Structure of the JWOD Program

Structure of the JWOD Program

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 JWOD Statute and Purpose. The Javits-Wagner-O’Day (“JWOD”) Act, 41 U.S.C. §§ 46-48c., is a federal statute that was first enacted in 1938 and has never substantively amended with the exception of a 1971 expansion that added the “severely disabled” category. Its purpose is to provide work for blind and severely disabled workers in “qualified” facilities (i.e., “workshops”) such as those that are typically operated by “Goodwill” agencies and various hospitals.[FN1]

The JWOD Program accomplishes this purpose by maintaining a “Procurement List” of commodities and services that are subject to the JWOD super-priority. An addition to the Procurement List results in a permanent assignment of all future contracts for that commodity or service to a specified workshop; the contract simply disappears from public bidding.[FN2] At the time of this writing the Procurement List controls somewhere in the neighborhood of $1.2 Billion in annual sales, and has grown by as much 20% per year.[FN3]

The Committee For Purchase From People Who Are Blind Or Severely Disabled[FN4] (the “Committee”). The Committee, an independent agency of the federal government, oversees the JWOD Program. From the private sector point of view, the Committee’s main function is to decide what gets added to the Procurement List, and its secondary task is to set a “fair market price” [FN5] for the monopoly holder to be paid.

The Committee has delegated the vast majority of operational matters to NIB and NISH [see below], which are essentially “brokerages” for the subsidiary workshops. At the time of this writing, the Committee’s budget is less than $5 Million per year. By contrast, NIB and NISH receive a 4% commission on every Procurement List contract, or a collective budget that would appear to be slightly more than of $40 Million per year.

The Committee has fourteen members, all appointed by the President of the United States. Nine Committee members represent the various procuring agencies,[FN6] and one each represent the Justice Department (on behalf of Federal Prison Industries)[FN7] and the Department of Labor. The remaining four members come from the private sector and are supposed to represent blind and handicapped individuals and workshops, respectively. The Committee meets once each month to vote on material presented by the Committee staff. In our experience, the Committee members almost never question the staff’s recommendations.[FN8]

The Committee staff includes approximately a dozen people led by the Executive Director. The staff oversees all of the Committee’s activities, including inspecting the workshops, processing additions to the Procurement List, and responding to the concerns and comments filed by contractors.

NIB and NISH – The Central Nonprofit Agencies (“CNAs”). NIB (National Industries for the Blind) and NISH (f/k/a National Industries for the Severely Handicapped) are separate entities created for the sole purpose of coordinating JWOD contracts assigned to handicapped and blind workshops, respectively.[FN9] We understand that many retired officers from the military and procuring agencies have moved to executive positions with NISH and NIB. NIB and NISH are not “government entities,” however. [FN10] Their financial records are not subject to outside review and they fall outside the jurisdiction of the Freedom of Information Act (“FOIA”).

Among other things, NIB and NISH typically organize and present the data used by the Committee to determine what should be added to or removed from the Procurement List. As a rule, the private sector will only become involved in the addition process at the very end, when the Committee is preparing to review a NIB/NISH proposal. In recent years the Committee has taken to sending the current contractors a summary letter requesting certain financial data.

The Workshops. The workshops vary from the very small to the very large (more than a thousand employees), and from glowing examples of human kindness to those which seem less savory. Workshops must be vetted by NIB/NISH and approved by the Committee before they can receive a JWOD contract. The JWOD Act requires “qualified” workshops, among other things, to employ blind or handicapped persons for 75% or more of their direct labor,[FN11] but At least one appeals court has confirmed that this requirement “does not mean, and was not intended to mean, that blind persons must perform 75% of the direct labor on each and every particular product produced by the workshops.”[FN12] Our experience, however, has been that the Committee strongly favors contracts with a 75% or higher direct labor component.

[LINKS TO OTHER JWOD ARTICLES]

[1] The text of the JWOD Act and the official regulations may all be found at www.jwod.gov. It should be noted, however, that the bulk of the Committee’s actual approach to the program have been designated as policy “Memoranda” rather than regulations. Several, but not all, of the relevant Memoranda are also available on-line. Parties doing detailed research should write to the Committee directly for a complete set.

[2] JWOD Act, 41 U.S.C. § 48. JWOD additions do not affect existing contracts. They merely prevent the public from bidding on new contracts.

[3] Sales increased by 20% in FY 1995 over FY 1994, and 16% in FY 2000 over FY1999. Sales in FY 2001 were $1.19 Billion, an 8% increase over FY 2000. All information drawn from the Committee’s Annual Reports, the most recent of which is FY2001 at the time of this writing.

The Annual Report, together with searchable and downloadable versions of the Procurement List, are available on-line at the Committee’s website.

[4] The Committee’s name was changed from the “Committee for Purchase from the Blind Or Severely Handicapped” in 1993, but one occasionally sees the acronym CPBOSH floating around.

[5] JWOD Act, 41 U.S.C. § 47(b).

[6] The agencies most effected by the JWOD Act appear to be the General Services Administration (“GSA”) and the Department of Defense, particularly the Defense Personnel Support Center (“DPSC”) which procures clothing. The JWOD program has many workshops which focus on the garment industry.

[7] A separate statute establishes the set-aside program for Federal Prison Industries, the entity charged with creating work for inmates in federal penitentiaries. See, 18 U.S.C. § 4121. Under section 48 of the JWOD Act, the FPI program has priority when both the prisons and the workshops seek to become the government’s monopoly supplier of the same commodity. See, 41 U.S.C. § 48. It remains to be seen at the time of this writing whether the recent changes to the FPI program will alter that balance.

[8] The sole exceptions we know of involved a 1986 case, HLI Lordship Indus., Inc. v. Committee for Purchase, 615 F.Supp. 970 (D.C. Va. 1985), rev’d on other grounds, 791 F.2d 1136 (4th Cir. 1986), and a relatively recent case where NIB and NISH were after a commodity (certain paper cups) that GSA had designated as an “essential business item”. The staff favored adding the cups to the Procurement List despite the fact that the workshop in question had never made any cups before. We appealed directly to the head of GSA on behalf of our client, which apparently led to a rebellion against the staff’s position. NIB/NISH eventually decided to withdraw the proposal.

Interestingly enough, the Committee soon added a different paper cup (one not currently supplied by our client) to the Procurement List. See, addition of Paper Cup, 60 Fed. Reg. 17775 (4/7/95). We also understand that NIB and NISH now tend to avoid “essential business items.”

[9] JWOD Act § 47(c) and regulations at 41 CFR § 51-3.1.

[10] See, the HLI Lordship case, supra.

[11] JWOD Act, 41 U.S.C. § 48b(4). Section 48b(5) Act goes on to define “direct labor” as “all work required for preparation, processing, and packing of a commodity, or work directly relating to the performance of a service, but not supervision, administration, inspection, or shipping.”

[12] Ballerina Pen Co. v. Kunzig, 433 F.2d 1204, 1211 (D.C. Cir. 1970), cert. dismissed, 401 U.S. 950, 91 S. Ct. 1186, 28 L. Ed. 2d 234 (1971); but c.f., HLI Lordship, supra, (affirming an addition to the Procurement list but addressing whether the workshop met the 75% test for the particular commodities).

 

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