that several 
requirements set forth in Committee procedural memoranda had not been 
followed in preparing the record for a Committee decision on the 
proposed addition to the Procurement List.
    The former contractor characterized the Committee's 1989 decision 
to add only fifty percent of the Government requirement for the drawers 
to the Procurement List as an agreement to split the requirement 
between the Committee's Javits-Wagner-O'Day (JWOD) Program and the 
commercial sector. The former contractor noted its substantial 
dependence on Government business and the loss of business to foreign 
competition, Federal Prison Industries, and the JWOD Program as factors 
responsible for the downsizing of its business and a loss of jobs for 
its workers. The former contractor claimed that the proposed addition 
to the Procurement List would cause it to furlough a large number of 
its remaining workers. It also questioned the fairness of the 
Committee's price for the drawers, and claimed that it is establishing 
a facility to create jobs for people with disabilities.
    The comments received from the local organizations, the State 
legislator, and Members of Congress emphasized some of the arguments of 
the contractors on whose behalf these comments were submitted. Some of 
the commenters also cited the loss of jobs and unemployment rates in 
the two geographical areas involved. One Member of Congress questioned 
the ability of the nonprofit agencies to meet military emergency 
requirements, indicated that loss of this business by the private 
sector would erode the defense industrial base as well as an industry 
greatly beset by foreign competition, and questioned whether all work 
of this type should be set aside for the JWOD Program. The State 
legislator suggested that the needs of people with disabilities should 
be balanced against those of the workers who stand to be displaced if 
the Committee's proposal were to be approved.
    The Committee added only fifty percent of the Government 
requirement for the drawers to the Procurement List in 1989 because of 
concern that adding the entire requirement at that time would have a 
severe adverse impact on the former contractor, which was then a 
subcontractor but was anticipated to, and did, become the contractor 
for the drawers. Since that time, the former contractor has lost the 
contract to the current contractor. Under the competitive bidding 
system, no contractor is guaranteed a Government contract for the 
drawers. Accordingly, it is possible that the former contractor, which 
has not produced the drawers in over a year, will never again hold a 
Government contract for the drawers. For this reason, the Committee 
looks at the current contractor when assessing impact, since that 
entity is most likely the one which would lose sales if an item were to 
be added to the Procurement List. Claims of impact by other contractors 
are generally considered by the Committee to be objections to losing 
the possibility of bidding on future contracts for the item. Loss of 
this possibility is not considered to be severe adverse impact. 
Consequently, any loss which the former contractor and its employees 
may experience in the immediate future would not be caused by the 
Committee's action in adding the remaining Government requirement for 
the drawers to the Procurement List, since they will not be losing 
anything they have not already lost.
    In addition, it should be noted that the Committee also limited the 
1989 addition of a related item--cold weather undershirts--to the 
Procurement List to

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fifty percent to avoid having a severe adverse impact on the former 
contractor. In this case, that contractor continues to hold the 
contract for the portion of the undershirt requirement that is 
commercially procured. The Committee's action at this time will not 
affect the contractor's ability to retain this business.
    The current contractor indicated that it had been impacted 
previously by Committee actions. A search of Committee records revealed 
that the current contractor was not the current contractor for any 
other item at the time it was added to the Procurement List. However, 
based on information provided by the contractor, it appears that it had 
been a subcontractor for the items cited. Notwithstanding this, the 
current contractor's total sales increased after the Committee's 
previous additions and are now at approximately the level they were 
before the contractor's recent substantial expansion and decline. While 
the contractor's sales data indicates that 1996 sales are likely to be 
well below those of 1995, the entire decline appears to be due to the 
current contractor's having completed a large contract for a type of 
chemical protective underwear that is not on the Procurement List. In 
addition, sales for the first half of 1996 are already about equal to 
the company's average annual sales for the years 1988 through 1994. 
Accordingly, the Committee's previous actions do not appear to be 
having any substantial impact on the current contractor.
    The one possible exception in this situation is the Marine Corps 
chemical protective underwear which has been added to the Procurement 
List. The current contractor thinks this underwear might be adopted by 
the other military services, displacing the underwear which the current 
contractor has recently produced for the Government and impacting its 
sales. The Committee thinks that this development is unlikely, but has 
promised the current contractor that it will revisit the impact issue 
and, if appropriate, modify its previous action if the development the 
current contractor fears were to occur.
    The Committee does not believe its previous actions have led to any 
reduction in the current contractor's sales or to other continuing 
impacts. However, it has decided that adding the total remaining 
portion of the Government requirement for the drawers to the JWOD 
Program, as requested, might cause severe adverse impact to the current 
contractor. Consequently, the Committee has decided to add only an 
additional 25 percent of the requirement for the drawers, leaving one-
quarter of the requirement available for the current contractor to 
continue competing for.
    The machinery used to make the drawers is primarily standard sewing 
equipment used for serging operations and can easily be used for other 
Government or commercial applications. Consequently, the Committee does 
not agree with the current contractor that use of its machinery or its 
investment in training its workers would be irretrievably lost because 
of the addition of the remaining Government requirement for the drawers 
to the Procurement List. Moreover, since the Committee has decided to 
leave 25 percent of the requirement in the competitive procurement 
arena, the contractor will have the opportunity to continue using some 
of its employees and equipment to produce the drawers.
    The current contractor's contention that the producing nonprofit 
agency is not in compliance with Committee regulations is based on a 
1991 report of a documentation problem which has since been corrected, 
and the current contractor's misunderstanding of the percentage of 
disabled direct labor required on a Committee project. The 75 percent 
disabled labor requirement applies to total direct labor employed by a 
nonprofit agency on all its contracts, not to individual projects, 
which can be performed at a lower (or higher) percentage. In addition, 
the Committee permits nonprofit agencies to start projects at a lower 
percentage than is ultimately intended, as long as the overall 75 
percent requirement is met and the ultimate percentage for the project 
in question is acceptable.
    The current contractor's challenge to the nonprofit agency's 
qualification to participate in the JWOD Program also included a 
contention that it was really not a nonprofit agency because a recent 
substantial increase in its net worth showed it had made a ``profit.'' 
Nonprofit status, as defined in both the Committee's law and the 
Federal tax code, requires only that a nonprofit corporation be 
structured and operated in a manner that precludes the inurement of the 
net earnings of the corporation to any individual. The first step in 
the Committee's qualification of a nonprofit agency to participate in 
its program is a verification that the nonprofit agency meets this 
qualification. The Committee has no evidence that suggests the 
nonprofit agency in question has failed to meet this requirement since 
its original qualification.
    Interpreting data presented in a Committee publication, the current 
contractor concluded that people with severe disabilities are only 
capable of working 396.5 hours per year and that there are only 739 
such individuals in the nonprofit agency's State who are eligible to 
work on JWOD contracts. The current contractor therefore questioned 
whether the nonprofit agency would be able to obtain the disabled labor 
necessary to perform its contract. The current contractor 
misinterpreted the data in question; the people covered by the data are 
not limited to the number of hours stated by the current contractor, 
nor is participation in the JWOD Program limited to current 
participants, as assumed by the contractor.
    The current contractor's claims that decisions were made in the 
administrative process outside normal procedures are based on a 
misreading of documents obtained under FOIA. Decisions on severity of 
impact are made by the Committee when it votes on addition of an item 
to the Procurement List, not by Committee staff or NISH personnel. 
Inspections were conducted to determine the capability of the two 
nonprofit agencies which will produce the new requirement of the 
drawers: no waivers of inspection were granted. Documents were 
submitted by NISH to the Committee in accordance with the timetable set 
out in Committee procedural memoranda. Because of the contemplated 
initial disabled direct labor ratio, no phase-in plan is required by 
Committee procedures.
    The current contractor contends that it is unfair for nonprofit 
agencies to be able to bid against it for commercial contracts for the 
drawers while the current contractor is precluded from supplying the 
part of the Government requirement reserved for the JWOD Program. This 
position does not take into account the remedial nature of the statute 
which created the program.
    Persons with severe disabilities historically and now have 
extremely high rates of unemployment, exceeding 65 percent. Congress 
created the JWOD Program to remedy this situation to the extent 
possible through the Federal procurement process. As a result, Congress 
knowingly limited the Government procurement opportunities of less 
disadvantaged companies, such as the current and former contractors, to 
create a fairer situation for Americans as a whole. By doing so, 
Congress addressed the balancing of the needs of disabled and non-
disabled citizens as the State legislator who wrote in support of the 
former contractor asked the Committee to do. The current contractor 
also charged that the

[[Page 43526]]

nonprofit agency has an unfair advantage over his firm and others in 
bidding for the portion of the Government requirement for the drawers 
that is not in the JWOD Program. This unfair advantage is alleged to 
exist because the fair market price is higher than market and provides 
the nonprofit agency with a substantial profit which enables it to bid 
at a below market price. Based on the Committee's review of the 
nonprofit agency's costs to make the drawers, it does not agree that a 
substantial profit is being made. In addition, the drawers are being 
procured through small business set-aside procurements which nonprofit 
agencies are currently barred from participating in. Even when 
nonprofit agencies were eligible to compete for small business set-
aside contracts, the nonprofit agency involved in making the drawers 
did not submit bids in competition with the commenter for the non-JWOD 
portion of the drawers. Moreover, if a nonprofit agency bids on and 
wins a contract for an item which it is also supplying under the JWOD 
Program, the fair market price for that item is revised to reflect the 
award price. This makes it unlikely that the type of situation feared 
by the current contractor will occur, since the result would be to 
reduce the price received by the nonprofit agency for the JWOD portion.
    The current contractor observed that the nonprofit agency did not 
appear capable of producing the drawers at a fair market price as 
required by the Committee's regulations. Therefore, the current 
contractor concluded, the nonprofit agency was not entitled to produce 
more of the Government requirement for the drawers, and should lose its 
existing right to produce 50 percent of the Government requirement. The 
current contractor supported its position by comparing nonprofit agency 
prices for the drawers with its own and stating that the nonprofit 
agency's prices exceeded those permitted by the Committee's fair market 
pricing policy. The current contractor alleged that a similar situation 
existed with a comparable product being furnished to the Government 
under the JWOD Program by another nonprofit agency. The former 
contractor also questioned whether the nonprofit agency's price 
represented a fair market value.
    The Committee has established the prices that have been charged by 
the nonprofit agency for the drawers (as well as the prices charged by 
another nonprofit agency for the comparable product) since their 
addition to the JWOD Program in August 1989. Those prices have in each 
case been consistent with the Committee fair market pricing policies in 
effect at the time they were established--policies that take into 
account the competitive bids submitted by the current contractor and 
other potential suppliers. Consequently, the nonprofit agency has 
proven itself capable of producing the drawers at a fair market price.
    The differences between Committee prices and the current 
contractor's prices for both products are less than reported by the 
current contractor. This is partially because the Committee prices used 
by the current contractor were older than the current contractor's 
prices and, thus, not comparable. The differential is also less because 
of a Committee procedural change instituted after receipt of the 
comments and applied to all future deliveries on current orders. As a 
result of the comments, the Committee will also consider a change in 
its fair market pricing policy for concurrent buy items (i.e., items 
where the Committee has only added a portion of the Government 
requirement to the JWOD Program). If approved, the new policy will 
affect the future adjustment of prices for the drawers (and the 
comparable item mentioned by the current contractor).
    After discussing changes over time in the nonprofit agency's 
prices, the current contractor concluded that the existence of 
competitive bids for a portion of the Government requirement for the 
drawers appeared to be responsible for reducing the fair market prices 
for those drawers. In the absence of this ``check and balance,'' the 
current contractor speculated that the Government would unnecessarily 
spend millions of additional dollars for the drawers. The Committee 
believes that its fair market pricing policies, which are based on 
competitive bids, changes in Producer Prices Indices and, to a certain 
extent, nonprofit agency costs, provide the Government with fair prices 
for JWOD items without the necessity of the type of ``check and 
balance'' advocated by the current contractor. However, in this 
particular case, the Committee's decision to permit 25% of the 
Government requirement to remain available for competitive procurement, 
will assure that the ``check and balance'' the current contractor 
believes necessary will continue to exist.
    The Committee applauds the former contractor's intent to establish 
a facility to create jobs for people with disabilities. However, the 
Committee does not believe that such facilities would eliminate the 
need to create jobs through the JWOD Program, as the former contractor, 
like other companies, would be free to terminate the employment of 
people with disabilities for business or other reasons at any time. 
More importantly, the former contractor's new operation will not be 
guaranteed to continue receiving Federal or other business, so the jobs 
would not be as stable as those afforded by the JWOD Program.
    With respect to the question about the ability of nonprofit 
agency's to meet military requirements, the Committee notes that such 
organizations are held to the same military emergency requirements and 
industrial capability requirements as commercial contractors. The 
Committee does not believe that the defense industrial base will be 
eroded by the participation of nonprofit agencies in furnishing defense 
commodities through the JWOD Program, as these agencies have performed 
as least as well as their commercial counterparts as defense suppliers. 
Through this action, the Committee is in fact expanding the industrial 
base by adding another producer under the JWOD Program. The Committee 
is also aware that a substantial majority of the apparel business of 
the Federal agency that purchases the drawers remains available for 
competitive procurement, thus, the non-JWOD participants in the defense 
industrial base continue to have the opportunity to obtain significant 
business from a major defense procurement agency, so the dependence of 
the current and former contractors on Government contracting should not 
seriously affect their future well-being.
    The questions of impact on the clothing industry and the employment 
rates of areas hard hit by foreign competition and domestic downsizing 
are difficult ones. The Committee is aware that its nonprofit agencies 
and their employees with disabilities have also been hit by these 
developments. Given their greater difficulty in securing and holding 
employment, and the remedial nature of the Committee's statute 
mentioned above, the Committee believes that the best course is for it 
to continue to achieve its mission of creating jobs for people with 
severe disabilities within the restrictions imposed by its regulations, 
and that placing a part of the proposed additional requirement for the 
drawers on the Procurement List is within the meaning of those 
restrictions.
    For the reasons stated above, the Committee does not believe the 
addition of another 25 percent of the cold weather drawers requirement 
constitutes severe adverse impact on the current contractor or other 
parties. Also for the reasons stated above, the Committee believes that 
the objections

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raised by the current contractor and other parties fail to justify a 
decision not to place any additional quantity of the drawers on the 
Procurement List.
    After consideration of the material presented to it concerning 
capability of qualified nonprofit agencies to provide the commodities 
and impact of the addition on the current or most recent contractors, 
the Committee has determined that the commodities 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 commodities to the 
Government.
    2. The action will not have a severe economic impact on current 
contractors for the commodities.
    3. The action will result in authorizing small entities to furnish 
the commodities 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 commodities proposed for addition to the 
Procurement List.
    Accordingly, the following commodities are hereby added to the 
Procurement List:
Drawers, Cold Weather
8415-01-227-9542
8415-01-227-9543
8415-01-227-9544
8415-01-227-9545
8415-01-227-9546

(Additional 25% of the Government's requirement)

    This action does not affect current contracts awarded prior to the 
effective date of this addition or options that may be exercised under 
those contracts.
E.R. Alley, Jr.,
Deputy Executive Director.
[FR Doc. 96-21548 Filed 8-22-96; 8:45 am]
BILLING CODE 6353-01-P