[Federal Register Volume 89, Number 57 (Friday, March 22, 2024)]
[Rules and Regulations]
[Pages 20324-20340]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-05717]


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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: Final rule.

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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), is publishing a final rule that clarifies the 
Commission's authority to consider different pricing methodologies to 
establish the initial Fair Market Price (FMP) for Procurement List (PL) 
additions and changes to the FMP. The final rule also permits the 
central nonprofit agency (CNA) to distribute certain high-dollar 
services orders on a competitive basis to the authorized nonprofit 
agency (NPA) after considering price and non-price factors. Lastly, the 
final rule further clarifies the Commission's authority to authorize 
and deauthorize NPAs as mandatory sources and require all NPAs to 
provide the right of first refusal of employment to the current 
employees of an incumbent NPA who are blind or have other significant 
disabilities for positions for which they are qualified.

DATES: This final rule is effective April 22, 2024.

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.

SUPPLEMENTARY INFORMATION:

I. Background

A. The Javits-Wagner-O'Day (JWOD) Act and the Commission

    The JWOD Act, 41 U.S.C. 8501, et seq., leverages the purchasing 
power of the Federal Government to create employment opportunities 
through the AbilityOne Program for individuals who are blind or have 
significant disabilities. The Program is administered by the 15-member, 
presidentially appointed Commission that, as an independent Federal 
agency, maintains a PL of products and services that Federal agencies 
must purchase from participating NPAs who employ individuals who are 
blind or have significant disabilities. See 41 U.S.C.8503 and 8504. 
CNAs are responsible for distributing orders to Commission-approved 
NPAs to provide products and services to Federal agencies. See 41 CFR 
parts 51-2.4(a)(3) & 51-3.4. NPAs must meet initial qualification 
requirements and maintain those qualifications throughout their 
participation in the AbilityOne Program. See 41 CFR parts 51-4.2 and 
51-4.3.
    The Commission has five roles stated in the JWOD Act. First, the 
Commission decides on the addition or removal of products and services 
on the PL. See 41 U.S.C. 8503(a). Second, the Commission sets the FMP 
that the Federal Government will pay for the products or services. See 
41 U.S.C. 8503(b). Third, the Commission designates nonprofit agencies 
to serve as CNAs, who are responsible for ``facilitating the 
distribution of orders'' for products or services among participating 
NPAs. See 41 U.S.C. 8503(c). Fourth, the Commission promulgates 
regulations ``on other matters as necessary'' to carry out the JWOD 
Act. See 41 U.S.C. 8503(d)(1). Fifth, the Commission engages in a 
``continuing study and evaluation of its activities'' to ensure 
effective administration of the JWOD Act. See 41 U.S.C. 8503(e).
    At present, pursuant to the JWOD Act, the Commission has designated 
National Industries for the Blind (NIB) and SourceAmerica as the CNAs 
responsible for distributing orders to participating NPAs. See 41 CFR 
51-1.3 (definition of CNA); see also 41 CFR 51-3.2 (describing duties 
of a CNA). The CNAs provide information to the Commission as needed and 
otherwise assist the Commission in implementing the Commission's 
regulations. NPAs associated with NIB primarily employ individuals who 
are blind or visually impaired; NPAs associated with SourceAmerica 
primarily employ individuals with other significant disabilities, 
including intellectual and developmental disabilities (IDD). As of 
September 30, 2023, NIB represents 58 NPAs participating in the 
AbilityOne Program, and SourceAmerica represents 355 NPAs.
    In making its determination on whether to add a product or service 
to the PL, the Commission assesses four suitability criteria. See 41 
CFR 51-2.4. First, the Commission considers whether there is the 
potential for the NPA to employ enough individuals who are blind or 
have significant disabilities as needed to carry out the contract.

[[Page 20325]]

Second, the Commission determines whether the recommended NPAs meet all 
the qualification requirements set forth in 41 CFR part 51-4. Third, 
the Commission assesses the capability of the recommended NPAs to 
provide the product or service, including the required labor 
operations, Government quality standards, and delivery schedules. 
Finally, if there is a current contractor providing the product or 
service, the Commission determines if there would be an adverse impact 
on that contractor if the proposed requirement is placed on the PL.

B. The Need for Rulemaking

The 898 Panel
    Section 898(a)(1) of the National Defense Authorization Act (NDAA) 
for Fiscal Year 2017 [Hereinafter referred to as the Act] \1\ directed 
the Secretary of Defense to establish a panel of senior level 
representatives from the Department of Defense (DoD) agencies, the 
Commission, and other Federal Government agencies to address the 
effectiveness and internal controls of the AbilityOne Program related 
to DoD contracts [Hereafter referred to as the Panel]. The Panel 
consisted of representatives from the Office of the Secretary of 
Defense and its DoD Inspector General, the Commission, and the 
Commission's 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, the General Services 
Administration, the Department of Education, and the Defense 
Acquisition University.
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    \1\ National Defense Authorization Act for Fiscal Year 2017, 
Public Law 114-328, sec. 898(a)(1) (2016).
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    The primary mission of the Panel was to identify both 
vulnerabilities and opportunities in DoD contracting within the 
AbilityOne Program and, at a minimum, recommend improvements in the 
oversight, accountability, and integrity of the Program. Of specific 
relevance to this rulemaking, the Panel was directed to make 
recommendations for increasing employment opportunities for individuals 
who are blind or have significant disabilities, especially service-
disabled veterans, and recommend ways to explore opportunities for 
competition among qualified NPAs to ensure equitable selection in work 
allocations. The Panel was required to provide an annual report to 
Congress on its activities not later than September 30, 2017, and 
annually thereafter for the next three years.\2\
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    \2\ Each report can be found at https://www.acq.osd.mil/asda/dpc/cp/policy/abilityone.html.
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    The first annual report from the Panel was submitted to Congress in 
July 2018 and its final report was submitted in January 2022. During 
its four-year tenure, the Panel established seven subcommittees that 
aligned with the duties described in Section 898(c), with the 
Acquisition and Procurement subcommittee, also known as Subcommittee 
Six, addressing the acquisition and procurement duties. Subcommittee 
Six identified ten findings that led to initial recommended actions for 
implementation.
    The most germane finding from Subcommittee Six called on the 
Commission to implement price-inclusive NPA selection procedures and 
conduct pilot tests that include DoD and Commission-led evaluations and 
recommendations.
    Although the Panel's recommendations were not binding on the 
Commission, subsection (f)(2) of the Act directed the Commission to 
make a good faith effort to implement its recommendations.\3\ If the 
Commission unduly delayed or ignored the Panel's recommendations, the 
Secretary of Defense was given the authority to ``suspend compliance 
with the requirement to procure a product or service in Section 8504 of 
title 41, United States Code.'' \4\ Currently, DoD procurements 
represent more than half of the Program's annual sales, which creates 
procurement opportunities that employ over 18,275 individuals with 
significant disabilities or who are blind.\5\ If the DoD were to 
withdraw from the Program, or even reduce participation, the results 
would greatly harm the objectives of the Commission.
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    \3\ Supra note 1. Since the Panel sunset when it submitted its 
final report to Congress in accordance with (IAW) part (j) of the 
Act, it is debatable as to whether the Secretary of Defense 
continues to retain the authority to invoke the authority described 
at (f)(2). However, in the fourth and final report to Congress the 
Panel identified numerous recommendations that remained incomplete, 
such as the recommendation related to competition (Recommendations 
10 & 11).
    \4\ Supra note 1 at (g)(1)(A).
    \5\ Employment numbers are based on estimates from SourceAmerica 
(15,600) and the National Industries for the Blind (2,675) at the 
close of fiscal year 2023. These numbers include employees working 
under service and product contracts.
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Pilot Tests at Fort Bliss and Fort Meade
    In October 2018, the Commission partnered with officials from the 
Army's Mission Installation Contracting Command (MICC) and Installation 
Management Command (IMCOM) to work on a competitive NPA selection 
process incorporating the key aspects of recommendations from 
Subcommittee Six.\6\ The parties selected the Facility Support and 
Operations Service (FSOS) contract at Fort Bliss, TX, for the first 
pilot and selected a second pilot, for similar services, at Fort Meade, 
MD, the following year. At the time, the Fort Bliss FSOS contract, 
valued at over $300 million in total contract value, was the highest 
dollar value contract in the AbilityOne Program.\7\ The Fort Meade 
requirement had a total contract value of approximately $98 million.
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    \6\ The MICC is a subordinate Command of the Army Contracting 
Command (ACC) and is responsible for the procurement of products and 
services for thirty-two Army Installations located throughout the 
Continental United States. IMCOM is a subordinate Command of the 
U.S. Army Materiel Command and is responsible for the day-to-day 
management of Army Installations around the globe. Currently, at 
least 18,000 AbilityOne workers support DoD contracts and a vast 
majority of work on contracts administered by the MICC for IMCOM 
installations.
    \7\ Report on the 2018-2019 Competition Pilot Test for 
AbilityOne Program Nonprofit Agencies Facility Support and 
Operations Services Contract Fort Bliss, Texas. AbilityOne 
Commission Report on Competition Pilot Test at Fort Bliss, Texas 
2018-2019
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    The Commission had three objectives for conducting both pilots: 
first, to test a way to include price as a factor in the NPA selection 
process; second, to determine how to integrate personnel and resources 
from the requesting Federal agency into the NPA evaluation process; and 
third, to explore ways to compete, and potentially authorize a 
different NPA to perform on an existing PL requirement.\8\ Both pilots 
were instructive in providing positive insights to the subcommittee and 
the Commission as to the last two questions. But the pilot at Fort 
Meade provided another equally valid insight to the first question, 
when the Commission was enjoined from completing the competitive pilot 
at Fort Meade due to a successful challenge at the Court of Federal 
Claims (COFC).\9\
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    \8\ ``Social impact'' was a term of art that was prevalent at 
the time, but the first attempt to operationalize that component was 
in the context of the Fort Knox pilot described below.
    \9\ Melwood Horticultural Training Center, Inc. v. United 
States, 153 Fed. Cl. 723, 737 (2021). The AbilityOne Commission 
decided to implement, through an interim policy, a pilot program to 
use competitive procedures for a base support contract at Fort 
Meade. The pilot program included price as part of the competition 
selection criteria. Melwood challenged the Commission's ability to 
undertake a pilot without having previously gone through the 
rulemaking process. The court ultimately enjoined the Commission 
from implementing this type of change to the procurement process 
through an interim policy.
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    The petitioner raised several arguments against the permissibility 
of conducting the Fort Meade pilot, but the

[[Page 20326]]

COFC focused on a narrow provision at 41 CFR part 51.2-7(a) of the 
regulatory language that signaled a preference for bilateral 
negotiations. The same regulation permitted use of other pricing 
methodologies, but COFC opined that other pricing methodologies could 
only be used ``if agreed to by the negotiating parties.'' The COFC 
further reasoned that the negotiating parties were limited to the NPA, 
the contracting activity, and the central nonprofit agency. As a result 
of this reading, the COFC found that the price component at issue in 
that case conflicted with the ``collaborative pricing process'' 
contemplated under 41 CFR part 51-2.7. The Commission posits that such 
an interpretation is not consistent with the Commission's statutory 
authority to establish the FMP, or the general thrust of the 
regulation. The JWOD Act unambiguously authorizes the Commission, not 
the negotiating parties, to establish the FMP and to revise it ``in 
accordance with changing market conditions.'' \10\
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    \10\ 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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    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 it 
is not limited to an agreement between the parties when the Commission 
utilizes other pricing methodologies to establish or change the 
FMP.\11\ In the Fourth Panel Report to Congress, the Commission 
Chairperson acknowledged the regulatory impasse created by the COFC 
decision, but explained that the Commission would be taking steps ``to 
strengthen its authority in this area.'' \12\ This rulemaking is an 
effort to carry out that pledge.
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    \11\ It should also be noted that the regulatory language 
discussed in the ruling was only added as the result of a regulatory 
change in 1999. The Commission posits that the purpose of that 
change was to signal a preference for bilateral negotiations. It was 
not intended to limit the Commission's authority to consider and use 
other pricing methodologies.
    \12\ Supra note 2 at Appendix A.
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    Despite some setbacks, the Commission was encouraged by the results 
of the pilots because each test demonstrated that including price as a 
factor, coupled with a ``customer focused'' NPA selection ethos, can 
provide promising results for the Federal customer and the Program. 
However, the Commission was also mindful of the COFC decision and the 
need to ensure that competition within the Program does not frustrate 
other modernization initiatives and the Commission's ability to 
encourage employment growth for employees who have significant 
disabilities and who are blind.\13\
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    \13\ The AbilityOne Program is an employment program, but the 
Commission does not create jobs. Jobs are created through Federal 
contracts performed by NPAs in the Program. Competition may or may 
not result in greater job growth for any individual contract, but by 
carrying out a primary objective of the Panel, it should help to 
retain existing work and make the Program a more attractive option 
for Federal customers.
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The Commission's Five-Year Strategic Plan
    The Notice of Proposed Rule Making (NPRM) explained how this 
rulemaking was also heavily informed by the Commission's Strategic Plan 
for Fiscal Year (FY) 2022-2026, issued in June 2022.\14\ The Strategic 
Plan, a policy road map for next five years, is anchored by four 
Strategic Objectives:
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    \14\ AbilityOne Strategic Plan for FY 2022-2026. 
www.abilityone.gov/commission/documents/AbilityOne%20Strategic%20Plan%20FY%202022-2026%20Final.pdf.
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    (1) Expand competitive integrated employment (CIE) for people who 
are blind or have other significant disabilities.
    (2) Identify, publicize, and support the increase of good jobs and 
optimal jobs in the AbilityOne Program.\15\
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    \15\ Id. The Commission defines a ``good job'' in the AbilityOne 
Program as having four attributes: 1. Individuals with disabilities 
are paid competitive wages and benefits; 2. The job matches the 
individual's interests and skills (``job customization''); 3. 
Individuals with disabilities are provided with opportunities for 
employment advancement comparable to those provided to individuals 
without disabilities; and 4. Individuals are covered under 
employment laws. An ``optimal job'' as one that includes the four 
attributes of a ``good job,'' but also allows AbilityOne employees 
to work side-by-side with employees without disabilities doing the 
same or similar work.
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    (3) Ensure effective governance across the AbilityOne Program.
    (4) 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.\16\ The Commission realizes that some reforms will require 
specific legislative actions to fully implement, such as potential 
changes to the seventy-five percent direct labor hour ratio 
requirement. See 41 U.S.C. 8501(6)(C) & (7)(C). Other reforms, however, 
can be made by updating existing regulations and policies. For example, 
in November 2023, the Commission finalized Commission Policy 51.400, 
which introduced the long-term objective of providing job 
individualizations, employee career plans, and career advancement 
programs.\17\ The Commission has also made numerous regulatory changes 
throughout its history, the most recent being the elimination of 14(c) 
certificates within the Program in 2022.\18\
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    \16\ Id.
    \17\ www.abilityone.gov/laws,_regulations_and_policy/documents/Commission%20Policy%2051.400%20AbilityOne%20Commission%20Compliance%20Program%20-%20Jan%201,%202024%20-%20signed%20-%20508.pdf.
    \18\ https://www.federalregister.gov/documents/2022/07/21/2022-15561/prohibition-on-the-payment-of-subminimum-wages-under-14c-certificates-as-a-qualification-for.
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Other Reasons for This Rulemaking
    Although Section 898 authorizes the Secretary of Defense to suspend 
compliance with the Program if the Commission does not substantially 
implement the Panel recommendations, that isn't the only risk the 
Program faces.\19\ Even if the DoD does not withdraw from the Program, 
it has other alternatives even for existing AbilityOne requirements. 
Increased competition can help to serve as a countermeasure to better 
protect existing PL work from other procurement actions or 
insourcing.\20\ According to a 2018 Government Accountability Office 
(GAO) study, the DoD ``budgets about $25 billion annually to operate 
its installations,'' but it has been under pressure since 1997 to 
``reduce its installation support cost.'' \21\ The GAO further noted 
that the ``DoD needed to show measurable and sustained progress in 
reducing installation support costs and achieving efficiencies in 
installation support.'' \22\ In 2013, Congress provided military 
services the authority to enter into Intergovernmental Support 
Agreements (IGSAs) with local and state governments to receive and 
provide or share installation support services.\23\ The Army, with a 
current portfolio of approximately 122 IGSAs, routinely uses IGSAs as a 
procurement tool to

[[Page 20327]]

reduce administrative burdens and achieve greater cost savings as 
compared to traditional government contracting.\24\ Although the DoD 
has placed some local policy limitations on the use of IGSAs to 
displace a contract in the AbilityOne Program,\25\ those limitations 
are not absolute.\26\
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    \19\ Supra note 1.
    \20\ See Sec.  51-6.12(d). With 90-days' notice, a Federal 
agency could elect to perform work with Government employees if it 
determines it is more cost effective to do so (or any other reason), 
rather than continue contract performance with an AbilityOne NPA.
    \21\ https://www.gao.gov/assets/gao-19-4.pdf.
    \22\ Id.
    \23\ See the National Defense Authorization Act for Fiscal Year 
2013, Public Law 112--239, Sec.  331 (2013). In the Carl Levin and 
Howard P. ``Buck'' McKeon National Defense Authorization Act for 
Fiscal Year 2015, Public Law 113--291, Sec.  351 (2014) (codified as 
amended at 10 U.S.C. 2679), Congress clarified the authority to 
enter into an IGSA, and transferred the provision from 10 U.S.C. 
2336 to 10 U.S.C. 2679.
    \24\ See https://www.army.mil/article/263529/historic_statewide_intergovernmental_support_agreement_signed.
    \25\ Panel on Department of Defense and AbilityOne Contracting 
Oversight, Accountability, and Integrity 2018 First Annual Report to 
Congress, footnote 38.
    \26\ Id.
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    For example, in 2017, the Army and the incumbent NPA were embroiled 
in a dispute over the price of the follow-on AbilityOne contract for 
installation support at Fort Polk (renamed Fort Johnson effective June 
13, 2023) in Louisiana. The Army estimated the new contract price at 
$75 million over five years, whereas the NPA's price estimate was 
approximately $115 million. After eight months of unsuccessful 
negotiations, the Army stated they were considering the conversion of 
the Fort Polk requirement to an IGSA with the City of Leesville, LA. 
Only after direct intervention by the Deputy Assistant Secretary of the 
Army for Procurement (DASA(P)), were the two sides able to agree on a 
price.\27\ A new contract was awarded on May 31, 2018, for a price of 
$75,984,926 over five years--thus averting the conversion to an IGSA. 
The Commission believes that for certain high dollar contracts it is 
far more advantageous for the Government to create a competitive 
environment where NPAs are competing against other NPAs, rather than 
risk the Federal customer converting an existing requirement within the 
Program to performance under an IGSA. Simply put, when competition 
leads to the addition of a new requirement to the Program or the 
retention of an existing requirement, it is a gain. When the lack of 
competition leads the DoD to move an existing requirement to an IGSA, 
it is a loss to the Program.
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    \27\ Id at 22-23.
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Proof of Concept: The Fort Knox Pilot
    In November 2022, using prior pilots, the Commission's Strategic 
Plan, and the COFC decision as a roadmap, the Commission authorized the 
execution of a pilot at Fort Knox that supported several objectives 
described in the Commission's 5-year strategic plan, such as creating 
good and optimal jobs while providing the ``best value'' to the Federal 
customer.\28\ To accomplish this goal, the pilot was divided into two 
distinct, but interdependent phases. Phase I began in mid-January of 
2023 with the issuance of an Opportunity Notice (ON),\29\ which fully 
explained the ground rules for participation. After responses were 
received, SourceAmerica, the responsible CNA, assessed and recommended 
two capable nonprofit agencies to the Commission for consideration as 
authorized sources. 41 CFR 51-3.2(d). Phase I ended when the 
Commission, after considering the suitability criteria at Sec.  51-2.4, 
authorized both NPAs to compete in Phase II. The decision to authorize 
the NPAs was based on both NPAs meeting or exceeding the necessary 
management capability, experience, demonstration of employment 
potential through proposed placement program participation,\30\ and 
having an effective workforce integration plan.\31\
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    \28\ The contract, covering 109,054 acres and 2,326 buildings, 
is to provide Total Facility Maintenance (TFM) across several 
functional areas, such as building and structure maintenance, snow 
and ice removal, landscaping services, utility system maintenance, 
and other maintenance.
    \29\ The ON acts as a solicitation from the CNA 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.
    \30\ Placement Program criteria include evaluation factors 
related to the NPA's ability to promote upward mobility and/or 
placement of individuals with disabilities outside the AbilityOne 
Program. Such factors include but are not limited to training, 
qualifications of the NPA's personnel supporting placements, 
placement support services, and/or leveraging referral sources to 
support placements.
    \31\ Integrated Work Environment criteria include evaluation 
factors related to how the NPA plans to achieve and maintain an 
integrated work environment.
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    On June 5, 2023, Phase II commenced. In Phase II, SourceAmerica was 
directed to select the NPA providing the best value to the Federal 
customer, after considering technical capability, past performance, and 
price. Although price was a selection factor, the Commission directed 
SourceAmerica to ensure that price did not have greater weight than the 
non-price factors in the final NPA selection decision.\32\ For the 
evaluation, the Army provided technical expertise to assist with all 
evaluation factors, and SourceAmerica made its selection on October 19, 
2023. After the NPA selection, the Commission received the pricing 
information and a recommendation from SourceAmerica for the FMP. In 
early November, the Commission established the FMP, principally relying 
on the results of the Phase II price competition to support its 
determination.\33\
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    \32\ 88 FR 17553 (2023).
    \33\ Commission Decision Document, voted and approved on May 25, 
2023. The Commission approved the following actions: (1) Approval to 
transfer the Commission's authority to perform the Fort Knox, 
Kentucky, Total Facilities Maintenance (TFM) Procurement List (PL) 
service (Procurement List #/Project #: 2004789/121674) from 
SourceAmerica to a qualified, capable nonprofit agency (NPA) at a 
Fair Market Price (FMP). (2) Authorization of Skookum and PCSI to 
serve in tandem as mandatory sources. (3) Authorize the use of a 
multi-factor process (with a price component) for final selection of 
the NPA that will perform the TFM. (4) Approve an NPA project-level 
ratio of less than 75 percent (but greater than 40 percent) for the 
5-year pilot test period. (5) Approve the use of price competition 
as the methodology for establishing the Fair Market Price (FMP)--to 
be completed in Phase II.
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    The execution and results of this test pilot illustrate one of 
several potential approaches to address the Panel objectives. The NPA 
selected for the Total Facilities Maintenance (TFM) contract will 
create nearly fifty percent more jobs for individuals who have 
significant disabilities than the predecessor contractor.\34\ The other 
NPA in the competition would have created approximately the same number 
of jobs for individuals with significant disabilities, but at a 
somewhat higher cost than the selected NPA.\35\
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    \34\ The previous requirement earmarked 34 positions for 
individuals who have significant disabilities under the total 
facilities maintenance requirement (30 were filled at the time of 
the competition). The newly selected NPA is expected to fill 45 of 
its available positions with individuals who have significant 
disabilities.
    \35\ NPA selection information on file with the Commission. The 
final rule adopts some of the lessons from the Fort Knox pilot, 
although it adds the component of assessing an NPA's capacity to 
provide training and placements at the final stage of determining 
the NPA that will receive the contract.
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    Like the previous two pilots, Fort Knox was identified and executed 
after senior leader coordination and approval from the Army and the 
AbilityOne Commission.\36\ This approach ensured excellent lines of 
communication and robust responsiveness from the early stages of 
requirement development to NPA selection and contract award. Once this 
rule is finalized, similar coordination, collaboration, and approval 
will be a critical component for implementing this rule.
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    \36\ Memorandum of Understanding between the MICC, IMCOM, 
SourceAmerica, and the Commission, executed on September 14, 2022. 
On file with the Commission.
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C. Notice of Proposed Rulemaking (NPRM)

    On March 13, 2023, the Commission issued an NPRM in the Federal 
Register.\37\ The proposed rule clarified the Commission's authority to 
consider different pricing methodologies in establishing the FMP for PL 
additions and changes to the FMP; defined the parameters for conducting 
competitive distributions among multiple qualified

[[Page 20328]]

NPAs; clarified the Commission's authority to authorize or deauthorize 
a NPA; and provided a right of first refusal of employment to the 
current employees of an incumbent NPA who are blind or have other 
significant disabilities for positions for which they are qualified.
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    \37\ 88 FR 15360 (2023).
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    The initial comment period was open for 60 days but was extended 
another 30 days for additional comments. After the comment period 
closed on June 12, 2023, the Commission had received 95 comments from 
various stakeholders and interested parties.\38\ Comments were received 
from NPAs (50), both CNAs (2), private individuals (27), disability 
rights organizations (2), NPA advocacy groups (3), and anonymous 
commenters (11). The level of support also varied, with 6 commenters 
supporting the rule unconditionally, 40 others supported the rule 
subject to certain conditions, 45 commenters opposed the rule, and 4 
comments were neutral or administerial in nature. One additional 
comment was received during the interagency review period from a 
disability rights advocacy group opposing the rule.
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    \38\ There were 100 total comments received, but 5 were 
duplicates.
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    Of the 50 responding NPAs, 16 NPAs provided a comment signaling 
complete opposition to the proposed rule. The most significant concern 
for most commenters was the proposed rule's deviation from the Panel's 
recommendations. Commenters pointed out the proposed rule's lower 
threshold to trigger competition of $10 million total contract 
value,\39\ not limiting competitions to government owned facilities/
properties, not limiting competition to once every ten years, and the 
lack of consideration of a social impact factor in the NPA selection 
decision for a competitive distribution.
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    \39\ The Panel recommended that new work to the program and re-
competition for service contracts valued at $10 million or greater 
annually and performed on Federal installations/properties would 
automatically be competed, unless the requiring activity provided a 
compelling reason why competition is unnecessary.
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    There were several commenters who also stated concerns about 
potential job losses due to competition. These commenters stated that 
if price is included in the NPA selection process, NPAs will cut costs 
at the expense of employees who are blind and have significant 
disabilities. In fact, nearly all private individuals who responded to 
the NPRM are employed by NPAs and feared that increased competition 
might cause them to lose their job. The disability rights advocacy 
group that offered a comment during the interagency review period, 
voiced a similar concern.

D. Changes From the NPRM

    Section II provides a detailed explanation of the scope of comments 
received and the changes made in response. In summary, the most 
significant changes are as follows:
     The threshold to trigger competition has been bifurcated. 
For DoD and its components, the threshold at which the Commission may 
consider a request for competition under this regulation will apply to 
projects valued at greater than $50 million. The threshold at which the 
Commission may consider a request for competition under this regulation 
by civilian agencies remains at greater than $10 million total project 
value in recognition of the lower base value of their contracts.\40\
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    \40\ The term contract is replaced with project because the 
threshold is tied to a specific requirement on the PL rather than a 
contract with several requirements or one large project under 
multiple contracts.
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     As recommended, the final rule now states that if a 
competitive distribution is approved by the Commission, the CNA shall 
not permit price to have greater weight than the non-price factors when 
making an NPA selection decision.
     The final rule does not adopt the term ``social impact,'' 
but, in response to NPA comments, it now directs the CNA to consider 
criteria or subcriteria related to training and placements, and 
employment opportunities for all competitive distribution decision 
approved in accordance with Sec.  51-3.4(d).
     The final rule requires that a competition shall not be 
approved by the Commission due to failed good faith bilateral price 
negotiations (price impasse), until the parties have exhausted all 
administrative remedies required by the Commission's pricing policies 
and procedures. The final rule also limits those impasse related 
competitions to service requirements that exceed $1 million in total 
project value.
     The final rule clarifies that all requests for competition 
must come from a Federal agency Senior Executive or Flag or General 
Officer and must be approved by the Commission. The rule also explains 
that the Commission must, at a minimum, consider the criteria under 
Sec.  51-2.4 before approving a competitive distribution.
     The final rule is reorganized, and terms are amended to 
ensure consistency throughout the rule, where appropriate.

II. Public Comments on the NPRM

    The Commission carefully considered all of the comments related to 
this rulemaking. We summarized the commenters' views and, where 
appropriate, responded to all significant issues raised by the 
commenters that were within the scope of this rule. This means that we 
did not respond to every aspect of every comment. Instead, we focused 
on the most significant comments that related to the essential thrust 
of this rule; namely, use of a price component in the NPA selection 
process and the use of price competition for establishing the FMP. We 
also did not summarize or respond to comments that were administerial 
or outside the scope of the proposed rule. An analysis of the public 
comments received and of the changes in the regulations since 
publication of the NPRM follows.

A. Withdraw the NPRM and Replace It With an Advanced Notice of Proposed 
Rulemaking (ANPRM)

    Comments: Several commenters requested that the Commission withdraw 
the NPRM and substitute it with an ANPRM and requested a public hearing 
to allow for greater dialogue, outreach, and a more detailed analysis 
on the costs, benefits, and alternatives to competition. Some who made 
similar comments to withdraw the NPRM also requested a public hearing 
to discuss the proposed rule further. Other commenters cited Executive 
Order (E.O.) 12866 which requires proactive engagement of interested or 
affected parties to inform the development of regulatory agendas and 
plans and stated that the Commission has not complied with the E.O. 
because there had not been adequate engagement with stakeholders.
    Discussion: There is no requirement for a Federal agency to issue 
an ANPRM before a NPRM, especially when, as in this case, the agency's 
decision has been informed by the four-years of work conducted by a 
Congressionally mandated Panel and a 5-year Strategic Plan that 
specifically called for these changes.\41\ The purpose of an ANPRM is 
to gauge the public's interest in a rule and to help the Federal agency 
decide if a new rule is necessary.\42\ As noted earlier, the main 
reason for this rule change was to address the basis for the COFC's 
enjoinment to the Commission's interim policies and previous efforts to 
introduce competition into the

[[Page 20329]]

Program.\43\ As such, there was no doubt that the agency needed to 
amend its regulations to carry out the Panel's recommendations and the 
guidance set forth in the Commission's 5-year Strategic Plan. 
Nevertheless, it has been the practice of this agency to consider 
stakeholders' interests and to actively engage the public whenever 
there is a significant change to the way the Commission administers the 
Program.
---------------------------------------------------------------------------

    \41\ OIRA's website states an agency uses an ANPRM only when an 
agency believes it needs to gather more information before issuing 
an NPRM.
    \42\ Id.
    \43\ Supra note 9.
---------------------------------------------------------------------------

    For this rulemaking, the use of an NPRM provided a sufficient 
avenue for comment on the proposed changes. We initially granted 60 
days to provide comment on the proposed rule. Subsequently, in response 
to requests for additional time, we provided an additional 30 days for 
public comment. Although the Commission did not hold a public hearing, 
members of the Commission staff attended conferences held by both CNAs 
to discuss the merits and challenges of introducing a price-inclusive 
competition into the Program. Additionally, the Commission routinely 
discussed this issue during public meetings and devoted the 
Commission's entire July 13, 2023, public meeting to listen to public 
concerns and support for the proposed rule. The issues raised during 
that public meeting largely mirrored comments received during the 
public comment period for the NPRM, but the engagement was useful for 
all involved. This is the type of engagement contemplated by E.O. 
12866, fulfilled through actively listening to each stakeholder and 
making decisions informed by the interests of all involved.
    Changes to the Rule: None.

B. Statutory & Rulemaking Authority

    Comments: A few commenters stated the proposed rule goes beyond the 
scope of the JWOD Act. In particular, NPAs asserted that price 
competition is a departure from how Congress intended the Program to 
operate, creates potential negative incentives that could harm the 
mission of the Program and individuals it intends to serve, and 
criticized the lack of consultation with Congress in part due to a 
perception that the Commission has offered no methodology for which 
contracts would be eligible for competition.
    Other commenters in support of the proposed rule disagreed and 
acknowledged there is nothing that prevents the AbilityOne Commission 
from approving FMPs resulting from price competition.
    Discussion: The final regulation addresses many of the concerns 
raised by commenters regarding possible adverse impacts from the 
proposed rule. In addition, in establishing the Panel, Congress gave 
DoD broad authority to suspend compliance with the Program if the 
Commission did not substantially implement the recommendations of the 
Panel. Not implementing the recommendation, and risking DoD suspension, 
would be directly inconsistent with the purpose of the JWOD Act.\44\ 
The authority to act on the Panel's recommendations, through 
regulation, has also been recognized by the COFC.\45\ The court wrote 
that ``Congress granted AbilityOne formal rulemaking authority, which 
it can and has used to establish the procurement scheme it desires.'' 
It went on to write ``[g]ranted [the Commission] must submit its rules 
to formal notice-and-comment procedures but at the end of the day, 
AbilityOne likely has the rulemaking authority to craft procurement 
procedures that include a price component.'' \46\ In issuing an NPRM, 
receiving and considering public comments, and publishing this final 
rule, the Commission has met its obligations under the statute and all 
applicable regulations.
---------------------------------------------------------------------------

    \44\ Supra note 1 at (g)(1)(A).
    \45\ See 41 U.S.C. 8503(d)(1). The JWOD Act gives the Commission 
explicit and the sole authority to ``maintain and publish'' a PL. 
The Act further states that the Commission ``may prescribe 
regulations . . . as necessary to carry out this chapter.''
    \46\ See also supra note 9 at pp. 17-18.
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    Changes to the Rule: No substantive changes.

C. Differences From 898 Panel Recommendations

a. $10 Million Total Project Value Competition Threshold
    Comments: Many commenters expressed opposition to the proposed 
rule's competition threshold of $10 million in total contract value 
instead of the Panel's recommendation of $10 million annual value. A 
few commenters noted that the Panel focused only on DoD procurements 
and that the proposed rule's lower threshold went far beyond the 
Panel's focus and recommendations. Of particular concern to many 
commenters is the increased number of eligible contracts for 
competition from 46 to 346 due to the lower threshold in the proposed 
rule. Commenters stated that participating in price competition is 
costly for NPAs and lowering the threshold exposes smaller NPAs to 
competition that may not have the ability to compete with larger NPAs. 
Commenters also argued that over time larger NPAs will dominate these 
competitive contracts, resulting in less competition among NPAs in the 
Program.
    Largely, commenters recommended adopting the Panel's competition 
threshold of $10 million annual value, because as one CNA stated, ``the 
898 Panel struck the correct compromise in providing an opportunity for 
competition on the largest contracts with the greatest opportunity for 
savings.'' Alternatively, one NPA recommended a $15 million threshold 
for existing contracts to further protect small NPAs, while another 
commenter recommended the Commission consider adding an escalation rate 
to the contract value that aligns with required minimum wage increase 
requirements for Federal contractors under the Executive Order 14026.
    The Commission also received comments in support of the proposed 
rule's $10 million total contract value threshold for competition. One 
commenter, for example pointed out that the Panel's recommended price 
competition threshold was mandatory and did not meet civilian Federal 
customer needs. The same commenter praised the Commission's decision to 
make competition discretionary as opposed to mandatory. Another 
supportive commenter believed the proposed rule would create new 
opportunities for other NPAs in the Program, thereby creating more jobs 
for individuals who are blind or have significant disabilities.
    Discussion: Although it is generally true the Panel sought to 
create a policy that targeted service requirements valued at $10 
million or greater annually, it did not foreclose the possibility of 
competing requirements under that threshold. On February 2020, 
Subcommittee Six established a policy working group to develop the 
proposed framework for executing the NPA selection process.\47\ This 
included, but was not limited to, establishing business rules for 
competition and assignment of work among AbilityOne Program NPAs. The 
policy working group compiled its final analysis and completed a draft 
policy shortly before the Panel's sunset in January 2022.\48\ The draft 
policy

[[Page 20330]]

expressly stated that competition ``automatically applied to new and 
existing Procurement List actions for services estimated to exceed $10 
million annually.'' \49\ The policy also permitted the Commission, 
through written vote, to allow competition for ``new and existing PL 
actions for services with an estimated value less than $10 million.'' 
\50\ In essence, the Panel's intention was to make competition 
mandatory for all requirements greater than $10 million annually, but 
discretionary for any service requirement below the threshold. In 
contrast, the threshold described in the NPRM is fully discretionary 
and limited to those requirements with a total contract value of $10 
million or greater, except in the case of a price impasse. Both the 
Commission's NPRM and final rule threshold are more targeted and 
ultimately less expansive than the Panel's and Subcommittee Six's 
intended competition framework, subjecting far fewer service 
requirements to potential competition.
---------------------------------------------------------------------------

    \47\ Third Annual Report to Congress, p. 33. at https://www.acq.osd.mil/asda/dpc/cp/policy/docs/a1/Third_Annual_Report_to_Congress_(Signed_by_the_OUSD_AS_February_4,_20
21).pdf Third Panel Report to Congress, p. 33. https://www.acq.osd.mil/asda/dpc/cp/policy/docs/a1/Third_Annual_Report_to_Congress_(Signed_by_the_OUSD_AS_February_4_202
1).pdf.
    \48\ See Fourth Panel Report to Congress, p. 29. The report 
refers to the draft policy that the Panel would provide to support 
the Commission's regulatory update. https://www.acq.osd.mil/asda/dpc/cp/policy/docs/a1/4%20-%20Fourth%20and%20Final%20Sec%20898%20Panel%20RTC%20(Dec%202021).pdf#page=29.
    \49\ Draft Policy 51.303 is on file with the agency and 
available on the agency`s website at FOIA Reading Room. In addition 
to the automatic competition trigger for requirements greater than 
$10 million annually, the policy permitted the Commission's 
executive director to waive a mandatory competition through a 
written request to the Commission from the CNA with concurrence from 
the Federal customer.
    \50\ Id.
---------------------------------------------------------------------------

    In setting the $10 million threshold, the Commission sought to make 
the Program more responsive to civilian Federal agencies. This decision 
was based on balancing the needs of civilian federal agencies and 
providing some measure of predictability to service-providing NPAs. For 
example, in SourceAmerica's 2022 Federal Customer Survey Final Report, 
the surveyed Federal customers reported an average 86% overall Program 
satisfaction rate for the five survey periods referenced in the 
report.\51\ Over the same period, however, approximately 40.5% of 
surveyed Federal customers reported that the Program's products and 
services were overpriced when compared to other non-AbilityOne 
contractors.\52\ Additionally, 25% of the surveyed customers reported 
it was unlikely they would pursue new contract opportunities through 
the AbilityOne Program, and 30% of the surveyed customers responded 
they were unlikely to expand current contracts with the Program.\53\ 
When asked what ways the Program could be improved, several survey 
participants mentioned pricing, noting that ``similar services with 
non-NPAs are much less expensive.'' \54\ The surveyed customers 
recommended the Commission provide for competition between NPAs, 
because the ability for Federal customers to compare market prices is 
not possible when they are compelled to negotiate price with one 
vendor.\55\ Comments, recommendations, and survey results like this 
have led the Commission to conclude that the desire for competition was 
not limited to the DoD and its instrumentalities, thereby supporting a 
need for a lower requesting threshold for civilian Federal agencies. 
Therefore, in addition to the final rule incorporating the work of the 
Panel, the Commission determined that it was prudent to retain a 
threshold low enough to be responsive to the concerns and needs of 
civilian Federal agencies, but not so low that every or most 
requirements could be subject to the type of competition described in 
this rulemaking.
---------------------------------------------------------------------------

    \51\ Source America Federal Customer Survey on file with agency. 
The report covered surveys conducted in 2014, 2016, 2018, 2020, and 
2022. The numbers used in this rule represents the average over that 
period.
    \52\ Id.
    \53\ Id.
    \54\ Id.
    \55\ Id.
---------------------------------------------------------------------------

    Changes to the Rule: The final rule bifurcates the thresholds to 
trigger competition eligibility for non-DoD Federal agencies and the 
DoD. The threshold will remain at $10 million total project value for 
the former but increased to $50 million total project value for the DoD 
and its components. The Commission also notes that the term 
``contract'' has been replaced with the word ``project,'' because the 
threshold is tied to a specific requirement identified on the PL, 
rather than the value of a contract which could contain several 
requirements under a single contract, or one large project issued under 
multiple contracts.
b. Frequency of Competition
    Comments: Commenters expressed concern over how often contracts 
would be recompeted, stating that competing contracts too often creates 
instability and administrative burden. Many commenters recommended 
adding a provision that a contract could not be recompeted for a 10-
year period. Commenters stated longer contract periods allow the NPAs 
to extend major purchases over a longer period which provides cost 
savings to the Federal customer. One commenter also stated that 
recompeting too often potentially makes it harder to partner with 
commercial partners who are attracted to long-term contracts, 
especially at a time when the Commission has expressed interest in 
increasing partnering and subcontracting opportunities to expand 
competitive employment options. Some commenters also noted that routine 
competitions provide less incentives for NPAs to make major 
investments, because the NPA may not recoup the cost of those 
investments if it loses the order after the period of performance ends.
    Discussion: After an initial competitive distribution has been 
completed, there would be little basis for the Commission to authorize 
another competition five years later, unless there are persistent 
concern(s) that had not been addressed from the last competition or new 
problems emerge. Although there is nothing in the rule to preclude a 
Federal agency from requesting competition every time a contract is up 
for renewal, it is highly unlikely that the Commission would approve 
routine requests for the same requirement. The Commission expects most 
Federal customers to be highly satisfied with their AbilityOne 
contractors and to prefer awarding sole source contracts as permitted 
by 10 U.S.C. 3204(a)(5) or 41 U.S.C. 3304(a)(5). Furthermore, 
Commission regulations already encourage agencies to ``to use the 
longest contract term available by law . . . in order to minimize the 
time and expense devoted to formation and renewal of these contracts.'' 
41 CFR 51-6.3. The Commission will continue to promote the use of long-
term agreements, especially where it provides lower administrative 
expenses for the Federal government and the service providing NPA.
    As noted previously, the Fort Knox pilot was identified and 
executed after senior leader coordination and approval from the Army 
and the AbilityOne Commission. This approach ensured excellent lines of 
communication and robust responsiveness from the early stages of 
requirement development to NPA selection and contract award. Once this 
rule is finalized, similar coordination, collaboration, and approval 
will be a critical component for implementing this rule. The Commission 
also believes that senior level coordination will help to mitigate the 
frequency of competition, by requiring request to be vetted by the 
requesting Federal agency at least one level above the user level prior 
to submission to the Commission.
    Changes to the Rule: The Commission has revised the final rule at 
Sec.  51-3.4(b) to clarify that a request for competition must come 
from members of the Senior Executive Service or Flag or General 
Officers in acquiring Federal agencies

[[Page 20331]]

and require approval from the Commission.
c. A Factor for Social Impact
    Comments: A significant number of commenters expressed concern that 
the proposed rule did not adopt the Panel's recommendation to include 
social impact as a factor for selecting an NPA. The commenters stated 
that omission of social impact in the proposed rule meant it would not 
be a factor in the competition process of selecting an NPA and that 
this would lead to a race to the lowest price at the expense of the 
mission of the Program. In large part, these commenters suggested that 
the Commission adopt the Panel's recommendation and make clear in the 
final rule that the best value trade-off includes an analysis of social 
impact in the final selection of an NPA to provide the requirement.
    Some commenters also recommended adding explicit weighting criteria 
for each factor, with a handful of commenters requesting that social 
impact be the most heavily weighted factor and price be the least 
heavily weighted factor. Other commenters recommended prioritizing all 
non-price factors above price but did not recommend that social impact 
be the most heavily weighted factor. The purpose of these approaches, 
as described by the commenters, was to protect the Program's mission of 
employing individuals who are blind or have significant disabilities 
and ensuring that actions by NPAs to provide career development for 
employees were taken into account as a positive factor.
    Additionally, multiple commenters recommended that the social 
impact include consideration of such things as maximizing job 
opportunities for individuals who are blind or have significant 
disabilities, direct labor ratios, NPA size, Quality Work Environment 
(QWE) certification, mentorship programs, teaming opportunities, and 
quality of employment. Other commenters suggested alternative criteria 
that should be considered under social impact, specifically, retention 
of employees who previously earned subminimum wage and potential 
disruption to the current workforce if there was a change in the NPA 
selected for the project. Other social impact factors recommended for 
consideration included the creation of impact-oriented safeguards to 
protect AbilityOne employees, such as no loss of seniority, no benefit 
changes, transportation to and from the job site, and preservation of 
career ladders and upward mobility.
    Discussion: The term ``social impact'' is not used in the 
AbilityOne Program. It is an umbrella term created by Subcommittee Six 
to account for various Program-specific priorities described as 
follows:

    The results of the new proposed process will maximize 
competition within the Program and ensure equitable selection and 
allocation of work. This includes maximizing job opportunities for 
persons with disabilities, including veterans with disabilities, 
through the Social Impact proposal that will identify participation 
levels for these individuals. It will also consider the size of the 
NPA, mentorship programs, teaming opportunities, contributions to 
the community, and the quality of the employment of individuals with 
disabilities.\56\
---------------------------------------------------------------------------

    \56\ Supra note 47, page 32.

    The Commission considered using the term ``social impact'' and 
creating a definition but concluded that even if it were to do so, 
social impact is a broad idea that might mean many different things to 
the different members of the Federal acquisition community as well as 
other Program stakeholders. The Federal Acquisition Regulation (FAR) 
lists guiding principles for the Federal Acquisition System (FAR 
1.102). One of these guiding principles is fulfilling public policy 
objectives. Nearly every single public policy objective is about having 
a positive social impact.
    As examples, Federal acquisition seeks a social impact in promoting 
economic resiliency through the Buy America Act, Trade Agreements Act, 
and local purchasing during major disasters under the Stafford Act. 
Another set of public policy objectives with a social impact are in the 
sustainable purchasing space. Examples include Bio-based purchasing 
through USDA and EPA's Comprehensive Procurement Guidelines. Federal 
acquisition seeks a social impact in supporting small businesses and 
underserved socio-economic communities through a host of efforts 
including set-asides for small, disadvantaged, woman-owned small 
businesses, purchases to service-disabled veteran-owned small 
businesses, etc. There are many more examples. Out of concern that it 
is too broad of an umbrella term which would never be understood, the 
Commission did not adopt or attempt to define the term social impact.
    However, a clearly stated social policy objective of the Program is 
to increase training, employment and placement opportunities for 
individuals who are blind or have other severe disabilities through the 
purchase of commodities and services from qualified nonprofit agencies 
employing persons who are blind or have other severe disabilities. 41 
CFR 51-1.1. Strategic Objective II of the Commission's Strategic Plan 
for FY 2022-2026 reinforces this policy objective by seeking an 
increase in the number of ``good jobs'' and ``optimal jobs,'' as 
defined in the Strategic Plan, throughout the Program.\57\ The 
Commission's work on updating its compliance policies, following 
issuance of the Strategic Plan, further solidified the Commission's 
commitment to enhancing the employment aspects of the Program. For 
example, in November 2023, the Commission finalized Commission Policy 
51.400, which introduced the long-term objective of providing job 
individualizations, employee career plans, and career advancement 
programs.\58\
---------------------------------------------------------------------------

    \57\ See supra note 14.
    \58\ www.abilityone.gov/laws,_regulations_and_policy/documents/Commission%20Policy%2051.400%20AbilityOne%20Commission%20Compliance%20Program%20-%20Jan%201,%202024%20-%20signed%20-%20508.pdf.
---------------------------------------------------------------------------

    Until the Commission updates its regulations with terminology 
addressing the activities described above,\59\ the Commission has 
determined that the most appropriate way to promote these types of 
activities is to use existing regulatory language regarding training 
and placements opportunities.\60\ The rule makes clear that the 
Commission will approve criteria or subcriteria in support of these 
types of opportunities.
---------------------------------------------------------------------------

    \59\ The Commission's Regulatory Agenda anticipates an update of 
regulation Sec.  51-2.4 regarding suitability criteria. Amendments 
to the regulation are likely to include enumerated workforce 
development elements or broadly require adherence to Commission 
policies on employee training and career development initiatives. 
https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202310&RIN=3037-AA21.
    \60\ The rewording emphasizes the policy goal of the Federal 
government described at Commission regulations 41 CFR 51-1.1. It 
also makes explicit reference to an NPA's responsibility to maintain 
an ongoing placement program under Commission regulation 41 CFR 51-
4.3(b)(8).
---------------------------------------------------------------------------

    The final rule also requires that the selection official consider 
criteria or subcriteria related to employment opportunities for each 
competitive distribution.\61\ This addresses the concern of many 
commenters that price competition between NPAs might reduce the number 
of individuals who are blind or have significant disabilities who are 
hired or may result in the substitution of employees whose disabilities 
are not as significant as those of other employees.
---------------------------------------------------------------------------

    \61\ Id.
---------------------------------------------------------------------------

    Finally, the rule makes clear that an NPA's capacity to create good 
and

[[Page 20332]]

optimal jobs will be taken into account early in the competition 
process as well. If the Commission decides that a competitive 
distribution is appropriate, it will authorize at least two nonprofit 
agencies to serve as mandatory sources. In determining these 
authorizations, the Commission will apply the suitability criteria 
described at Sec.  51-2.4. As the Commission made clear during the July 
2023 public meeting, the ``special considerations'' referenced in 
Commission Policy 51.301 may include an NPA's record and capability in 
providing elements of employee training and career development. Indeed, 
these factors were considered during the Fort Knox pilot project.
    Changes to the Rule: The final rule now directs the CNA to consider 
the capability of the NPA to provide training and placement, as well as 
employment opportunities, in making the selection decision. The rule 
also explains that the Commission must consider the criteria under 
Sec.  51-2.4 before approving a competitive distribution and 
authorizing NPAs for the distribution.
d. Limiting Competition To Work Performed on Federal Property
    Comments: Several commenters recommended adopting the Panel's 
recommendation that competition be limited to work performed on Federal 
property or at government owned facilities. Commenters raised the 
concern that the proposed rule did not consider the significant 
investment in infrastructure required when services are performed at an 
NPA location and are not portable or easily moved to another NPA 
location without significant unfavorable consequences.
    Discussion: The Commission is aware that many NPAs have made 
significant investments in equipment, supplies, facilities, and 
personnel to perform work at NPA-owned or NPA-leased facilities. That 
was the principal reason this rule excludes products, because of the 
significant capital investments required to start and maintain a 
production line.
    The Commission believes some of the future growth of the Program 
will come in knowledge-based jobs or in other jobs which can be 
performed remotely. Limiting this regulation to jobs which will be 
performed from a Government facility does not reflect the changing 
nature of many jobs.
    Changes to the Rule: None.

D. Concerns About Price Being a Dominant Factor in Making the NPA 
Selection Decision

    Comments: Several commenters expressed concern that there is 
nothing in the proposed rule that would prevent a requirement from 
simply going to the NPA offering the lowest price and that approach 
would lead to a ``race to the bottom.'' NPAs were concerned that if 
price becomes the deciding factor or the sole differentiator among 
technically capable bidders, the results of a competition could cause 
irreparable harm to the Program and the individuals who depend on it 
for support.
    Other commenters raised similar concerns, such as stating that the 
proposed rule promoted price competition alone without considering 
other factors such as accommodating disabilities, productivity levels, 
costs of workforce integration and empowering individuals with 
disabilities, and costs of transitioning employees with disabilities 
into the private sector.
    Commenters recommended a variety of guardrails to reduce the 
possibility of Lowest Price Technically Acceptable (LPTA) 
determinations. These recommendations included: requiring the Federal 
customer and incumbent NPA to engage in good faith bilateral 
negotiations prior to requesting price competition, not allowing re-
competition if quality of service is not a factor, incorporating a best 
value tradeoff social impact criterion, and including language in the 
proposed rule that addresses when the LPTA is acceptable, similar to 
language in the FAR.\62\
---------------------------------------------------------------------------

    \62\ See FAR 15.101-2(c).
---------------------------------------------------------------------------

    Discussion: To address the concerns raised by commenters, the 
Commission has added language in the final rule to ensure that price 
will not have greater weight than the non-price factors for competitive 
distributions. It should also be noted that limiting the weight that 
price might have in a competitive distribution is a departure from the 
Panel's recommendation. The Panel left open the possibility of price 
having equal weight than the non-price factors. However, the final rule 
departs from this recommendation, which will serve as a signal to the 
NPA community and Federal agencies that price can be ``a'' factor, but 
it must be subordinate to the non-price factors for NPA selection. 
Lastly, but most importantly, nothing in this rulemaking is intended to 
supplant the Commission's statutory authority and responsibility to set 
the FMP.\63\ For instance, if the Commission determines that the price 
resulting from a competition is dangerously low or out of synch with 
other Commission priorities, it retains the authority to adjust the 
final price or allow for additional price protections as necessary.
---------------------------------------------------------------------------

    \63\ 41 U.S.C. 8503(b).
---------------------------------------------------------------------------

    Changes to the Rule: Under Sec.  51-3.4(d), the final rule now 
states that if a competitive distribution is approved by the 
Commission, the CNA shall not permit price to have greater weight than 
the non-price factors (combined) when making an NPA selection decision.

E. Job Losses

    Comments: Several commenters were concerned about the downward 
effect of price competition on jobs in the Program, fearing individuals 
who are blind or have significant disabilities would be negatively 
impacted by the reduction of labor positions in response to their NPA 
providing competitive pricing. One of the CNAs argued that the proposed 
rule touted the benefits of competition without addressing the 
potential impact on employees with disabilities and that ``increased 
competition may force NPAs to evaluate who they can hire to support 
lower contract costs and greater efficiency.'' Several NPAs similarly 
stated that price competition incentivizes NPAs to focus on achieving 
the lowest price by hiring the most efficient workers with less 
significant disabilities, subcontracting out work, hiring on a part-
time basis rather than employing individuals with the most significant 
disabilities, or transitioning individuals who are blind or have 
significant disabilities into employment outside of the Program. A few 
commenters also expressed concern about competition causing 
consolidation of NPAs which could also negatively impact jobs for 
individuals with disabilities. Two commenters requested there be a 
post-final-rule study on the impact on job loss for individuals with 
disabilities.
    Discussion: The rule changes described in this rulemaking open the 
potential for attracting new and emerging jobs from Federal agencies. 
The changes also contain a number of protections to ensure a robust 
review before any competitions are accepted, discussed above. Finally, 
the rule now includes a requirement that the CNA consider training, 
placements, and employment opportunities in making the selection 
decision.
    Changes to the Rule: The final rule directs the CNA to consider NPA 
capability of providing training, placements, and placement, as well as 
employment opportunity, as criteria or subcriteria for each NPA 
selection decision. In addition, as discussed

[[Page 20333]]

above, the changes ensure a robust review before requests for 
competition are accepted.

F. Directed Competition Due to Price Impasse

    Comments: Several commenters disagreed with the provision allowing 
competition due to a price impasse. A primary concern voiced was that 
it gives the Federal customer little to no reason to avert impasse and 
as one NPA argued ``any contract could be approved for competition 
under the proposed rule . . . effectively opening the door for any 
government customer to prefer impasse as a means to render the contract 
eligible for competition.'' Commenters also expressed concern about the 
lack of criteria for when price competition would be directed and that 
the mere threat of competition would cause NPAs to accept prices below 
fair market value to the detriment of the NPA and employees. Many 
commenters that opposed the provision asked the Commission to remove 
the option from the proposed rule and leave the current impasse 
procedures in place.
    Conversely, two commenters in support of the provision requested 
the price impasse provision only apply when other conditions are 
satisfied such as limiting it to contracts valued at $10 million 
annually and services operating on government-owned sites/facilities.
    Discussion: During fiscal year 2023, the Commission oversaw the 
resolution of three price disputes between an NPA and a Federal agency 
using the Commission's current price impasse procedures. None of those 
impasse actions were for service contracts.\64\ This is consistent with 
the annual average of two to three price impasse decisions over the 
last five years. The Commission does not expect the number of impasses 
to increase because of this rule change, since Federal agencies will 
still be required to exhaust the Commission's existing administrative 
procedures before a competitive option is considered. Even then, a 
competitive distribution would only be directed for requirements 
exceeding $1 million in total project value and when other methods for 
resolving a price impasse have proven ineffective.
---------------------------------------------------------------------------

    \64\ There was one service requirement referred to the 
Commission for a price impasse decision, but the request for impasse 
was withdrawn before the Commission rendered a decision.
---------------------------------------------------------------------------

    Changes to the Rule: We have modified and reorganized Sec.  51-3.4. 
First, we moved the impasse provision in the final rule from paragraph 
(c) to (e). We also added language clarifying that the Commission shall 
not direct a competition because of a price impasse until bilateral 
price negotiations consistent with Sec.  51-2.7(b) are attempted in 
good faith, and that a Federal agency may not request competition until 
the parties have exhausted all administrative remedies required by the 
Commission's pricing policies and procedures. Lastly, we added language 
to the final rule that limits those impasse related competitions to 
service requirements that exceed $1 million in total project value.

G. Competition Will Drive Up NPA Costs

    Comments: Several commenters expressed concern that the proposed 
rule did not include an adequate cost benefit analysis to the NPA 
community. Commenters largely argued that the proposed rule 
underestimated the costs to the NPA network to prepare bids, the cost 
to the Program for competition and re-competition, and the costs of 
stranded assets and trying to recapture those costs over a 5-year 
period. They further argued that the money to prepare the bids and 
proposals to compete would take funds away from NPAs spending to 
support their social mission.
    Commenters argued the proposed rule did not adequately consider the 
impact and interaction with other simultaneous changes in the Program's 
policies and the new requirements upon NPAs that may impose additional 
costs. These commenters expressed concern that the proposed rule did 
not address the impact on an incumbent NPA, particularly when the NPA 
loses a contract that makes up a significant portion of the NPA's total 
revenue and the impact on subcontracting NPAs if the incumbent loses 
the contract.
    A few commenters recommended the Commission evaluate using the 
Program Fee collected by the CNAs to mitigate the costs for the NPAs, 
with one commenter specifically recommending that the responsible CNA 
share in the increased cost burden by modifying the fees collected when 
competition occurs to help mitigate costs, while another commenter 
recommended eliminating the CNA Program Fee after the fifth year of a 
service contract on contracts valued at more than $10 million.
    Discussion: The cost to prepare a response to an Opportunity Notice 
(proposal) may not be an insignificant matter for a competitive 
distribution. However, the Commission has, on balance, determined that 
any additional costs associated with competition are offset by the 
potential cost savings benefit Federal Government and the ability to 
attract new work performed by employees who are blind or have 
significant disabilities and retain existing requirements in the 
Program.
    If an incumbent NPA is displaced by a competitive distribution, 
such displacement would result in a net loss to the outgoing NPA, but 
not to the Program. In addition, as noted throughout, Federal agencies 
may request a competitive distribution, but it will ultimately be up to 
the Commission to decide whether competition will occur. Commission 
discretion coupled with the relative infrequency of competitions, 
should result in an overall net gain for the Program and the ordering 
agency. Simply put, competitions will not be approved simply for the 
sake of competing, but when the overall benefits of competing 
reasonably outweigh other options.
    Lastly, the Commission will continue to study the results of 
previous and future pilots, to best gauge how to offset unnecessary 
cost burdens associated with competition. However, comments related to 
mitigating cost through changes in CNA Program Fees is beyond the scope 
of this rulemaking.
    With regard to the impact and interaction between this rule and 
other simultaneous changes in the Program's policies, the final rule 
requires the CNA to consider the NPA's activities in making some of 
these changes.
    Changes to the Rule: The Commission has revised the final rule 
language at Sec.  51-3.4(d) to limit frequency of competition through 
an approval process and inclusion of NPA capability regarding training 
and placements, as well as employment opportunities.

H. Criticisms of Pilots & Cost-Savings Projections

    Comments: Several commenters claimed that the cost savings achieved 
by the pilots were exaggerated, costs to workers were ignored, and the 
results of two pilots were not sufficient information on which to base 
long-term changes to the Program. These commenters argued that cost 
savings and results did not capture or include the effect competition 
had on the incumbent NPA's retention of jobs or availability of 
training. One commenter noted that the pilot at Fort Bliss cost 60 jobs 
for people with significant disabilities and the curtailment of social 
impact support services and other programs designed to benefit the 
workforce.
    Additionally, a few commenters contended that the discussion of the 
pilot savings was misleading and that the existing performance work 
statements (PWSs) and contractual

[[Page 20334]]

vehicles were significantly different from the original PWS and 
contracts issued in the competition. Commenters claimed these scope 
reductions and other substantial changes lowered the price regardless 
of price competition. Other commenters argued the blocked Fort Meade 
pilot resulted in bilateral negotiations which saved the Federal 
customer more money than the projected pilot savings.
    Discussion: Like any complex Government requirement in which there 
are almost always changes from one year to the next, we agree that 
there were changes made to the PWSs for the pilot test requirements. 
Such changes are especially likely when the Government restructures a 
follow-on contract from the prior effort. Some commenters have asserted 
that changes to the requirement, rather than the impact of a price-
inclusive NPA selection, are the reason for the cost savings from the 
pilots described in the NPRM. We disagree with this characterization. 
The Commission believes the best measure for the savings achieved with 
the pilots is seen when the price of the successful (or would be 
successful) NPA is compared to the Independent Government Cost Estimate 
(IGCE) and the proposed prices of the other NPAs involved in the 
competition.\65\ When compared to the IGCE, the cost savings for Fort 
Bliss were approximately 12.7 percent. The NPRM stated that the cost 
savings were 12 percent. For Fort Meade, the savings were 14 percent 
when compared to the IGCE. The NPRM erroneously stated the cost savings 
were 17 percent, but the NPRM correctly stated the applicable totals; 
namely, $19.6 million estimated annual contract value compared to the 
$16.8 million annual contract value offered by NPA 4 (14 percent).
---------------------------------------------------------------------------

    \65\ One commenter noted that the new PWS for the Fort Bliss 
FSOS eliminated two requirements that were required under the 
predecessor effort (i.e., service order desk and reduced reporting 
requirements). These requirements were not priced into the IGCE, 
because the IGCE was based off of the revised PWS, not the incumbent 
contract.
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    Under an IGSA, the DoD already has authority to use an alternative 
to the AbilityOne Program. Ensuring the DoD has a means to give it 
confidence that its use of the AbilityOne Program will result in good 
service at a fair market price is critical to ensuring the DoD's future 
use of the Program. The true benefit of the competition process, 
regardless of cost savings, was the requirement remained with 
AbilityOne.
    Another point raised by some commenters was the claim that the 
price-inclusive competition at Fort Bliss caused 60 workers with 
significant disabilities to lose employment. The Commission rejects 
this assertion. First, the same commenter noted that the cost savings 
at Fort Bliss were the result of reductions in the scope of the 
requirement. As noted above, every contract undergoes changes in scope 
from one contract period of performance to the next. Sometimes the 
scope of work increases, and the contractor will need to employ a 
larger workforce to accomplish the mission. On other occasions, the 
scope is reduced, necessitating a reduction in the number of workers 
performing on the contract. In any event, if the loss in jobs was the 
result of a reduction in scope (i.e., less work) the loss in jobs 
cannot be attributed to the competition. In fact, another commenter 
noted that it was able to achieve greater cost savings for the Federal 
agency through bilateral negotiations, but the commenter did not 
indicate that those cost savings adversely impacted AbilityOne 
employees.
    Second, the Fort Bliss competitive pilot concluded in 2019.\66\ 
Since that time, the entire nation experienced one of the most life-
altering events in the history of the world--the COVID-19 pandemic. The 
pandemic not only caused a reduction in certain service requirements 
across the Federal Government, but many employees, those with and 
without disabilities, were fearful about returning to work. The 
pandemic caused unprecedented job losses across the country and 
employers in the AbilityOne Program and throughout the nation have 
struggled to bring employment levels back up to pre-pandemic levels. As 
such, it does not follow that every worker that is no longer working at 
Fort Bliss (or elsewhere) is not working because of the competition 
pilot in 2019.\67\ There are numerous reasons impacting employee 
participation in the workforce, and employees in the AbilityOne Program 
are no exception.\68\ In fact, the Commission authorized the selected 
NPA for the Fort Knox pilot to operate at a lower project level ratio 
not only to encourage the creation of integrated work environments, but 
to also address the challenges NPAs are experiencing in recruiting 
qualified personnel with disabilities in the current job market.\69\
---------------------------------------------------------------------------

    \66\ Report on the 2018-2019 Competition Pilot Test for 
AbilityOne Program Nonprofit Agencies Facility Support and 
Operations Services Contract Fort Bliss, Texas. AbilityOne 
Commission Report on Competition Pilot Test at Fort Bliss, Texas 
2018-2019.
    \67\ See U.S. Bureau of Labor Statistics article at https://www.bls.gov/opub/mlr/2021/article/covid-19-ends-longest-employment-expansion-in-ces-history.htm. The article states that ``[a]ccording 
to data from the U.S. Bureau of Labor Statistics (BLS) Current 
Employment Statistics (CES) survey, nonfarm payroll employment in 
the United States declined by 9.4 million in 2020, the largest 
calendar-year decline in the history of the CES employment series.''
    \68\ See U.S. Department of Commerce report at https://www.uschamber.com/workforce/understanding-americas-labor-shortage. 
The report states, ``[r]ight now, the labor force participation rate 
is 62.7%, down from 63.3% in February 2020. There's not just one 
reason that workers are sitting out, but several factors have come 
together to cause the ongoing shortage.''
    \69\ See Id. The report notes that ``[r]ight now, the latest 
data shows that we have 9.5 million job openings in the U.S., but 
only 6.5 million unemployed workers.''
---------------------------------------------------------------------------

    Lastly, although it is permissible to use profits from an 
AbilityOne contract to finance social endeavors to support employees 
who are blind or have significant disabilities, it is generally not 
permissible to treat such costs as directly chargeable to the 
Government. With that said, the Commission does not dictate to an NPA 
how it should use its net proceeds. However, an NPA's decision to 
discontinue or reduce workforce development activities for workers who 
are blind or have significant disabilities will have a detrimental 
effect on its ability to compete for AbilityOne work in the future.
    Changes to the Rule: None.

I. Right of First Refusal

    Comments: A few commenters commended the Commission for protecting 
the jobs of employees who are blind or have significant disabilities by 
including a right of first refusal. However, other commenters raised 
concerns that this provision was not sufficient to protect employees. 
Commenters argued that even with this provision, there is concern that 
employees will lose their jobs due to pressure to reduce operating 
costs. Additional concerns were raised such as the same vocational 
supports the employee received not being available from the successful 
contractor, the disruptive nature of changing employers for some 
employees, and the NPA not having the primary opportunity to retain the 
employee.
    These commenters asked that the rule include how these individuals 
will be supported, as well as specifications and funding for 
appropriate assistance and training to help displaced individuals with 
disabilities find new employment opportunities. Commenters also made 
recommendations that included using Executive Order 14055 
Nondisplacement of Qualified Workers Under Service Contracts as a guide 
and revising the proposed rule to include

[[Page 20335]]

specifications and funding for the provision of appropriate assistance 
and training to help displaced individuals with disabilities find new 
employment opportunities. One commenter suggested expansion of the 
right of first refusal provision to all projects on the PL regardless 
of project type. In contrast, another commenter recommended applying 
proposed Sec.  51-5.1(f) to only service contracts, while another 
commenter recommended including a requirement that the employee only 
have the right of refusal if the employee decided to move to the new 
NPA and/or the losing NPA does not have an equal or better opportunity 
for continued employment for that individual.
    Discussion: The right of first refusal is not limited to those 
authorizations where the change in NPA is the result of a competitive 
distribution. Any instance where an NPA is replaced by another NPA 
would trigger a participating employee's right of first refusal (for 
products or services). Although providing employee accommodations and 
supports are beyond the scope of this rule, there are other Commission 
policies and procedures aimed to ensure that there is standardized 
level of support NPAs are expected to provide to their AbilityOne 
workforce. This means that once a new NPA assumes responsibility for 
the existing workforce of an AbilityOne requirement it should be just 
as conscientious in supporting its inherited workforce as the 
incumbent. However, the Commission does recognize that there may be 
some instances where some NPAs are better at providing specific types 
of support to a given workforce than another. There is nothing in this 
rule that would preclude an incumbent NPA from offering an individual 
another job to retain his or services with its NPA. However, the right 
of first refusal is an employee's right that they may choose to 
exercise if they do not choose to seek other opportunities elsewhere.
    Lastly, this regulatory change is designed to work in concert with 
Executive Order 14055 or any other Executive Order or rule aimed at 
protecting an incumbent workforce. The significance of this rule is 
that it directs NPAs to prioritize incumbent workers who are blind or 
have significant disabilities over all others when the work is being 
performed under a PL requirement. Although the potential funding needs 
of individual employees are beyond the scope of this rulemaking, the 
Commission will continue to collect and review data to determine if 
there is an unmet workforce need that might require additional funding 
to rectify.
    Changes to the Rule: None.

J. Strain on Commission and CNA Resources

    Comments: Several commenters expressed concern that the Commission 
and CNAs do not have the resources or the staff to handle the potential 
volume of competitions with a lower threshold and re-competitions due 
to the price impasse provision. Commenters also argued that the 
proposed rule lacked sufficient guardrails to limit the number of 
competitions to protect Commission and CNA resources. One commenter 
argued that the Commission and CNA do not have the expertise to conduct 
price competitions. This commenter recommended the procuring Federal 
agencies should be delegated authority to conduct the price 
competition, like the Small Business Act (SBA) competitive 8(a) Program 
at FAR 19.800, and that the Commission or CNAs should only provide the 
``pool'' of qualified NPA candidates. One commenter recommended 
identifying and approving new distributions at least 24 months out so 
that the Commission, CNAs, and NPAs would have enough lead time to plan 
and execute.
    Another commenter argued that while the NPRM stated that price 
competition would only be utilized in complex projects or cases that 
had unique requirements, the history of the pilot projects suggests 
that price competition is not intended for a select few items on the PL 
and that price competition is likely to be broadly applied and 
overwhelm Commission resources.
    Discussion: Approving and managing competitive distributions, 
especially for existing requirements, may increase the workload for CNA 
and Commission staff. This means that the process for implementing 
changes will need to be done in a deliberate manner from initial 
approval to execution. The Commission currently has an existing 
framework for identifying and granting approval for complex projects. 
Complex projects must generally be identified and approved 24 months 
before project execution. A similar approach could be used for 
identifying and approving candidates for competition.
    It is true that the Fort Bliss and Fort Meade pilots created 
additional workload for the Commission staff. The Fort Knox pilot was 
significantly less burdensome for Commission staff, but in turn 
required more work from the CNAs and the Federal customer in terms of 
overall management and evaluative support. Both CNAs have indicated 
that this additional workload would not come without cost in terms of 
time and other resources. The Commission recognizes planning will be 
important, as well as deliberate coordination with CNAs and Federal 
agencies desirous of pursuing a price-inclusive competitive option. The 
Federal customer provided expertise in pricing and technical support 
for all three pilots. When the final rule is implemented, the Federal 
customer will be expected to provide similar support. Lastly, the 
Commission believes the fact that approval of a competitive 
distribution is discretionary will allow the Commission to manage the 
workload of the number of requests approved on an annual basis.
    Changes to the Rule: The Commission revised Sec.  51-3.4(b) to 
clarify that requests for competition must come from members of the 
Senior Executive Service or Flag or General Officers in acquiring 
Federal agencies and that the Commission determines whether to approve 
the request. Availability of resources to conduct the competition is 
appropriately part of the decision process.

K. Alternative Methods to Price Competition

    Comments: Several commenters recommended the Commission consider 
alternative methods to price competition to address the Federal 
customers' needs.
    These same commenters provided the following alternatives to 
competition: analysis of supply schedules, approved indirect rate or a 
safe harbor based on the audit with a default rate, pricing 
methodologies that account for accommodations, use of FAR 15.404-
1(b)(2) which includes guidance on factors to consider in determining 
``fair and reasonable'' price outside of competition and which lists 
price analysis techniques, and use of an AbilityOne Supply Schedule. 
Additional recommendations included modernizing the Commission's and 
CNA's pricing methods and processes, training NPAs and contracting 
officers in best practices for bilateral negotiations and using the 
Contractor Performance Assessment Reporting System (CPARS) to improve 
contractor performance. One commenter noted that all agencies are 
exempt from the use of CPARS except DoD and suggested this exemption 
should be removed and thoroughly explored before engaging in re-
competition.
    Alternatively, another commenter suggested, rather than using price 
competition to establish the FMP, the Commission should improve the 
price impasse process. In addition to similar recommendations as above, 
the

[[Page 20336]]

commenter recommended strict time limits to prevent years-long impasses 
and a single appeal process where the Commission decides the price. The 
NPA would then accept the price or pass on the opportunity, and a 
competitive process that excludes price competition between NPAs would 
occur to replace the NPA. Another commenter stated that if the 
Commission's concerns about price relate to overhead and general and 
administrative (G&A) rates, then mechanisms already existed to control 
these concerns such as adding audited/accepted/certified indirect 
rates.
    In contrast, one NPA proposed a procedure to address price or 
performance concerns not in lieu of competition, but as a prerequisite 
before the Commission would authorize a re-competition. This 
recommended process would require the contracting officer to submit a 
formal request to the Commission for a review at the mid-point of the 
contract period and the Federal customer would either document specific 
shortcomings for performance-based concerns or provide an IGCE or other 
price analysis for price-based concerns. The Commission would then 
authorize the CNA to conduct an independent pricing analysis or best 
practices assessment and conduct sessions with the Federal customer and 
NPA to address concerns with the NPA, submitting a plan to address 
these concerns. Only then would the Commission have the option to 
authorize a re-competition.
    Discussion: The inclusion of price competition at Sec.  51-2.7 as a 
tool for establishing the fair market price is just one option of the 
numerous options already available to the Commission. In fact, the most 
significant change in this rulemaking is to clarify the pricing tools 
available to the Commission. The Commission's current procedures 
encourage bilateral price negotiations between the NPA and contracting 
agency to establish price reasonableness. Currently, the Commission 
relies almost exclusively on these negotiations. The existing 
regulation also stated that other methodologies can be used, ``if 
agreed to by the negotiating parties.'' In interpreting this provision, 
the COFC found that, absent a change in the regulation, the Commission 
cannot consider other methodologies unless the NPA and contracting 
activity also agree.\70\ The changes to Sec.  51-2.7 eliminate this 
ambiguity and clarify the statutory authority of the Commission. The 
larger point here is that the changes proposed in this rulemaking 
provide the Commission with the flexibility to use price competition, 
in concert with other methodologies, for distribution decisions covered 
under this section.
---------------------------------------------------------------------------

    \70\ Supra note 9.
---------------------------------------------------------------------------

    Changes to the Rule: None.

L. Fair and Equitable

    Comments: A small number of commenters also took issue with the 
removal of the phrase ``fair and equitable'' from Sec.  51.3-4 in the 
proposed rule, believing that the removal meant prioritizing the needs 
of the requesting Federal agency would come at the expense of the NPA's 
equity interest.
    Discussion: In most instances, only one NPA will be authorized to 
provide a good or service, based on the Commission's public policy 
objectives at the time a requirement is added to the PL. When a 
competition is requested, the CNA will still be expected to make 
recommendation decisions in a manner that is ``fair and equitable'' to 
the NPAs responding to the Opportunity Notice. For instance, there may 
be times when it might be advantageous to limit an Opportunity Notice 
to NPAs of a specific size, geographical area, or other special 
considerations approved by the Commission. Once a recommendation is 
made, the Commission will also consider the equity interest of each NPA 
when making an authorization decision. Again, in most instances the 
Commission will only be authorizing a single NPA to serve as a 
mandatory source. The change in language at Sec.  51-3.4 was only meant 
to distinguish how CNAs will distribute orders when more than one NPA 
is authorized. However, for clarity, the Commission is adopting this 
comment and retaining the ``fair and equitable'' language from the 
existing Sec.  51-3.4 into Sec.  51-3.4(a) of the final rule.
    Changes to the Rule: The Commission has moved ``fair and 
equitable'' language from the existing Sec.  51-3.4 into Sec.  51-
3.4(a) of the final rule and makes clear that the distribution will 
also provide the best value for the requiring Federal agency and for 
the mission of the Program.

M. Deauthorization of an NPA

    Comments: Some commenters took issue with the change in Sec.  51-
5.2 that clarified the Commission's authority to authorize and 
deauthorize mandatory sources.
    Discussion: Only the Commission can authorize an NPA, and once an 
NPA is authorized, it naturally stands that the Commission has the 
authority to deauthorize an NPA if it has a legitimate basis for doing 
so. For example, this may occur if an NPA fails to maintain 
qualifications, no longer desires or is no longer capable of providing 
products or services to the Government, or is otherwise not performing 
up to the standards of the Commission or the Federal customer.
    Changes to the Rule: None.

Regulatory Procedures

Executive Orders 12866 (Regulatory Planning and Review) and 13563 
(Improving Regulation and Regulatory Review)

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives. E.O. 13563 
directs agencies to propose or adopt a regulation only upon a reasoned 
determination that its benefits justify its costs; tailor the 
regulation to impose the least burden on society, consistent with 
achieving the regulatory objectives; and in choosing among alternative 
regulatory approaches, select those approaches that maximize net 
benefits (including potential economic, environmental, public health 
and safety, and other advantages). E.O. 13563 emphasizes the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and promoting flexibility. E.O. 13563 further 
recognizes that some benefits are difficult to quantify and provided 
that, where appropriate and permitted by law, agencies may consider and 
discuss qualitative values that are difficult or impossible to 
quantify, including equity, human dignity, fairness, and distributive 
impacts. The Office of Information and Regulatory Affairs in the Office 
of Management and Budget has determined that this is a significant 
regulatory action and, therefore, was subject to review under Section 
6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30, 
1993.

Impact of Final Rule

    In the NPRM, the Commission acknowledged that the proposed rule 
changes were applicable to all NPAs and estimated the proposed rule 
change would have the most impact on 27 percent of NPAs, approximately 
122 out of 450 NPAs. However, the final rule bifurcates the price 
competition threshold from $10 million in total project value for all 
service requirements on the PL to $50 million for DoD agencies and $10 
million for non-DoD agencies. This change from the NPRM significantly 
reduces the final rule's impact and scope by over 50 percent, from 
approximately 346 to 155 PL service requirements. Additionally, the 
final rule's bifurcated price

[[Page 20337]]

competition threshold substantially reduces the percentage of NPAs 
potentially impacted to 15 percent, approximately 63 NPAs.\71\
---------------------------------------------------------------------------

    \71\ This calculation is based on a total of 413 NPAs in the 
program as of September 30, 2023.
---------------------------------------------------------------------------

    As discussed in the NPRM, an average of one-fifth of all applicable 
AbilityOne service contracts would be eligible for price competition in 
any given year. With the changes to the total annual contract value 
threshold, a maximum of approximately 31 contracts per year would be 
eligible for competitive distribution on an annualized basis. The exact 
number of price competitions will still be based on how many requests 
for price competition the Commission receives and ultimately approves. 
In SourceAmerica's 2022 Federal Customer Survey Final Report, the 
surveyed Federal customers reported satisfaction ranged from on average 
approximately 84% to 89% of Federal customers who responded to the 
survey were overall satisfied with their AbilityOne contractor.\72\ 
Therefore, based on this data, of the 155 PL service requirements 
eligible for competition under this rule, the Commission generally 
anticipates that 11%-16% or 17-25 requirements may yield a request for 
competition over a 5-year period. As a result, the Commission estimates 
that the number of requests for price-inclusive competitions will 
likely fall somewhere between 3 to 5 per year in the first several 
years of implementation. This number could increase with the inclusion 
of the price impasse trigger. But as previously noted, the Commission 
receives an average of 2 price impasse requests on an annual basis, and 
a vast majority of those are for products which are outside the scope 
of this regulatory change.
---------------------------------------------------------------------------

    \72\ Supra note 51.
---------------------------------------------------------------------------

    The Commission believes the benefits of introducing a price 
component into the competitive distribution process includes increasing 
transparency in the NPA selection process, engaging the Federal 
customer in the process, and incentivizing better NPA performance and 
more competitive pricing. Most PL service requirements above the $10 
million threshold are DoD contracts. Therefore, as discussed above, in 
response to public comments regarding the number of service 
requirements subject to potential price competition, the potential 
negative impact on smaller NPAs, and requests to align the rule's 
threshold to the Panel recommendation, the Commission raised the final 
rule's threshold to $50 million total project value for DoD agencies. 
However, the final rule preserves a lower threshold of $10 million 
total project value for non-DoD agencies and allows the Commission to 
remain responsive to the needs of civilian Federal agencies and the 
Commission's Strategic Plan.

Costs of the Final Rule

    As discussed earlier in response to comments, competition is not 
mandatory, and the Commission's determination to approve a competition 
will be done on a case-by-case and informed basis. For both new and 
existing PL additions, if the Commission ultimately approves a request 
for a competitive distribution, authorized NPAs will incur the cost of 
preparing a competitive proposal. An incumbent NPA may also incur 
transition costs if it loses a competitive distribution, however, 
transition costs may be reimbursable under the existing Federal 
contract. Additionally, the competitive distribution process means an 
incumbent NPA is at risk of losing the revenue from a service 
requirement. However, the Commission notes that while the lost revenue 
is a cost for the incumbent NPA, the revenue would remain within the 
Program because the service requirement would go to another authorized 
NPA. For new PL additions, the cost of preparing a proposal is 
significantly outweighed by the new revenue stream into the Program.
    SourceAmerica initially reported it would need 14 full-time 
equivalents (FTEs) in additional staff or $1.5 million annually to 
handle 336 potential price-inclusive competitive allocations. However, 
under the final rule's bifurcated threshold, CNAs would incur costs 
based on the approximately 155 service requirements that are eligible 
for a price competitive distribution, 150 of which fall under 
SourceAmerica. Based on this new reduced scope, if the Commission 
approved every request for a competitive distribution, SourceAmerica 
would need six full-time equivalents FTEs in additional staff or 
$670,000. But as noted above, approval of all 150 possible competitions 
over the 5-year period is highly improbable, based on available 
customer satisfaction data and the fact that Commission approval lies 
at the heart of every request. Additionally, even when a competition is 
approved, the CNAs' costs would likely be offset by the Federal 
customer's involvement and support. For instance, in support of each 
pilot, the requesting agency provided several FTEs of assistance in the 
form of price analyst, technical evaluators, and other subject matter 
experts.
    Once the final rule is implemented, the Commission expects that if 
the Federal customer requests a competitive distribution, it will 
provide personnel to assist with the evaluation of technical 
capability, past performance, and price analysis. The cost to the 
Federal customer will ultimately vary based on how much support it 
provides to the Commission and applicable CNA. The Federal customer may 
also incur costs due to the disruption in contract performance or 
administrative costs associated with replacing an incumbent contractor, 
however, that is a calculation the Federal customer must make prior to 
requesting a competitive distribution.
    The Commission initially estimated that it will need an additional 
budget of $1.75 million annually to support a competitive 
allocation.\73\ Like the CNA estimate, these numbers were based on the 
worst-case scenario of 336 possible competitions. However, due to the 
reduced scope and the expectation that the Commission would likely 
process no more than 3 to 5 request per year, the cost to the agency 
would be no greater than a fourth of the original estimate or 3 to 4 
additional FTEs (i.e., a competition lead, a contract specialist, and 
up to two additional price analysts).
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    \73\ See The Third Annual 898 Report to Congress, dated January 
2021 at p. 33. This is based on analysis from the first two pilot 
tests conducted by the Commission, which called for hiring an 
additional 8-12 FTEs, benefits, equipment, and IT support.
---------------------------------------------------------------------------

    As discussed throughout this rulemaking, subsection (f)(2) of the 
Act directed the Commission to make a good faith effort to implement 
the Panel's recommendations. If the Commission unduly delayed or 
ignored the Panel's recommendations, in subsection (g)(1)(A) of the 
Act, the Secretary of Defense was given the authority to ``suspend 
compliance with the requirement to procure a product or service in 
Section 8504 of title 41, United States Code.'' Currently, DoD's 
spending represents over half of the Program's $4 billion portfolio, 
which creates tens of thousands of jobs for individuals with 
significant disabilities or who are blind. Introducing competition 
prevents DoD's withdrawal from, or reduced participation in, the 
Program, thereby protecting the jobs and objectives of the Program.
    The Commission believes that the potential costs from 
implementation of the final rule are greatly outweighed by the benefits 
to the NPA community, the CNAs, and the Federal customer. As noted 
elsewhere, making the Program responsive to the Panel's recommendations 
will help to secure the jobs the Program currently creates and increase 
the agency's prospects of adding more opportunities.

[[Page 20338]]

Regulatory Flexibility Analysis

    Under the Regulatory Flexibility Act (RFA),\74\ an agency can 
certify a rule if the rulemaking does not have a significant economic 
impact on a substantial number of small entities. This final rule only 
imposes a burden on NPAs with contracts that fall within the bifurcated 
threshold of $50 million in total project value for DoD agencies and 
$10 million in total project value for non-DoD agencies. In total, 
approximately 63 NPAs out of 413 participating NPAs have applicable 
contracts that may be impacted by this rule. This number, however, is 
only applicable if every possible contract is competed and, as 
discussed above, competition is not mandatory and is at the discretion 
of the Commission. Moreover, this rule only establishes business rules 
to improve the AbilityOne Program processes and does not require any 
new reporting, recordkeeping, or other compliance requirements for 
small entities.
---------------------------------------------------------------------------

    \74\ 5 U.S.C. 605.
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    Accordingly, the Commission certifies this rule will not have a 
significant economic impact on a substantial number of small entities, 
and, therefore, no final regulatory flexibility analysis has been 
prepared.

Unfunded Mandate Reform

    This final 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.

Paperwork Reduction Act

    This final rule does not contain an information collection 
requirement subject to the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501 et seq.). Accordingly, it does not impose any burdens under the 
Paperwork Reduction Act and does not require further OMB approval.

Small Business Regulatory Enforcement Fairness Act of 1996

    This final rule would not constitute a major rule as defined by 
section 804 of the Small Business Regulatory Enforcement Fairness Act 
of 1996. This final 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.
    Accessible Format: On request to the program contact person listed 
under FOR FURTHER INFORMATION CONTACT, individuals with disabilities 
can obtain this document and a copy of the application package in an 
accessible format. The Commission will provide the requestor with an 
accessible format that may include Rich Text Format (RTF) or text 
format (txt), a thumb drive, an MP3 file, braille, large print, 
audiotape, or compact disc, or other accessible format.
    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. At this site you can view this 
document, as well as all other documents of this Commission published 
in the Federal Register, in text or PDF. To use PDF you must have Adobe 
Acrobat Reader, which is available at no cost to the user at the site.
    You may also access documents of the Department published in the 
Federal Register by using the article search feature at: 
www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.

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.

    The Executive Director of the Commission, Kimberly M. Zeich, having 
reviewed and approved this document, is delegating the authority to 
electronically sign this document to Michael R. Jurkowski, for purposes 
of publication in the Federal Register.

Michael R. Jurkowski,
Director, Business Operations.

    For reasons set forth in the preamble, the Commission amends 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. 8501-8506.


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, where 
applicable, 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, where 
applicable, bilateral negotiations between contracting activities and 
authorized 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 price 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. 8501-8506.


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 in a manner that is fair and

[[Page 20339]]

equitable to each authorized nonprofit agency, and that provides the 
best value for the requiring Federal agency and best meets the mission 
of the Program.
    (b) For new and existing Procurement List services that are 
estimated to exceed $10 million in total project value for a Federal 
agency, other than the Department of Defense and its components, or $50 
million in total project value for the Department of Defense and its 
components, inclusive of the base period and all option periods, a 
Federal agency may, at the Senior Executive Service or Flag or General 
Officer level, request that the procurement be distributed to an 
authorized nonprofit agency on a competitive basis among all authorized 
nonprofit agencies. In addition to the requirements described at part 
51-6 of this chapter, the requesting Federal agency shall advise the 
Committee of the rationale for competition, whether it will provide 
resources to support the competitive process, the independent 
government cost estimate of the contract being competed or of the 
resources to support the competitive process, any information 
pertaining to performance, and such other information as is requested 
by the Committee. The Committee will answer a request within 60 days of 
receipt unless additional information is needed.
    (c) If the Committee accepts a request from a Federal agency for 
competitive distribution, the action will be forwarded to the 
responsible central nonprofit agency for assessment in accordance with 
Sec.  51-3.2(b) through (d). Upon receipt of a recommendation from the 
central nonprofit agency, the Committee will determine whether a 
competitive distribution is appropriate after considering the 
suitability criteria described at Sec.  51-2.4 of this chapter and 
applicable Committee policies and procedures. If the Committee decides 
that a competitive distribution is appropriate and authorizes at least 
two nonprofit agencies to serve as mandatory sources, a competitive 
distribution may commence upon notification in the Federal Register.
    (d) After notification, the responsible central nonprofit agency 
shall select the authorized nonprofit agency that it determines 
provides the best value for the ordering Federal agency and meets the 
mission of the Program in accordance with the Committee's policies and 
procedures. The selection decision shall be based on criteria approved 
by the Committee, such as technical capability, past performance, and 
price. The selection decision may also consider any other criteria or 
subcriteria specific to the service requirement. In addition, each 
selection decision shall consider criteria or subcriteria that address 
the nonprofit agency's capability to provide opportunities related to 
training and placements, as well as employment, for individuals who are 
blind or have significant disabilities. Criteria may be weighted, but 
price shall not have greater weight than the non-price factors when 
combined, except for competitive distributions directed by the 
Committee in accordance with paragraph (e) of this section.
    (e) The Committee may also direct a competitive distribution in 
accordance with paragraph (c) of this section for any service 
requirement already on the Procurement List that exceeds a total 
project value of $1 million, if bilateral negotiations described at 
Sec.  51-2.7(b) of this chapter are attempted in good faith but fail to 
produce a recommendation to the Committee for revising the fair market 
price. A Federal agency may not request, and the Committee shall not 
direct a competitive distribution based solely on failed price 
negotiations, until the parties have exhausted all available remedies 
established within the Committee's pricing policies and procedures.
    (f) Any dispute arising out of a competitive distribution decision 
described at paragraph (d) 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 
resolution, 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 resolution decision, and only a nonprofit agency 
that participated in the competitive distribution process described at 
paragraph (c) of this section may file an 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. 8501-8506.


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 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 in accordance with the Committee's 
policies and procedures. To meet the needs of the ordering Federal 
agency, the central nonprofit agencies may distribute the commodity or 
service to one or more nonprofit agencies in accordance with Sec.  51-
3.4(a) of this chapter.
    (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, Department of Veterans 
Affairs, 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 orders 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

[[Page 20340]]

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 for a successor nonprofit agency to offer the right of 
first refusal also applies to an authorized nonprofit agency that is no 
longer serving as the mandatory source because of a competitive 
distribution under Sec.  51-3.4(d) of this chapter.

[FR Doc. 2024-05717 Filed 3-21-24; 8:45 am]
BILLING CODE P