Background

The Randolph-Sheppard Act created a vending facility program in 1936 to  provide blind individuals with more job opportunities and to encourage  their self-support. The program trains and employs blind individuals to  operate vending facilities on federal property. While Randolph-Sheppard is  under the authority of the Department of Education, the states  participating in this program are primarily responsible for program  operations. State licensing agencies, under the auspices of the state  vocational rehabilitation programs, operate the programs in each state.  Federal law gives blind vendors under the program a priority to operate  cafeterias on federal property. Current DOD guidance implementing this  priority directs that a state licensing agency be awarded a contract if its  contract proposal is in the competitive range. In fiscal year 2006, all of the  activities of the Randolph-Sheppard program generated $692.2 million in  total gross income and had a total of 2,575 vendors operating in every state  except for Wyoming.
In 1938 the Wagner-O’Day Act established a program designed to increase  employment opportunities for persons who are blind so they could  manufacture and sell certain goods to the federal government. In 1971, the  Javits-Wagner-O’Day Act amended the program to include people with  other severe disabilities and allowed the program to provide services as  well as goods. The JWOD Act established the Committee for Purchase,  which administers the program. The Committee for Purchase is required  by law to designate one or more national nonprofit agencies to facilitate  the distribution of federal contracts among qualified local nonprofit  agencies. The designated national agencies are the National Industries for  the Blind and NISH, which represent local nonprofit agencies employing  individuals who are blind or have severe disabilities. These designated  national agencies charge fees for the services provided to local nonprofit  agencies. Effective on October 1, 2006, the maximum fee is 3.83 percent of  the revenue of the contract for the National Industries for the Blind, and  3.75 percent for NISH. The purpose of these fees is to provide operating  funds for these two agencies. In fiscal year 2006, more than 600 JWOD  nonprofit agencies provided the federal government with goods and  services worth about $2.3 billion. The JWOD program provided  employment for about 48,000 people who are blind or have severe  disabilities.
Military dining contracts under the Randolph-Sheppard and JWOD  programs provide varying levels of service, ranging from support services  to full-food services. Support services include activities such as food  preparation and food serving. Full-food service contracts provide for the  complete operation of facilities, including day-to-day decision making for  the operation of the facility. As of October 17, 2006, DOD had 39  Randolph-Sheppard contracts in 24 different states. These contracts had  an annual value of approximately $253 million and were all for full-food  services. At the same time, DOD had 53 JWOD contracts valued at $212  million annually. Of these, 39 contracts were for support services and 15  were for full-food service. Figure 1 shows the distribution of Randolph- Sheppard and JWOD contracts with DOD dining facilities across the  country.
In 1974, amendments to the Randolph-Sheppard Act expanded the scope  of the program to include cafeterias on federal property. According to a  DOD official, when DOD began turning increasingly to private contractors  rather than using its own military staff to fulfill food service functions in  the 1990s, state licensing agencies under the Randolph-Sheppard program  began to compete for the same full-food services contracts for which  JWOD traditionally qualified. This development led to litigation, brought  by NISH, over whether the Randolph-Sheppard Act applied to DOD dining  facilities. Two decisions by federal appeals courts held that the Randolph- Sheppard Act applied because the term “cafeteria” included DOD dining  facilities. The courts also decided that if both programs pursued the full- food service contracts for DOD dining facilities, Randolph-Sheppard had  priority.
Congress enacted section 848 of the National Defense Authorization Act  for Fiscal Year 2006 requiring the key players involved in each program to  issue a joint policy statement about how DOD food services contracts  were to be allocated between the two programs.  In August 2006, DOD,  Education, and the Committee for Purchase issued a policy statement that  established certain guidelines, including the following:    The Randolph-Sheppard program will not seek contracts for dining  support services that are on the JWOD procurement list, and Randolph- Sheppard will not seek contracts for operation of a dining facility if the  work is currently being performed under the JWOD program; JWOD  will not pursue prime contracts for operation of dining facilities at  locations where an existing contract was awarded under the Randolph- Sheppard program (commonly known as the “no-poaching” provision).
For contracts not covered under the no-poaching provision, the  Randolph-Sheppard program may compete for contracts from DOD for  full-food services; and the JWOD program will receive contracts for  support services.  If the needed support services are on the JWOD procurement list, the  Randolph-Sheppard contractor is obligated to subcontract for those  services from JWOD.  In affording a priority to a state licensing agency when contracts are  competed and the Randolph-Sheppard Act applies, the price of the  state licensing agency’s offer will be considered to be fair and  reasonable if it does not exceed the best value offer from other  competitors by more than 5 percent or $1 million, whichever is less.
Congress enacted the no-poaching provision in section 856 of the National  Defense Authorization Act for Fiscal Year 2007. A recent GAO bid protest  decision determined that adherence to the other provisions of the policy  statement was not mandatory until DOD and the Department of Education  change their existing regulations. As of July 2007, neither agency had  completed updating its regulations.

	Randolph-Sheppard Places Blind Individuals in Managerial Roles, while JWOD Employs Persons with Disabilities in Less Skilled Jobs

The Randolph Sheppard and JWOD programs utilize different operating  procedures to provide dining services to DOD. For the Randolph-Sheppard  program, state licensing agencies act as prime contractors, and train and  license blind vendors to operate dining facilities. For the JWOD program,  the Committee for Purchase utilizes NISH to act as a central nonprofit  agency and match DOD needs for dining services with local nonprofit  agencies able to provide the service. JWOD employees generally fill less  skilled jobs such as cleaning dining facilities or serving food.

		Randolph-Sheppard Relies on State Licensing Agencies to Place Blind Vendors as Managers of Dining Facilities

Education is responsible for overseeing the Randolph-Sheppard program,  but relies on state licensing agencies to place blind vendors as dining  facility managers. The Department of Education certifies state licensing  agencies and is responsible for ensuring that their procedures are  consistent with Randolph-Sheppard regulations. According to our survey,  state licensing agencies act as prime contractors on Randolph-Sheppard  contracts, meaning that they hold the actual contract with DOD. The state  licensing agencies are responsible for training blind vendors to serve as  dining facility managers and placing them in facilities as new contracting  opportunities become available. According to our survey, the state issues  the vendor a license to operate the facility upon the successful completion  of the training program. Furthermore, many states said this process often  includes both classroom training and on-the-job training at a facility.  Figure 2 depicts how the Randolph-Sheppard program is generally  structured.
Responding to our survey, state licensing agencies reported that all blind  vendors have some level of managerial responsibility for each of the 39  Randolph-Sheppard contracts. Specific responsibilities may include  managing personnel, coordinating with military officials, budgeting and  accounting, and managing inventory. An official representing state  licensing agencies likened the vendor’s role to that of an executive and  said the vendor is responsible for meeting the needs of his or her military  customer. At one facility we visited, the vendor was responsible for  general operations, ensuring the quality of food, and helped develop new  menu selections. Of the 37 contracts where the state licensing agencies  provided information regarding whether the blind vendor visits his or her  facility, all stated that their blind vendors visit their facilities, and in most  cases are on site every day. Additionally, most state licensing agencies told  us that they have an agreement with the blind vendor that lays out the  state licensing agency’s expectations of the blind vendor and defines the  vendor’s job responsibilities.
Most state licensing agencies rely on private food service companies to  provide the expertise to help operate dining facilities. According to our  survey, 33 of the 39 Randolph-Sheppard contracts relied on a food service  company—known as a teaming partner—to provide assistance in  operating dining facilities. The survey showed that in many cases, the  blind vendor and teaming partner form a joint venture company to operate  the facility with the vendor as the head of the company. The teaming  partner can provide technical expertise, ongoing training, and often  extends the vendor a line of credit and insurance for the operation of the  facility. Officials representing state licensing agencies told us that states  are often unable to provide these resources, and for large contracts these  start-up costs may be beyond the means of the blind vendor and the state  licensing agency. According to our survey, the teaming partner may assist  the state in negotiating and administering the contract with DOD.  Additionally, state licensing agencies told us that they often enter into a  teaming agreement that defines the responsibilities of the teaming partner.
For 6 of the 39 contracts, the state licensing agencies reported that the  blind vendor operates the dining facility without a teaming partner. We  visited one of these locations and learned that the vendor has his own  business that he uses to operate the facility. This particular vendor had  participated in the Randolph-Sheppard program for almost 20 years and  operated various other dining facilities.
In our survey, state licensing agencies reported that vendors in about half  (20 of 39) of the contracts are required to employ individuals who are  blind or have other disabilities, while others have self-imposed goals. In  other cases there may be no formal hiring requirements, but the state  licensing agency encourages the blind vendor to hire individuals with  disabilities. Based on survey responses we received for 30 contracts, we  calculated that the percentage of persons with disabilities working at  Randolph-Sheppard dining facilities ranged from 3 percent to 72 percent,  with an average of 18 percent.

		The Committee for Purchase Works with NISH and Local Nonprofit Agencies to Employ Individuals with Disabilities in DOD Dining Facilities

The Committee for Purchase works with NISH to match DOD’s need for  services with nonprofit agencies able to provide food services. For military  food service contracts, NISH acts as a central nonprofit agency and  administers the program on behalf of the Committee for Purchase. In this  role, NISH works with DOD to determine if it has any new requirements  for dining services. When it identifies a need, NISH will search for a  nonprofit agency that is able to perform the required service. NISH then  facilitates negotiations between DOD and the nonprofit agency, and  submits a proposal to the Committee for Purchase requesting that the  specific service be added to the JWOD procurement list. If the Committee  for Purchase approves the addition, DOD is required by the Federal  Acquisition Regulation (FAR) to obtain the food service from the entity on  the procurement list.  In some instances, a private food service company  is awarded a military dining facility contract and then subcontracts with a  JWOD nonprofit agency to provide either full or support food services. For  example, the Marine Corps awarded two regional contracts to Sodexho—a  large food service company—to operate its dining facilities on the East  and West Coasts. Sodexho is required by its contracts to utilize JWOD  nonprofit agencies and uses these nonprofit agencies to provide food  services and/or support services at selected Marine Corps bases. Figure 3  depicts the JWOD program structure.
Most JWOD employees at military dining facilities perform less skilled jobs  as opposed to having managerial roles. At the facilities we visited, we  observed that employees with disabilities (both mental and physical)  performed tasks such as mopping floors, serving food, and cleaning pots  and pans after meals. Officials from NISH said this is generally true at  JWOD dining facilities, including facilities where the nonprofit agency  provides full-food service. Additionally, we observed—and NISH  confirmed—that most supervisors are persons without disabilities. At one  facility we visited, for example, the nonprofit supervisor oversees  employees with disabilities who are responsible for keeping the facility  clean and serving food. The Committee for Purchase requires that  agencies associated with NISH perform at least 75 percent of their direct  labor hours with people who have severe disabilities. For nonprofit  agencies with multiple JWOD contracts, the 75 percent direct labor  requirement is based on the total for all of these contracts.  Therefore one  contract may be less than 75 percent but another contract must be greater  than 75 percent in order for the total of these contracts to meet the 75  percent requirement. NISH is responsible for ensuring that nonprofit  agencies comply with this requirement, and we previously reported that it  performs site visits to all local nonprofit agencies every three years, in  order to ensure compliance with relevant JWOD regulations. At the three  JWOD facilities we visited, officials reported that the actual percentage of  disabled individuals employed was 80 percent or higher. Table 1 provides  a comparison of the Randolph-Sheppard and JWOD programs’ operating  procedures.

	Programs Differ Regarding How Contracts Are Awarded and Priced, and How Program Beneficiaries Are Compensated

The Randolph-Sheppard and JWOD programs have significant differences  in terms of how contracts are awarded and priced, and in the  compensation provided to beneficiaries who are blind or have other  disabilities. Under the Randolph-Sheppard program, federal law provides  for priority for blind vendors and state licensing agencies in the operation  of a cafeteria. This priority may come into play when contracts are  awarded either by direct noncompetitive negotiations or through  competition with other food service companies. Regardless of how the  contract is awarded, the prices are negotiated between the state licensing  agency and DOD. Under the JWOD program, competition is not a factor  because DOD is required to purchase food services from a list maintained  by the Committee for Purchase. Contracts are awarded at fair market  prices established by the Committee for Purchase. The two programs also  differ in terms of how program beneficiaries are compensated. Under the  Randolph-Sheppard program, blind vendors generally receive a share of  the profits, while JWOD beneficiaries receive hourly wages and fringe  benefits under federal law or any applicable collective bargaining  agreement. Randolph-Sheppard blind vendors received, on the average,  pretax compensation of about $276,500 annually, while JWOD workers at  the three sites visited earned on average $13.15 per hour, including fringe  benefits.

		Significant Differences Exist in How Randolph- Sheppard and JWOD Contracts Are Awarded and Priced

Although contracts for food services awarded under the Randolph- Sheppard and JWOD programs use the terms and conditions generally  required for contracts by the FAR, the procedures for awarding and  pricing contracts under the two programs differ considerably. Under the  Randolph-Sheppard program, Education’s regulations provide for giving  priority to blind vendors in the operation of cafeterias on federal property,  provided that the costs are reasonable and the quality of the food is  comparable to that currently provided. The regulations provide for two  procedures to implement this priority. First, federal agencies, such as the  military departments, may engage in direct, noncompetitive negotiations  with a state licensing agency. Of the eight Randolph-Sheppard contracts  we reviewed in detail, six had been awarded through direct negotiations  with the state licensing agency. In most of the eight cases, the contract  was a follow-on to an expiring food service contract. The second award  procedure involves the issuance of a competitive solicitation inviting  proposals from all potential food service providers, including the relevant  state licensing agency. The solicitation will specify the criteria for  evaluating proposals, such as management capability, past performance,  and price, and DOD will use these criteria to evaluate the proposals  received. When the competitive process is used, DOD policy provides for  selecting the state licensing agency for award if its proposal is in the  “competitive range.”  Of the eight Randolph-Sheppard contracts we  reviewed, only two involved a solicitation open to other food service  providers, and there was no case in which more than one acceptable  proposal was received such that DOD was required to determine a  competitive range.
The prices of contracts under the Randolph-Sheppard program are  negotiated between DOD and the state licensing agency, regardless of  whether DOD uses direct negotiations or seeks competitive proposals.  Negotiations in either case typically begin with a pricing proposal  submitted by the state licensing agency, and will then involve a  comparison of the proposed price with the prices in previous contracts, an  independent government estimate, or the prices offered by other  competitors, if any. In some cases, DOD will seek the assistance of the  Defense Contract Audit Agency (DCAA) in assessing various cost aspects  of a proposal. All of the Randolph-Sheppard contracts we reviewed were  generally firm, fixed price. Some had individual line items that provided  for reimbursing the food service provider for certain costs incurred, such  as equipment maintenance or replacing items. In most cases, the contract  was for a base year, and provided for annual options (usually four) that  may be exercised at the discretion of DOD. Of the 39 Randolph-Sheppard  contracts within the scope of our review, the average price for the current  year of the contract was about $6.5 million. Table 2 shows the 8 Randolph- Sheppard contracts in our sample with selected contract information.
Under Part 8 of the FAR, the JWOD program is a mandatory source of  supply, requiring DOD to award contracts to the listed nonprofit entity at  fair market prices established by the Committee for Purchase. There is no  further competition. Table 3 shows the 6 JWOD contracts in our sample  with selected contract information.

		Randolph-Sheppard Vendors Generally Receive a Percentage of Profits, and JWOD Beneficiaries Are Paid Hourly Wages According to Federal Law

Compensation for Randolph-Sheppard blind vendors is computed  differently from compensation paid to JWOD disabled workers. For the  Randolph-Sheppard program, blind vendors’ compensation is generally  based on a percentage of the profits generated by the dining facilities’  operations. Based on the 37 survey responses where we could determine  the basis of how blind vendors’ compensation was computed, 34 reported  that that the vendor’s compensation was computed either entirely, or in  part, based on the profits generated by the dining facility contract. For  compensation based entirely on the facilities’ profits, the blind vendor  received from 51 to 65 percent of the profits. For those blind vendors that  were compensated partially based on profits, their compensation was  based on fixed fees, administrative fees or salaries, and a percentage of the  profits. Where compensation was not based on profits, these three blind  vendors received either a percentage of the contract value or a fixed base  fee. Figure 4 shows the annual compensation received by blind vendors  for military food services contracts, within specified ranges, and the  average compensation for each range.
As shown in figure 4, 15 of 38 Randolph-Sheppard blind vendors’ annual  compensation was between $100,000 and $200,000. Overall, blind  vendors working at DOD dining facilities received average annual  compensation of about $276,500 per vendor. These figures are based on  pretax earnings.  We did not collect compensation information for  employees of the blind vendors or employees of the teaming partners.
For the JWOD program, for most workers—including those with and  without a disability—the compensation is determined by either federal law  or collective bargaining agreements. The Service Contract Act (SCA) was  enacted to give employees of contractors and subcontractors labor  standards protection when providing services to federal agencies. The  SCA requires that, for contracts exceeding $2,500, contactors pay their  employees, at a minimum, the wage rates and fringe benefits that have  been determined by the Department of Labor to be prevailing in the  locality where the contracted work is performed. However, the SCA  hourly rate would not be used if there is a collective bargaining agreement  that sets a higher hourly wage for selected workers. According to NISH,  the collective bargaining hourly rates are, in general, 5 to 10 percent higher  than the SCA’s wage rates. Of the six JWOD contracts in our sample,  Holloman Air Force Base and the Marine Corps’ eastern and western  regional contracts had collective bargaining agreements. For the three  JWOD sites visited, we obtained an estimate of the average hourly wages,  average hourly fringe benefits rates, and average number of hours worked  and computed their annual wages. The average hourly wage for the three  JWOD sites was $13.15 including fringe benefits. Table 4 shows the  average annual wages that an employee earned.
Another law that can affect the disabled worker’s wages is section 14(c) of  the Fair Labor Standards Act, which allows employers to pay individuals  less than the minimum wage (called special minimum wage rates) if they  have a physical or mental disability that impairs their earning or  productive capacity. For example, if a 14(c) worker’s productivity for a  specific job is 50 percent of that of experienced workers who do not have  disabilities that affect their work, and the prevailing wage paid for that job  is $10 dollars per hour, the special minimum wage rate for the 14(c)  worker would be $5 dollars per hour.  None of the three JWOD sites we  visited applied the special minimum wage for any of their disabled  workers.

	Concluding Observations

The Randolph-Sheppard and JWOD programs have a common goal of  serving individuals who are blind or have severe disabilities, and who are  generally underrepresented in the workforce. However, these programs  operate differently regarding how contracts are awarded and priced, and  are designed to serve distinct populations through different means— particularly with respect to compensation for program participants. This is  true for contracts with military dining facilities. The blind vendors who  participate in the Randolph-Sheppard program seek to become  entrepreneurs by gaining experience managing DOD dining facilities. In  this respect, although most of these vendors require the assistance of a  private food service teaming partner, they are compensated for managing  what can be large, complicated food service operations. By contrast,  because the participants of the JWOD program perform work activities  that require less skill and experience, and who might otherwise not be able  to secure competitive employment, they are compensated at a much lower  rate than the Randolph-Sheppard vendors. In this regard, it is apparent  that the two programs are designed to provide very different populations  with different types of assistance, and thus, it is difficult to directly  compare them, particularly with respect to compensation.

	Agency Comments and Our Evaluation

We provided a draft of this report to the Committee for Purchase, the  Department of Defense, and the Department of Education for review and  comment.  The Committee for Purchase had no comments.  DOD  concurred with the draft and also provided technical comments for our  consideration.  We considered all of DOD’s technical comments and  revised the draft as appropriate.  The DOD comment letter is attached as  appendix II.
The Department of Education provided clarifications and suggestions in a  number of areas.  First, Education was concerned about comparing the  earnings of the blind vendors under the Randolph-Sheppard program and  the compensation provided to the food service workers under the JWOD  program.  The agency suggested we compare the earnings of the blind  vendors with the earnings of employees of the JWOD nonprofit agencies  who perform similar management functions. We agree that there are  significant differences in their responsibilities, but we were required to  report on the compensation of the “beneficiaries” of the two programs,  which are blind managers for the Randolph-Sheppard program and hourly  workers for the JWOD program.  Our report highlights these differences.    Our report also highlights in a number of places the difficulty in comparing  the compensation of the two groups of beneficiaries.  We were not  required to report on the earnings of the management personnel of the  nonprofit agencies, and we did not collect this information.
Second, Education urged that we fully describe the permitted uses of the  set-aside fees charged by the state licensing agencies, and that we  recognize that there is a similar assessment under the JWOD program.  We  have revised the report to point out that the Randolph-Sheppard set-aside  may be used to fund the operation of the state licensing agencies.  We also  added language to a footnote to table 3 to recognize that the JWOD  contract amounts include a fee that is used to fund the operations of the  central nonprofit agency.  Third, Education questions our description of  the price negotiations that occur between DOD and the state licensing  agencies.  We believe our report is both clear and accurate on this point as  written.  In addition, DOD did not have any comments or questions about  how we described price negotiations for the Randolph-Sheppard program.
Fourth, Education questioned our discussion of the numbers of persons  with disabilities employed under the two programs.  Specifically,  Education  pointed out that the requirement under the JWOD program that  at least 75 percent of the direct labor hours be performed by persons with  disabilities applies in the aggregate to all work performed by a nonprofit  entity, not at the contract level.  We have revised the report to reflect this.   And finally, Education sought clarification concerning the extent  commercial food service companies are used as teaming partners under  the Randolph-Sheppard program or as subcontractors under the JWOD  program.  We have revised figures 2 and 3 of the report to more accurately  reflect the use of these companies.  The comment letter from Education is  attached as Appendix III.
We will send copies of this report to interested congressional committees,  the Secretary of Defense, the Secretary of Education, and the Chairperson  of the Committee for Purchase, as well as other interested parties. We will  also make copies available to others upon request. In addition, the report  will be available at no charge on GAO’s Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  George Scott at (202) 512-7215 or scottg@gao.gov or William Woods at  (202) 512-8214 or woodsw@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Key contributors to this report are listed in appendix IV.

Appendix I: Scope and Methodology

To accomplish our research objectives, we interviewed officials from the  Department of Defense (DOD), the Department of Education, the  Committee for Purchase, and organizations representing both the  Randolph-Sheppard and Javits-Wagner-O’Day (JWOD) programs. We also  reviewed pertinent documents and regulations governing both programs.  We reviewed a sample of 14 contracts—8 Randolph-Sheppard contracts  and 6 JWOD contracts. For these contracts, we requested the source  selection memorandum, the acquisition plan, the basic contract, and the  statement of work. For two of these contracts, the Randolph-Sheppard  prime contractor for full-food services subcontracted with a JWOD  nonprofit agency for support services. We determined that it was not  feasible to review a representative sample of contracts based on our  preliminary work, which indicated wide variations in how the two  programs are structured and how the Randolph-Sheppard program is  administered from state to state. For these reasons, we selected a number  of contracts to review in order to ensure representation of both programs,  as well as ensure a balance of contracts based on dollar value, size of  military facility, branch of the military, and geographic location. As the  sample was not representative, results of our review cannot be projected  to the entire universe of contracts. In addition, we visited the military  installation for 5 of the 14 contracts in our sample in order to observe  dining facilities and their operations, as well as interview pertinent  officials and staff, including the blind vendor or JWOD agency  management whenever possible. Again, these five locations were selected  to ensure representation of both programs, as well as variation in  geographic location, contract size, and military branch. In terms of  beneficiary compensation, we limited our review to Randolph-Sheppard  blind vendors and JWOD workers. For the JWOD program, we obtained  average hourly wages, average hourly fringe benefits, and average total  hours worked during the year for JWOD employees at selected sites.  We  did not obtain compensation amounts for the managerial employees for  any JWOD nonprofit agencies.
To obtain information on the relationships between state licensing  agencies and blind vendors, we conducted a survey of the 24 state  licensing agencies we determined to have Randolph-Sheppard military  dining contracts. We asked questions regarding the roles and  responsibilities of blind vendors, the vendor’s relationship with the state  licensing agencies, and the role played by teaming partners. We  administered this survey between April and July 2007. We pretested this  survey with program directors and modified the survey to take their  comments into account. All 24 state licensing agencies responded to our  survey for a response rate of 100 percent and provided information for 39  military dining facilities contracts. Additionally, we requested information  for the 40 blind vendors with military dining contracts to determine their  annual compensation. For the 39 contracts, there were 40 blind vendors as  one contract utilized two vendors. We received compensation information  for 38 of the 40 blind vendors.

Appendix II: Comments from the Department of Defense

Appendix III: Comments from the Department of Education

Appendix IV: GAO Contacts and Staff Acknowledgments

	Staff Acknowledgments

Jeremy D. Cox (Assistant Director), Richard Harada (Analyst-in-Charge),  Daniel Concepcion, Rosa Johnson, and Sigurd Nilsen made significant  contributions to all aspects of this report. In addition, Susannah Compton  and Lily Chin assisted in writing the report and developing graphics. John  Mingus provided additional assistance with graphics. Walter Vance  assisted in all aspects of our survey of state licensing agencies as well as  providing methodological support. Doreen Feldman, Daniel Schwimer,  and Alyssa Weir provided legal support.

Related GAO Products

Federal Disability Assistance: Stronger Federal Oversight Could Help  Assure Multiple Programs’ Accountability. GAO-07-236. Washington,  D.C.: January 26, 2007.

Summary:
Why GAO Did This Study

Randolph-Sheppard and Javits-Wagner-O'Day (JWOD) are two federal programs that provide employment for persons with disabilities through federal contracts. In 2006, participants in the two programs had contracts with the Department of Defense (DOD) worth $465 million annually to provide dining services at military dining facilities. The 2007 National Defense Authorization Act directed GAO to study the two programs. This report examines (1) differences in how the Randolph-Sheppard and JWOD programs provide food services for DOD and (2) differences in how contracts are awarded, prices are set, and program beneficiaries (i.e. persons with disabilities) are compensated. GAO interviewed program officials, conducted a survey of states with Randolph-Sheppard programs, and reviewed eight Randolph-Sheppard and six JWOD contracts.

What GAO Found

The Randolph-Sheppard and JWOD programs use different procedures to provide food services to DOD. In Randolph-Sheppard, states act as prime contractors, and train and license blind individuals to act as managers of dining facilities. In most cases, the blind vendor relies on a food service company--known as a teaming partner--to assist in operations, provide expertise, and help with start-up costs. About half of the blind vendors are required to employ other persons with disabilities. JWOD is administered by an independent federal agency called the Committee for Purchase from People Who are Blind or Severely Disabled (Committee for Purchase). The Committee for Purchase engages a central nonprofit agency to match DOD's needs with services provided by local nonprofit agencies. Most of the individuals working for these local nonprofit agencies are employed in less skilled jobs such as serving food or washing dishes. The Randolph-Sheppard and JWOD programs differ significantly in the way DOD dining contracts are awarded, how prices are set, and how participants are compensated. For Randolph-Sheppard, DOD awards contracts to the states either through direct negotiations or competition with other food service companies. In either case, DOD and the states negotiate the prices based on factors such as historical prices and independent government estimates. Under JWOD, competition is not a factor because DOD is required to purchase services it needs from a list maintained by the Committee for Purchase, which establishes fair market prices for these contracts. In terms of compensation, Randolph-Sheppard blind vendors generally received a percentage of contract profits, averaging about $276,500 per vendor annually. JWOD beneficiaries are generally paid hourly wages according to rules set by the federal government. For the three sites we visited, we estimate that beneficiaries received an average wage of $13.15 per hour, including fringe benefits. Given the differences in the roles of the beneficiaries of these two programs, comparisons of their compensation have limited value.