Pride Indus., Inc. v. Comm. for Purchase from People Who Are Blind or Severely Disabled

• Citation: 420 F.Supp.3d 1035
• Decision Date: 29 October 2019
• Docket Number: No. 2:19-cv-01620 KJM CKD,2:19-cv-01620 KJM CKD
• Parties: PRIDE INDUSTRIES, INC., Plaintiff, v. COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR SEVERELY DISABLED, et al., Defendants.
• Court: U.S. District Court — Eastern District of California

420 F.Supp.3d 1035

PRIDE INDUSTRIES, INC., Plaintiff,

v.COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR SEVERELY DISABLED, et al., Defendants.

No. 2:19-cv-01620 KJM CKD

United States District Court, E.D. California.

Signed October 29, 2019

Claudia Veronica Garcia, Drinker Biddle & Reath LLP, San Francisco, CA, Mark H. M. Sosnowsky, Dana B. Pashkoff, Jessica C. Abrahams, Pro Hac Vice, Drinker Biddle & Reath, LLP, Washington, DC, for Plaintiff.

Edward A. Olsen, Govt, United States Attorney's Office, Sacramento, CA, for Defendants.

ORDER

Kimberly J. Mueller, UNITED STATES DISTRICT JUDGE

On August 26, 2019, plaintiff PRIDE Industries, Inc. ("PRIDE") moved to preliminarily enjoin the U.S. AbilityOne Commission ("AbilityOne" or "defendants") from taking any further action under a Pilot Program to award a contract for services at United States Army Base Fort Bliss ("Fort Bliss"). Compl., ECF No. 6-1. Plaintiff alleges the Pilot Program conflicts with the statutorily prescribed system for contract selection under the Javits-Wagner O'Day Act, 41 U.S.C. §§ 8501 – 8506 ("JWOD Act"). Compl. at 1. Defendants oppose the motion, Opp'n, ECF No. 32, and plaintiff has replied, Reply, ECF No. 36. The court heard oral argument on the motion on October 24, 2019. After thorough consideration of the arguments and the governing law, the court DENIES plaintiff's motion for preliminary injunction. The court's reasons for its decision are below.

I. STATUTORY AND REGULATORY FRAMEWORK

Because an understanding of the statutory and regulatory framework undergirding the complaint is essential to comprehending plaintiff's claims and the court's resolution of the pending motion, the court begins with a review of that framework here.

A. Javits-Wagner-O'Day Act (JWOD)

In 1971, Congress enacted the Javits-Wagner-O'Day Act, 41 U.S.C. §§ 8501 – 8506 ("JWOD Act"), an update to the Wagner O'Day Act of 1938. The JWOD Act created the Committee for Purchase From People Who Are Blind or Severely Disabled (the "AbilityOne Commission" or the "Committee") to administer the AbilityOne program, which aims to "increase employment and training opportunities for persons who are blind or have other severe disabilities through the purchase of commodities and services from qualified nonprofit agencies employing persons who are blind or have other severe disabilities." 41 C.F.R. § 51-1.1.

The JWOD Act established a unique procurement process for the government projects designed to train and employ people who are blind or severely disabled. Under this process, AbilityOne maintains a procurement list of products and services suitable for federal government procurement from qualified nonprofit agencies (NPAs) employing the blind or severely disabled. 41 U.S.C. § 8503(a)(1). Qualified NPAs must employ "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) - (7). The Federal Government may purchase products and services from the procurement list at a Committee-determined Fair Market Price (FMP), and the Committee "from time to time shall revise its price determinations with respect to those products and services in accordance with changing market conditions." 41 U.S.C. § 8503(b).

AbilityOne manages the JWOD program with the help of central nonprofit agencies (CNAs), which "facilitate the distribution, by direct allocation, subcontract, or any means of orders of the Federal Government for products and services on the procurement list among qualified [NPAs] for the blind or qualified nonprofit agencies for other severely disabled." 41 U.S.C. § 8503(c). National Industries for the Blind is the CNA that represents NPAs employing people who are blind; SourceAmerica is the CNA that represents NPAs employing people with severe disabilities, including PRIDE, the plaintiff here. 41 U.S.C. § 8503(c) ; 41 C.F.R. § 51-3.1.

AbilityOne "determine[s] the fair market price of products and services contained on the procurement list" through a process that involves the contracting activity, the NPA and the CNA. 41 U.S.C. § 8503(b). The "contracting activity" is "any element of an entity of the Government that has responsibility for identifying and/or procuring Government requirements for commodities or services." 41 C.F.R. § 51-1.3. The Committee sets the initial price through "negotiations between the contracting activity and the [NPA] which will produce or provide the commodity or service to the Government, assisted by the [CNA]." 41 C.F.R. § 51-2.7(a). The Committee may revise prices in the face of changing market conditions, "which include negotiations between contracting activities and producing [NPAs], assisted by [CNAs], or the use of economic indices, changes in nonprofit agency costs, or other methodologies permitted under these procedures." 41 C.F.R. § 51-2.7(b). Contracting activities and NPAs will submit recommendations for the fair market price to the CNA. 41 C.F.R. § 51-2.7(c). Then, the CNA will submit the recommended price and reasoning behind it to the Committee. 41 C.F.R. § 51-2.7(c).

The contracting process described above differs from the typical federal contracting process based on the unique needs of the blind and severely disabled. "It is the policy of the Government to increase employment and training opportunities for persons who are blind or have other severe disabilities through the purchase of commodities and services from qualified nonprofit agencies employing persons who are blind or have other severe disabilities." 41 C.F.R. § 51-1.1. Because AbilityOne is subject to a statute that "expressly authorizes or requires that the procurement be made through another executive agency or from a specified source," Congress has allowed AbilityOne to use noncompetitive procedures to further this policy. 41 U.S.C. § 3304(a)(5) ("An executive agency may use procedures other than competitive procedures only when—[...] a statute expressly authorizes or requires that the procurement be made through another executive agency or from a specified source"). As a result, AbilityOne and the qualified nonprofit agencies for the blind or severely disabled need not provide for "full and open competition." Federal Acquisition Regulation (F.A.R.) subpart 6.302-5(b)(2) ("This authority may be used when statutes, such as the following, expressly authorize or require that acquisition be made from a specified source or through another agency: [...] (2) Qualified nonprofit agencies for the blind or other severely disabled 41 U.S.C. chapter 85, Committee for Purchase From People Who Are Blind or Severely Disabled (see subpart 8.7)).

B. National Defense Authorization Act (NDAA)

On December 23, 2016, Congress passed the National Defense Authorization Act of 2017 (NDAA). National Defense Authorization Act of 2017, Pub. L. No. 114-328, § 898, 130 Stat. 2331 (2016). Section 898 of the NDAA empowered the Secretary of Defense to establish a Panel on Department of Defense and AbilityOne Contracting Oversight, Accountability, and Integrity (referred to as the "Section 898 Panel"). National Defense Authorization Act § 898(a)(1). The NDAA provided that the Section 898 Panel shall "recommend ways the Department of Defense and AbilityOne Commission may explore opportunities for competition among qualified nonprofit agencies or central nonprofit agencies and ensure equitable selection and allocation of work to qualified nonprofit agencies." Id. § 898(c)(6). The Section 898 Panel is required to submit an annual report to Congress about these opportunities. Id. § 898(i)(2).

The annual report is required to contain a summary of findings and recommendations to the Secretary of Defense, the Chairman of the AbilityOne Commission, Congressional defense committees, the House Committee on Oversight and Government Reform and the Senate Committee on Homeland Security and Governmental Affairs. Id. For example, the report shall include "recommendations for any changes to the acquisition and contracting practices of the Department of Defense and the AbilityOne Commission to improve the delivery of goods and services to the Department of Defense." Id. § 898(i)(2)(D). Additionally, the report shall consider the provisions of the JWOD Act and include "recommendations for administrative safeguards to ensure the Department of Defense and the AbilityOne Commission are in compliance with the requirements of the Javits-Wagner-O'Day Act, Federal civil rights law, and regulations and policy related to the performance of contracts of the Department of Defense with qualified nonprofit agencies and contracts of the AbilityOne Commission with central nonprofit agencies." Id. § 898(i)(2)(E). The report also is to include an examination of the current structure of AbilityOne "to eliminate waste, fraud, and abuse and to ensure contracting integrity and accountability for any violations of law or regulations." Id. § 898(i)(2)(C).

The NDAA grants powers to the Section 898 Panel to implement its recommendations by setting milestone dates and allowing the Section 898 Panel to notify the Department of Defense and certain Congressional committees if and when AbilityOne has not complied. National Defense Authorization Act § 898(f)(1)–(2). If AbilityOne does not implement the recommendations and the Secretary of Defense receives notice under subsection (f)(2), "the Secretary may suspend compliance with the requirement to procure a product or service in section 8504 of title 41, United States Code, until the date on which the Secretary notifies Congress, in writing, that the AbilityOne Commission is substantially implementing the recommendations made under subsection (c)." Id. § 898(g)(1)(A).

II. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff PRIDE is a 501(c)(3) nonprofit social enterprise corporation. PRIDE employs, trains and rehabilitates persons who have significant disabilities. Compl. at 6. AbilityOne awarded...