U.S. deals favoring blind draw scrutiny as rivals struggle
By David Lerman and Nick Taborek,
Angela Meredith, who is legally blind, says she owes her job to a U.S. government program that reserves contracts for disabled workers.
“I wouldn’t be able to find work anywhere else,” said Meredith, 58, who earns $7.75 an hour making army uniforms at a factory near Baltimore, under a much-praised initiative started in 1938 by President Franklin D. Roosevelt.
Now, with the government poised to reduce spending, a counter view is emerging of programs that favor groups such as the disabled and prisoners: It holds that such set-asides are unfair to companies seeking government work.
“We’re slowly seeing ourselves squeezed out of the game,” said Kurt Wilson, vice president of business development and government affairs at Selma, Ala.-based American Apparel, one of the largest military uniform companies, with about $100 million in annual revenue.
As the Pentagon reduces the number of troops, for-profit uniform suppliers may see a greater share of the market exempted from regular competition because of set-asides. Qualifying suppliers receive about half the contracting dollars in the almost-$2-billion-a-year military uniform industry.
The biggest share of orders awarded without competition goes to AbilityOne, the program that benefits workers at the plant near Baltimore, run by Blind Industries and Services of Maryland. AbilityOne received $557 million in uniform orders in 2010, or 31 percent of the $1.82 billion the Defense Department spent that year, according to federal procurement data.
Begun as an effort to boost employment among the blind, the program now known as AbilityOne expanded in 1971 to include those with other disabilities. It employs about 47,000 people, compared with 7,500 in 1980, according to its Web site.
Total AbilityOne contract revenue, for services like janitorial work and products such as ballpoint pens and uniforms, rose 6.4 percent, to $2.8 billion, in fiscal 2010 from the previous year, even as total government contract spending declined. The government’s fiscal year begins Oct. 1.
AbilityOne is not the only beneficiary of the set-asides. Federal Prison Industries, a rehabilitation program run by the Justice Department that also dates to the 1930s, received orders for military uniforms valued at $132 million in fiscal 2010, according to the organization’s annual report.
An additional $221 million in uniform orders was set aside for small businesses, defined as those with no more than 500 employees. That left about $907 million, or 49.9 percent, available for unrestricted competition, according to data compiled by Bloomberg.
The squeeze on private uniform makers was evident in Alabama on Jan. 9, when American Apparel, which isn’t related to the publicly traded clothing retailer of the same name, announced plans to close its Fort Deposit plant and eliminate about 175 jobs.
That meant Rachel Proveaux, 30, mother of an 8-week-old boy, returned from maternity leave to find herself out of a job.
“I’m sending out résumés anywhere I can find,’’ she said in an interview. “They should not set aside so many contracts for small business. To me, that’s not fair.”
While the company’s officials didn’t fault the program for the disabled in particular, they said the large share of contracts awarded through set-aside programs has left little work for competitive bidding. They also said the government ends up paying more than it should, sometimes for inferior products.
“We are denying our troops the best if we do not allow competition,” C. Lash Harrison, chairman of American Apparel’s board of directors, said in a September letter to President Obama.
U.S. Representative Terri A. Sewell, a Democrat from Birmingham, Ala., agrees.
“While I fully support the Pentagon’s policies to assist various restricted sources,” the lack of competition in programs such as AbilityOne and Federal Prison Industries “has resulted in an increase in prices paid by the services for uniforms,” she wrote in a Sept. 8 letter to the Defense Logistics Agency, the biggest buyer of military uniforms.
The agency paid as much as 17 percent more for AbilityOne-manufactured uniforms compared with those made by large commercial businesses, according to a Bloomberg analysis of $2.23 billion in uniform spending by the agency in the past decade.
Before awarding orders, the government has to determine whether the prison workshops or organizations for the disabled can provide a “fair and reasonable” price, Nancy Heimbaugh, the senior procurement executive at the Defense Logistics Agency, said in an Aug. 18 letter to U.S. Rep. Mike D. Rogers (R-Ala.), who has raised concerns about combat uniform orders going to favored groups.
AbilityOne’s prices are “usually within the competitive market range of what federal agencies would pay for other, similar projects,” George Selby, spokesman for the AbilityOne Commission, a 15-member panel appointed by the president to oversee the program, said in an e-mail.
Defense Department buyers have consistently awarded about a third of uniform contracts to AbilityOne while splitting the remainder between the private sector and Federal Prison Industries since the mid-1990s, said Kevin Lynch, president of National Industries for the Blind, which is part of AbilityOne. That ratio will probably remain intact as the Pentagon reduces its demand, he said in an interview.
— Bloomberg Government