Jan. 26 (Bloomberg) -- 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, amid a still-struggling U.S. economy and a 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, Alabama-based American Apparel Inc., 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. Such programs already 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 compiled by Bloomberg.
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. Today, the organization employs about 47,000 people, compared with 7,500 in 1980, according to its website.
Total AbilityOne contract revenue, for services like janitorial work and products such as ball point pens as well as 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.
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.
The decision meant Rachel Proveaux, a 30-year-old mother of an eight-week-old boy, returned from maternity leave to find herself out of a job.
“I’m sending out resumes 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.
‘Denying Our Troops’
“Price, delivery and quality are being sacrificed to no good purpose,” C. Lash Harrison, chairman of American Apparel’s board of directors, said in a September letter to President Barack Obama. “We are denying our troops the best if we do not allow competition.”
U.S. Representative Terri Sewell, a Democrat from Birmingham, Alabama, 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 during the past decade.
For example, the data provided by the agency showed it paid an average price of $33.98 for women’s Air Force coats, 17 percent more than the average price of $29.14 charged by large companies. AbilityOne contractors sold the agency Army combat coats at an average premium of 4.6 percent, for $34.67 per coat compared with $33.13.
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. Representative Mike Rogers, a Republican from Saks, Alabama, 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.
Splitting the Business
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.
The goal of the Defense Logistics Agency is to maintain “appropriate balances” among the businesses, including large companies, said Mimi Schirmacher, an agency spokeswoman.
There’s broad-based support for AbilityOne, said Robert Burton, a former deputy administrator of the Office of Federal Procurement Policy and a partner at Venable LLP, a Washington-based law firm.
“Politically, it’s an untenable position not to be supportive of AbilityOne,” Burton said.
Awards recognizing support for the program have gone to lawmakers including Tea Party Caucus member Representative Pete Sessions, a Republican from Texas, and Democratic Representative Barney Frank of Massachusetts.
AbilityOne won’t be immune to an expected decline in contracting dollars, Burton said in an interview.
“There will be arguments made that they need to take a hit just like the private sector,” he said.
For now, companies are taking sharper aim at work given to Federal Prison Industries, said Kurt Courtney, director of government relations for the American Apparel and Footwear Association in Arlington, Virginia.
“It’s very hard for us to think that prisoners are working and putting tax-paying, law-abiding citizens out of work,” he said in an interview.
“We don’t want China to use prison labor, but what does the Department of Defense do?” said Tom Kellim, president and chief executive officer of Propper International Sales Inc. The St. Louis-based clothing supplier has about 2,000 employees, most of whom are in Puerto Rico.
He didn’t criticize AbilityOne directly. “I’ve seen their work,” he said in an interview. “It’s great work. But in a shrinking market, everybody on the periphery” of mandatory programs like AbilityOne and Federal Prison Industries “is going to be affected.”
At the Baltimore-area factory where she works, Meredith helps align camouflage fabric as it moves on a conveyor belt toward automated blades.
Meredith says she dropped out of high school at 16 because her trouble seeing made it difficult to keep up in class. She’s had her present job for six years, and her employer provides health insurance, paid vacation time and regular bonuses.
“This was a blessing for me,” she said.
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