Nonprofit employers of people with disabilities have different procurement rules than other businesses
Can Ability One nonprofit entrepreneurs compete on price as if they were regular entrepreneurs after solicitation? It is on this question that the Federal Claims Court was called upon to rule. The case is at the heart of what the AbilityOne program is. Federal Drive with Tom Temin got the latest news from Smith Pachter McWhorter’s attorney, Joseph Petrillo.
Tom Temin: Joe, first of all, give us the background to the AbilityOne program, the rules around it, and how it all generally works.
Joe Petrillo: Of course, the Javits-Wagner-O’Day Act, or JWOD in government parlance, has a socio-economic program in place to help employ people who are blind and severely disabled. And it did so by giving a contractual preference to nonprofits that use these people in more than 75% of the direct workforce they provide.
Tom Temin: And that goes back many years.
Joe Petrillo: Many years. This program has been around for a very long time and it has evolved over time, but it has been stable for quite some time now. It’s a very large program – and in fact, it involves roughly $ 4 billion worth of goods and services sold to the United States government, they employ over 45,000 blind and severely disabled people in all 50 states, and it has a huge blanket. The procurement process, the process of awarding and pricing contracts, is carried out in accordance with the procedures established by AbilityOne in its regulations. So they have the power to make this program, the preferential program, work through regulations.
Tom Temin: And by the way, where does AbilityOne live in government.
Joe Petrillo: It is an independent body from the federal government. AbilityOne sets these regulations, as I mentioned, and it’s a federal agency. And as relevant in this case, the pricing process is very different from what you have in an ordinary competitive purchase. First, the association is selected for the contract through a process of assessing its technical and other capacities. And once the selection is made, the price is established through a negotiation process, including the government agency that will award the contract and use the services or goods, the non-profit organization that will execute the contract. . And a company called Source America, another organization that administers that part of the program for AbilityOne, that’s the process. So first you figure out who the winner is, and then you negotiate the price.
Tom Temin: But in this case, AbilityOne tried to do something completely different.
Joe Petrillo: Right. Apparently, around 2015-2016, Congress started to look at the idea of having competition between these nonprofits in terms of price as well as other features. And they asked the Section 898 panel, which was established under the National Defense Authorization Act 2017, to study whether there should be price competition in JWOD purchases. . And the Section 898 panel thought it might be a good idea to have a better compromise on these purchases. Thus, AbilityOne did not change its regulations, but set up a pilot program by issuing an interim policy, and selected the facilities contract at Fort Meade for the pilot program. The current contractor for this facilities contractor was a JWOD entity called Melwood Horticultural Training Center. And they weren’t interested in competing on price, so they filed a claim with the Federal Claims Court when the supply was announced. The Ministry of Justice managed to dismiss this case because it was premature, the procurement had taken place. The supply continued after the court dismissed the case and Melwood apparently did not get the price. And so they filed a second protest. They lost the competition, protested a second time, and the Federal Claims Court now had to consider the main question, whether the AbilityOne program can be run with price competition in this context?
Tom Temin: We speak with Joseph Petrillo. He is a procurement lawyer with Smith Pachter McWhorter. So that goes to the heart of the whole question – what did the court decide in the second protest?
Joe Petrillo: The problem Melwood raised was that the pilot program established by this interim policy conflicted with the law and regulations Jay wants. was included in the pilot program. This was the old system of selecting nonprofits first and then negotiating prices without having price competition between the nonprofits. The question seems technical, but it is important that the regulatory process be one that involves notice from the agency intending to issue a regulation. There is then a comment period, and generally the regulation does not come into effect until the comments are taken into account, the agency explains what it is doing. Why is he perhaps amending the rules and formally posing, capacity, we dodged all this by issuing an interim policy? And the court basically said: No, you can’t do that. This is such a fundamental change that it has to happen through the regulatory process.
Tom Temin: So that supply then came back to basics, and the policy AbilityOne was trying to put in place, what’s the status then? How can they have a competition policy, but there is no way to try it?
Joe Petrillo: Well, there is a way for AbilityOne to do it. The court suggested that AbilityOne probably has the right to change its regulations to adopt this type of pilot program. But it has to go through the regulatory process. And it will take time. In the meantime, the court permanently barred AbilityOne from awarding the contract that had competed under the interim policy and permanently barred them from awarding another contract under this interim policy for the facilities contract. Fort Meade. I think there are some interesting policy questions related to whether or not there should be such price competition. On the one hand, you could see that perhaps price competition could lead to a more attractive price, and that could make the AbilityOne program more interesting and attractive to federal agencies – they might be inclined to switch to it. no more contracts. On the other hand, this is about employing people who are blind and severely disabled, and who are unlikely to be as productive as people with different abilities. So, to the extent that you are competing with the price, nonprofits may have an incentive to employ less of these blind and severely disabled people in contract performance. And these are tough policies that need to be considered and weighed.
Tom Temin: Sure. And these people are often employed under different labor regulations and therefore do not always have to be paid minimum wage in many cases. And so if you have the agencies they work for or the nonprofits they work for, competing on price that might even drive down the salaries of the people who as a company have decided that we want help.
Joe Petrillo: Yes, there are some really interesting and complicated policy questions here to try to figure out how to help as many people as possible in the best possible way.
Tom Temin: Well, AbilityOne’s court is the ball at this point, if it really wants to move forward with this price competition system, it has to go through the making of the rules first.
Joe Petrillo: Yes, that’s what they should be doing to continue. And Congress kind of gave it some thought, but they haven’t really decided what to do, so they might step in at some point as well.
Tom Temin: Joseph Petrillo is a procurement lawyer with Smith Pachter McWhorter. Thank you so much.
Joe Petrillo: Thanks, Tom.