Suggestions for JWOD Reform

Suggestions for Reform of the Ability One (“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.”

 

Other articles discuss the Structure of the JWOD Program.
in more detail, and address how contractors may oppose proposed
additions to the Procurement List.
This article critiques the JWOD program’s
1930’s-style “command-and-control” approach and suggests some
ideas for reform. Please note that the article does not suggest that the program
be eliminated or its benefits curtailed. See “Defending JWOD.” Rather,
it suggests a reform based on a bid-advantage approach.

INTRODUCTION
When the new Constitution was being debated in 1787, critics raised the point that no popular government in the history of man had ever endured for more than thirty years. Why, they asked, should the new nation plunge into a venture that experience showed to be doomed? The supporters answered as follows:

If it had been found impracticable to have devised models of a more
perfect structure, the enlightened friends to liberty would have
been obliged to abandon the cause of [popular] government as
indefensible. The science of politics, however, like most other
sciences, has received great improvement. The efficacy of various
principles is now well understood, which were either not known at
all, or imperfectly known to the ancients.

Federalist Paper No. 8 (Hamilton).

There has been a similar advance in the science of regulation. In 1938 the JWOD Act was state-of-the-art. A panel of experts was convened to determine what commodities should be set aside for monopoly purchase and to set the “fair market price” that the government should pay. The approach was comparable, in a loose way, to the way utilities and other regulated monopolies set their prices.

Three-quarters of a century later the same command-and-control approach is a hopeless antique. Were the JWOD Act to be enacted today, no one would even consider it. The article is intended to begin a debate on how to best replace it.

 

THE PROPOSED REFORM


1. The “command and control” structure should be replaced with a bid-advantage approach. An advantage in the 5-10% range would appear to be reasonable, though it might be even better to apply the amount of the “handicapped” payroll (see below) as the amount of the bid advantage, subject to a 10%-of-the-total-bid cap.

2. Workshops and CNAs should be relieved from the restrictions on their ability to bid for federal contracts. At the very least, the current cap will be expanded to include the >$1 Billion value of the current program.

  • Note that nonprofit workshops have built-in advantages in addition to any new bid advantage. They pay no income taxes; they receive a variety of government monies ranging from federal, state and local authorities; they receive at least as much indirect support from those authorities; and they are exempt from many of the regulatory burdens such as minimum wage laws. To the extent they lack business expertise, it can be acquired, developed or obtained via the CNAs.
  • Note also that this would eliminate the automatic 4% “cut” of the CNAs. The CNA fee would be negotiated by each workshop.

3. Private industry should be able to claim the bid advantage by certifying that it will pay to blind and/or severely handicapped labor a given percentage of the total payroll allocated to the project. This could be done by either direct hiring or by subcontracts (for either a lower advantage or a higher payroll %) to certified workshops or CNAs.

  • The definition for “certifying” a workshop should be reexamined to limit the paperwork burden and encourage private industry to hire the marginally employable. The “direct labor” structure appears to be a great creator of otherwise-extraneous paperwork.
  • Payroll makes a useful distinction because it helps to focus the program on labor-intensive industries.

4. The Committee could be reduced in size to only its staff, with a mission focused on what it does best; i.e., regulating the standards for workshops and acting as a central expert for other agencies regarding these issues.

5. Penalties would include (i) 150% disgorgement to the employees of the difference between what the bidder promised to pay and what it actually paid, (ii) all the normal penalties for fraud, up to and including disbarment and criminal offenses, and (iii) appropriate notice to potentially interested agencies such as the IRS, EEOC, state licensing boards, etc.

EVERY PARTY SHOULD BENEFIT FROM THE PROPOSED REFORM

  • The benefits for business start with the release of more than $1 Billion of contracts to public bid, preservation of contracts that would have been lost to the JWOD program, and elimination of the ‘transaction costs’ associated with the ills of the current situation. In addition, businesses that make the effort to employing handicapped workers or subcontract work to qualified workshops would benefit from the bid advantage, affirmative action results, access to an underestimated work force, and the various advantages that come with simply Doing Good.
  • The main benefit to the handicapped community in general is also obvious; companies offered a bid advantage will seek out the disabled community in order to compete more effectively. That would not only provide jobs, it would help to eliminate the main problems that advocates complain about, ignorance and preconceptions.
  • Blind and handicapped workers would benefit directly from hugely enhanced opportunities to find commercial employment, vastly better exposure to the mainstream workplace, education of the general public, and the essential dignity that all of that would engender. They would benefit indirectly from the increased health of the support community.
  • Workshops will obviously be the first place to look if your company wanted to gain the bid advantage, opening up opportunities for subcontracting they’ve never had before. The current system actually prevents business from cooperating with workshops, because doing so would make that business’ contracts a target for the JWOD program. The new system would reverse that, and even cause companies to seek the workshops out. Moreover, any workshop that does a good job could count on receiving private sector work that might exponentially increase their ability to employ their clients.

Impressive programs could also expect an increase in charitable giving and, of course, nothing would prevent them from continuing to win the contracts they currently hold. They may also choose to subcontract directly with local businesses, avoiding the 4% “cut” to CNAs.

More subtly, most workshop founders hoped to create halfway houses and training facilities, not places of long-term employment. The proposed reform would therefore help the workshops do what they were meant to do, and what most of them are trying to do.

  • NIB and NISH stand to lose the most from the proposed reform, but only because they supply the most questionable benefit to the whole arrangement. Under a bid advantage system NIB and NISH would lose their automatic 4% commission on JWOD contracts. The reality is that NIB and NISH should benefit from the reformed JWOD program as much as anyone else. The reform would open vast new opportunities to broker subcontracts between workshops and private firms. The reformed program would not put NIB and NISH out of business; it would merely require them to negotiate an appropriate commission with each workshop they represent instead of having the government skim their cream directly. NIB and NISH can only lose from this change if it turns out that they do not do enough to earn their 4% commission.
THE ARGUMENTS AGAINST REFORM
From the policy viewpoint, there are none. Any studied attempt to modernize the JWOD program is a policy slam-dunk. “But the Workshops Will Lose Money.” In a word, “How?” The workshops can suffer from the proposed reform only to the extent that they’re currently being paid a price that’s inflated beyond the amount of the bid advantage. Everyone must agree that a “sufficient” bid advantage would achieve all the benefits of the JWOD program without its many drawbacks. The only valid argument from a policy viewpoint therefore goes to what number is “sufficient.” Since only the Government would suffer from an “excessive” bid advantage, advocates for industry and for the disabled community should find themselves on the same side of that debate. If we get to that point we will have already won.

Article on Fighting Proposed Additions to the JWOD Procurement List

Scott P. Pavelle, Esq.
355 Fifth Avenue
Suite 1200
Pittsburgh, PA 15222
Direct: (412) 325-2535
Front Office: (412) 391-2515
E-mail: scottp@pavellelaw.com
Web Page: www.PavelleLaw.com