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Hello Gurus!

I am a first-year intern. Is there a minimum productivity rate for AbilityOne / NISH Government contracts?

The question comes from CM-5, G. "If at any time after the phase-in period, particularly at the end of a fiscal year, a nonprofit agency is performing an AbilityOne project with a direct labor ratio below 60 percent, the nonprofit agency will notify either NIB or NISH."

Some here think the quote references the ratio of number of handicapped-workers to total-workers employed but others think there is a minimum productivity rate so as not to "unduly burden the Government" since we still have to pay full H&W.

I can see both sides and think the reason to create the program in the first place was to help employ people with severe disabilities but is there a point when a worker's productivity rate is just too low?

I have looked at several Compliance memorandums and CFRs but have not found a clarification to this.

Thanks in advance for sharing your knowledge.

Dan

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Not that Vern needs any extra support, but I'm confirming his response.

Plus I want to pontificate for a minute.

As many know, DOD is pushing to use AbilityOne NPAs. There is quite a bit of ignorance and confusion associated with getting a handle on how to work with the NPAs. In particular, I'm seeing use of DCAA to audit AbilityOne program proposals, so as to help determine whether a proposed price is fair and reasonable. DCAA is looking for cost or pricing data in the format of Table 15-2.

The only problem is that when the price is being reviewed and approved by the NISH Committee, the price is being set by the operation of a "law or regulation".

Lots of wasted effort all around.

H2H

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This is from the JWOD website:

The Committee for Purchase From People Who Are Blind or Severely Disabled (the Committee) was established by the Javits-Wagner-O'Day Act (41 U.S.C. 46-48c). The Committee implements a comprehensive program to enforce the policy of the federal government to increase employment opportunities for people who are blind or severely disabled. The pricing procedures implemented herein derive from the authority of the Javits-Wagner-O'Day Act as implemented through Federal Acquisition Regulation (FAR) Subpart 8.7, 41 CFR Chapter 51, and OMB Circular A-122. The Committee has sole authority to establish the Fair Market Price. Because of this authority, the Committee's pricing procedures take precedence for AbilityOne contracts over other pricing provisions of the FAR (See FAR 8.707). However, the Committee's pricing procedures are intended to be consistent with FAR practices to the degree possible. The Committee is not bound to approve recommended prices and may establish a price other than negotiated.
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No doubt the price is ultimately set by the Committee. 41 USC 47(B). However, this isn't like a more typical situation where a independent public utility commission sets rates that apply generally, not simply for a single contract. Under JWOD, the procuring agency is involved before that price is set. 41 CFR 51-2.7(a) provides, "This initial price is based on Committee procedures, which permit negotiations between the contracting activity and the nonprofit agency which will produce or provide the commodity or service to the Government, assisted by the appropriate central nonprofit agency." Likewise, FAR 8.707© provides, "The Committee may request the agency responsible for acquiring the supplies or service to assist it in establishing or revising the fair market price. The Committee has the authority to establish prices without prior coordination with the responsible contracting office." The procuring agency is required to provide its recommendation for an initial fair market price. 41 CFR 51.2.7©.

You seem to be saying that recommendation MUST be based solely on price analysis, rather than cost analysis. If the price set "by regulation" can result from the negotiation, it seems a little counterintuitive that the negotiation cannot be based on cost or pricing data. Doesn't the price have to be set before the exception applies?

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No doubt the price is ultimately set by the Committee. 41 USC 47(B).

You seem to be saying that recommendation MUST be based solely on price analysis, rather than cost analysis. If the price set "by regulation" can result from the negotiation, it seems a little counterintuitive that the negotiation cannot be based on cost or pricing data. Doesn't the price have to be set before the exception applies?

jacques,

What I am saying is exactly what you said: "No doubt the price is ultimately set by the Committee."

Since the Committee is established by statute (JWOD Act) and its role in establishing contract price is implemented by the FAR, I believe that the pricing policy established at 15.403-1©(2) applies.

I.e. -- (2) Prices set by law or regulation. Pronouncements in the form of periodic rulings, reviews, or similar actions of a governmental body, or embodied in the laws, are sufficient to set a price.

H2H

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Guest Vern Edwards

This is interesting. When can it be said that a price has been "set by law or regulation"?

AbilityOne says that its prices are set by law or regulation. See AbilityOne Pricing Memorandum No. 2, dated January 26, 2007, http://www.abilityone.gov/pricing/pr2.html, which says in pertinent part:

In accordance with FAR 15.403-1©(2) contracting officers are prohibited from requiring certified cost and pricing data from nonprofit agencies under the AbilityOne Program because the prices are set by law or regulation.

End of story, if you consider that to be persuasive. But I think Jacques raised an interesting point:

No doubt the price is ultimately set by the Committee. 41 USC 47(B). However, this isn't like a more typical situation where a independent public utility commission sets rates that apply generally, not simply for a single contract.

See the Contract Pricing Reference Guides, Vol. IV, which provides this guidance about prices set by law or regulation:

Pronouncements in the form of periodic rulings, reviews, or similar actions of a governmental body, or embodied in the laws, are sufficient to demonstrate a set price.

I am inclined to think, based on notoriously unreliable common sense, that AbilityOne's prices can be said to be set by law or regulation. As a CO, that is probably what I would think. All the same, I don't think that Jacques is being silly. What strikes me as remarkable is that there is so little guidance about prices set by law or regulation. At least, I couldn't find much through a quick search. What I could find referred to utility services. If AbilityOne's prices are set by law or regulation, why doesn't FAR just say so? I know, I know... I shouldn't ask such why questions.

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What I am saying is exactly what you said: "No doubt the price is ultimately set by the Committee."

Perhaps there is another way to skin this cat. Rather than relying on the "prices set by law or regulation" exception, argue that 10 USC 2306a (in the case of DoD) doesn't apply at all, because an acquisition under JWOD isn't made under the authority of Chapter 137. By extension, FAR Subpart 15.4 doesn't apply, because it only provides "policies and procedures for pricing negotiated prime contracts (including subcontracts) and contract modifications" (emphasis added). Since the Committee, not the procuring activity, ultimately prices the award, FAR 15.4 does not apply to the government's recommendation. Thoughts? Does this go too far?

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Vern, thanks much. I think an easier way to get there is to say, to the extent 10 USC 2306a & 41 USC 48 are in conflict, the specific prevails over the general, and 41 USC 48 prevails. You don't have to draw any far-reaching conclusions about Chapter 137.

41 USC 48 provides in relevant part:

If any entity of the Government intends to procure any commodity or service on the procurement list, that entity shall, in accordance with rules and regulations of the Committee, procure such commodity or service, at the price established by the Committee...

I'm not sure it matters how you get there, but for what it's worth (nothing), I'm now satisfied there isn't an irreconcilable conflict between a CO's obligations under FAR Subpart 15.4 (and statute) and the Committee's guidance in Pricing Memorandum Number 2 (PR 2). Section 8A of the PR states,

Under the AbilityOne Program and in accordance with FAR 15.404-1(2), price analysis is the preferred method. Cost or cost-realism shall be used only when information is not available to analyze price such as no commercial market exists or commercial prices are artificially lowered. Use of exceptions to price analysis shall be documented and submitted to the Committee accompanied with the Recommended FMP.
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