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Requirements
State Contracts under the State Use Program



Briefly, a Work Center must do the following to obtain a State contract:

  • Provide a product or service that the State needs, i.e., according to State specifications;
  • Price the product or service at a fair market value;
  • Employ persons with severe disabilities for at least 75% of the direct labor hours needed to produce the product or service; and, for products,
  • Add appreciable contribution (add value) to the raw materials needed to make the product.

When a Work Center satisfies these requirements, then:

  • A State agency need not solicit bids or proposals. However, an agency may solicit bids or proposals as a means to establish fair market value when other means do not exist.
  • A State agency is obligated to buy the product or service from the Work Center.
  • A State agency may approve a price increase provided that such increase is predicated on an increase in the Work Center’s material or compensation costs.
  • The State contract continues so long as the Work Center performs satisfactorily to meet the State agency needs.

If a State agency is dissatisfied with the performance of a work center, the State agency, first, must attempt to negotiate an adjustment and, second, advise the State Use Board of the situation. Then, the State Use Board, if it decides that the performance is unsatisfactory, may suspend the Work Center’s eligibility to participate in the State Use Program. Such action effectively would cancel the Work Center’s contract with the State.

In the information above, “a State agency” refers to either the State agency with whom a Work Center contracts or to the State Bureau of Procurement when the Bureau contracts on behalf of all State agencies. In the latter situation, all State agencies are obligated to use the State contract with the Work Center.

Further Explanation of the State Use Program Requirements

Set-Asides: Shortly after the legislature re-structured the State Use Program in 1989, the State Use Board established an administrative procedure for Work Center set-asides. Granted on a first come basis, a set-aside is an exclusive 90 working day period given to a Work Center to research and develop a plan to provide a product or service to the State. The Director of the State Use Program may approve the initial set-aside and one extension of an additional 90 working days, when the Work Center reports progress in its planning. The Board must approve any additional set-aside extension. Thus, a set-aside is an administrative means to eliminate duplicate work among multiple Work Centers interested in providing the same product or service to the State.

State Contracts: S.16.752, Wis. Stat., “Procurement from work centers for severely handicapped individuals,” establishes the policies through which State of Wisconsin agencies contract with Work Centers.

First, the statute defines a work center as:

    16.572(1)(e): “a charitable organization or nonprofit institution which is licensed under s.104.07 and incorporated in this state … which is operated for the purpose of carrying out a program of rehabilitation for severely handicapped individuals and for providing the individuals with remunerative employment or other occupational rehabilitating activity of an educational or therapeutic nature, and which is engaged in the production of materials, supplies, or equipment or performance of contractual services in connection with which not less than 75% of the total hours of direct labor are performed by severely handicapped individuals.”

Second, the statue defines direct labor as:

    16.752(1)(c): “all labor or work involved in producing or supplying materials, supplies or equipment or performing contractual services including preparation, processing, and packing, but excluding supervision, administration, inspection and shipping.”

Shipping here means use of a common carrier to deliver the product. Preparation of a product for shipping is included in packing. Having individuals with severe disabilities perform supervision, administration, inspection and shipping is admirable, but their work is not counted in computing the 75% direct labor hours.

Third, the statue describes the Work Center’s responsibilities as:

    16.752(8):

  1. “Furnish materials, supplies, equipment and services in strict accordance with orders issued by (State of Wisconsin) agencies.
  2. Make its records available for public inspection at any reasonable time.”
  3. “Maintain records of direct labor hours performed in the work center by each worker.
  4. Annually submit to the (State Use) board a certification that it is qualified to participate in the program established under this section.
  5. Comply with applicable occupational health and safety standards prescribed by the U.S. secretary of labor, the federal occupational health and safety administration or the (State Of Wisconsin) department of commerce.
  6. Maintain an ongoing placement program for severely handicapped individuals that includes staff which is assigned to perform personal evaluations and to maintain liaisons with appropriate community service organizations.
  7. Maintain a record for each severely handicapped individual employed by it which includes a written report prepared by a licensed physician or psychiatrist, or a qualified psychologist, reflecting the nature and extent of the disability that causes the individual to qualify as severely handicapped.”

While the State Use Board has required access to medical information of a Work Center’s client-workers under items b and g above, the Board has not permitted public release of such information with the client-workers’ names.

    And

  1. 16.752(10): “Seek broad competition in the purchase of raw materials and components used in the materials, supplies, equipment or services … inform the board before entering into multiyear contracts for such raw materials and components.”

    And

  1. 16.752(11): “…make an appreciable contribution to the reforming of raw materials or the assembly of components thereof.”

    And

  1. 16.752(17): Furnish “materials supplies and equipment under specifications issued by an agency” and “in strict accordance with the specifications;” and provide services “in strict accordance with the specifications.”

Fourth, the statute describes State agencies’ responsibilities as:

    16.752(12):

  1. … agencies shall obtain materials, supplies, equipment and services on the list maintained by the (State Use) board….”

The statute does not require the State agency to solicit bids or for the Work Center to submit a bid. Rather, the Work Center submits its price which is accepted or not accepted depending on the State agency’s fair market price information. If the Work Center’s price exceeds fair market price, the Work Center may re-figure its pricing and re-submit its price to the State agency. If an agency solicits bids to establish fair market pricing, then the Work Center, if not the low bidder, is permitted to match the low bid.

  1. “The purchase order shall contain the following:
  • The name, material, supply or equipment number assigned by the board, most recent specification, quantity, unit price, and place and time of delivery.

  • The type of work and location of services required, most recent specification, work to be performed, estimated volume, and time for completion.
    1. Agencies shall issue purchase orders with sufficient time for the appropriate work center to produce the materials, supplies or equipment or provide the services required.”

    More often now, a State agency and a Work Center sign a memorandum of agreement or a contract to identify terms and conditions, specifications, invoicing and payment procedures, and performance requirements for delivery of the product or service. A State agency may issue a purchase order annually to encumber funds or on an as needed basis.

      And

    1. 16.752(15): “If a work center fails to comply with the terms of an order from an agency, the ordering agency shall make every effort to negotiate adjustments before canceling the order.”

      And

    1. 16.752(17)(c): “If the quality of a material, supply, piece of equipment or services received from a work center is not satisfactory to the contracting agency, the agency shall advise the board.”

    The Board interprets this section to mean that a State agency may not terminate a contract without approval of the Board. Precedence exists for this interpretation.

    Fifth, the statute also specifies conditions for establishing prices:

      16.752(14):

    1. “All prices shall be determined by the Board on the basis of fair market prices for materials, supplies, equipment or services similar to those supplied by work centers.
    2. Prices for materials, supplies or equipment shall include delivery and packaging, packing and marketing costs.
    3. Price changes for materials, supplies or equipment shall apply to all orders placed on or after the effective date of the change.
    4. Delivery of an order is accomplished when a shipment is received and accepted by the purchasing agency.”

    While the Board permits the Work Center to include reasonable overhead costs in its price, the Board does not permit a Work Center to include profit or reserve.

    Sixth, the statue identifies the State Use Board responsibilities pertaining to contracting as:

    1. 16.752(2)(g): “… maintain a list of each material, supply, piece of equipment or contractual service to be supplied by work centers….”

      And

    1. 16.752 (17)(c): “… if the board determines that the quality of the material, supply, equipment or service is unsatisfactory, the board shall suspend the eligibility of the work center which provided the material, supply or equipment or which performed the service….”

    For further information, call 608-266-5462 or write to: State Use Program, 101 East Wilson Street, 6th Floor, P.O. Box 7867, Madison, Wisconsin 53707-7867.

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