The opinion
In the United States Court of Federal Claims
No. 14-378C
(Filed: December 23, 2014)*
*Opinion originally filed under seal on December 19, 2014
)
AKIMA INTRA-DATA, LLC, )
)
Plaintiff, )
)
v. ) Post-Award Bid Protest; Javits-
) Wagner-O’Day Act, 41 U.S.C. § 8501
THE UNITED STATES, ) et seq.; AbilityOne Program; Direct
) Labor Ratio; Alaska-Native-Owned
Defendant, ) Corporation
)
and )
)
SERVICESOURCE, INC., )
)
Defendant-Intervenor. )
)
Craig A. Holman, Washington, DC, for plaintiff. Dominique L. Casimir,
Washington, DC, of counsel.
Douglas G. Edelschick, United States Department of Justice, Civil Division, with
whom were Joyce R. Branda, Acting Assistant Attorney General, Robert E. Kirschman,
Jr., Director, and Steven J. Gillingham, Assistant Director, for defendant. Dennis
Lockard, Committee for Purchase from People Who are Blind or Severely Disabled,
Arlington, VA, and Mason C. Alinger, National Geospatial-Intelligence Agency, Arnold,
MO, of counsel.
Robert J. Symon, Washington, DC, for defendant-intervenor. William R. Purdy,
Jackson, MS, and Aron C. Beezley, Washington, DC, of counsel.
OPINION
Firestone, Judge.
Pending before the court are the motion for judgment on the administrative record
filed by plaintiff Akima Intra-Data, LLC (“AID”), ECF No. 32, and the cross-motions for
judgment on the administrative record filed by defendant the United States (“the
government”) and defendant-intervenor ServiceSource, Inc. (“ServiceSource”), ECF Nos.
41 & 42. This case involves the award of the National Geospatial-Intelligence Agency
(“NGA”) West Base Operations Services (“BOS”) contract. After a referral from NGA,
the Committee for Purchase from People Who Are Blind or Severely Disabled (“CFP”)
awarded the contract to ServiceSource under the AbilityOne program created by the
Javits-Wagner-O’Day Act (“the JWOD Act” or “the Act”), 41 U.S.C. §§ 8501-8506.
Plaintiff, an Alaska-Native-Owned corporation (“ANC”), alleges that the award to
ServiceSource, a nonprofit organization employing persons with severe disabilities
(“PWSD”), was arbitrary, capricious, or a violation of the law for three principal reasons.
First, plaintiff argues that CFP incorrectly determined that ServiceSource is “qualified” to
receive a contract award under the AbilityOne program because CFP calculated the
statutory ratio of direct labor performed by PWSD using all of the contract work
performed by ServiceSource—both under AbilityOne and elsewhere—instead of
focusing solely on the specific services to be provided under the BOS contract.1 Plaintiff
1
As discussed at length below, under the JWOD Act, a “qualified nonprofit agency” is defined,
in relevant part, as a nonprofit agency
that in the production of products and in the provision of services (whether or not
the products or services are procured under this chapter) during the fiscal year
employs blind or other severely disabled individuals for at least 75 percent of the
hours of direct labor required for the production or provision of the products or
services.
2
argues that this was an incorrect calculation under definitions set forth in the JWOD Act.
Second, plaintiff argues that CFP erred in concluding that the BOS contract was suitable
to be added to the AbilityOne procurement list in the first instance. As part of this
argument, plaintiff challenges CFP’s findings for all four of the suitability factors set
forth by the regulations: (1) that the addition of the BOS contract would potentially create
employment for PWSD, (2) that ServiceSource was capable of performing the contract,
(3) that ServiceSource was eligible to perform the contract, and (4) that such an award
would not severely impact the incumbent plaintiff, AID. Third, plaintiff argues that NGA
separately erred in relying on CFP’s determinations by failing to perform its own
evaluation of ServiceSource’s ability to perform the BOS contract and failing to
recognize that the organization that helped it to decide whether to refer the BOS contract
to the AbilityOne program, SourceAmerica, had an organizational conflict of interest in
the selection of ServiceSource due to the method by which it was funded.2
In response, the government and defendant-intervenor argue that the award to
ServiceSource through the AbilityOne program is lawful. First, they argue that CFP’s
interpretation of the JWOD Act with regard to a “qualified nonprofit agency” is based on
the plain language of the statute as well as its legislative history. Next, they argue that
CFP’s suitability determinations regarding the addition of the BOS contract to the
41 U.S.C. § 8501(6)(C).
2
As discussed in detail below, SourceAmerica is not funded through appropriations but rather
receives a percentage of the contract award from nonprofit agencies that secure AbilityOne work.
41 C.F.R. § 51-3.5. Accordingly, plaintiff argues that NGA may not rely on any information
supplied by SourceAmerica.
3
procurement list were rational and properly supported by the administrative record,
therefore entitling them to deference. Finally, they argue that plaintiff’s arguments
regarding NGA’s role in the decision-making process are not relevant as the CFP
decision is binding on NGA regardless of NGA’s actions. In the alternative, they argue
that NGA’s actions were proper in any event.
For the reasons set forth below, the court finds that the award to ServiceSource
was lawful. As a result, plaintiff’s motion for judgment on the administrative record is
DENIED and the government’s and defendant-intervenor’s cross-motions for judgment
on the administrative record are GRANTED.
I. BACKGROUND
A. The AbilityOne Program
Under to the JWOD Act, Congress created CFP as a 15-member committee
appointed by the President of the United States to administer the AbilityOne Program. 41
U.S.C. § 8502. The AbilityOne program is intended to provide employment
opportunities for blind and severely disabled persons whose condition is a barrier to
traditional employment by qualified nonprofit agencies (“NPA”). The primary task of
CFP is to “maintain and publish in the Federal Register a procurement list” that includes
“products and services determined by the Committee to be suitable for the Federal
Government to procure” from “a qualified [NPA] for the blind or . . . a qualified [NPA]
for other severely disabled.” Id. at §§ 8502, 8503(a)(1); see also 41 C.F.R. §§ 51-2.2, 51-
2.8. In addition to adding suitable products and service to the procurement list, CFP is
tasked to “determine the fair market price of products and services contained on the
4
procurement list that are offered for sale to the Federal Government by a qualified [NPA]
for the blind or a qualified [NPA] for other severely disabled.” 41 U.S.C. § 8503(b).
Once CFP adds a service to the procurement list, only qualified AbilityOne
contractors are eligible to perform the work. Id. at §§ 8501(6)-(7), 8503(a)(1). The
JWOD Act differentiates between NPAs that operate in the interest of the blind and those
who operate in the interest of the severely disabled. Qualified NPAs in both cases must
employ “blind or other severely disabled individuals for at least 75 percent of the hours
of direct labor[3] required for the production or provision of the products or services.” 41
U.S.C. § 8501(6); see also 41 C.F.R. §§ 51-4.2, 51-4.3. While exceptions may be made
on a case-by-case basis, CFP policy “expects that the vast majority of individual
AbilityOne Procurement List projects (fulfilling products or services) are performed with
a direct labor ratio of at least 75 percent.” AR 3170-72.
Pursuant to the Act, CFP has designated two central NPAs to “facilitate the
distribution, by direct allocation, subcontract, or any other means, of orders of the Federal
Government for products and services on the procurement list among qualified [NPAs]
for the blind or qualified [NPAs] for other severely disabled.” 41 U.S.C. § 8503(c); see
also 41 C.F.R. § 51-3.2. These NPAs are SourceAmerica4 and the National Industries for
the Blind. 41 C.F.R. § 51-3.1. Central NPAs do not receive appropriated funds; instead,
3
“Direct labor” is defined as “all work required for preparation, processing, and packing of a
product, or work directly relating to the performance of a service;” except “supervision,
administration, inspection, or shipping.” 41 U.S.C. § 8501(3); see also 41 C.F.R. § 51-1.3.
4
SourceAmerica was formerly known as the National Industries for the Severely Handicapped.
This name change occurred during the events at issue in this case. For consistency, the court will
refer to SourceAmerica throughout this opinion.
5
they fund their operations by charging fees to NPAs with Federal contracts. 41 C.F.R.
§§ 51-3.5, 51-4.3(b)(9). These central NPAs provide information about the AbilityOne
program to federal agencies and assist them in selecting a potential NPA to perform the
contract. If a federal agency decides that it has a contract for products or services that
might be suitable for the AbilityOne program, the central NPA refers the agency’s
contract to the CFP for consideration.5 CFP then determines whether the contract is
suitable for inclusion on the AbilityOne procurement list and determines a fair price for
the contract. 41 U.S.C. § 8503(b). Finally, CFP publishes a notice in the Federal
Register announcing the addition. Id. at § 8503(a)(1). CFP may reconsider such
decisions independently upon receipt of relevant information or following a request by an
interested party with 60 days of the effective date of the addition. 41 C.F.R. § 51-2.6.
Once the contract is included on the AbilityOne procurement list, it must be filled
through the contractor identified by CFP unless and until CFP removes the product or
service from the procurement list.6
B. The Procurement
Since 1999, NGA has contracted out for the performance of various services on its
NGA Campus West (“NCW”), located in St. Louis, Missouri and later expanded to
5
This submission is not a required step in the process, but rather assists CFP by helping to
identify potential additions to the procurement list. The federal agency could also refer the
contract to CFP on its own, or CFP could independently consider the contract.
6
CFP is required to monitor the contractor’s performance to ensure that the contractor continues
to meet the requirements for inclusion in the AbilityOne program. 41 C.F.R. § 51-2.2(d).
6
Arnold, Missouri. These services, grouped together in the BOS contract Performance
Work Statement (“PWS”), include 11 different categories of work:
(1) Classified Waste Disposal, Recycling, Fleet Management, Material
Handling, and Warehouse Management; (2) Freight Management and Mail;
(3) Property Inventory, Accountability, Management, and Disposition; (4)
Janitorial; (5) Physician, Clinical Psychologist, Occupational Health Nurse,
Optical, and Optometric; (6) Security; (7) Snow and Ice Removal, Grounds
Maintenance, Roads and Grounds, Integrated Pest Management, and
Refuse Collection; (8) Facilities Equipment Operations and Maintenance;
(9) Project Management and Record Drawing Maintenance; (10) Customer
Support, Conference Center, and Management Support; and (11) Safety and
Emergency Preparedness.
AR 3151; see also AR 3186. In order to perform these services, many contractor
personnel are required to have a Top Secret/Sensitive Compartmented Information
security clearance (“TS/SCI”). AR 2393, 3151, 3156.
Beginning in 1999, AID has performed the BOS contract for the St. Louis
location; since 2009, AID has performed the BOS for both of NGA’s NCW locations.
AR 4269-70. The original contract was awarded to AID under the Small Business
Administration’s 8(a) program with a ten-year term. Id. That contract included a base
year and four option years, followed by five years as unpriced options for later
negotiation. Id. In 2002, NGA learned that AID was no longer eligible for the 8(a)
program and thus it could not continue to rely on the contract to provide work to AID.
Id. Nonetheless, NGA was able to use the one responsible source exception to the full
and open competition requirement and AID continued to perform the contract during the
5 unpriced option years. AR 4269-70, 4298-4302.
7
In December 2008, NGA conducted a full and open competition to select a
contractor to perform a five-year BOS contract covering NGA’s facilities in both NCW
locations. AR 4270-71. In May 2009, NGA awarded the contract to AID, which was
now required to compete as a large business due to its growth in the interim. Id. The
contract contained one base year and four option years running through June 30, 2014.
Id. As a result of this case, NGA has extended the contract with AID, the plaintiff,
through December 31, 2014. AR 7745-48.
In 2013, NGA began conducting market research in preparation for the
competition that would follow the expiration of the BOS contract with AID in 2014. AR
3486-92. In March 2013, NGA issued a sources sought notice requesting information
from prospective offerors interested in competing for the contract. Id. at 3488, 3798-
3802. NGA received 28 responses from prospective offerors interested in performing the
work, including an affiliate of AID, ServiceSource, and SourceAmerica. AR 3488-90;
3803-04. In May 2013, NGA issued a second notice, AR 4195-96, and received 11
responses. AR 3490-91, 3722.
In May 2013, NGA personnel met with SourceAmerica representatives “to discuss
the AbilityOne Program and how . . . [AbilityOne] contractors could fulfill the total
NCW [BOS] requirements.” AR 3491. During this meeting, SourceAmerica
“representatives provided a detailed overview of how the program was started, what is
the AbilityOne program, how [SourceAmerica] fits under the AbilityOne Program[,] and
the process for awarding a contract under the” program. Id. Later that month,
SourceAmerica representatives met NGA personnel “for a site visit of the St. Louis and
8
Arnold facilities and discussions/questions,” including “a tour of the . . . main areas that
are part of the BOS services.” Id. at 3491-92. “The following day, discussions were held
to address [NGA’s] questions regarding . . . AbilityOne contractor capabilities” in
providing “Total Facilities Management” services. Id.
Following these meetings and discussions, NGA’s contracting officer (“CO”)
recommended in June 2013 that NGA “pursue AbilityOne as a potential source of
services for the . . . [NCW] BOS requirement.” AR 3492. Accordingly, SourceAmerica
issued a sources sought notice to its pool of AbilityOne NPAs and solicited technical
proposals for the NCW BOS contract. AR 5286-92. SourceAmerica received technical
proposals from two interested nonprofit agencies, PRIDE Industries, AR 4864-5036, and
ServiceSource, AR 5037-5257.
In June, both NGA and SourceAmerica independently evaluated the submitted
proposals. On June 27, 2013, NGA eliminated PRIDE Industries from competition after
determining that it did not address the “full scope of NGA’s requirements.” AR 5401-02.
Regarding ServiceSource, NGA found that it (1) ”[c]urrently holds a Top Secret (TS)
Facility Clearance;” (2) “[e]xhibit[ed] [a] clear understanding of contract requirements
and magnitude;” (3) ”[d]emonstrated technical expertise and experience in Total
Facilities Management (TFM);” (4)”addressed . . . how the contractor will specifically
satisfy NGA requirements” for “[e]ach PWS Annex . . . in detail;” (5) has TFM
experience “serving as BOS Prime Contractor at the [Department of Defense] Mark
Center [Headquarters Complex, in Alexandria, Virginia,] which is comparable in size and
scope [to that] of the NGA requirements;” and (6) presented a “[s]ound plan for
9
recruiting, hiring, and retaining personnel with TS/SCI clearances.” Id. Also on June 27,
SourceAmerica evaluated the submitted proposals and recommended ServiceSource as a
contractor to NGA. AR 1218-67.
Through July and August 2013, NGA conducted on-site technical discussions with
ServiceSource and its proposed subcontractors regarding the PWS for the NCW BOS
contract. AR 5261-62, 5363-64. In September 2013, after multiple rounds of internal
briefings to NGA officials involved in the procurement decision-making process, the
NGA Deputy Director authorized the CO to pursue an acquisition strategy of proposing
that CFP add the BOS to the procurement list. AR 4445, 4268-80. In October 2013,
NGA posted a notice on FedBizOpps announcing the agency’s intent to propose that the
CFP add the BOS to the AbilityOne procurement list. AR 4317.
On October 16, 2013, NGA issued a formal request for proposal to ServiceSource
for the BOS. AR 4746-4863. On November 12, 2013, ServiceSource submitted its
technical and price proposals to NGA. AR 5853-6619. During the course of negotiations
in November and December, ServiceSource submitted additional price proposals. AR
6814-7533. On December 10, 2013, NGA and ServiceSource reached a tentative
agreement on the total, five-year price of the BOS contract: $71 million for the fixed-
price service components of the contract. AR 7536-42. After extensive discussions and
review, the NGA CO determined that ServiceSource was capable of performing the work.
AR 6724-28.
Under the proposal, ServiceSource would perform eight of the 11 categories of
services listed in the PWS. AR 5937. Among these services, ServiceSource identified 56
10
positions as suitable for performance by PWSD, including accounting clerks, service
order dispatchers, and visitor control specialists. AR 983. ServiceSource also described
types of severe disabilities that an individual might possess and still be capable of
successfully performing a particular job function. AR 983-86. For example,
ServiceSource described how a service order dispatcher position could be effectively
performed by a PWSD with paralysis of the sciatic nerve in both legs such that the
individual was unable to work for extended periods of time during the day. AR 985.
For work at the prime contract level, ServiceSource proposed to perform 60
percent—approximately 34 positions—of the direct labor using PWSD, and proposed to
reach that level through an 18-month phase-in period, partly to account for potential
delays in the security clearance process. AR 191. By identifying several positions that
did not require security clearances and were suitable for performance by PWSD, such as
grounds maintenance, ServiceSource committed to begin performance with a 30 percent
direct labor ratio. AR 191. ServiceSource also proposed to rely on escorts while a new
hire’s security investigation was ongoing, consistent with NGA’s historical practice. AR
2568.
For the remaining three categories of services, ServiceSource proposed to
subcontract the work to two subcontractors. For the janitorial services, ServiceSource
proposed CW Resources (“CWR”), another NPA, as the subcontractor. AR 1382. As
with ServiceSource, CWR proposed a 60% direct labor ratio with an 18-month phase-in
period. AR 1386, 2252. For the physical and occupational health nurse services,
ServiceSource proposed STGi International, a provider of occupational health services, as
11
the subcontractor. AR 5937. For the facilities equipment operations and maintenance
services, ServiceSource proposed Exelis, a contractor with expertise in operations and
maintenance, as the subcontractor. Id. These two subcontractors did not propose to use
PWSD.
Shortly after reaching the tentative agreement on price with NGA, SourceAmerica
submitted to CFP the proposal to add the NGA’s BOS to the AbilityOne procurement list,
including ServiceSources’ proposed phase-in plans for hiring PWSD. AR 171 et seq.,
2232-53. SourceAmerica’s proposal on behalf of ServiceSource attached letters of
support from various organizations in the St. Louis area that promote employment
opportunities for wounded warriors and other persons with disabilities, including the
severely disabled. AR 2613-20. ServiceSource also submitted its own detailed, 248-
page technical proposal explaining how it planned to perform the services. AR 730-977.
In February 2014, ServiceSource responded to questions from CFP about the
suitability of adding NGA’s BOS to the procurement list. AR 3260-72, 3274-81. In
March 2014, CFP held a hearing to allow interested parties to make presentations
regarding the proposed addition of the BOS contract to the procurement list. AR 3337-
84. AID, ServiceSource, and NGA each made presentations to CFP about the proposed
addition. AR 3337-84, 7657. Later in March, CFP members and staff toured the
Department of Defense Mark Center in Alexandria, Virginia (“Mark Center”), which was
identified as a facility where ServiceSource employs PWSD to perform services similar
to those performed under the BOS contract. AR 3303. On April 1, 2014, CFP members
and staff conducted a site visit at the NCW NGA facility to get a first-hand understanding
12
of those facilities and to see how the work compared to that performed at the Mark
Center for purposes of determining whether there were barriers to employing PWSD. AR
3303-09.
After this work was completed, the CFP prepared various assessments to assist
CFP members regarding their vote to add or not add the BOS contract to the AbilityOne
procurement list. These assessments included: (1) a review of NGA’s work
requirements, AR 3156-57; (2) SourceAmerica’s recommendation of ServiceSource, AR
3209-11; (3) a review of the potential for the BOS contract to generate employment
opportunities for PWSDs, AR 3212-18; (4) an analysis of ServiceSource’s capability to
perform the BOS contract, AR 3219-23; (5) an analysis of ServiceSource’s qualifications
to participate in the AbilityOne program, AR 3226-27; (6) an analysis of the impact
adding the NCW BOS contract would have on AID, AR 3228-29; (7) a legal review of
the issues bearing on the suitability question, AR 3230-33; (8) a review of NGA’s
security clearance processes and procedures, AR 3301-02; (9) a report on the first-hand
observations garnered by CFP members and staff during the April 1, 2014 visit to NGA,
AR 3303-09; (10) a review of ServiceSource’s proposed phase-in plan for hiring PWSD,
AR 3313-15; (11) a report on the fair market price for performance of the BOS services,
AR 3385-86; and (12) the history of the AbilityOne program and employment of PWSD,
AR 3450-52. Individual recommendations were also prepared by CFP’s Executive
Director, AR 3401-04, and Deputy Executive Director, AR 3388-3400.
Voting by the CFP members began on April 3, 2014, and closed on April 14,
2014. AR 3409; AR 7706. The vote count revealed that the 15 CFP members had
13
unanimously agreed that NGA’s BOS were suitable for addition to the AbilityOne
procurement list and signed memoranda documenting their findings. AR 3413-26, 3433-
46. On April 21, 2014, CFP published a notice in the Federal Register adding the BOS
PWS to the AbilityOne procurement list, effective May 20, 2014. AR 7551; Procurement
List: Additions, 79 Fed. Reg. 22,103 (April 21, 2014).
To begin the transition to the new contractor, ServiceSource, NGA executed an
initial 90-day contract modification to extend AID’s incumbent contract through
September 30, 2014. AR 7692. After this lawsuit was filed in May 2014, NGA
rescinded the 90-day modification, see AR 7656, and instead executed a six-month
extension of AID’s current BOS contract through December 31, 2014. AR 7745. CFP
also suspended the addition of services to the procurement list until November 20, 2014.
Procurement List: Additions and Deletions, 79 Fed. Reg. 28,489 (May 16, 2014)
(suspending effective date until Nov. 20, 2014).
On June 9, 2014, the government sought a remand to CFP to consider certain
issues identified in the litigation. On June 10, 2014, the court granted the government’s
motion. On remand, CFP sought additional information and responses to questions from
ServiceSource with the goal of verifying ServiceSource’s eligibility within the
AbilityOne program. To accomplish this, CFP sent a letter to ServiceSource with 21
separate questions and requests on June 17, 2014. AR 8170.7 On June 20, 2014,
7
Of particular relevance, CFP sought to clarify the accuracy of the statistics submitted by CFP
demonstrating its direct labor ratio and to resolve perceived discrepancies between statements
made by ServiceSource in the proposal and statements made in this case. AR 8170-74.
14
ServiceSource responded to the inquiry and provided additional responses on July 3,
2014 and July 9, 2014.8 CWR, one of ServiceSource’s subcontractors that is also a NPA,
provided additional information to ServiceSource on July 2, 2014 and July 3, 2014,
which was included in ServiceSource’s response to CFP. On July 7, 2014, the Executive
Director of the CFP submitted the responses to the voting members, AR 8608, who
unanimously voted to affirm their prior decision to add the BOS to the AbilityOne
procurement list. AR 8635.
Briefing on the cross-motions for judgment on the administrative record, including
supplemented materials submitted to the CFP on remand, was completed on October 30,
2014 and was followed by an oral argument on November 13, 2014.
II. STANDARD OF REVIEW
The standard of review in bid protest cases is well-established. The court will
uphold an award decision unless it is found to be “arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.” Banknote Corp. of Am., Inc. v.
United States, 365 F.3d 1345, 1350 (Fed. Cir. 2004). To prevail, the protester must
demonstrate that either (1) the agency’s decision was irrational, id. at 1351, or (2) the
agency violated a regulation or procedure in a manner that significantly prejudiced the
protester, Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1358 (Fed. Cir. 2009).
8
Among other responses, ServiceSource affirmed the information that it had submitted in
support of its proposal and offered explanations for the perceived discrepancies. ServiceSource
provided copies of the annual forms submitted to CFP including the direct labor ratio calculation,
verified that it applied the statutory definition of “severely disabled,” stated the difference
between employees and labor hours, offered an explanation for the percentage of wages paid to
PWSD, and claimed to maintain documentation for the PWSD that it employs. AR 8176-8204
15
Where a protester seeks to demonstrate that the award decision was irrational, it must
demonstrate that the agency’s exercise of discretion lacked any “coherent and reasonable
explanation.” Banknote, 365 F.3d at 1351. This standard is “highly deferential,” Weeks
Marine, 575 F.3d at 1368-69, and a plaintiff “bears a heavy burden of showing that the
award decision had no rational basis,” Banknote, 365 F.3d at 1351. Where a rational
basis exists, the court shall not substitute its judgment for that of the agency, “even
though it might, as an original proposition, have reached a different conclusion as to the
proper administration and application of the procurement regulations.” Honeywell, Inc.
v. United States, 870 F.2d 644, 648 (Fed. Cir. 1989).
Where, as here, a question of an agency’s interpretation of a Federal statute is also
at issue, the court will apply a two-step analysis. First, the court will determine “whether
Congress has directly spoken to the precise question at issue.” Corus Staal BV v. United
States, 395 F.3d 1343, 1346 (Fed. Cir. 2005) (quoting Chevron, U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 842-43 (1984)). If the court finds, based
on the plain language of the statute, that “the intent of Congress is clear, that is the end of
the matter.” Id. However, if the court finds that the statute is silent or ambiguous with
respect to the specific issue, the court will proceed to the second step: determining
“whether the agency’s answer is based on a permissible construction of the statute.” Id.
(quoting Chevron, 467 U.S. at 843). In determining whether the agency’s interpretation
is permissible, the court’s “duty is not to weigh the wisdom of, or to resolve any struggle
between, competing views of the public interest, but rather to respect legitimate policy
choices made by the agency in interpreting and applying the statute.” Suramerica de
16
Aleaciones Laminades, C.A. v. United States, 966 F.2d 660, 665 (Fed. Cir. 1992). The
agency’s “interpretation governs in the absence of unambiguous statutory language to the
contrary or unreasonable resolution of language that is ambiguous.” United States v.
Eurodif S.A., 555 U.S. 305, 316 (2009); accord Timken Co. v. United States, 354 F.3d
1334, 1342 (Fed. Cir. 2004) (“[a]ny reasonable construction of the statute is a permissible
construction”).
III. DISCUSSION
As discussed above, plaintiff contends that both CFP and NGA erred in deciding
to add the BOS for NGA’s NCW to the AbilityOne procurement list and in selecting
ServiceSource to perform the work. In response, the government and intervenor argue
that CFP’s decision was lawful and rational and thus must be affirmed. The court will
consider each of plaintiff’s arguments in turn.
A. The Direct Labor Ratio for Determining the Qualification of an
AbilityOne Contractor is Lawfully Calculated at the Agency Level.
The chief legal argument in this case concerns whether CFP erred when it decided
that ServiceSource was “qualified” for AbilityOne work according to the definition of a
NPA set forth in the JWOD Act, which requires an NPA to maintain a direct labor ratio
in which PWSD perform 75% of the direct labor during a given fiscal year. Specifically,
plaintiff argues that CFP is required to calculate this 75% requirement using only the
specific type of service that is listed on the procurement list.9 Plaintiff argues that
9
For example, if CFP were to add “janitorial services” to the procurement list, a NPA seeking to
be assigned by CFP to perform those services must maintain a 75% direct labor ratio for all
“janitorial services” that it performs, regardless of what direct labor ratio it maintains for any
17
because ServiceSource has a phase-in plan that only requires it to reach 60% direct labor
ratio for the BOS work after 18 months, it was not “qualified” under the JWOD Act and
cannot do the work as a matter of law. The government and intervenor argue that
plaintiff’s reading of the JWOD Act is contrary to the plain language of the statute and
that CFP’s reading of the statute is correct. The government and intervenor contend that
the statute requires that the calculation of the direct labor ratio includes ServiceSource’s
agency-wide work hours—under all of its various contracts—to determine whether it
meets the 75% ratio and is therefore “qualified” to participate in the AbilityOne Program
as a whole.
As noted above, under the JWOD Act, a “qualified nonprofit agency” for PWSD
is defined, in relevant part, as an agency
that in the production of products and in the provision of services (whether
or not the products or services are procured under this chapter) during the
fiscal year employs blind or other severely disabled individuals for at least
75 percent of the hours of direct labor required for the production or
provision of the products or services.
41 U.S.C. § 8501(6)(C). Plaintiff argues that this language requires 75% of the direct
labor hours for each procurement list service performed by the agency be performed by
PWSD. According to plaintiff, the use of the term “the . . . services,” in the last sentence
of the provision, demonstrates that the 75% labor ratio applies to the “provision” of all of
the services provided by the nonprofit and thus compliance with § 8501(6)(C) is
measured by calculating the ratio of direct labor by PWSD on each separate services
other services it provides or products it produces. Under this standard, ServiceSource may be
eligible to perform certain contracts but not others.
18
procurement contract. Thus, plaintiff argues, CFP cannot apply the ratio to all of the
work provided by the agency, but instead is limited to considering the particular service
that is to be provided. In this case, as ServiceSource was not previously performed by
ServiceSource, it would be required to demonstrate that it could immediately achieve a
75% direct labor ratio for BOS and could not rely on a phase-in plan. In support of its
interpretation of the JWOD Act, plaintiff refers to CFP’s notice in the Federal Register, in
which it identified “the services” as the BOS to be performed at NGA’s NCW. Plaintiff
further argues that Congress elected not to use the words “all” or “agency-wide” in the
statute, thus making clear that the 75% ratio calculation was not to be done at the agency
level. Plaintiff contends that the more expansive interpretation offered by the
government and defendant-intervenor would permit manipulation of the ratio through
misclassification and subcontracting, thereby creating a loophole allowing for the
performance of large contracts by non-disabled employees on any individual AbilityOne
procurement in contravention of Congressional intent.
In response, the government and defendant-intervenor argue that the plain
language of the statute requires CFP to calculate the 75% labor ratio based on all of the
NPA’s work at the agency-level. Specifically, the government and intervenor contend
that the parenthetical in § 8501(6)(C) states that “whether or not the . . . services are
procured under [the AbilityOne program]” compels a finding in favor of their
interpretation of the statute. According to the government and intervenor, a calculation
that by law can include services not procured under the AbilityOne program to determine
whether an agency is qualified must, by definition, be broader than plaintiff argues. They
19
read “whether or not the . . . services are procured under the [AbilityOne] program” to
mean that Congress wanted to qualify non-profit agencies that could show, taking into
account all of their work hours, that they satisfied the 75% requirement. Under the
government and intervenor’s reading of the Act, ServiceSource was required to
demonstrate—and CFP required to find—that for any fiscal year it met the 75% ratio
taking into account all of the products it produced and services it provided, including the
BOS performed pursuant to the contract at issue here.
The court agrees with the government and intervenor’s reading of § 8501(6)(C) of
the JWOD Act. When interpreting a statute, the court looks first to the language of the
statute to determine whether the meaning is unambiguous. As noted above, if the
meaning is plain, the court need look no further. Here, the court finds that the statute
unambiguously provides for a calculation of the 75% direct labor ratio based on all of the
nonprofit agency’s work. The court finds that the term “the . . . services” used at the end
of § 8501(6)(C) refers to the same “services” used at the beginning of the clause, which
plainly includes plural “services” performed both pursuant to and separately from the
AbilityOne program. Congress’s inclusion of “services” under both AbilityOne and non-
AbilityOne contracts with respect to establishing a ratio only has meaning if the
calculation is to be performed based on all of the work hours performed by PWSD on an
agency-wide level. Plaintiff’s reading of the statute effectively reads a NPA’s non-
AbilityOne work out of this equation. The court will not interpret the statute to make the
parenthetical in § 8501(6)(C) mere surplusage. See Ali v. Fed. Bureau of Prisons, 552
U.S. 214, 237 (2008) (quoting Duncan v. Walker, 533 U.S. 167, 174 (2001)). Plaintiff’s
20
argument that Congress intended to impose a 75% ratio requirement for each separate
AbilityOne service listed simply cannot be reconciled with the plain language of the
statute and is thus rejected.10
Having determined that the statute is unambiguous, the court need proceed no
further. Nevertheless, for the sake of completeness, the court shall consider plaintiff’s
additional arguments regarding the 75% ratio. The court finds from its review of the
legislative history of the JWOD Act that this history supports the government’s reading
of the Act. Plaintiff argues that the JWOD Act was amended in 1971 and 1974 to correct
CFP’s regulations, which authorized the calculation of direct labor across all of the
nonprofit agency’s work, and to instead require CFP to apply the ratio to each service
provided. Plaintiff argues that Congress was specifically responding to the decision in
Ballerina Pen Co. v. Kunzig, 433 F.2d 1204 (D.C. Cir. 1970), which dealt with a contract
that provided only a small percentage of direct labor by PWSD. Specifically, plaintiff
argues that, while Congress adopted much of the language from the CFP’s 1969
regulations allowing for an agency-wide ratio calculation in the 1971 amendment to the
statute, it specifically rejected CFP’s ratio formulation and purposefully omitted the
phrase “all articles” in order to limit the calculation to a per-product or per-service basis.
In support, plaintiff relies on testimony by John F. Nagle, an officer for the National
Federation of the Blind, who argued that the Act should be amended to require a per-
10
Even if the language of the statute were not clear, there is an absence of unambiguous
language contrary to the agency’s interpretation. See Eurodif S.A., 555 U.S. at 316. As a result,
the court would be required to defer to CFP’s interpretation of the statutory requirement.
21
product or per-service calculation, to show that Congress was concerned about the
potential misuse of the AbilityOne program to benefit those without disabilities.
Regarding the 1974 amendment, plaintiff argues that specific statements in the House and
Senate reports reflect Congress’s intent to impose a per-service requirement in
calculating the ratio, although the statutory language at issue in this case was not
amended in that year.
In response, the government and intervenor argue that plaintiff has misread the
import of the 1971 amendments to the JWOD. According to them, Congress amended
the Act in 1971 in order to affirm Congressional support for the 75% agency-wide
calculation after questions about statutory authorization for CFP’s interpretation were
raised in Ballerina Pen. They argue that a review of the 1971 amendments demonstrates
that the amended language is nearly identical to the 1969 CFP regulations, which, in turn,
shows that Congress intended to maintain the agency-level calculation. The government
and intervenor also argue that the testimony of one private citizen does not alter this
showing of Congressional intent. As to the 1974 amendment, they argue that plaintiff’s
argument is misplaced because Congress did not amend the provisions at issue and thus
did not alter the meaning set by the 1971 amendments.
As stated above, the court agrees with the government and intervenor’s reading of
the legislative history. While the language adopted by Congress in 1971 with regard to
the 75% ratio is not identical to CFP’s 1969 regulations, the changes made to CFP’s
language by Congress in the relevant provision did not change the substantive meaning of
22
CFP’s regulation and its use of an agency-wide approach. The 1969 regulations stated
with regard to qualified nonprofit agencies:
which employs blind persons to an extent constituting not less than 75
percent of the total hours of employment during the fiscal year, of all
personnel engaged in the direct labor of manufacturing, assembling, or
handling of all commodities by the agency for the blind (hereinafter
referred to as “workshop”) whether for this program or otherwise.
41 C.F.R. § 51-1.1(b) (1969). The 1971 amendment included the statutory definition:
which in the production of commodities and in the provision of services
(whether or not the commodities or services are procured under this Act)
during the fiscal year employs blind individuals for not less than 75 per
centum of the man-hours of direct labor required for the production or
provision of the commodities or services.
41 U.S.C. § 8501(6)(C) (1971). The statutory language change does not, as plaintiff
argues, evidence an intent by Congress to reverse the meaning of the 1969 regulations.
In 1969, CFP used the inclusive “all commodities” to indicate an agency-level calculation
“whether for this program or otherwise.” In 1971, Congress used the plural
“commodities or services” and clarified that the ratio is based on all “commodities or
services” provided by the agency regardless of whether they were “procured under this
Act.” The result of these approaches is the same: the analysis includes all products
produced under the AbilityOne program and otherwise.11 Thus, an analysis of the two
clauses in both the CFP regulation and the 1971 amendment demonstrates the correctness
11
The 1971 amendments also introduced services to the AbilityOne program.
23
of the government’s reading and does not show an intent by Congress to reverse CFP’s
approach to determining the 75% ratio.12
Regarding the specific effect of Ballerina Pen on Congress’s action, the court is
not persuaded by plaintiff’s argument. First, while the court in that case stated that “[t]he
sole question before us today is whether appellants have standing to challenge the actions
of the Committee and the General Services Administration,” it did go on to discuss other
elements of the case. Ballerina Pen, 433 F.2d at 1206. In these comments, the court did
not criticize CFP’s regulations. The court noted that the direct labor requirement “does
not mean, and was not intended to mean, that blind persons must perform 75% [o]f the
direct labor on each and every particular product produced by the workshops” and went
on to add that “neither the [JWOD] Act nor the regulations specify exactly what
percentage of the contract must represent blind labor.” Id. at 1212. While the court
noted that it had been alleged that only 14% of the labor for producing the pens at issue
was done by blind labor, it did not offer an opinion on whether such a ratio would violate
the JWOD Act. See id.
Further, nothing in the 1974 JWOD amendments alters the court’s conclusion that
Congress did not intend to change CFP’s approach to the 75% requirement. In 1974,
Congress made several additional amendments to the JWOD Act. While most of these
12
Plaintiff also argues that CFP’s post-1971 revision of the CFP regulations provides further
evidence that the pre-amendment regulations were incompatible with the amendment. However,
the 1971 amendments made major changes to the AbilityOne program unrelated to the direct
labor ratio calculation, as well. Thus, the fact that an overhaul of the regulations was required
has no bearing on whether Congress had overruled CFP’s prior regulations with regard to that
individual aspect.
24
amendments were minor and unrelated to the issue in this case, Congress added the
definition of direct labor now codified at 41 U.S.C. § 8501(3). This definition specified
that direct labor “includes all work required for preparation, processing, and packing of a
product, or work directly relating to the performance of a service; but does not include
supervision, administration, inspection, or shipping.” Pub. L. 93-359, 88 Stat. 392
(1974). While plaintiff argues that this amendment and other statements made as part of
the Senate report indicate that Congress interpreted the requirement to ensure that the
75% ratio be met on a per-service level and intended the 1974 amendments to clarify this
meaning, the court agrees with the government that the amendments did not change the
language regarding the ratio calculation. Direct labor is an element of the ratio
calculation in that it is what the ratio measured, but the specific definition of direct labor
has no bearing on whether the calculation to determine the ratio is done at the agency-
wide or specific-service level.13
The court has also considered and rejects plaintiff’s contention that its reading of
the Act should be adopted as the reading most consistent with CFP’s historic application
of the 75% ratio. Plaintiff argues that, following the 1971 amendments and until
recently, CFP had demanded that the 75% ratio be applied to each individual AbilityOne
project. In support, plaintiff contrasts the June 29, 2007 Committee Staff Nonprofit
13
Plaintiff also argues that statements made by committee members as part of the enactment of
the 1974 amendments provide evidence into the intent behind the 1971 amendments. However,
while these members may have been involved in the earlier passage of the 1971 amendments,
“[p]ost-enactment legislative history (a contradiction in terms) is not a legitimate tool of
statutory interpretation.” Bruesewitz v. Wyeth LLC, 562 U.S. 223, ---, 131 S.Ct. 1068, 1082
(2011) (citing Jones v. United States, 526 U.S. 227, 238 (1999); United States v. Mine Workers,
330 U.S. 258, 281-282 (1947).
25
Agency Review Manual (“Manual”) with later statements of Executive Committee
member Lou Bartalot (“Mr. Bartalot”). With regard to an agency’s overall ratio, the CFP
Manual states that “[i]t is always important to emphasize the imperative of meeting the
75% direct labor ratio, and that it applies to the total work being done by the nonprofit
agency.” AR 8419. With regard to AbilityOne projects themselves, the Manual states
the “[CFP] policy directs that at least 75% of the direct labor hours performed on the
aggregate of AbilityOne work should be done by people who are blind or severely
disabled. However, the ratio on individual AbilityOne projects must be no lower than
60%. . . . This policy is not as inflexible as the 75% overall direct labor ratio
requirement.” Id.14 Plaintiff contrasts this with statements made during a CFP meeting
on April 24, 2012. First, plaintiff refers to the following exchange:
Tina Ballard: What I was asking is on the projects are we required to have
75% of the people have significant disabilities and I understood the answer
to be no.
Jim Omvig: That’s right.
Tina Ballard: So, if he does not have to have 75% on the project, then on
that project can he do the jobs on the range without hiring any people with
significant disabilities and maintain his overall 75% ratio.
Lou Bartalot: Well!
Jim Omvig: So, we understood right.
14
Plaintiff argues that these statements are internally inconsistent, but that they nevertheless have
the net effect of requiring a 75% per-service requirement. As the sections address overall and
individual project requirements as separate calculations, the court finds them to be internally
consistent and in accordance with the statutory language regarding the 75% ratio in determining
whether an agency is “qualified.”
26
Lou Bartalot: The answer is technically yes, but we don’t require and we
don’t allow anybody to have a project added to the Procurement List that
isn’t going to provide jobs to people who are blind or severely disabled.
Tina Ballard: But, technically the answer is yes. We still drive them to
accomplish the mission of the Program on every project, is the answer.
Lou Bartalot: Well, I disagree the answer is technically yes . . . .
Tina Ballard: You just said it was.
Lou Bartalot: No, if you simply read the regs, yes. But, we don’t allow
anybody to do that. So technically, they can’t do it because we wouldn’t
allow them to do it.
AR 2530-31. Second, plaintiff refers to Mr. Bartalot’s statement that
I think in part yes, I mean we have a history, I did look. At least back as far
as 1982, I can find records where [CFP] had a policy that you needed a
phase-in plan if you started at less than 50%, and back in 1982 the
assumption was that every project would get to 75%. So, even back then
we were allowing projects that started below that 50%.
AR 2532. Plaintiff argues that these materials, read together, demonstrate both that CFP
has historically required that 75% of direct labor for each AbilityOne project be
performed by PWSD and that it has now changed its interpretation to reflect the agency-
wide level approach it used in this case.
In response, the government argues that CFP has consistently applied the 75%
requirement for determining whether an agency is qualified. The government notes that a
review of CFP guidance demonstrates that Congress has set a strict 75% agency-level
requirement for determining whether an agency is “qualified,” and CFP has set an
aspirational 75% per-service project objective, with a 60% regulatory requirement. The
government contends that, as the statute does not set or forbid establishing a labor ratio
27
for services listed on the AbilityOne list, CFP is free to set and enforce its own
requirement, presumably by removing a service from the procurement list if the nonprofit
agency fails to achieve the desired number of hours for PWSD following a phase-in
period.
The court agrees with the government and finds no inconsistency in CFP’s policies
over the relevant period. CFP has always required that agencies meet a 75% ratio at the
agency level to be “qualified.” It is clear to the court that the statements by Mr. Bartalot
relied on by plaintiff do not address the 75% “qualification” requirement for nonprofit
agencies, but rather the suitability requirement of providing employment for PWSD. The
second comment addresses the history of CFP’s phase-in procedures, which at best only
indirectly affect a nonprofit’s eligibility as a qualified nonprofit based on the agency’s
agency-level ratio. The first comment addresses the hypothetical possibility that an
agency could be awarded an AbilityOne work while proposing to hire no PWSD, so long
as it did not cause the NPA’s agency-level ratio to fall below 75%. A hypothetical
concern does not allow the court to turn the “qualification” requirement for any
individual NPA into a substantive requirement for each individual AbilityOne project.
Indeed, Mr. Bartalot acknowledged that CFP would not make such an award to a NPA
that did not intend to hire any PWSD because the project would fail to provide potential
employment to PWSD and therefore would not be “suitable” for addition to the
procurement list under other regulatory requirements. This is consistent with the court’s
understanding of the interplay between the various elements of the regulatory suitability
requirements, and is in accordance with the court’s interpretation of the statutory
28
eligibility or qualification requirements for NPAs seeking work under the AbilityOne
program.
Next, the court rejects plaintiff’s contention that its reading of the statutory 75%
requirement as applying on an agency-wide basis is inconsistent with all other courts to
consider this issue. Plaintiff argues that the United States Court of Appeals for the
District of Columbia rejected CFP’s use of an agency-level approach to meeting the 75%
ratio in McGregor Printing Corp. v. Kemp, 20 F.3d 1188 (D.C. Cir. 1994). According to
plaintiff, the court in that case was dismissive of the ratio argument, finding that CFP’s
own regulation focused on the generation of employment opportunities for each product
added to the procurement list. Plaintiff also cited HLI Lordship Industries, Inc. v.
Commission For Purchase from the Blind and Other Severely Handicapped, 791 F.2d
1136 (4th Cir. 1986), arguing that it demonstrated a similar rejection of CFP’s approach
here. In response, the government argues that neither court actually addressed the ratio
calculation, but dealt instead with other suitability issues. As a result, the government
argues that no court that has considered the issue has found that an eligibility or
qualification determination for a nonprofit agency based on an agency-level calculation
to be incorrect.
The court has reviewed the cases identified by plaintiff and agrees with the
government that none have addressed the question of whether CFP may use an agency-
level calculation to determine eligibility. In McGregor, it is clear that the court was
addressing the related—but distinct—questions of whether the nonprofit agency had the
capability to produce the product in question and whether adding the product to the
29
procurement list would create employment opportunities for PWSD. McGregor, 20 F.3d
at 1195. The court found that CFP’s suitability analysis in that case was lacking because
“[t]here is nothing in the record to support [CFP’s] apparent conclusion that blind people
could do the work . . . described” and that CFP “never analyzed the . . . production
process or the experience of [the NPA] in producing similar products.” Id. The phrase
“focuses on the employment opportunities” in the decision makes it clear that the parties
were not disagreeing over whether the subject NPA was eligible or “qualified” to perform
the work—instead, the focus of the court was on other prongs of the suitability analysis
involved in adding the product to the procurement list. Id. As a result, the court finds
plaintiff’s reliance on McGregor regarding CFP’s ratio calculation to be misplaced.
Similarly, in HLI Lordship, the court did not reach the question of the direct labor
ratio calculation, but rather overturned CFP’s addition to the procurement list based on
CFP’s failure to provide a sufficient explanation of its reasoning. HLI Lordship, 791
F.2d at 1141. While noting that CFP was not required to provide an exhaustive
explanation, the court found that CFP provided virtually no explanation for its decision.
Id. (quoting State of S.C. ex. rel. Tindal v. Block, 717 F.2d 874, 886 (4th Cir. 1983)).
There is no dispute in this case that CFP documented its decision and provided specific
reasoning.
Finally, the court also rejects plaintiff’s policy argument that without imposing a
75% ratio for each AbilityOne service listed, the AbilityOne program can be used as a
subterfuge for keeping contracts out of the competitive process and providing work to
persons without disabilities. According to plaintiff, because services listed on the
30
AbilityOne procurement list must be performed by a NPA set by CFP and will not be
competitively bid, federal agencies may turn to the AbilityOne program knowing that
much of the work can be performed by persons without PWSD through manipulation of
the direct labor ratio and subcontracting. Plaintiff argues that Congress has identified
these policy issues as a problem and that the statute must be interpreted to make sure that
the purposes of the AbilityOne program—namely, to benefit the blind and PWSD—are
being met.
The court agrees that the plaintiff has identified legitimate policy concerns.15
However, contrary to plaintiff’s assertions, the court finds that these policy concerns do
not compel plaintiff’s reading of the statute, but rather raise concerns that may be
addressed by Congress in the future. Moreover, as the government argues, these policy
concerns are effectively addressed in the Act and by CFP in other ways. First, CFP is
required to perform periodic compliance checks of the nonprofits to ensure that they are
meeting the ratio and other statutory requirements, 41 C.F.R. § 51-2.2(d), and CFP can
change their award or remove an item from the procurement list if it finds that an agency
is not acting in accordance with statutory and regulatory requirements, 41 U.S.C §
8503(a)(2). Second, and perhaps more importantly, CFP may only add a project to the
AbilityOne procurement list if it finds that the project will provide legitimate
employment opportunities for PWSD. 41 C.F.R. § 51-2.4(a)(1). Such a finding may be
15
Plaintiff has provided materials from investigations by the Government Accountability Office
and law review articles indicating concerns about the AbilityOne program generally. The
conclusions contained in these materials, which are unrelated to this case, are undisputed here.
31
challenged at two stages: following the addition of the services to the Federal Register
and, as here, in court with a bid protest. As a result, CFP cannot lawfully use the
AbilityOne procurement list as a means of aiding federal agencies seeking merely to
avoid competition. As discussed in greater detail below, CFP—in this case and in
others—is required to justify its decision regarding opportunities for PWSD. See, e.g.,
HLI Lordship, 791 F.2d at 1141 (finding that CFP did not adequately justify its decision).
If a project will not provide such opportunities it will either not be added to the list or if
successfully challenged the work will be removed from the AbilityOne procurement list.
In sum, for all of the above-stated reasons, the court finds that CFP’s reliance on
all of ServiceSource’s agency-wide work to find that they were “qualified” and thus
eligible to participate in the AbilityOne program was consistent with the statute and was
not in violation of the law or any CFP regulation.16
B. CFP Rationally Determined That the Contract Is Suitable for Addition
to the Procurement List.
Plaintiff next challenges CFP’s suitability determination, which found that the
BOS could be added to the procurement list. Under the committee’s regulations,
For a commodity or service to be suitable for addition to the Procurement
List, each of the following criteria must be satisfied:
16
While the court has determined that CFP’s conclusion that the 75% ratio is met by looking at
all of the agency’s work is compelled by the plain language of the JWOD Act, the court further
finds that, even if the statute were ambiguous, CFP has reasonably interpreted the subject statute
regarding the 75% ratio and thus its interpretation is entitled to deference for the reasons set forth
above. Timken Co. v. United States, 354 F.3d at 1342 (“[a]ny reasonable construction of the
statute is a permissible construction”).
32
(1) Employment potential. The proposed addition must demonstrate a
potential to generate employment for persons who are blind or have
other severe disabilities.
(2) Nonprofit agency qualifications. The nonprofit agency (or agencies)
proposing to furnish the item must qualify as a nonprofit agency serving
persons who are blind or have other severe disabilities, as set forth in
part 51-4 of this chapter.
(3) Capability. The nonprofit agency (or agencies) desiring to furnish a
commodity or service under the JWOD Program must satisfy the
Committee as to the extent of the labor operations to be performed and
that it will have the capability to meet Government quality standards
and delivery schedules by the time it assumes responsibility for
supplying the Government.
(4) Level of impact on the current contractor for the commodity or service.
i. In deciding whether or not a proposed addition to the
Procurement List is likely to have a severe adverse impact on the
current contractor for the specific commodity or service, the
Committee gives particular attention to:
A. The possible impact on the contractor’s total sales,
including the sales of affiliated companies and parent
corporations. In addition, the Committee considers the
effects of previous Committee actions.
B. Whether that contractor has been a continuous supplier to
the Government of the specific commodity or service
proposed for addition and is, therefore, more dependent on
the income from such sales to the Government.
ii. If there is not a current contract for the commodity or service
being proposed for addition to the Procurement List, the
Committee may consider the most recent contractor to furnish the
item to the Government as the current contractor for the purpose
of determining the level of impact.
41 C.F.R. § 51-2.4(a). Plaintiff challenges CFP’s determination of all four of these
elements: (1) the potential for the BOS contract to generate employment for PWSD, (2)
33
ServiceSource’s capability to perform the BOS contract, (3) ServiceSource’s eligibility to
be an AbilityOne NPA, and (4) the impact on AID. In response, the government argues
that CFP’s determinations were rational based on the record. Each of these issues is
discussed, in turn, below.
i. CFP Rationally Found that the BOS Contract Had the Potential
to Generate Employment for PWSD.
First, plaintiff argues that the record does not support a determination that adding
the BOS to the procurement list will generate additional employment for PWSD.
According to plaintiff, the record does not identify any qualified and unemployed PWSD
with a TS/SCI clearance or the ability to obtain one living in the vicinity of the NCW.
Further, plaintiff argues that the extended phase-in period is contrary to law. Plaintiff
relies on Systems Application & Technology, Inc. v. United States, 107 Fed. Cl. 795
(2012), for the proposition that the burden is on the NPA to demonstrate that there are
sufficient jobs that may be performed by PWSD, and that a promise to reach 60% PWSD
labor within three years is not sufficient to satisfy the regulatory standard. Relying on the
total numbers of contract positions, AID argues that ServiceSource will only be able to
fill one-third of the contract positions with PWSD. Of those positions, plaintiff argues
that the potential workers discussed in the proposal do not all fit the statutory definition
of a PWSD. Additionally, plaintiff argues that CFP lacked sufficient information to
determine that there were sufficient PWSD in the St. Louis area, that PWSD could
perform the work at issue, and that PWSD could obtain the TS/SCI clearance required to
perform some of the positions.
34
In response, the government argues that CFP was not required to find that
employment was guaranteed for PWSD, but rather merely must find that there was a
demonstrated potential to generate employment. According to the government, CFP
rationally determined that such a potential existed and supported this finding with record
evidence. The government notes that CFP found that the proposed contract would
provide employment for between 47 and 51 PWSD, that ServiceSource has relevant
experience in hiring PWSD, and that ServiceSource has a hiring plan well-suited to this
project. The government argues that CFP found that ServiceSource has created a team of
human resources specialists to assist in staffing its contract locations, and that
ServiceSource’s track record demonstrates that ServiceSource has had success using this
approach in the past under previous contracts. The government further contends that CFP
found that ServiceSource’s hiring plan identified a variety of state and local vocational
rehabilitation agencies, other NPAs, and veteran organizations with which to create a
referral network. Regarding the allegation that only one-third of the positions will be
filled with PWSD, the government argues that plaintiff’s argument conflates the total
number of contract positions—which is not part of any calculation—with the total
number of direct labor hours that will be performed—which is used to determine the ratio
discussed above. Regarding the phase-in plan, the government argues that CFP policy
authorizes phase-in plans, as well as the subcontracting of work to other NPAs, and that
CFP found that the phase-in plan would not cause ServiceSource to fall below the 75%
direct labor requirement for the fiscal year. Regarding security clearances, the
government argues that CFP found that physical disabilities are not considered when
35
obtaining TS/SCI clearance and that mental disabilities are not a bar to obtaining such a
clearance. Additionally, the government argues that services similar to the BOS have
been performed under the AbilityOne program before, including multiple ServiceSource
contracts. Finally, the government argues that plaintiff’s reliance on Systems Application
is misplaced, because Systems Application is factually distinguishable from the present
case.
The court finds that CFP’s determination regarding the potential to generate
employment for PWSD was rational and therefore must be upheld. The regulations
governing the addition of services to the procurement list state that “[t]he proposed
addition must demonstrate a potential to generate employment for persons who are blind
or have other severe disabilities.” 41 C.F.R. § 51-2.4(a)(1). This language clearly
requires only that CFP determine the “potential” to generate employment rather than a
guarantee of employment. Id. Based on the record, it is clear that CFP considered a
significant amount of evidence in making its determination regarding the potential of the
BOS work to generate opportunities for PWSD. This evidence, as discussed below,
included demographic information about the surrounding area, letters from state and local
organizations that had offered to assist ServiceSource in locating qualified PWSD, and a
specific hiring plan. Accordingly, CFP properly relied on historical information and
ServiceSource’s proposed plans in making its determination.
Further, it is clear that CFP appropriately differentiated between the total positions
created for PWSD and the direct labor hours that would be performed by PWSD. The
contract identifies a total staff of 153.66, of which ServiceSource has identified 56
36
positions that may be performed by PWSD. Plaintiff argues that, using these figures, it is
impossible for ServiceSource to reach the 75% statutory requirement even under the
CFP's reading of the Act.17
The government argues that plaintiff is conflating the total staff with the total
hours of direct labor. According to the government, direct labor hours are taken into
account for the eligibility calculation, while the number of positions is considered as part
of the employment potential determination and the latter does not involve the 75%
statutory threshold. The court agrees with the government that the potential employment
determination does not involve the 75% statutory requirement. CFP has wide discretion
under the regulations to determine whether the work will provide potential employment
for PWSD. See 41 C.F.R. § 51-2.4(a). This flexibility allows the AbilityOne program to
include projects both large and small in deciding whether a project will generate
employment for PWSD. In this case, CFP was presented with ServiceSource’s estimate
that it hoped to employ PWSD for around 45 out of 153.66 positions.18 Based on
compliance reviews of ServiceSource showing that it was able to achieve its PWSD
17
To the extent that plaintiff argues that ServiceSource applied an improperly overbroad
definition of “severely disabled,” plaintiff has not identified any instance where ServiceSource
actually proposed hiring non-PWSD as PWSD. While the record indicates that ServiceSource
stated that it would seek, among other groups, to hire disabled veterans, who do not necessarily
meet the statutory definition of PWSD, it also indicates that ServiceSource will seek to hire
disabled veterans who meet the statutory definition. Further, based on the positive compliance
reviews that it had recently performed on ServiceSource, it was reasonable for CFP to determine
that ServiceSource would staff the project with PWSD who met the statutory definition.
18
The government and intervenor argue that NPAs do not always have the resources to conduct
the full-scale search that would be required to guarantee PWSD employment, and it would be
burdensome to require NPAs to do so before receiving a contract. This burden is undisputed by
plaintiff.
37
staffing goals on other projects, the court finds that it was rational for CFP to accept and
rely on this estimate. Indeed, CFP found that ServiceSource has operated for 37 years
with an agency-level ratio above 76% and frequently rose above 80%, including an
87.2% rating for Fiscal Year 2013, AR 3313.
Regarding the availability of PWSD in the St. Louis area specifically, CFP
rationally found that “information submitted by ServiceSource . . . demonstrates the
demographic data and sufficient numbers of potentially qualifying individuals in the St.
Louis and Arnold, MO areas.” AR 2611-12, 2654-67, 3213. This, coupled with
ServiceSource’s plan to work with organizations now supporting PWSD in the St. Louis
area was sufficient to support the CFP’s finding that the BOS contract had the potential to
generate employment for PWSD. Further, the court finds that CFP rationally found that
it was possible for PWSD to obtain the required clearances for work on the BOS contract.
ServiceSource’s demonstrated record of obtaining clearances for PWSD and staffing
contracts requiring such clearances was well-supported. The record showed that
ServiceSource had successfully processed 147 out of 150 security clearances for work on
previous contracts, including 21 top secret clearances. AR 2610-11. The CFP therefore
reasonably concluded that the need for security clearances to work at the St. Louis
facility would not be a barrier to finding potential employment for PWSD.
In this connection, the court finds, contrary to plaintiff’s contentions, that the
decision in Systems Application setting aside an AbilityOne contract is plainly
distinguishable from this case. In that case, the services which PWSD would be hired to
perform carried a “risk of encountering unexploded ordinance” and included “disposal of
38
any hazardous and toxic waste” at an Army “live fire range . . . in a remote desert area”
that was inaccessible by public transportation. Systems Application, 107 Fed. Cl. at 797.
Employees would be required to be available 24 hours a day. Id. Additionally, the
proposed AbilityOne contractor in that case, Skookum, did not have any experience with
the type of work that would be performed, and “ma[de] no attempt to explain how
particular direct labor positions or tasks at the ranges could be done by the severely
disabled.” Id. at 805-08. Moreover, “Army personnel . . . expressed reservations about
any . . . AbilityOne contractor being able to successfully meet all the contract
requirements.” Id. at 807; see also id. at 808.
In this case, in contrast, the services will be performed during regular business
hours19 and the location is accessible by public transportation. Further, CFP found that
ServiceSource has performed and is currently performing similar work at other locations,
AR 3303-09, and has described in detail how the particular direct labor positions could be
performed by PWSD, AR 983-86. Finally, NGA has not expressed reservations about the
ability of ServiceSource to perform the work, as the agency did in Systems Applications.
Therefore, the court finds that Systems Application is distinguishable from the present
case. For all of these reasons, the court finds that the CFP’s conclusion that there is the
“potential” to generate work for PWSD is rationally supported.
ii. CFP Rationally Determined that ServiceSource Is Capable of
Performing the BOS Contract.
19
Some services will be performed outside of those hours, but these will not necessarily be
performed by PWSD.
39
Second, plaintiff argues that the record does not support CFP’s determination that
ServiceSource was capable of performing the work required by the contract. Plaintiff
argues that ServiceSource lacks this capability for three reasons: (1) that it does not have
a ready workforce and plans to hire the incumbent’s workforce, (2) that it plans to
subcontract work for which it lacks expertise, and (3) that it cannot be ready to perform at
the end of the three-month transition period provided for under the contract.
Additionally, plaintiff challenges CFP’s determination CFP has had prior experience that
is similar to the contract at issue here. Relying on these factors, plaintiff contends that
CFP should have found that ServiceSource lacked the capability to perform the contract
and thus it should not have been added to the AbilityOne list.
In response, the government argues that (1) CFP rationally found that
ServiceSource could properly staff the project, (2) ServiceSource is permitted to
subcontract work under the applicable regulations and thus ServiceSource’s reliance on
subcontractors for some work was not improper, and finally (3) there are sufficient
safeguards in the proposed contract to avoid potential issues with regard to the transition,
NGA may extend the plaintiff’s incumbent contract for six months and provide additional
time if necessary to allow for a smooth transition.
The court finds that CFP’s determination regarding ServiceSource’s capability to
perform the BOS required by the contract was rational. While plaintiff disagrees with
CFP’s conclusions, it has not demonstrated that the determination was arbitrary,
capricious, or contrary to law. Regarding a ready workforce, CFP properly considered
the hiring plan submitted by ServiceSource, including both the proposed strategy and the
40
personnel expertise used by ServiceSource and rationally determined that it was
acceptable. AR 3212-13; see also AR 2610. This included specific demographic
information about the region showing that potential employees existed, AR 2611-12,
2651-65, 3213, and letters submitted by five local and state rehabilitation agencies stating
that they would assist ServiceSource in identifying potential employees, AR 2613-20.
Further, plaintiff has not provided any reason to find that the proposed plan would not be
possible, and the court is unaware of any evidence in the record that raises significant
doubts. To the contrary, the record in this case includes information submitted by
ServiceSource detailing past successes with similar work together with evidence of the
preliminary steps it had taken to find PWSD to meet the needs of the BOS contract.20
The court finds that this evidence is enough to find the CFP decision to be rational on this
issue.
Regarding the permissibility of subcontracting, the plaintiff’s objections are also
unsupported. The regulations provide, in relevant part, that
[NPAs] may subcontract a portion of the process for producing a
commodity or providing a service on the Procurement List provided that
the portion of the process retained by the prime nonprofit agency generates
20
Plaintiff also argues that ServiceSource’s plan to hire incumbent employees demonstrates that
they are unable to properly staff the contract independently. However, there is no prohibition on
such a practice, and it is not clear how a plan to hire certain employees demonstrates that
ServiceSource would be unable to hire employees with PWSD for other jobs. To the extent that
plaintiff seeks to analogize this plan to the plan criticized in Systems Application, the court finds
that the circumstances are factually distinct. In that case, the court’s specific concern with such a
plan was that it appeared that the NPA, Skookum, would seek to reclassify the incumbent
employees as severely disabled in order to reach its goals, which would be contrary to the
statutory definition of “severely disabled.” 107 Fed. Cl. at 806. In this case, ServiceSource has a
specific plan to hire the required number of PWSD separate from its plan to hire incumbent
employees.
41
employment for persons who are blind or have other severe disabilities.
Subcontracting intended to be a routine part of the production of a
commodity or provision of a service shall be identified to the Committee at
the time the commodity or service is proposed for addition to the
Procurement List and any significant changes in the extent of
subcontracting must be approved in advance by the Committee.
41 C.F.R. § 51-4.4(c). Additionally, the regulations allow even greater subcontracting
with specific CFP approval. Id. at § 51-4.4(d). It is undisputed that the use of
subcontractors in this case was identified to CFP and approved. Plaintiff argues,
however, that the subcontracting to be performed under ServiceSource’s proposal violate
these regulations because it includes subcontracting for all of the Annex 8 Operations and
Maintenance Services and Annex 5 Occupational Health Nurse Services. According to
plaintiff, each of the 11 services to be performed as part of the BOS contract separately
constitutes a service under the meaning of the regulation, thereby requiring that it be
performed at least in part by ServiceSource. See Procurement List: Additions, 79 Fed.
Reg. 22,103 (April 21, 2014) (adding the BOS as one complete “service”). While
plaintiff characterizes ServiceSource as subcontracting out “all” of certain services, in
fact those services are part of an overall services contract involving 11 separate service
categories. Indeed, the overall service that CFP added to the procurement list is BOS as a
whole, not 11 individual additions. The court agrees with the government that
subcontracting out a portion of the overall services with CFP’s approval is permitted by
the regulations and does not provide a basis for overturning the CFP decision.
Regarding plaintiff’s objections to the transition period, the court finds that
plaintiff’s arguments are without merit. First, to the extent the plaintiff argues that the
42
use of a transition period is, in and of itself, contrary to law as it permits the NPA to
operate at a lower direct labor ratio than required by the JWOD Act, the court rejects the
argument. As discussed above, plaintiff’s argument is based on its misreading of the
75% requirement. In fact, CFP policy explicitly permits the use of phase-in plans and
only requires that contractors achieve and maintain a 60% direct labor ratio on a
particular project by the end of the phase-in period.21 AR 3173-80, 3221. In this case,
CFP rationally relied on ServiceSource’s history of meeting phase-in deadlines in other
situations to find that using a phase-in plan for this contract would not cause
ServiceSource’s direct labor ratio to fall below the agency-wide 75% level. AR 3227,
3313-15.
Next, the court also rejects plaintiff’s challenge to CFP’s conclusion that
ServiceSource can perform even though it may need assistance from NGA to provide for
a smooth transition, including providing escorts for uncleared personnel. According to
plaintiff, such a reliance assumes that NGA will be willing to assist ServiceSource and, if
it does not, will result in the inability for the NPA to perform. In this connection,
plaintiff’s arguments regarding CFP’s findings on ServiceSource’s ability to obtain
security clearances is not supported by the record. CFP noted that clearances for all
personnel will not be required on the first day of the contract, and further that it had no
reason to doubt ServiceSource’s ability to obtain clearances in that ServiceSource had, as
21
In this context, the court notes that ServiceSource’s proposal set an ultimate goal of an 80%
direct labor ratio following the phase-in period.
43
discussed above, successfully obtained 147 out of 150 previous clearances, including 21
top secret clearances.22 AR 3156, 3301-02.
Finally, the court must reject plaintiff’s challenge to the CFP’s conclusion that the
ability of PWSD to perform work at the Mark Center supported a finding that
ServiceSource could also perform the NGA contract with PWSD. Regardless of whether
the work for NGA will require more personnel to obtain security clearances, CFP
rationally concluded that the actual work itself at both facilities appears to be quite
similar in several categories and can be performed by PWSD. The record indicates that
“[m]embers of the Commission and Commission staff knowledgeable with the
capabilities of people with significant disabilities . . . toured both the Mark Center and the
[NCW] BOS campuses,” before reaching these conclusions. AR 3222; see also AR 3303.
The record reflects that among those who toured the facilities was a CFP member who
“uses a white cane for mobility and has over 40 years’ experience in rehabilitation
services for [PWSD].” AR 3304. Another CFP member who toured both facilities uses a
walking cane and motorized scooter and served on the board which determined the
minimum standards for public space ability under the Americans with Disabilities Act.
22
Plaintiff implies that it will be more difficult for PWSD to obtain security clearances.
However, there is no evidence for such a proposition. CFP consulted NGA’s Personnel Security
Division in order to obtain specific information about the process TS/SCI security clearance. AR
3302. CFP found that a physical disability is not a factor that is considered during the process of
obtaining clearance and that, while emotional, mental, and/or personality disorders are
considered during the process, there is no blanket denial for such individuals. Id. In fact, many
of the 21 top secret clearances previously obtained by ServiceSource for PWSD involved
individuals with intellectual disabilities or mental health issues. AR 2611. As a result, the
information before CFP reflecting past experience with security clearances was properly
considered regardless of whether the person obtaining said clearance was severely disabled or
not.
44
AR 3305-06. After touring both facilities, the group found that “the NGA West BOS
Service appears to be an ideally suitable opportunity for employment for the AbilityOne
workforce, with upward mobility potential.” AR 3308. The court has been given no
reason to second guess their conclusions here, and finds that it was rational for CFP to
rely on those conclusions.
Importantly, in upholding the CFP’s conclusion that ServiceSource can perform
the work, the court is not suggesting that ServiceSource will not suffer serious
repercussions if it later fails to be able to perform the work, either by failing to meet the
employment goals and estimates for PWSD relied on by CFP, by failing to properly
perform the services contracted, or for any other reason. Instead, the statute and
regulations permit CFP to maintain the procurement list to ensure that services are
properly provided. Under the regulations, CFP is required to monitor NPAs as they
perform the contracts on the procurement list, 41 C.F.R. § 51-2.2(d), and may, in its
discretion, re-assign contracts or remove contracts from the list entirely if it finds that the
NPA’s performance is not satisfactory, 41 U.S.C § 8503(a)(2). As a result, should
plaintiff’s concerns regarding the likelihood of generating employment for PWSD turn
out to be correct or if PWSD cannot perform the work, the existing regulatory structure
provides sufficient recourse for correcting the AbilityOne list.
iii. CFP Rationally Concluded that ServiceSource is Eligible to
Participate in the AbilityOne Program.
Third, plaintiff argues that ServiceSource is not eligible for AbilityOne work
because: (1) ServiceSource is not operated in the interest of PWSD, as required by the
45
JWOD Act, and (2) ServiceSource violates the 75% statutory requirement (even under
CFP's reading of the JWOD). According to plaintiff, ServiceSource’s financial
information for Fiscal Year 2013 shows that 15% of the total sales revenue it received
was paid as wages to PWSD, which plaintiff argues demonstrates that the NPA is not
actually operated in the interest of PWSD. Plaintiff further argues that ServiceSource’s
high PWSD employment ratios for direct labor agency-wide are created through the
manipulation of position labelling. According to plaintiff, ServiceSource is able to
achieve these ratios by only characterizing positions suitable for PWSD as “direct labor”
positions and categorizing all other positions as “indirect” regardless of whether the labor
is direct or not in order to skew the ratios in its favor. Plaintiff particularly refers to a
truck driver position performed at the Mark Center, which was categorized as “indirect,”
as an example of such selective labelling.
In response, the government and intervenor argue that there is no evidence to
support plaintiff’s contentions. They argue that the percentage of wages paid does not
reflect other benefits provided and costs incurred as part of running a NPA. Additionally,
they argue that the rate of payment for PWSD and the number of employees on each
contract is irrelevant to the eligibility determination and thus regardless of whether only
15% of revenues goes to PWSD, if they make up 75% of the direct labor hours, agency-
wide, ServiceSource is eligible. The government further argues that the most recent
compliance reviews of ServiceSource was positive and did not raise any concerns about
ServiceSource’s position-labelling practices.
46
The court finds that the record supports CFP’s conclusion that ServiceSource is a
qualified NPA under the terms of the JWOD Act. In making its determination, CFP
relied on a recent “comprehensive compliance review of ServiceSource” that had “found
them to have an outstanding rating.” AR 3214. While this review was conducted in
2011, there does not appear to be any requirement that an NPA be reviewed during every
procurement process. Indeed, as plaintiff notes in its motion, CFP sets an annual goal of
conducting on-site reviews for 20% of NPAs. AR 3665, 3669-70. Additionally, a NPA
also submits an annual report, known as Form 404, which details its eligibility statistics.
ServiceSource filed four such forms in 2013, one for each of its businesses. AR 8206-13.
The court has been given no basis for questioning the accuracy of those forms. After this
case was filed, the court granted the government’s motion to remand the matter to CFP to
confirm whether or not ServiceSource was eligibile under the JWOD Act. Following the
remand, CFP sent ServiceSource a letter with 21 questions seeking additional information
and clarifications. AR 8170-74. Chief among these were requests to verify the
information contained in the submitted Form 404. Id. CFP asked questions regarding the
categorization of services as direct or indirect, questions regarding verification of
disability status, questions regarding the percentage of wages paid by ServiceSource to
severely disabled employees, and a request for clarification regarding the specific entity
within ServiceSource that would be performing the services. Id. ServiceSource provided
comments and documents in response, after which CFP reaffirmed its original findings.
AR8176-8204, 8608. In its response, ServiceSource affirmed that the forms it had
submitted were accurate and that it applied the statutory definition of “severely disabled”
47
when determining whether employees qualified for such a designation.23 AR 8176.
SourceAmerica had also raised specific questions regarding the disability status of two
individuals shown in photos provided to CFP. ServiceSource confirmed that these
individuals qualified as PWSD and stated that it kept the required records of each
employee’s disability status and that severe disabilities are not necessarily obvious from
an individual’s physical appearance. AR 8203. Regarding the amount of revenues paid
as wages to PWSD, ServiceSource noted that wages are only one part of the funds that it
spends to benefit PWSD. AR 8198. According to ServiceSource, substantially more
than 15% of revenues are spent for the benefit of PWSD through health benefits and
community programs, as well as additional expenses required to employ PWSD including
taxes, equipment, and other costs incurred in connection with its contracts. Id.
Regarding the categorization of certain positions and calculation of the direct labor ratio
at the Mark Center, ServiceSource stated that the truck driver position in question was
properly labelled because it was not a direct labor position required by the contract for
that facility but rather an occasional task performed by a supervisory position on an as-
needed basis. AR 8202. ServiceSource also clarified concerns about its earlier statement
that the Mark Center contract employed 20 veterans without disabilities while still
23
Plaintiff raised concerns that ServiceSource sought to apply overly-broad definitions of
“severely disabled.” In particular, plaintiff pointed to statements indicating that ServiceSource
was interested in hiring disabled persons, even though those individuals would not meet the strict
standard set forth under the JWOD Act. For example, plaintiff noted that a currently-employed
disabled person would not qualify as a PWSD since his or her employment would demonstrate
employability. However, there is no prohibition on hiring individuals of any ability, so long as
ServiceSource does not count such individuals as severely disabled in its direct labor ratio.
There is no evidence in the record that ServiceSource did so in this case.
48
achieving a 100% disability ratio by noting that, as the court discussed above, the total
number of employees employed is separate from the calculation of the direct labor ratio,
which is a measurement of hours of specific types of labor. Id. As a result,
ServiceSource stated, the total number of employees includes positions that would not be
included in the direct labor ratio calculation. Id. Finally, while plaintiff argues that CFP
did not weigh the information provided by ServiceSource correctly, it has not provided
the court with any legal basis to substitute its judgment for that of CFP.24
iv. CFP Rationally Determined That AID, the Incumbent, Would
Not Be Seriously Impacted.
Fourth, plaintiff argues that CFP failed to properly evaluate the severe adverse
impact that adding the BOS to the procurement list would have on AID, the incumbent.
Plaintiff raises two objections: (1) CFP failed to consider AID’s status as a continuous
supplier dependent on the revenue, and (2) CFP failed to consider AID’s status as an
ANC-owned entity when evaluating the impact. According to plaintiff, CFP was
required by its regulations to consider AID to be a continuous supplier dependent on the
revenue it received from the contract and that the impact determination should have been
made based on AID alone without regard to the resources of its corporate parent. Next,
plaintiff argues that CFP erred in finding that the preferences afforded to ANCs under
Federal law did not bar the addition of the BOS to the AbilityOne procurement list.
According to plaintiff, Congress has specified ANCs like AID as economically-
24
Plaintiff also makes numerous arguments regarding the overall administration and oversight of
the AbilityOne program. However, plaintiff has not provided any evidence connecting these
criticisms of the overall program to specific legal arguments related to the present case. As a
result, the court declines plaintiff’s invitation to extrapolate those criticisms to this case.
49
disadvantaged for all purposes under Federal law and that, under FAR § 26.102, AID was
entitled to receive “the maximum practicable opportunity to participate in performing
contracts awarded by Federal agencies,” which it argues requires CFP to provide it with
preferential treatment under this section of the suitability analysis.
In response, the government and intervenor argue that CFP correctly considered
the impact on AID by looking at data from both AID and its parent corporation.
According to the government, CFP’s regulations expressly allow CFP to determine
impact on an incumbent by looking at corporate parent data and that a review of AID’s
corporate parent’s income demonstrates that AID will not be severely impacted. In this
connection, they note that AID refused to submit to CFP AID-specific financial
information, thus requiring it to obtain information from publicly-available sources.
They also argue that to the extent the plaintiff is challenging CFP’s reading of the
relevant regulation, CFP’s reading is entitled to deference. They also argue that AID’s
preference argument is without merit. While they agree that, as a matter of informal
policy, CFP does not add contracts awarded pursuant to a small business preference to
the procurement list,25 it argues that the JWOD Act does not recognize any other Federal
25
CFP has an informal policy, when considering impact, of deferring to incumbent awards made
pursuant to the 8(a) preference programs. According to their website,
requirements currently set aside under the 8(a) Program can be added to the
Procurement List. However, in recognition and support of other socioeconomic
initiatives, the Committee’s voluntary practice is to refrain from adding projects
to the Procurement List that are currently in the 8(a) Program when the incumbent
contractor has not yet graduated from the 8(a) Program and/or there is more than
one option year remaining on the contract.
50
contracting preferences and thus does not require CFP to consider AID’s status as an
ANC.
The court agrees with the government that CFP rationally and lawfully determined
that AID would not be severely impacted by placing the BOS on the procurement list.
First, contrary to AID’s contentions, CFP was authorized and required by its regulations
to consider the revenues of both AID and its parent company in making its impact
determination. Under CFP’s regulations, CFP is to give “particular attention” to “[t]he
possible impact on the contractor’s total sales, including the sales of affiliated companies
and parent corporations.” 41 C.F.R. § 51-2.4(a)(4)(i)(A) (emphasis added). It is “that
contractor” that CFP then analyzes to see if it is “more dependent on the income from
such sales to the Government.” Id. at § 51-2.4(a)(4)(i)(B). As a result, it was reasonable
for CFP to consider the revenues of AID’s parent corporation in making its impact
determination, and further reasonable for CFP to use publicly-available records when
AID did not supply the requested financial information. In this analysis, CFP determined
that AID’s parent corporation had revenues of $1.8 billion in Fiscal Year 2012. AR
3228. Based on this evidence, it was rational for CFP to conclude that AID would not be
seriously impacted.
Second, the court finds that CFP was not required by law to give a preference to
AID as an ANC in making its impact determination under the JWOD Act. Where
AbilityOne Program – About Us: FAQs, http://www.abilityone.org/about_us/faqs.html#18 (last
visited December 4, 2014). In this case, as noted above, the plaintiff had graduated from the 8(a)
Program prior to the award of the current contract, which was awarded through full and open
competition.
51
preferences are granted to qualifying businesses, such preferences are identified and
given effect in the relevant statute. See, e.g., 15 U.S.C. §§ 636(j)(10)(J)(ii),
636(j)(11)(B)(iii), 637(a)(4)(A)(i)(II), 637(d), 644(g); 10 U.S.C. § 2323. The JWOD Act
does not include or reference any other statutory preference provisions. Indeed, the
AbilityOne Program is itself a program designed to provide a preference in the
circumstances specified by the JWOD for the benefit of PWSD. Further, the court is not
aware of any requirement that CFP must omit from the procurement list contracts where
the incumbent enjoys an economically-disadvantaged status by virtue of the Alaska
Native Claims Settlement Act. See Kingdomware Techs., Inc. v. United States, 754 F.3d
923, 925 (Fed. Cir. 2014) (“Unless otherwise specified by statute or regulation, an agency
has wide discretion to decide the method of contracting to use” (citing Tyler Constr. Grp.
v. United States, 570 F.3d 1329, 1334 (Fed. Cir. 2009)).
C. NGA Did Not Err in Referring the BOS Contract to CFP.
Plaintiff argues that the NGA erred in awarding the BOS contract through the
AbilityOne Program to ServiceSource for three primary reasons: (1) NGA improperly
relied on CFP’s determination, (2) NGA’s evaluation of ServiceSource’s proposal was
flawed, and (3) NGA failed to identify organizational conflicts of interest (“OCI”).
Plaintiff’s first argument is related to its suitability argument: if CFP’s evaluation of
ServiceSource was flawed, then NGA’s award pursuant to that evaluation was similarly
flawed. Next, plaintiff argues that NGA’s independent evaluation of ServiceSource was
flawed because the CO’s later questions regarding the definition of PWSD indicated a
lack of understanding of the AbilityOne program, the CO did not perform a thorough
52
enough analysis of ServiceSource’s proposed plan to obtain security clearances, and the
CO was not able to properly evaluate ServiceSource’s size, revenues, or previous history
based on the information provided by the NPA. According to plaintiff, ServiceSource
only provided accurate information about its size and experience on remand and counted
subcontractor experience as its own, requiring a reevaluation by NGA before any contract
could be awarded. Finally, plaintiff argues that NGA determined that no actual or
potential OCI issues existed despite the fact that SourceAmerica, which assisted NGA in
its evaluation of ServiceSource, receives a percentage of the total value of the contract.
In this connection, plaintiff argues that NGA was ultimately persuaded to contract
through the AbilityOne program in order to avoid a full and open selection process and
potential bid protests.
In response, the government and intervenor argue that NGA was correct to rely on
CFP’s evaluation of ServiceSource and that plaintiff has not identified any actual or
potential OCI under the definition set forth in the FAR. They argue that NGA’s actions
are not a required step of the AbilityOne contracting process, thus making them legally
irrelevant here. According to the government, because CFP has exclusive statutory
authority to manage the procurement list, NGA had to contract through the NPA using
CFP’s choice once the CFP added the BOS to the procurement list. Further, the
government contends that NGA could not have relied on SourceAmerica’s evaluation in a
way that creates an OCI because NGA completed its evaluation before it received
SourceAmerica’s evaluation, and even then only received a brief email from
SourceAmerica indicating that it had selected ServiceSource as the best option for the
53
BOS contract. The government argues that CFP also completed an independent analysis
of the proposal, thus removing any bias on the part of SourceAmerica from the process.
The court finds that plaintiff’s arguments regarding NGA are meritless. It is
undisputed that NGA acted properly in determining that the BOS was a potential
candidate for addition to the procurement list. Plaintiff instead disputes NGA’s actions
following this identification. Because CFP is the only authority which oversees the
procurement list, 41 U.S.C. § 8503(a)(1), and because a service that is added to the
procurement list may only be contracted through the contractor selected by CFP, id. at §
8504(a), NGA’s actions are irrelevant. Indeed, it is undisputed that no actions on NGA’s
part are required for the addition of the BOS to the procurement list. Further, CFP could
have added the BOS to the AbilityOne list even over the objection of NGA. Under such
circumstances, plaintiff’s objections to NGA’s actions are without merit.
IV. CONCLUSION
Based on the foregoing, plaintiff’s motion for judgment on the administrative
record is DENIED and the government’s and defendant-intervenor’s cross-motions for
judgment on the administrative record are GRANTED. The clerk is directed to enter
judgment accordingly.
IT IS SO ORDERED.
s/Nancy B. Firestone
NANCY B. FIRESTONE
Judge
54