The Defense Department may soon have an additional way to award contracts to companies that employ people with severe disabilities, breathing life back into a project Congress set up 15 years ago but that’s languished ever since.

A proposed rule, published April 1, amends the Defense Federal Acquisition Regulation Supplement by implementing a demonstration project giving Defense agencies more incentive to purchase contracts directly from eligible firms employing those with severe disabilities. It gives contractors with a disabled workforce a boost when competing for certain awards.

Most DoD contracts with entities that employ large numbers of disabled Americans are currently handled through a procurement list maintained by the AbilityOne program. But under the proposed rule, DoD would be able to award contracts to companies — both nonprofit and for-profit — that do not qualify to sell through AbilityOne, as long as the contractors can meet other criteria

• Individuals suffering from severe disability must make up at least 33 percent of a contractor’s workforce over a 12-month period from the time the award period begins.
• The entity cannot pay those with disabilities less than minimum wage.
• The organization must also provide those individuals with health insurance and a retirement plan comparable to those provided by other contractors.

“Contracts awarded to eligible contractors under this demonstration project may be counted toward DoD’s small disadvantaged business goal,” the proposal said.

Why change DFARS now?

The government has held this authority since the 2004 National Defense Authorization Act was signed into law, but DoD officials said the program had been considered a “discretionary” pilot program. Until now, they have not changed the department’s acquisition regulations to reflect the change.

But Congress specifically ordered the department to do so as part of the 2019 NDAA. And DoD now said it believes that making the change to the DFARS would provide more visibility and incentivize Defense contracting officers to use the authority.

The unemployment rate among those with disabilities is more than twice the rate of rate of the rest of the U.S. workforce.

The demonstration project “provides opportunities for severely disabled individuals to become gainfully employed taxpayers. Employing people with disabilities can be a way to offset the effects of an aging and shrinking workforce. In addition, people with disabilities bring different perspectives on solving problems and adapting to different circumstances,” according to the proposed rule.

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Potential impact

Defense officials estimated that approximately 549 annual procurements could be eligible under the demonstration project’s guidelines. The estimate is based on data from the Federal Procurement Data System on the number of contracts awarded in the Producer Service Codes (PSCs) DoD plans to target for the demonstration’s initial phases.

In its 2004 conference report, Congress said contracting opportunities under the project would likely be in air frame structural components, aerospace craft components and accessories, information technology equipment and software, as well as IT telecommunications products and services.

But DoD said it has only been able to find one example of a contract that has used the authority since then.

“The contract was awarded in 2006; Congress had provided funds specifically for this use,” officials wrote in an explanation accompanying the proposed rule. “This limited use makes it difficult to predict the impact of the Demonstration Project. Depending on the extent to which it is used, it could create additional contract opportunities for entities employing people with severe disabilities, including service-disabled veterans.”

Comments on the proposed rule are due by May 31.

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