[Federal Register Volume 88, Number 48 (Monday, March 13, 2023)]
[Proposed Rules]
[Pages 15360-15368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04939]


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COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR SEVERELY DISABLED

41 CFR Parts 51-2, 51-3, and 51-5

RIN 3037-AA14


Supporting Competition in the AbilityOne Program

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

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: The Committee for Purchase From People Who Are Blind or 
Severely Disabled (Committee), operating as the U.S. AbilityOne 
Commission (Commission), proposes to amend the Commission's regulations 
to incorporate specific recommendations from the ``Panel on Department 
of Defense and AbilityOne Contracting Oversight, Accountability, and 
Integrity'' (the Panel) review mandated by section 898 of the National 
Defense Authorization Act (NDAA) for Fiscal Year 2017. The mission of 
the Panel, in part, was to assess the overall effectiveness and 
internal controls of the AbilityOne Program related to Department of 
Defense (DoD) contracts and provide recommendations for changes in 
business practices. Although the Panel focused on DoD-related 
procurements, the Commission's proposed revisions will apply to all 
Procurement List (PL) additions. The proposed revisions will clarify 
the Commission's authority to consider different pricing methodologies 
in establishing the Fair Market Price (FMP) for PL additions and 
changes to the FMP; better define the parameters for conducting fair 
and equitable competitive allocations amongst multiple qualified 
Nonprofit Agencies (NPAs); and clarify the responsibilities and 
procedures associated with authorizing and deauthorizing NPAs.

DATES: The Commission must receive comments on these proposed revisions 
no later than May 11, 2023.

ADDRESSES: You may submit your comments, identified by ``RIN 3037-
AA14,'' by using the following method: internet--Federal eRulemaking 
Portal. Electronic comments may be submitted through https://www.regulations.gov. To locate the proposed rule, use RIN 3037-AA14. 
Follow the instructions for submitting comments. Please be advised that 
comments received will be posted without change to https://www.regulations.gov, 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 CONTACT 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 www.govinfo.gov. You may also access

[[Page 15361]]

documents of Commission published in the Federal Register by using the 
article search feature at: www.federalregister.gov.

FOR FURTHER INFORMATION CONTACT: Cassandra Assefa, Regulatory and 
Policy Attorney, Office of General Counsel, U.S. AbilityOne Commission, 
355 E Street SW, Suite 325, Washington, DC 20024; telephone: (202) 430-
9886; email: [email protected]. If you are deaf, hard of hearing, 
or have a speech disability and wish to access telecommunications relay 
services, please dial 7-1-1.
    During and after the comment period, you may inspect all public 
comments about the proposed regulations by accessing Regulations.gov.

SUPPLEMENTARY INFORMATION:

I. Background

A. The AbilityOne Program

    The Commission is an independent agency of the Federal Government 
that consists of a 15-member, Presidentially- appointed Commission, and 
a career civil service staff. The 15-member Commission consists of four 
(4) private citizen members and 11 other senior-level government 
employees from various cabinet-level departments of the Government. The 
Commission administers the AbilityOne Program (AbilityOne or the 
Program) authorized by the Javits-Wagner-O'Day Act (JWOD Act) and its 
implementing regulations.\1\
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    \1\ 41 U.S.C. chapter 85, Committee For Purchase From People Who 
Are Blind or Severely Disabled and Code of Federal Regulations, 
title 41, chapter 51, Committee for Purchase From People Who Are 
Blind or Severely Disabled.
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    The JWOD Act directs the Commission to designate Central Nonprofits 
Agencies (CNAs) to facilitate, by direct allocation, subcontract, or 
any other means, the distribution of government orders of commodities 
\2\ and services among NPAs employing individuals who are blind or have 
significant disabilities. The Commission has designated National 
Industries for the Blind (NIB), for NPAs that employ individuals who 
are blind, and SourceAmerica, for NPAs that employ individuals with 
other significant disabilities, as the national nonprofit organizations 
that perform the CNA roles and responsibilities.\3\ Each CNA has a 
Cooperative Agreement to govern its relationship with the Commission 
and to establish measurable performance metrics for each CNA.\4\
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    \2\ The Commission recognizes that the Federal Acquisition 
Regulation (FAR) uses the term ``products.'' However, 
``commodity(ies)'' is more consistent with the Commission's existing 
regulations (41 CFR chapter 51).
    \3\ 41 CFR 51-3.1.
    \4\ Agreements can be found at https://www.abilityone.gov/laws,_regulations_and_policy/foia_reading_room.html.
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    The JWOD Act authorizes the Commission to determine which 
commodities or services are suitable for sole-source procurement by the 
Federal Government and placed on the PL. 41 U.S.C. 8503. Once an item 
is placed on the PL, only the NPA sources authorized by the Commission 
may supply the commodity or service to Federal agencies. 41 CFR 51-
1.2(a). The significance of being a mandatory source for items on the 
PL is two-fold. First, Federal agencies do not have to follow normal 
competitive procedures when acquiring items on the PL. Instead, Federal 
agencies are required to procure the listed item from the qualified 
NPAs (and only those NPAs) identified on the PL. Second, a PL addition 
provides a steady stream of income for NPAs and a catalyst for job 
creation for individuals who are blind or have other significant 
disabilities. Currently, the PL generates approximately $4 billion in 
revenue for about 450 NPAs in the AbilityOne Program, creating or 
sustaining approximately 40,000 jobs for individuals who are blind or 
have other significant disabilities.

B. The 898 Panel

    Section 898 of the Fiscal Year 2017 NDAA \5\ directed the Secretary 
of Defense to establish a panel of senior level representatives from 
DoD agencies, the Commission, and other Federal agencies and 
organizations to address the effectiveness and internal controls of the 
Program related to DoD contracts.\6\ The primary mission of the Panel 
was to identify vulnerabilities and opportunities in DoD contracting 
with the AbilityOne Program and, at a minimum, to recommend 
improvements in the oversight, accountability, and integrity of the 
Program. The Panel established seven subcommittees to fulfill its 
duties. The Panel was required to provide annual reports to Congress on 
its activities, starting no later than September 30, 2017, and annually 
thereafter for the next three years and a final report in 2022.\7\ Of 
specific relevance to the proposed rule, the Panel formed an 
Acquisition and Procurement and U.S. AbilityOne Contracting Oversight 
subcommittee (also known as Subcommittee Six) to address procurement-
specific concerns.
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    \5\ Pub. L. 114-328, sec. 898 (2016).
    \6\ The Panel consisted of representatives of the Office of the 
Secretary of Defense and the DoD Inspector General, the U.S. 
AbilityOne Commission, and the U.S. AbilityOne Commission Inspector 
General, as statutory members. The Panel's membership also consisted 
of senior leaders and representatives from the military service 
branches, Department of Justice, Department of Veterans Affairs, 
Department of Labor, Department of Education, the General Services 
Administration, and the Defense Acquisition University.
    \7\ Each report can be found at https://www.acq.osd.mil/asda/dpc/cp/policy/abilityone.html.
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    Before the Panel's sunset in December 2021, Subcommittee Six made 
eleven recommendations. The Commission implemented several of those 
recommendations. The following four recommended actions are now being 
proposed through this notice of proposed rulemaking (NPRM):
     Require CNAs to consider price, technical capability, and 
past performance when making an NPA allocation decision.
     Establish policy and business rules for competition and 
re-competition of the PL within the AbilityOne Program.
     Revise 41 CFR part 51 to include information regarding 
deauthorization of NPAs as the authorized source on the PL.
     Protect, to the maximum extent practicable, the jobs of 
incumbent employees who are blind or have other significant 
disabilities if an NPA is deauthorized and its work is reallocated 
within the AbilityOne.
    The Commission found significant utility in the Panel's work and 
agreed with many of its recommendations. For instance, even though the 
Panel's efforts were focused on the interplay between AbilityOne and 
DoD procurements, the Commission recognized that many of the Panel's 
findings applied to the entire Program. Specifically, the Panel raised 
numerous concerns about the lack of transparency and perceptions of an 
unequal playing field in the NPA authorization process. The Commission 
acknowledges that the process to recommend and authorize an NPA may 
appear opaque from an outsider perspective. These proposed regulatory 
changes make affirmative steps toward clarifying the process and 
modifying the NPA selection process with the goal of best meeting the 
needs of the Federal customer.
    In June 2022, the Commission issued its Strategic Plan for fiscal 
year (FY) 2022-2026. The document incorporated much of the work of the 
Panel and serves as a policy road map for the Program over the next 
five years. The plan is anchored by four Strategic Objectives:
     Expand competitive integrated employment (CIE) for 
individuals who are blind or have other significant disabilities.

[[Page 15362]]

     Identify, publicize, and support the increase of good jobs 
and optimal jobs in the AbilityOne Program.
     Ensure effective governance across the AbilityOne Program.
     Partner with Federal agencies and AbilityOne stakeholders 
to increase and improve CIE opportunities for individuals who are blind 
or have other significant disabilities.
    These four objectives represent a deliberate shift to align the 
Program with contemporary disability policy and modern business 
practices.\8\ Objective III, Outcome Goal 2, describes how the 
Commission will ``support the mission by providing best value through 
contract performance.'' This goal is consistent with the Panel's work 
and the purpose of the proposed rules described herein.
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    \8\ AbilityOne Strategic Plan for FY 2022-2026. https://www.abilityone.gov/commission/strategicplan.html.
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II. Need for Rulemaking

    Every item procured on behalf of the Federal Government originates 
as a requirement for a Federal agency. Under the Program's current 
framework, CNAs are responsible for identifying which requirements are 
``suitable'' for the Program and making a recommendation to the 
Commission for addition to the PL. A suitability recommendation also 
includes identifying qualified NPAs capable of serving as authorized 
sources.
    In most cases, the CNAs work with Federal agencies to determine 
which requirements are best suited for a PL addition given the agency's 
needs, available funding, and time frame. This initial identification 
can be made by the Federal agency or by the CNA in search of potential 
opportunities. After the parties agree that a requirement may be 
suitable for a PL addition, the CNA issues an opportunity notice (ON) 
to its network of NPAs. The ON acts as a solicitation to the NPA 
community, which describes, at a minimum, the requirements, necessary 
NPA qualifications, the period of performance, and any other special 
consideration established by the CNA or Commission. If multiple NPAs 
respond to the ON, the responsible CNA will engage in a NPA selection 
process to determine which NPA can offer the best overall solution to 
the Federal agency. NPA selection normally consists of an evaluation of 
each NPA's technical capabilities and past performance information. 
Price, however, is never a consideration at this pre-selection stage. 
After the CNA identifies the most qualified NPA, it provides a 
recommendation to the Commission along with all other information 
pertaining to the overall suitability of the proposed PL addition and 
enough supporting data to substantiate an initial FMP. The FMP data is 
generally the byproduct of bilateral negotiations between the NPA and 
the Federal agency. The Commission staff will often scrutinize the 
proposed FMP to determine if it is, in fact, a fair price. The FMP is 
not the lowest or the highest price that could be paid. Instead, the 
FMP is a reasonable price based on the needs of the Federal agency, 
market conditions, and the quality of the goods and/or services being 
provided by the NPA. If the Commission staff concurs with the FMP, the 
CNA's recommendation and proposed FMP is forwarded to the Commissioners 
for a vote. If a majority of the Commissioners concur with the 
recommendation, the suitability determination is affirmed and the 
initial FMP is established. The Commission then adds the requirement to 
the PL and authorizes a single NPA to serve as the mandatory source to 
receive orders from Federal customers. Once the requirement is on the 
PL, it will normally remain there until no Federal agency needs the 
requirement or there is no NPA in the Program capable of providing the 
commodity or service. If, however, there is an ongoing need, Federal 
agencies must procure the commodity or service from the NPA authorized 
by the Commission.
    The proposed regulatory changes leave the existing NPA 
recommendation and allocation framework in place, with three modest 
modifications. First, Sec.  51-2.7 (fair market price) proposes to 
clarify the Commission's authority to use price competition as a means 
of determining, establishing, and changing the initial FMP. Second, 
Sec.  51-3.4 (distribution of orders) proposes to provide a mechanism 
for Federal agencies to increase their involvement in the allocation 
process by requesting a competitive distribution. A request for a 
competitive distribution means the responsible CNA recommends, and the 
Commission approves, at least two qualified NPAs to function as 
authorized sources. After which, an allocation would then be issued on 
a competitive basis to the NPA that can provide the ``best overall 
solution'' to the Federal customer. Lastly, proposed Sec.  51-5.2 
(mandatory source requirement) clarifies the Commission's authority to 
authorize and deauthorize NPAs and adds additional protections to 
employees when work is transferred between NPAs.\9\ These changes are 
intended to modernize the Program and to better align it with the needs 
of the Federal customer.
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    \9\ The Commission acknowledges the Panel's additional 
recommendations; however, this proposed rule is intended only to 
address the Panel's recommendation related to competition and is not 
meant to address all recommendations.
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III. Specific Proposed Changes to 41 CFR Parts 51-2, 51-3, and 51-5

    A. Section 51-2.7 (Fair market price). Section 8503(b) of the JWOD 
Act states that the Commission ``shall determine the fair market price 
of commodities and services contained on the [PL] that are offered for 
sale to the Federal Government by a qualified nonprofit agency for the 
blind or a qualified nonprofit agency for other severely disabled.'' As 
noted above, the current process only calls for considering an NPA's 
Program-specific qualifications, technical rating, and past 
performance. Price, however, is only considered and negotiated after an 
NPA has been selected. 41 CFR 51-2.7. This is prudent in many 
situations, especially when there is sufficient market data to validate 
the sufficiency of those negotiations. However, in some instances, the 
complexity, varied market conditions, and/or uniqueness of the 
requirement make bilateral negotiations less feasible for establishing 
the FMP. In those instances, using competitive market forces as a 
factor for establishing the FMP would be more beneficial to the 
Commission in meeting its statutory obligation.
    To test the efficiency of considering price on a competitive basis, 
the Commission pilot-tested two procurements that included price in the 
NPA recommendation process. The pilot tests demonstrated that including 
price as a factor, coupled with a ``customer-focused'' selection ethos, 
can provide promising results for the Federal customer and the 
AbilityOne Program.\10\ It also provided the Commission a reliable 
baseline on which the Commission could rely in establishing the FMP. 
The inclusion of price as an evaluation factor was not used as an 
attempt by the Commission to prioritize price over all other factors. 
Instead, price was subordinate to performance history to emphasize the 
Federal agency's desire to identify NPAs with a strong performance 
record, and a commitment to customer satisfaction. Again, a fair market 
price is not the lowest price or the highest price the market will 
bear, but rather the fairest price supported by adequate research and 
market considerations.
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    \10\ Information on file at the AbilityOne Commission (available 
upon request).
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    Current Regulation: The Commission's current regulations

[[Page 15363]]

permit bilateral price negotiations between the NPA and contracting 
agency rather than leveraging competitive market forces. The regulation 
states, in part, that ``other methodologies'' (like price competition) 
can be used, ``if agreed to by the negotiating parties.'' The 
regulation also states, in relevant part, that ``[p]rices are revised 
in accordance with changing market conditions which include 
negotiations between contracting activities and producing nonprofit 
agencies, assisted by central nonprofit agencies, or the use of 
economic indices, changes in nonprofit agency costs, or other 
methodologies permitted under these procedures'' (Sec.  51.2-7(b)) and 
that ``recommendations for initial fair market prices, or changes 
thereto, shall be submitted jointly by the contracting activities and 
nonprofit agencies concerned to the appropriate central nonprofit 
agency'' (Sec.  51-2.7(c)).
    Rationale for Proposed Change: The Commission is concerned that the 
provision ``if agreed to by the negotiating parties'' in Sec.  51.2-
7(a) could be misinterpreted to mean that the Commission cannot 
consider other methodologies (such as price competition) in 
establishing the initial FMP unless the NPA and contracting activity 
also agree. Such a reading is not consistent with the Commission's 
statutory authority to establish the FMP or the general thrust of the 
regulation.\11\ In fact, a recent decision at the Court of Federal 
Claims (COFC) held the following:
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    \11\ See, e.g., Melwood Horticultural Training Center, Inc. v. 
United States, 153 Fed. Cl. 723, 737 (2021).

    This is not to say that introducing a price component can never 
be utilized in AbilityOne procurements, nor that use of competitive 
pricing may not be advantageous to the United States. On the 
contrary, the Court only holds that the agency may not depart from 
its enabling statutes and its own regulations by adopting policies 
that conflict with the statutory and regulatory scheme.\12\
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    \12\ Melwood Horticultural Training Center, Inc. v. United 
States, 153 Fed. Cl. 723, 737 (2021).

    The COFC found that the price component at issue in this case 
conflicted with the ``collaborative pricing process'' contemplated 
under 41 CFR 51-2.7 (negotiations with the nonprofit contractor, the 
contracting activity, and the central nonprofit agency). The COFC added 
that ``other methodologies'' (aside from negotiations) are permissible, 
but only if the parties agree to a deviation from this process. Sec.  
51-2.7(a). The JWOD Act, however, unambiguously authorizes the 
Commission to establish the FMP and to revise it ``in accordance with 
changing market conditions.'' \13\ As such, the Commission believes it 
has the discretion to use the most appropriate pricing methodology when 
it initially establishes or changes the FMP and is not limited solely 
to an agreement of the negotiating parties as interpreted by the Court. 
The proposed changes to Sec.  51-2.7 are intended to harmonize the 
statute and regulation to eliminate any ambiguity surrounding the 
Commission's authority to establish the FMP, by making it clear that an 
agreement between the parties is not required for the Commission to 
utilize other pricing methodologies (including price competition) to 
establish or change the FMP.
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    \13\ 41 U.S.C. 8503(b). It should be noted that a 
``collaborative pricing process'' is not contemplated under the 
statute. The authority to establish the FMP rests solely with the 
Commission.
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    Proposed Regulation: The proposed changes to Sec.  51-2.7 eliminate 
the ambiguity surrounding the Commission's authority to establish the 
FMP. The proposed regulation amends paragraph (a) by removing ``if 
agreed to by the negotiating parties'' and replacing the existing text 
with ``the price can be based on market research, comparing the 
previous price paid, price competition, or any other methodology 
specified in Committee policies and procedures.'' This change makes 
clear that agreement by the parties is not required in establishing the 
FMP and adds examples of other bases upon which FMP can be based. The 
proposed regulation also amends paragraph (b) to state that the FMP may 
be revised in accordance with methodologies established by the 
Committee, which include the addition of price competition. Lastly, the 
proposed rule removes the language currently at Sec.  51-2.7(c) 
requiring the initial FMP, or changes thereto, to be submitted jointly 
by contracting activities and NPAs to the CNA (Sec.  51-2.7(c)). The 
contracting activities and NPAs may still submit prices jointly as a 
matter of Commission policy, but such a requirement would only be 
applicable if bilateral negotiations is the method the Commission 
chooses to use to determine the FMP.
    B. Section 51-3.4 (Distribution of orders)--CNAs have explicit 
statutory authority ``to facilitate the distribution, by direct 
allocation, subcontract, or any other means, of orders of the Federal 
Government for commodities and services on the procurement list among 
qualified nonprofit agencies for the blind or qualified nonprofit 
agencies for other severely disabled.'' 41 U.S.C. 8503(c). A 
distribution can only occur, however, after the Commission has 
authorized at least one NPA to serve as a mandatory source.
    Current Regulation: The current regulation states that the CNA 
``shall distribute orders from the government only to nonprofit 
agencies which the Committee has approved,'' and, ``[w]hen the 
Committee has approved two or more nonprofit agencies to furnish a 
specific commodity or service,'' the CNA shall distribute the order 
``in a fair and equitable manner.''
    Rationale for Proposed Change: Under the current structure, the 
CNAs typically recommend a single NPA to provide a commodity or service 
to the Federal customer. The CNAs consider numerous factors before 
recommending an NPA to the Commission, but the priorities of the 
Federal customer aren't always effectively articulated throughout the 
recommendation process.\14\ Nevertheless, once that recommendation is 
made and the Commission authorizes the recommended NPA to serve as a 
mandatory source, the CNA must distribute orders to that NPA and only 
that NPA as long as the commodity or service remains on the PL. Since 
NPAs in the Program vary in sophistication and technical expertise, 
where two or more NPAs have been approved to provide a service, the 
competitive distribution option will be limited to only services 
contracts where the total contract value exceeds $10 million \15\ or in 
instances where bilateral negotiations have failed. The proposed 
language emphasizes the priorities of the Federal customer for specific 
allocations and creates a framework for the Federal agency to utilize 
the competitive distribution option for any service contract with a 
total contract value exceeding $10 million. This rule proposes to allow 
the Commission to opt for a competitive allocation for services 
contracts with a total contract value at or below $10 million due to an 
impasse in bilateral negotiations regarding price. It is important to 
emphasize that the competitive distribution option may only be utilized 
for services contracts, not contracts for commodities. These changes 
are intended to provide all Federal agencies access to competitive 
distributions while also allowing the Commission to have the 
flexibility to approve requests and tailor execution consistent with 
the Commission's available resources,

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personnel, and the needs of the Program.
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    \14\ Supra note 5.
    \15\ Total contract value consists of the base period plus all 
option periods.
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    Proposed Regulation: The process for recommending, authorizing, and 
distributing orders to NPAs will continue to be done in a ``fair and 
equitable manner,'' but each allocation will be made to the NPA that 
provides the ``best overall solution'' for the Federal customer. This 
rule proposes to amend Sec.  51-3.4 to impose new requirements as to 
how a CNA must distribute orders for certain services contracts among 
two or more approved NPAs. First, this rule proposes to remove the 
language requiring CNAs to distribute orders to NPAs in a ``fair and 
equitable manner'' and replace the existing text with ``in a manner 
that provides the best overall solution for the Federal customer.'' 
This rule also proposes to add new paragraphs (b), (c), (d), and (e), 
which impose additional requirements for new and existing PL additions. 
For service requirements that are expected to exceed $10 million in 
total contract value, the Federal customer may request, subject to the 
Commission's approval, that the procurement be distributed on a 
competitive basis among all authorized NPAs (proposed Sec.  51-3.4(b)). 
For service requirements equal to or less than $10 million in total 
contract value, the Commission may direct a competitive distribution 
for an existing PL service requirement in instances where good faith 
sole source negotiations have failed to produce an agreeable price 
(proposed Sec.  51-3.4(c)). Finally, this rule also proposes to provide 
guidance for NPA selection and the Federal customer's obligations in 
requesting a competitive distribution (Sec.  51-3.4(d)) and establishes 
a framework for resolving a dispute arising out of a competitive 
distribution decision (Sec.  51-3.4(e)).
    C. Section 51-5.2 (Mandatory source requirement)--The Commission is 
responsible for placing and removing items from the PL and authorizing 
and deauthorizing qualified NPAs to serve as mandatory sources. 41 CFR 
51-2.2(b).
    Current Regulation: The current regulation states, in relevant 
part, that ``[n]onprofit agencies designated by the Committee are 
mandatory sources of supply for all entities of the Government for 
commodities and services included on the Procurement List'' (Sec.  51-
5.2(a)), ``[p]urchases of commodities on the Procurement List by 
entities of the Government shall be made from sources authorized by the 
Committee'' (Sec.  51-5.2(b)), ``[c]ontracting activities shall require 
other persons providing commodities which are on the Procurement List 
to entities of the Government by contract to order these commodities 
from the sources authorized by the Committee'' (Sec.  51-5.2(c)), and 
``[c]ontracting activities procuring services which have included 
within them services on the Procurement List shall require their 
contractors for the larger service requirement to procure the included 
Procurement List services from nonprofit agencies designated by the 
Committee'' (Sec.  51-5.2(e)).
    Rationale for Proposed Regulation: Before an item is added to the 
PL, the Commission must find that the commodity or service is 
``suitable'' for addition. 41 CFR 51-2.4. The Commission's regulations 
require that the suitability of a commodity or service be evaluated on 
four criteria: (1) employment potential, (2) the qualifications of the 
proposed NPA(s), (3) the capability of the proposed NPA(s), and (4) the 
level of impact on the current contractor. 41 CFR 51-2.4(a). Under the 
Commission's regulations, the suitability determination ``approves'' a 
commodity or service for PL addition and ``authorizes'' at least one 
NPA to serve as a mandatory source. The current regulation at Sec.  51-
5.2 does not explicitly assert the Commission's authority to authorize 
or deauthorize an NPA.\16\ It is also silent on an NPA's 
responsibilities for the incumbent workforce when work is transferred 
from one NPA to another. This rule proposes changes to Sec.  51-5.2 to 
clarify the Commission's authority to authorize and deauthorize NPAs 
and add additional protections for incumbent employees when work is 
transferred between NPAs.
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    \16\ 41 CFR 51-2.2(b) provides that the Committee has the power 
and responsibility to authorize and deauthorize central nonprofit 
agencies and nonprofit agencies to accept orders from contracting 
activities for the furnishing of specific commodities and services 
on the PL.
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    Proposed Regulation: The proposed changes clarify the Commission's 
authority to authorize and deauthorize NPAs to serve as mandatory 
sources and to transfer work within the Program. The Commission 
proposes to amend the text of paragraph (a) to state that the Committee 
may authorize one or more NPAs to provide a requirement on the PL; that 
NPAs authorized as mandatory sources remain on the PL until the NPA has 
been deauthorized by the Committee; and that CNAs may allocate to one 
or more NPAs a commodity or service on the PL. This rule also proposes 
to amend paragraph (b) to state that the Committee will authorize the 
most capable NPA as a mandatory source and paragraph (c) to clarify 
that contracting activities shall require that their contract with 
others, such as prime vendors, providing commodities already on the PL 
to the Federal agency, must order these commodities from Committee 
authorized sources. We also propose to change the language in paragraph 
(e) to state that contracting activities procuring services must 
procure included PL commodities in addition to services from the NPA 
``authorized'' in lieu of ``designated'' by the Committee. Lastly, the 
proposed changes also include a new paragraph that includes an 
affirmative requirement to protect and retain employees who are blind 
or have other significant disabilities when a project is transferred to 
another NPA within the Program (proposed Sec.  51-5.2(f)).

VI. Regulatory Procedures

A. Applicability of E.O. 12866 and 13563

    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 that this will be a significant 
regulatory action and, therefore, is subject to review under section 
6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 
1993.

B. Expected Impact of Proposed Rule

    While the proposed changes are applicable to all NPAs, the 
Commission estimates that they would have the most impact on 
approximately 27 percent or 122 of the 450 NPAs currently qualified to 
participate in the Program.\17\ This group of NPAs performs 
approximately 346 services contracts, which total an annual revenue of 
roughly $3.07 billion.\18\ Half of that amount ($1.63 billion), is 
concentrated amongst 23 qualified NPAs.\19\ In addition, these rule

[[Page 15365]]

changes would apply equally across all Federal agencies, but the 
Department of Defense (DoD) would be impacted the most, accounting for 
approximately 79 percent of the $3.07 billion ($2.41 billion) in 
AbilityOne service contracts annually.
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    \17\ This number is based on the total number of NPAs within the 
Program that have at least one contract that exceeds $10 million in 
total contract value. These estimates do not account for impasse 
occurrences which historically are rare with an average of two each 
year based on data from the last five years. Information on file at 
the AbilityOne Commission (available upon request).
    \18\ Information on file at the AbilityOne Commission (available 
upon request).
    \19\ Id.
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    Lastly, service contracts are typically renewed once every five 
years. This means that, on average, up to one-fifth of all applicable 
AbilityOne service contracts (69 per year) would be subject to the 
proposed changes in any given year. In terms of dollar amount, this 
would subject approximately $614 million in contract dollars to a 
possible competitive distribution on an annualized basis.\20\ The exact 
amount for any given year would be based on the number of requests 
received and approved by the Commission.
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    \20\ Based on an extrapolation of available data and estimated 
contract expiration dates, the number of possible requests would be 
28, 69, 99, 79, and 69 for FY 2021, FY 2022, FY 2023, FY 2024, and 
FY 2025, respectively. The Commission believes, for purposes of this 
proposed rule, using the average number is appropriate.
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Benefits of Proposed Rule 21
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    \21\ The changes discussed in this rulemaking are separate and 
distinguishable, but collectively all three rules are designed to 
enhance competition within the Program. The benefits in this section 
address the impact on all three proposed changes collectively.
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    Both CNAs already use a competitive approach when recommending NPAs 
to the Commission to serve as mandatory sources for a vast majority of 
new PL additions.\22\ The largest criticism to current practice is the 
perceived lack of transparency in the NPA selection process, a 
perception of NPA complacency after receiving an authorization, and the 
inability to consider price on a competitive basis when selecting an 
NPA.\23\ The proposed regulatory changes will directly address each 
concern by providing greater customer involvement in NPA selection, 
creating a mechanism to incentivize better performance, and encouraging 
more competitive pricing.
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    \22\ Supra note 12.
    \23\ Available at, https://abilityone.oversight.gov/reports/2022/898-panel-issues-fourth-and-final-annual-report-congress, pp 
26-27.
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    i. Increased Transparency--For PL additions of more than $10 
million in total contract value, inclusive of the base period and all 
options periods, the proposed changes provide Federal agencies the 
option to request a competitive allocation. A significant component of 
that request requires the Federal agency to state ``whether it will 
provide resources to support the process.'' The Federal agency is not 
required to provide resources, but the Commission has found great 
utility in involving the Federal customer in assisting with evaluating 
NPA technical capabilities, past performance, and pricing. In 2019 and 
2021, the Commission conducted competitive NPA selection pilot tests, 
leveraging the resources of the Federal agency's responsible 
contracting activity.\24\ In both instances, the Federal agency 
provided an invaluable mix of engagement and expertise throughout the 
entire process. However, the ultimate decision for selecting the 
servicing NPA always fell within the purview of the Commission's 
authority and will remain within the purview of the Commission under 
the proposed rule.
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    \24\ Information on file at the AbilityOne Commission (available 
upon request).
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    ii. Incentivize Better Performance--The AbilityOne Program was 
created to allow Federal agencies to issue orders on a sole-source 
basis to qualified NPAs. The competitive procedures proposed herein 
will not change that. In fact, service requirements below the threshold 
will not be significantly impacted by the proposed changes and 
commodities are not subject to the changes for competitive 
distributions. However, NPAs involved in servicing higher dollar 
requirements will have to be more responsive to market forces and 
innovative practices to maintain its place as a mandatory source. The 
Commission believes that the prospects of a competitive allocation 
every five to ten years is an appropriate motivator.
    The proposed rules also provide a CNA a more effective means for 
replacing a poor performing NPA, without resorting to granting a 
Federal agency a purchase exception to procure the requirement outside 
the Program. Instead, the proposed changes will encourage CNAs to 
identify as many capable NPAs as possible when a PL addition is 
initially established. If, in the unlikely event, the originally 
selected NPA falls well short of expectations, the responsible CNA can 
make a re-allocation amongst the other authorized NPAs.
    iii. More Competitive Pricing--The AbilityOne Program has been a 
trusted source to Federal agencies since 1938. To remain a trusted 
source, qualified NPAs must deliver high-quality commodities and 
services in a timely manner at a competitive price. The two test pilots 
completed in 2019 and 2021 provide a proof of concept to the potential 
cost savings that might be generated through competition. The first 
competitive pilot test was conducted for the Ft. Bliss Facilities 
Support and Operations Services (FSOS) contract, initially valued at 
$66.7 million per year and resulted in a contract award of $59.5 
million per year, an annual savings of $7.2 million ($39.6 million over 
the entire performance period) or a 12% reduction.\25\ The second pilot 
test for the Ft. Meade Maintenance and Repair Services contract was 
valued at $19.6 million per year. The new price would have been $16.8 
million per year, an annual savings of $2.8 million ($14 million over 
the entire performance period) or a 17% reduction.\26\ These results 
suggest that price competition at the pre-selection stage, when 
compared to bilateral negotiations after NPA selection, can have some 
very tangible benefits to the Federal Government through cost savings.
---------------------------------------------------------------------------

    \25\ Id.
    \26\ Id.
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Cost of Proposed Rule 27
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    \27\ The changes discussed in this rule making are separate and 
distinguishable, but collectively all three rules are designed to 
enhance competition within the Program. The costs in this section 
address the impact on all three proposed changes collectively.
---------------------------------------------------------------------------

    The Commission believes that the potential costs from 
implementation of the proposed changes are greatly outweighed by the 
benefits to the NPA community, the CNAs, and the Federal Government.
    i. Cost to NPAs--The Commission believes that the only additional 
cost that might be attributed to these proposed rules for new PL 
additions is the cost an NPA would incur if it is required to include 
pricing information in its response to an ON. For existing 
requirements, the only meaningful cost might be proposal preparation 
cost and possible phase-out cost to the incumbent NPAs if they do not 
receive a re-allocation after a competitive distribution and must 
transfer the incumbent workforce to the new NPA.
    a. New PL Additions Without an Incumbent NPA: When a CNA issues an 
ON, NPAs are already required to prepare and submit a competitive 
response. Responses will provide, at a minimum, information regarding 
the NPA's qualifications, technical capabilities, and past performance 
information. It does not, however, provide pricing until after the 
field has been narrowed down to a single NPA. At that stage, the 
successful NPA will enter bilateral price negotiations with the Federal 
customer. Under the proposed rule Sec.  51-2.7(a), it is permissible to 
include price as a factor as part of the ON. If price is used as a 
factor, responding NPAs might incur some cost if required to include 
pricing data in the initial response to the ON.

[[Page 15366]]

However, since each responding NPA is already on notice that pricing 
information will be needed to ultimately secure a recommendation, this 
change would only alter when the NPA must submit it and how it is used.
    b. Existing PL Services with an Incumbent NPA: For existing service 
requirements, the only meaningful cost might be proposal preparation 
cost and possible phase-out expenses to the incumbent NPAs for the 
approximately 346 service requirements potentially impacted by a 
competitive distribution. Under current practice, an incumbent NPA will 
generally only be displaced by another NPA if it cannot meet the 
Government's requirements in a satisfactory manner. Otherwise, an NPA 
will continue to serve as a mandatory source for the life of an 
existing requirement. Under the proposed rule changes, a Federal agency 
may request a re-allocation on a competitive basis for a service 
requirement exceeding $10 million in total contract value, inclusive of 
the base period and all option periods, or the Commission may direct a 
competitive re-allocation in instances where bilateral negotiations 
have failed. If the Commission approves the Federal agency's request 
for a competitive re-allocation, or if the Commission directs 
competitive re-allocation after an impasse in negotiations, the 
incumbent may incur cost in preparing a competitive proposal. If it is 
displaced, it may incur transition costs, but a vast majority of those 
costs may be reimbursable under the existing Federal contract. A 
displaced incumbent NPA would also lose the revenue from the lost 
allocation. However, from a programmatic perspective, the revenue would 
remain within the Program because the work would continue to be 
performed by another qualified NPA. Secondly, proposed rule Sec.  51-
5.2(f) requires the losing and gaining NPAs to work together to ensure 
that any adverse impacts on the incumbent workforce are mitigated to 
the maximum extent practicable.
    ii. Cost to CNAs--The most significant cost that the CNAs would 
incur are the costs for the approximately 346 PL services that might be 
selected for a price-inclusive competitive allocation. Of that number, 
all but ten would fall to SourceAmerica, which has reported to the 
Commission that it would need 14 full-time equivalents (FTEs) in 
additional staff or $1.5 million annually to handle the potential 
increase in workload. However, such costs assume that the Commission 
would approve every eligible PL service for a competitive distribution. 
As noted above, the discretionary nature of each request and the 
Commission's discretion under the proposed rule to determine whether a 
competitive distribution is appropriate provides the Commission the 
flexibility to control the number of approved requests based on 
resource availability.
    While competitive distributions may be more resource intensive for 
CNAs than the status quo, the potential additional costs to CNAs may be 
offset by increased participation by the Federal customer. For 
instance, during the competitive pilot for Fort Bliss, the Federal 
customer provided no less than 7 FTEs of general staff and evaluation 
support (i.e., technical evaluation, past performance, and pricing). In 
any event, the Commission recognizes that competitive distributions 
might be more resource intensive than the status quo, but many of those 
costs will be offset by increased participation from the Federal 
customer and improved customer satisfaction. Additionally, a price 
impasse because of failed bilateral price negotiations could take 
multiple bridge contracts and hundreds of additional man-hours to 
establish the price for a follow-on contract. In those instances, a 
competitive allocation would reduce the administrative burden for both 
the CNA and Federal customers by allowing market conditions to be a 
more determinative factor.
    iii. Cost to Federal Customers--The Commission anticipates that the 
cost to the Federal customer will vary depending on how much support it 
provides to the Commission and the responsible CNA in carrying out a 
competitive distribution. In most instances, the Federal customer will 
be expected to provide personnel to assist with the technical 
evaluation, past performance evaluation, and price analysis. 
Additionally, each time an existing PL service requirement is re-
allocated, there may be some disruption to contract performance and 
administrative cost associated with replacing an incumbent contractor. 
However, this cost would only be incurred if the Federal customer 
determines that a re-allocation is more advantageous to the Federal 
Government than maintaining the status quo.\28\
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    \28\ The cost will vary by Federal agency. The Commission will 
have more information from the After Action Response (AAR) on the 
Fort Bliss Competitive Pilot test. The results of the pilot will be 
posted on our website and will also be available by request.
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    iv. Cost to the AbilityOne Commission--According to analysis 
derived from the two pilot tests, the Commission would need to dedicate 
additional FTEs consisting of a competition lead, additional attorney 
advisors, a contract specialist, and several price analysts.\29\ Absent 
additional personnel, the Commission would only be able to support a 
small number of competitive distributions. The agency would need to 
budget an additional $800,000-$1.2 million annually to account for the 
personnel needed to support a competitive allocation for each PL 
addition in excess of $10 million in total contract value.\30\ However, 
the Commission will largely be able to mitigate additional cost in the 
following ways:
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    \29\ Information on file at the AbilityOne Commission (available 
upon request).
    \30\ This estimate is based on hiring an additional 8-12 FTEs at 
an average cost of $100K per person.
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    a. Limited Scope: The Section 898 Panel recommended that a 
competitive process apply to those service requirements with an annual 
value of $10 million per year. It also recommended that competitive 
distributions be mandatory.\31\ The proposed rule changes allow for 
competitive distributions on service contracts that are greater than 
$10 million in total contract value or in instances where bilateral 
negotiations have failed, and application of a competitive distribution 
is not mandatory. The discretionary nature of competitive distributions 
under the proposed rule provides the Commission the flexibility to 
approve requests and tailor execution consistent with the Commission's 
available resources, personnel, and the needs of the Program.
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    \31\ Supra note 18.
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    b. Leveraging personnel from the Federal customers: By placing a 
vast majority of the resource burden for conducting competitive 
distributions on the responsible CNAs and the requesting Federal 
agency, the Commission can focus on providing better oversight and 
compliance. For CNAs, the resource burden is only slightly more than 
the status quo, and for the Federal customer all additional costs are 
dedicated to supporting NPA evaluations (i.e., technical experts, 
pricing analysis, etc.).
    D. Regulatory Flexibility Act--The Committee does not expect this 
proposed rule 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., because it does not include 
any new reporting, recordkeeping, or other compliance requirements for 
small entities. The proposed rule only establishes business rules to 
improve the AbilityOne

[[Page 15367]]

Program processes. This proposed rule also does 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).
    E. Unfunded Mandate Reform--This proposed rule will not result in 
the expenditure by State, local, and Tribal governments, in the 
aggregate, or by the private sector, of $100,000,000 or more in any one 
year, and it will not significantly or uniquely affect small 
governments.
    F. Paperwork Reduction Act--This proposed rule does not contain an 
information collection requirement subject to the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3501 et seq.).
    G. Small Business Regulatory Enforcement Fairness Act of 1996--This 
proposed rule would not constitute a major rule as defined by section 
804 of the Small Business Regulatory Enforcement Fairness Act of 1996. 
This proposed rule will not result in an annual effect on the economy 
of $100,000,000 or more; a major increase in costs or prices; or 
significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of the United States-based 
companies to compete with foreign based companies in domestic and 
export markets.

List of Subjects

41 CFR Part 51-2

    Government procurement, Individuals with disabilities, Organization 
and functions (Government agencies).

41 CFR Parts 51-3 and 51-5

    Government procurement, Individuals with disabilities.

    For reasons set forth in the preamble, the Commission proposes to 
amend 41 CFR parts 51-2, 51-3, and 51-5 as follows:

PART 51-2--COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR 
SEVERELY DISABLED

0
1. The authority citation for part 51-2 is revised to read as follows:

    Authority: 41 U.S.C. 46-68c.

0
2. Amend Sec.  51-2.7 by:
0
a. Revising the second and third sentences and removing the fourth 
sentence of paragraph (a); and
0
b. Revising paragraphs (b) and (c).
    The revisions read as follows:


Sec.  51-2.7  Fair market price.

    (a) * * * The Committee is responsible for determining fair market 
prices, and changes thereto, for commodities and services on the 
Procurement List. The initial fair market price may be based on 
bilateral negotiations between contracting activities and authorized 
nonprofit agencies, market research, comparing the previous price paid, 
price competition, or any other methodology specified in Committee 
policies and procedures.
    (b) The initial fair market price may be revised in accordance with 
the methodologies established by the Committee, which include sole 
source negotiations between contracting activities and producing 
nonprofit agencies assisted by central nonprofit agencies, the use of 
economic indices, price competition, or any other methodology permitted 
under the Committee's policies and procedures.
    (c) After review and analysis, the central nonprofit agency shall 
submit to the Committee the recommended fair market prices and, where a 
change to the fair market price is recommended, the methods by which 
prices shall be changed to the Committee, along with the information 
required by Committee pricing procedures to support each 
recommendation. The Committee will review the recommendations, revise 
the recommended prices where appropriate, and establish a fair market 
price, or change thereto, for each commodity or service which is the 
subject of a recommendation.

PART 51-3--CENTRAL NONPROFIT AGENCIES

0
3. The authority citation for part 51-3 continues to read as follows:

    Authority: 41 U.S.C. 46-48c.

0
4. Revise Sec.  51-3.4 to read as follows:


Sec.  51-3.4  Distribution of orders.

    (a) Central nonprofit agencies shall distribute orders from the 
Government only to nonprofit agencies which the Committee has 
authorized to furnish the specific commodity or service. When the 
Committee has authorized two or more nonprofit agencies to furnish a 
specific commodity or service, the central nonprofit agency shall 
distribute orders among those nonprofit agencies in a manner that 
provides the best overall solution for the Federal customer.
    (b) For new and existing Procurement List services that are 
estimated to exceed $10 million in total contract value, inclusive of 
the base period and all option periods, the Federal customer may 
request that the procurement be distributed on a competitive basis 
among all authorized nonprofit agencies. The Committee will determine 
whether a competitive distribution is appropriate. The nonprofit agency 
selected through a competitive distribution is the nonprofit agency 
that the Committee has determined provides the best overall solution 
for the Federal customer after considering such factors as technical 
capability, past performance, and price. Depending on the needs of the 
Federal customer, factors may be weighted. Price shall not be the only 
factor in a distribution decision.
    (c) The Commission may also direct a competitive distribution in 
accordance with paragraph (b) of this section for any service already 
on the Procurement List (regardless of dollar amount) if the sole 
source negotiations described at Sec.  51-2.7(b) of this chapter fail 
to produce a price acceptable to both parties for a follow-on 
procurement.
    (d) In addition to the requirements described at part 51-6 of this 
chapter, the requesting Federal customer shall advise the Committee of 
the rationale for competition, whether it will provide resources to 
support the process, the estimated cost, any information pertaining to 
performance by any independent contractor, and such other information 
as is requested by the Committee.
    (e) Any dispute arising out of a competitive distribution decision 
described at paragraph (b) of this section shall be submitted to the 
appropriate central nonprofit agency for resolution. If the affected 
nonprofit agency disagrees with the central nonprofit agency's 
distribution decision, it may appeal that decision to the Committee for 
final resolution. Appeals must be filed with the Committee within five 
business days of the nonprofit agency's notification of the central 
nonprofit agency's distribution decision, and only a nonprofit agency 
that participated in the competitive distribution process described at 
paragraph (b) of this section may appeal.

PART 51-5--CONTRACTING REQUIREMENTS

0
5. The authority citation for part 51-5 continues to read as follows:

    Authority: 41 U.S.C. 46-48c.

0
6. Amend Sec.  51-5.2 by revising the section heading and paragraphs 
(a), (b), (c), and (e) and adding paragraph (f) to read as follows:


Sec.  51-5.2  Authorization/deauthorization as a mandatory source.

    (a) The Committee may authorize one or more nonprofit agencies to 
provide a commodity or service on the Procurement List. Nonprofit 
agencies

[[Page 15368]]

that have been authorized as mandatory sources for a commodity or 
service on the Procurement List are the only authorized sources for 
providing that commodity or service until the nonprofit agency has been 
deauthorized by the Committee. To meet the needs of the Federal 
customer, the central nonprofit agencies may allocate the commodity or 
service to one or more nonprofit agencies as appropriate.
    (b) After a determination of suitability for approving items on the 
Procurement List, the Committee will authorize the most capable 
nonprofit agencies as the mandatory source(s) for commodities or 
services. Commodities and services may be purchased from nonprofit 
agencies; central nonprofit agencies; Government central supply 
agencies, such as the Defense Logistics Agency and General Services 
Administration; and certain commercial distributors. (Identification of 
the authorized sources for a particular commodity may be obtained from 
the central nonprofit agencies indicated by the Procurement List which 
is found at www.abilityone.gov.)
    (c) Contracting activities shall require that their contracts with 
other organizations or individuals, such as prime vendors providing 
commodities that are already on the Procurement List to Federal 
agencies, require that the vendor order these commodities from the 
sources authorized by the Committee.
* * * * *
    (e) Contracting activities procuring services, which have included 
within them services on the Procurement List, shall require their 
contractors for the larger service requirement to procure the included 
Procurement List services from nonprofit agencies authorized by the 
Committee.
    (f) If the Committee deauthorizes a nonprofit agency as the 
mandatory source, the deauthorized nonprofit agency shall ensure as 
many of its employees who are blind or have other significant 
disabilities as practicable remain on the job with the new authorized 
successor nonprofit agency. The successor nonprofit agency is required 
to offer a right of first refusal of employment under the successor 
contract to current employees of the deauthorized nonprofit agency who 
are blind or have other significant disabilities for positions for 
which they are qualified. The deauthorized nonprofit agency shall 
disclose necessary personnel records in accordance with all applicable 
laws protecting the privacy of the employee to allow the successor 
nonprofit agency to conduct interviews with those identified employees. 
If selected employees agree, the deauthorized nonprofit agency shall 
release them at a mutually agreeable date and negotiate transfer of 
their earned fringe benefits and other relevant employment and Program 
eligibility information to the successor nonprofit agency. The 
requirement to offer the right of first refusal also applies if a 
nonprofit agency loses an allocation because of a competitive 
distribution under Sec.  51-3.4(b) of this chapter.

Michael R. Jurkowski,
Acting Director, Business Operations.
[FR Doc. 2023-04939 Filed 3-10-23; 8:45 am]
BILLING CODE 6353-01-P