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Subject:
Nonprofit Agency Organization-wide Direct Labor Ratio Requirements
Effective
Date: October 1, 2004
1. Purpose
2. Effective Period of Memorandum
3. Direct Labor Requirement
4. Nonprofit Agency Responsibilities
5. Central Nonprofit Agency Requirements
6. Phase-in Requirements
7. Calculation of Direct Labor Ratios
8. Failure to Meet Direct Labor Requirements
9. Verification of Direct Labor Ratios
10. Reinstatement
Appendices
1. Purpose
In accordance with the Committee's regulations (41 CFR 51-1.3 and
51-4.3), this memorandum prescribes the procedures to be followed
by nonprofit agencies participating in the AbilityOne
Program when submitting annual direct labor certifications to the
Committee. It also prescribes the procedures to be followed when
a nonprofit agency fails in any fiscal year to meet the requirements
for the direct labor ratios of people who are blind, in the case
of nonprofit agencies associated with National Industries for the
Blind (NIB), and people who are blind and/or have other severe disabilities,
in the case of nonprofit agencies associated with NISH. This memorandum
supersedes Compliance Memorandum No. 4, dated January 12, 1995.
2. EFFECTIVE PERIOD OF MEMORANDUM
The effective date of the attached interim guidance is October
1, 2004, and the expiration date of the interim guidance is the
latest of the following dates:
- September 30, 2005; or
- the effective date of a final rule incorporating this guidance
into the Committee's regulations at 41 CFR 51; or
- the date of publication in the Federal Register of a
withdrawal of the proposed rule to incorporate this guidance into
the Committee's regulations at 41 CFR 51.
3. DIRECT LABOR REQUIREMENT
The definition of a qualified nonprofit agency under the JWOD Act
requires the agency to employ people who are blind (in the case
of NIB-associated nonprofit agencies serving such individuals) or
people who are blind and/or have other severe disabilities (in the
case of NISH-associated nonprofit agencies serving such individuals)
for at least 75 percent of the direct labor hours performed in the
nonprofit agency during any fiscal year (hereinafter 75 percent
ratio).
4. NONPROFIT AGENCY RESPONSIBILITIES
A. Prior to verification to participate in the AbilityOne Program,
nonprofit management must have attended a central nonprofit agency
(CNA) training course on the AbilityOne Program.
B. Once the Committee has added a nonprofit's first project
to the Procurement List, personnel from the nonprofit who will
be managing/supervising the project must attend training on the
AbilityOne Program prior to the nonprofit beginning performance.
C. Each nonprofit agency that has been authorized to
produce a product or provide a service is required to submit quarterly
reports to either NIB or NISH, as well as an annual certification
(in accordance with the Committee's regulations at 41 CFR 51-4.3(a))
through NIB or NISH to the Committee. These provide the following
information:
- The number of direct labor hours performed by persons who
are blind (in the case of NIB-associated nonprofit agencies
serving such individuals) or persons who are blind and/or
have other severe disabilities (in the case of NISH-associated
nonprofit agencies serving such individuals);
- The number of direct labor hours performed by persons who
are not blind (in the case of NIB-associated nonprofit agencies)
or do not have severe disabilities (in the case of NISH-associated
nonprofit agencies);
- The total direct labor hours performed in the agency; and
- Other information as required by Committee Form 403 for
NIB-associated nonprofit agencies serving individuals who
are blind, or Committee Form 404 for NISH-associated nonprofit
agencies serving individuals who are blind and/or have other
severe disabilities.
D. The annual certification mentioned above is due to
NIB or NISH by November 1st for the fiscal year ending the preceding
September 30. (Committee Forms 403 and 404 with instructions are
at Appendix 1.) Quarterly reports are due to NIB or NISH within
30 days of the end of the fiscal quarter.
5. CENTRAL NONPROFIT AGENCY REQUIREMENTS
A. NIB and NISH will provide training to nonprofit agencies
interested in becoming authorized nonprofits so that the nonprofits
are aware of all Program requirements prior to a nonprofit submitting
its request for verification.
B. During a nonprofit agency's first year in the AbilityOne
Program, NIB or NISH will monitor and report the nonprofit's performance
on a quarterly basis to the Committee.
C. NIB and NISH will monitor the quarterly reports of
their nonprofit agencies. Those nonprofits with cumulative overall
ratios below 75 percent after the second quarter will be sent
warning letters. The letters to the Board Chair and executive
director/president will state the process that will be used if
the nonprofit should finish the year below 75 percent.
D. NIB and NISH will report to the Committee the status
of nonprofit cumulative overall direct labor ratios after the
end of the second quarter.
E. NIB and NISH are required to review and forward their
nonprofits' annual certifications to the Committee by December
1.
6. PHASE-IN REQUIREMENTS
At the time the CNA submits a request proposing the addition of
a product or service to the Procurement List or the transfer of
a product or service from one nonprofit to another, the request
must include an estimate of the direct labor hours that will be
performed by people who are blind or have severe disabilities (ADD-5
or ADD-6). If the nonprofit is unable to initially perform the project
at the direct labor ratio stated on the form, a phase-in must also
be requested.
A. Normally, phase-ins will be reserved for unusual or
highly complex projects that are large (more than 10 people) or
where unique circumstances exist.
B. When a phase-in is requested by the nonprofit agency,
the CNA must include information on whether or not the phase-in
will cause the nonprofit's cumulative overall direct labor ratio
to drop below 75 percent and, if so, when that ratio will again
be at 75 percent.
C. A project that has a phase-in approved after
the nonprofit has already begun work on that project will not
be exempted from meeting the required direct labor ratios.
D. A phase-in plan must be submitted when the nonprofit
agency's overall direct labor ratio will drop below 75 percent
as a result of the phase-in.
7. CALCULATION OF DIRECT LABOR RATIOS
Direct labor ratio information must be reported to two decimal
places. The Committee will use commonly understood rounding rules
in determining compliance with direct labor ratios. A ratio at or
above 74.51 percent will be counted as 75 percent.
8. FAILURE TO MEET DIRECT LABOR REQUIREMENTS
A. 75 Percent Overall Direct Labor Ratio
- The following procedures will apply when a nonprofit agency
fails to meet the 75 percent overall direct labor ratio in
any fiscal year, except for any nonprofit agency whose failure
to meet the ratio is attributable solely to its operating
under a Committee-approved phase in plan/schedule with which
it is in full compliance or attributable to providing a product
or service under national emergency or wartime surge requirements.
a) The Committee will, by certified letter, place the nonprofit
agency on probation. The letter will explain the process that
will be used if the nonprofit wishes to remain in the AbilityOne
Program. (See Appendix 2.)
b) The Committee will suspend any proposed additions for that
nonprofit agency until the nonprofit is again above 75 percent.
However, the Committee will consider projects on a case-by-case
basis if the nonprofit agency can present a compelling argument
to the Committee for an addition while below 75 percent.
c) The nonprofit agency is required to report its direct labor
information to the Committee quarterly by submitting to the
Committee a copy of their CNA's quarterly report. These reports
will begin with the first quarter of the fiscal year following
the year in which the nonprofit agency failed to meet the
75 percent ratio and continuing through the four quarters
of that fiscal year. These quarterly reports must reflect
cumulative data for the fiscal year through the end of the
reporting quarter and must reach the Committee within 30 days
after the end of each quarter.
d) Failure to submit the quarterly reports may result in withdrawal
of the Committee's approval of a nonprofit agency's authorization
to produce products for or provide services to entities of
the Government under the provisions of 41 U.S.C. 46-48c. (See
Appendix 2 for a sample letter requiring quarterly reports.)
e) If the Committee determines it is appropriate, an on-site
compliance visit will be conducted by NIB, NISH or the Committee
staff within the fiscal year following the year in which the
nonprofit agency failed to meet the 75 percent direct labor
ratio requirement.
f) If the Committee staff determines that the circumstances
are extreme enough to warrant the withdrawal of the nonprofit
agency's authorization, the facts in each particular case
will be presented to the Committee for a formal decision.
A report by NIB or NISH, as provided by the Committee's regulations
(41 CFR 51-4.5(a)), will also be presented to the Committee.
Both the nonprofit agency and NIB or NISH will be permitted
to address the Committee if they desire.
g) If the Committee disqualifies the nonprofit agency, it
cannot receive future orders, and if another nonprofit cannot
immediately perform the work, in accordance with 41 CFR 51-5.4(c),
the Committee will issue a purchase exception to the contracting
activity to permit procurement from other sources.
- The following procedures will apply when a nonprofit agency
fails to meet the 75 percent ratio for a second consecutive
year. The same exceptions noted above will continue to apply.
a) The nonprofit will be given the opportunity to present
the specific circumstance to the Committee for a formal decision
on whether the nonprofit should be removed from the AbilityOne Program.
A report by NIB or NISH, as provided by the Committee's regulations
(41 CFR 51-4.5(a)), will also be presented to the Committee.
Both the nonprofit agency and NIB or NISH will be permitted
to address the Committee if they desire.
b) If the Committee votes to allow the nonprofit to remain
in the AbilityOne Program, the nonprofit agency is required to continue
to submit quarterly reports to the Committee along with an
updated plan detailing further action that will be taken to
correct the direct labor ratio.
c) The Committee will determine if an on-site compliance visit,
including review and/or intervention in specific issues, is
appropriate. Unless it is determined that there are compelling
reasons why an on-site review is not needed, a review will
be conducted as soon as is practicable within the fiscal year
following the year in which the nonprofit agency failed to
meet the 75 percent ratio requirement for a second consecutive
year. In most cases, the on-site review for a second consecutive
year will be conducted by Committee staff.
d) If the Committee disqualifies a nonprofit agency or removes
a AbilityOne project from the nonprofit, it cannot receive future
orders, and if another nonprofit cannot immediately perform
the work, in accordance with 41 CFR 51-5.4(c), the Committee
will issue a purchase exception to the contracting activity
to permit procurement from other sources.
9. VERIFICATION OF DIRECT LABOR RATIOS
At the time that a Committee, NIB or NISH compliance staff person
makes an on site visit to an individual nonprofit agency, that nonprofit
agency must make available the cumulative direct labor hours being
performed on all projects.
10. REINSTATEMENT
A. When the Committee has withdrawn a nonprofit agency's
designation as a qualified nonprofit agency, the following conditions
must be met before the nonprofit agency may be reinstated as a
qualified nonprofit agency, in addition to the qualification requirements
of 41 CFR 51-4.2:
- The nonprofit agency must meet the 75 percent direct labor
requirements for the year in which the authorization was withdrawn;
or
- The nonprofit agency must meet the 75 percent direct labor
requirement for two consecutive quarters.
B. For the nonprofit agency to receive orders for the
item it was previously authorized to provide, the following circumstances
must apply:
- No other nonprofit agency has assumed responsibility for
providing the item under the AbilityOne Program; or
- 2. The nonprofit agency providing the item has no objection
to permitting the affected nonprofit agency to reassume supply
responsibility for the item.
(signed)
Leon A. Wilson, Jr.
Executive Director
Date: November 1, 2004
Appendix 1 - Committee Annual Certification
forms (Forms 403 and 404) (Download in Microsoft
Word or Adobe Acrobat)
Appendix 2 - Sample letters to agencies not meeting direct
labor requirement (Download in Microsoft
Word or Adobe Acrobat)
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