Fighting Proposed Additions to the JWOD Procurement List

How to Fight NIB, NISH and the “Ability One” Program

Opposing Proposed Additions to the Procurement List Maintained
by the Committee for Purchase
from People Who Are Blind or Severely Disabled

By: Scott P. Pavelle, Esq.

DISCLAIMER

This article was written in mid-2003. It is intended to provide background
information for a lay reader and to indicate our familiarity with the general
field. DO NOT USE THIS ARTICLE AS THE BASIS FOR DECIDING ON A COURSE
OF ACTION. The information provided herein amounts to generalities that may or
may not apply to your specific case, has not been updated, and may therefore be
100% wrong at a later date. Consult an attorney before deciding on any specific
action, and keep in mind two old saws that couldn’t be more relevant:

“A little knowledge is a dangerous thing,”

and

“The lawyer who handles his own case has a fool for a client.”

The general structure of the JWOD Program has been addressed in a separate article. [Insert Link to Structure Article]. Very generally, the JWOD Program operates by maintaining a “Procurement List” of commodities and services which the federal government is required to buy on a monopoly basis from specified handicapped workshops. The Procurement List now controls in excess of $1.2 Billion worth of contracts on an annual basis.[FN1]

The program is officially overseen by an independent agency called the Committee for Purchase from People Who Are Blind or Severely Disabled (the “Committee”), which has delegated the majority of actual regulation to two central “brokerages” called NIB (National Industries for the Blind) and NISH (f/k/a National Industries for the Severely Handicapped). NIB and NISH are not government agencies; they are designated as Central Nonprofit Agencies (“CNAs”) and their budget comes from a 4% commission on Procurement List sales.

The Addition Process. The addition process begins with NIB and NISH, which spend a good part of their time searching for commodities and services to swell the Procurement List. It should be noted that NIB and NISH have a collective budget of more than $40 Million[FN2] compared to the Committee’s budget of under $5 Million, a ratio that may explain the level of reliance on the CNAs to provide the primary set of data.

After identifying a likely target, NIB and NISH spend an average of a year preparing the Committee’s various forms, culminating with a last-moment request for the Committee to obtain financial information from the current contractor.[FN3] If you are a contractor who has received such a letter, please contact us directly for a case-specific discussion.

After incorporating the financial data (if any) obtained by the Committee staff, NIB/NISH present a sheaf of papers and a request that the Committee add the item or service to the Procurement List ASAP.

After reviewing the NIB/NISH request, the Committee staff will publish a notice in the Federal Register requesting that interested parties comment on the proposed addition. The notice identifies commodities by name and National Stock Number (“NSN”), and services by name and location. Commenters have 30 days to respond. If no one files a comment, the Committee will soon rubber-stamp the proposal and publish a second Federal Register notice. After the second notice, no new solicitation will go out.[FN4]

The Federal Register filing does not list the current contractor, no notice is published in Commerce Business Daily or any on-line source, and no direct notice is sent to the current contractor except the initial request for financial data.

The Problem Lies In Momentum. The largest single concern this system poses for those who oppose the addition is the bureaucratic momentum that builds up unopposed. By the time a contractor learns of a given proposal, NIB or NISH have a year or more of work into the project and the workshop may even have started gearing up for production. In addition, the Committee staff has been known to view every addition to the Procurement List as a success and every delay as a failure. The Committee therefore faces enormous pressure to ‘just get it done,’ and will react with predictable irritation when a contractor files last-minute objections. This state of affairs makes the addition process something like a runaway bull; you can’t stop it by getting in the way, but if you make it think it will stop itself. So how do you compel the bull to think?

Earlier Is Better. Contractors may secure advance notice of a JWOD problem in two ways. The first requires that you stay in close touch with your contract officer at DPSC, GSA or whatever other procuring agency you deal with. Contract officers typically get wind of proposed additions a few months before the NIB/NISH package goes to the Committee, and will often tell you about it if you ask. (What they won’t do, of course, is take a side in the process or call you to volunteer information you haven’t asked for).

The other way involves luck and attention to detail. Recognize that Committee letter for the threat it is. At least one of your government contracts has been targeted and you should do something about it immediately. Don’t wait for the bull to gather more momentum! And don’t send in a reply and then let the matter rest; the momentum will just rebuild unless you keep up the pressure. We recommend that you expressly reserve the right to file a formal Comment if the proposed addition moves forward. You may also want to specify that your Comment will be based, in part, on new information to be obtained via FOIA from the complete NIB/NISH proposal package. Don’t leave open the argument that a summary response of financial data includes your entire set of potential objections.

If you need an extension, ask for one. The Committee used to grant extensions as a matter of course, but this seems to have been changing (partly because NIB and NISH seem to be timing their proposals to arrive just before a proposed solicitation). Regardless, as far as the contractor is concerned it should make no difference. The fact that NIB or NISH sat on the package until late in the day should not interfere with your rights to due process. Extensions to buy a delay are abuses, but extensions to buy time that you’re going to use are not. If you need that extension and can explain the reasons why, demand it. Both law and logic are on your side.

They Know What’s Going On And You Don’t. When you fight in the dark you make only lucky hits. Your light switch is the Freedom of Information Act (“FOIA”). Use it. As soon as you learn of a potential JWOD problem, send the Committee a FOIA request demanding all forms, letters and other documents related to the proposed addition and the workshop that wants to replace you. Careful study of these documents will often turn up flaws in what NIB and NISH have supplied to the Committee. Have NIB and NISH stated your financial data correctly? They often don’t. Is the workshop big or small, new or old? Has it made an item like this before? We’ve seen workshops that never made anything try to have potentially deadly[FN5] manufacturing processes added to the Procurement List. Does the workshop plan to make the item itself, or subcontract the job and handle only packaging? If that’s the case, maybe you can negotiate a supply contract with the workshop or argue about the legal requirements of the JWOD Act.[FN6] If the JWOD program or Unicor (a.k.a., Federal Prison Industries) have hit you before, does the NIB/NISH package cumulate those damages with the harm this proposal would cause? It’s supposed to, but it rarely does. What are NIB/NISH calculating as the value of the upcoming contract? Is that accurate? If it seems high, how does that affect your impact calculations? What do NIB/NISH propose as a “fair market price?” Is that absurd? Why? What special factors about this item or your company have they missed?

You should examine all of these factors and any others you can think of, and your comment should lay them out carefully. Remember, the Committee didn’t prepare the package, NIB or NISH did. The Committee won’t know anything which NIB and NISH failed to reveal unless you explain it. And if you fail to get your facts into the record now, you won’t be able to use them if you appeal to a court.

SOME SPECIFIC THINGS TO LOOK FOR.

Financial Impact. Rightly or wrongly, the Committee considers this the main area of focus for comments. The informal touchstone for this is that the loss of any item comprising more than 15-20% of the contractor’s gross sales will be deemed to cause a “severe” enough financial impact to limit or reject the proposal. Most business owners would describe that level of loss as “catastrophic” rather than merely “severe”, but proving that distinction to the Committee will require exacting logic and support.

Pay particular attention to the accuracy of the NIB/NISH figures, cumulative impact, and matters specific to your company that don’t appear on the record. The Committee likes to use your most recent year’s gross sales as its basis for calculating impact. Is there reason to believe next year will be substantially different? Do you have a union contract or a bank loan which the loss of this contract will effect? This requires some careful thought.

Job Losses. No one likes to hear about layoffs. If the addition will cause that, by all means let the Committee hear about it. You should know, however, that the Committee has traditionally turned a deaf ear to job losses if it felt that the addition would create job gains for handicapped workers in exchange. If you work extensively with handicapped employees or subcontractors, however, the tradeoff becomes handicapped jobs for handicapped jobs, plus all the other harms you may point out. This will make the bull stop to think, especially if NIB and NISH failed to inform the Committee of so damaging a fact.

Workshop Capability. Before you attack capability, you should understand that many workshops have made extraordinary adjustments that allow their workers to do jobs you never would have thought possible. You therefore have to set forth in great detail why your particular commodity or service requires unusual problems. The use of proprietary patents and know-how has made a difference, for example, as have special situations such as extremely dangerous machinery, unusual contract specifications, the potential for extraordinary demands in situations such as wartime-use items, and the workshop’s experience in this field. In addition, the Committee will often add an item to the Procurement List despite capability problems, on the grounds that a procuring agency can seek a “purchase exception” if the workshop proves to have difficulties when the time comes.

Commenters should also know that their FOIA request will likely reveal a so-called “inspection” by the procuring agency. These are not the same inspections to which the government subjects private industry. If no inspection report appears in the record, that’s a sign of a potential problem at the workshop which you should pursue diligently. If an inspection report does show up, don’t take it as gospel.

“Are You a Good Workshop or a Bad Workshop?” Some workshops employ the saints of the earth, people who have dedicated their lives to helping the disabled. Some employ less noble people. Careful investigative work can help identify which type you’re dealing with. Begin by asking the workshop for a copy of its IRS Form 990. This is a public document the IRS requires non-profit companies to send to all who ask, and it will tell you, among other data, the workshop’s gross sales and what it pays to its key employees. Don’t let six-figure salaries in rural counties go by without comment! If you can, have someone stop by the workshop for a physical visit. The good workshops are usually eager to show people around. The Internet sometimes contains interesting data, while Lexis and Nexis usually do, ranging from financial information and legal filings to newspaper and magazine articles.[FN7]

Assertions Mean Nothing. In some situations you can get away with merely saying “you can’t do this because of XYZ.” That will not work with the Committee. You must support any claims you make with attached documents wherever possible. If you lack the time to gather the documents, supply what you can and offer to obtain them all on request. If time presses, reserve (and use) the right to supplement your comment. And always append a sworn certification affirming that everything you’ve said is true and correct to the best of your knowledge. Any evidence you don’t make a part of the record now cannot be used if you have to appeal to court. Leave no room for a response that “the commenter alleged ABC to be true, but the Committee concludes that it’s not.” An accountant’s opinion about your financial condition may also help immeasurably.

Remember Who’s Who. Agencies and organizations may act like runaway bulls, but people do not. The personnel at the Committee are bureaucrats, but they take their duties and mission quite seriously, and they usually do a competent and responsive job. Committee personnel will call you back, and will review what you send them. Your problem lies not in the honesty of the staff, but in the presumptions and pressures they face on the job.

For presumptions, remember that the Committee’s emotional point of view workshops are almost always “good guys,” while industry can range anywhere from “accidental victim” to “scoundrels trying to keep the handicapped down.” Since you can do no better, aim to fit the “accidental victim” category. On the legal level, the United States Constitution protects your role as an interested party trying to fill out the record and the Committee staff will respect it. Keep in mind, however, that filling out the record is not the same as fighting it out in court. If you go in fighting, the Committee staff can and will ignore you, while if you go in explaining, the rules of constitutional due process will require them to listen and respond. So stand on your rights and make the most thorough case possible without inclining the Committee against you more than it already is. Save the fighting for when the Committee decides the wrong way. The patient record you build up now will be your ammunition then.

In terms of pressures, like everyone else the Committee operates on a thin budget and lacks the time to get everything done which it would like to. Additions with no comments take no extra time or expense. Comments take up Committee time, and the diversion of resources always has a chorus of the NIB/NISH “good guys” standing behind crying, “what’s taking so long? We’ve got a year of work in this project!” The natural inclination is to brush the comments aside. That is why detail matters. Detailed comments require sophisticated responses. Sophisticated responses take thought and time, and often require supplemental data and explanations from NIB and NISH. Viola! The bull has stopped to think and you can get a fair hearing. It may go against you, but you did get heard, and you’re now primed to fight for real if you want to.

Note that you can supply some counter-pressure by involving your representatives in Congress, but this neither will nor should cause the Committee to cave in to your demands. Thinking otherwise results in a predictable backlash. Your Representatives will, however, give the Committee staff another good reason to slow down, think things out, and make sure the “I’s” get dotted and the “T’s” get crossed. The courts and Congress get more exercised when an agency treats you unreasonably than when it acts incorrectly.

You should also remember that the Committee tends to view NIB and NISH as something like trusted colleagues because they work together so closely. NIB and NISH are not your colleagues, however. The Committee has obligations to the public, but NIB and NISH have the one-sided task of adding as many items and as much value as possible to the Procurement List. They’re not supposed to be fair. If you catch NIB or NISH in a deceit, however, you’ve caught them betraying the Committee’s trust and can claim the high ground.

Finally, workshops only rarely turn out to be the villain in the piece. NIB and NISH handle all the paper work, while all the workshops do is try to sell items for as much as they can get. Check to see if you’ve got a “bad” workshop, but don’t attack it for bad faith unless you can show some hard evidence. You may even find that the best solution lies in striking a deal with the workshop rather than trying to fight a proposed addition that may be unjust, but probably is legal.

How Can Your Lawyer Help? This is one activity you can’t hand to your attorney with instructions to “just take care of it.” The details necessary to a good Comment reside with the business owner. Nevertheless, organizing and drafting comments poses exactly the type of challenge lawyers train to deal with. Spotting issues, organizing arguments, gathering evidence, and presenting a case defines the legal approach. In addition, the threat of court (like the threat of Congress) helps counterbalance the administrative pressures to give your comment short shrift. If you have no attorney, you’re not going to court, and everybody knows it.

If you can find a lawyer with experience before this particular agency, he can add extra value by knowing the details of its law, regulations, procedures and standards, where to look for the subtler problems, how to read the Committee’s forms “on the run”, and how to prepare for an appeal if you need one. This article may seem long, but in reality it’s little more than an outline. It may help you organize your thoughts and approach, but nothing can replace experience. “A little knowledge is a dangerous thing.”

Conclusion. You can defeat a NIB/NISH attempt to target your business, but only if you fight smart as well as hard. Keep these thoughts in mind:

  • Avoid getting ambushed, and insist on an extension of time to the extent you may need one.
  • Always use the tools available to gather all the data you can.
  • Always study that data critically, keeping in mind that it came from NIB or NISH. Neither entity has a reason to find or disclose any negative information.
  • Always organize your arguments carefully, preferably with your attorney’s guidance.
  • Always present your arguments with written back-up.
  • Never forget that your representatives in Congress can help; keep them informed at all stages of the proceedings.
  • Never be impolite; your role at this stage is to fill out the record, make the Committee do its job right, and make it decide on the merits instead of the momentum. Fighting comes later, if and when the Committee does something to deserve it.

[1] Based on the Committee’s FY 2001 Annual Report. Over the past 10 years, sales growth for the JWOD program has averaged from 7% to 20% per year.

[2] Based on a 4% commission of all JWOD sales.

[3] Anemic as it may be in terms of proper notice, these letters are a tremendous improvement over the “traditional” approach in which the CNA used Dun & Bradstreet filings and the only way for a contractor to learn of an impending problem was to watch the Federal Register each week.

[4]JWOD additions do not affect existing contracts. They merely prevent the public from bidding on new contracts.

[5] Even worse, potentially explosive.

[6]The JWOD Act requires that 75% of the “direct labor” at a workshop be done by handicapped workers. The Committee has taken the teeth out of this requirement by interpreting it to apply to the workshop as a whole rather than to a particular contract; in other words, a workshop could have a contract that uses no handicapped labor so long as handicapped employees do 75% of all labor at the workshop. Nevertheless, it may sometimes help the larger picture if you can force the agency to publicly declare something that sounds wrong. You may also want to preserve the issue for appeal, as the Committee’s interpretation richly deserves a renewed challenge in the courts.

[7]Lexis and Nexis searches can cost into the hundreds of dollars, but a well-crafted search is often worth the cost.

Scott P. Pavelle, Esq.
355 Fifth Avenue
Suite 1200
Pittsburgh, PA 15222
Direct: (412) 325-2535
E-mail: scottp@pavellelaw.com
Web Page: www.PavelleLaw.coml