The Randolph-Sheppard Act: Business Enterprise Opportunities for the Blind

The Randolph-Sheppard Act: Business Enterprise
Opportunities for the Blind
August 7, 2008
Andrew R. Sommers
Analyst in Public Health and Epidemiology
Domestic Social Policy Division

The Randolph-Sheppard Act: Business Enterprise
Opportunities for the Blind
Summary
The Randolph-Sheppard Act (P.L. 74-732), as amended, was enacted to provide
blind individuals with remunerative employment and to enhance their economic well-
being. Under the act, blind individuals in need of employment are given priority in
the operation of vending facilities and automatic vending machines on federal
property. Typically, blind individuals who receive Randolph-Sheppard contracts act
as managers, subcontracting with food service organizations that provide meal and/or
vending services on a day-to-day basis. Since its inception, the Randolph-Sheppard
Business Enterprise Program has extended its reach beyond federal locations to
include state, county, municipal, and private installations. However, the priority
provisions of the Randolph-Sheppard Act (R-SA) apply only to the operation of
vending facilities on federal property. This program is not mandatory, though every
state except Wyoming chooses to participate.
The 1974 amendments to the R-SA added cafeterias to its list of eligible
“vending facilities.” Congress, however, did not specify whether military mess halls
should be treated as “cafeterias” in context of the R-SA. This issue has been quite
controversial, raising concerns about possible conflicts between the R-SA and
AbilityOne (formerly Javits-Wagner-O’Day, or JWOD), a statutorily mandated
procurement program that promotes employment opportunities for persons who are
blind or severely disabled.
In FY2007, a total of 2,545 blind vendors operated 3,031 Randolph-Sheppard
vending facilities, generating $713.2 million in gross income, with average vendor
earnings of $46,963. This report provides a brief history of the Randolph-Sheppard
program and an explanation of how it is structured. Then, detailed financial and
operational data are provided — including the number of program participants, their
overall sales, and their earnings. Finally, the report explores how JWOD and the R-
SA intersect, or overlap. It concludes with a discussion of recent legislation that has
been introduced to reform and combine the AbilityOne and the Randolph-Sheppard
programs. This report will be revised as new program data become available and as
legislative or judicial events warrant.

Contents
Background ..................................................1
Program Description...........................................2
Program Data.................................................3
Intersection Between the Randolph-Sheppard and AbilityOne Programs...5
Legislative Activity............................................8
List of Tables
Table 1. Randolph-Sheppard Program Vendors, FY1998-FY2007............4
Table 2. Earnings and Funding Sources of the Randolph-Sheppard
Program, FY1998-FY2007......................................5
Table 3. Comparison of the Randolph-Sheppard and AbilityOne Programs.....7

The Randolph-Sheppard Act: Business
Enterprise Opportunities for the Blind
Background
Signed into law in 1936, the Randolph-Sheppard Act¹ (R-SA) provides
employment opportunities to qualified blind persons through the operation of²
vending facilities in federal buildings. In enacting the R-SA, Congress’s explicit
intent was to foster independence and self-sufficiency among the visually impaired.³
During its first 15 years, however, this program met with little success. Encouraged
by the invention of “vending machines,” legislators revisited the R-SA in 1954 (P.L.⁴

83-565), expanding its applicability to federal properties (previously buildings).

Nonetheless, the Randolph-Sheppard vending program still failed to employ
significant numbers of blind individuals — in part because the law continued to
provide agency officials with broad discretion when implementing R-SA provisions:
blind or visually impaired vendors were only to be given preference “so far as is
feasible.” This feasibility standard was replaced in 1974 (P.L. 93-516) when R-SA
amendments clearly established a federal-state relationship and created a process by
which priority was given to blind vendors seeking to operate vending facilities on
federal property. The 1974 changes also broadened the reach of the R-SA to include
management functions once thought to be beyond the capability of blind individuals.
Finally, these amendments also added cafeterias to the R-SA’s list of eligible
“vending facilities.”
Today, four types of retail facilities are governed by R-SA regulations:⁵
^!Automatic (coin-operated) vending machines.

¹ P.L. 74-732, 49 Stat. 1559. The Randolph-Sheppard Act is named for its two sponsors:
Representative Jennings Randolph (WV) and Senator Morris Sheppard (TX).
² The R-SA defines “vending facilities” as “automatic vending machines, cafeterias, snack
bars, cart services, shelters, counters, and such other appropriate auxiliary equipment as the
Secretary [of Education] may by regulation prescribe as being necessary for the sale of the
articles or services described in [20 USC §107a(a)(5)] and which may be operated by blind
licensees.”
³ Erik L. Christiansen, “The Applicability of the Randolph-Sheppard Act to Military Mess
Halls,” The Army Lawyer, Department of the Army Pamphlet 27-50-371, April 1, 2004, pp.

1-13.

⁴ Federal property is any building, land, or other real property owned, leased, or occupied
by any agency or department of the United States (20 USC §107e (3)).
⁵ 34 CFR §395.

^!Retail stores, which provide prepackaged food (e.g., hot dogs,
microwaveable sandwiches, hot/cold beverages, prepared soups).
These stores often also sell magazines, newspapers, and tobacco
products.
^!Snack bars/delicatessens, which offer prepackaged goods but also
“prepared-on-premises” food items.
^!Cafeterias, which at a minimum, must serve hot meals.
The program has also expanded from federal facilities to include some state, county,
and private facilities.⁶ However, private vending facilities are not subject to
Randolph-Sheppard Act regulations.
Program Description
Under the Randolph-Sheppard vending facilities program, state licensing
agencies (SLAs) are responsible for recruiting, training, and licensing blind⁷ and
visually impaired individuals to manage vending facilities.⁸ SLAs by definition are
entities that provide vocational rehabilitation services to persons who are blind, such
as job counseling or training, information and referral, and job search assistance.
Blind entrepreneurs who receive funds from an SLA to manage vending facilities
usually subcontract with a food service company to help with operations and/or
provide expertise. SLAs administer Randolph-Sheppard programs at the state-level,
where these programs are most commonly referred to as “business enterprise
programs”; by contrast, the U.S. Department of Education dubbs them “vending
facility programs” for the blind.⁹ The R-SA requires that each participating state
empower an elected committee to help inform and direct the work of its SLA. As a
result, Randolph-Sheppard program policies may vary from state to state.
The Randolph-Sheppard program is funded by several sources. These include
federal funds allocated through the vocational rehabilitation state grant program
under the Rehabilitation Act of 1973, as amended;¹⁰ a portion of net proceeds from

⁶ Under the Surface Transportation Assistance Act (P.L. 97-424), as amended, blind vendors
are given priority when state governments award contracts for the operation of vending
facilities in rest areas along interstate highways.
⁷ Legal blindness is defined as visual acuity (vision) of 20/200 or less in the better eye with
the best correction possible. This means that a legally blind individual would have to stand
20 feet (6.1 m) from an object to see it — with vision correction — with the same degree
of clarity as a normally sighted person could from 200 feet (61 m). Approximately 10% of
those people deemed legally blind have no vision. The rest have some vision, from light
perception alone to relatively good acuity.
⁸ To be eligible for operating a Randolph-Sheppard vending facility, an individual must be
a U.S. citizen as well as be legally blind.
⁹ See [http://www.ed.gov/programs/rsarsp/index.html].
¹⁰ For further information, see CRS Report RL34017, Vocational Rehabilitation Grants to
(continued...)

vending machines on federal property;¹¹ a set-aside levied by states on vendors;¹² and
state appropriations. The program is administered by the Rehabilitation Services
Administration, part of the Office of Special Education and Rehabilitative Services
(OSERS) in the Department of Education.
Program Data
Table 1 describes the number of blind contractors who received contracts to
manage vending operations under the Randolph-Sheppard program since FY1998.
It also details the number of facilities, both federal and non-federal, that these
vendors have served, and the average annual earnings of each vendor. In FY2007
(the latest year for which data are available), 2,545 vendors oversaw 3,031 vending
facilities.¹³ There were 1,070 (35.3%) vending facilities located on federal property,
whereas 1,961 (64.7%) were located on non-federal property. Nationally, average
annual earnings for vendors were $46,753, an 0.4% decrease compared with the prior¹⁴

fiscal year (Table 1).
¹⁰ (...continued)
States and Territories: Overview and Analysis of the Allotment Formula, by Scott
Szymendera, and CRS Report RL31298, Rehabilitation Act: Summary of 1998
Reauthorization Legislation, by Carol O’Shaughnessy.
¹¹ The law allows in certain cases a portion of net proceeds from vending machines on
federal property to be set aside for program support.
¹² Not all states levy a set-aside on vendors. However, a reasonable amount of funds could
be set aside from the net proceeds generated by the operation of vending facilities for such
purposes as maintenance and replacement of equipment, purchase of new equipment,
management services, and health insurance contributions, among other things (see 34 CFR

395.9).

¹³ Over and above these licensed blind operators, the Randolph-Sheppard program employed
an additional 500 individuals with disabilities in FY2007.
¹⁴ U.S. Department of Education, OSERS, RSA-IM-07-05, June 27, 2007.

Table 1. Randolph-Sheppard Program Vendors, FY1998-FY2007
^FY¹⁹⁹⁸^FY¹⁹⁹⁹^FY²⁰⁰⁰^FY²⁰⁰¹^FY²⁰⁰²^FY²⁰⁰³^FY²⁰⁰⁴^FY²⁰⁰⁵^FY²⁰⁰⁶^FY²⁰⁰⁷
^Num^b^{er of Vendors}
^Fed^e^r^a^l
^l^o^catⁱ^oⁿ^s⁹⁷⁴⁹²⁵⁸⁹⁷⁹⁰⁰⁹¹²⁹⁰⁵⁹¹¹⁸⁹⁵⁸⁹⁴⁸⁸⁸
^N^o^n-fe^d^e^r^a^l
^l^o^catⁱ^oⁿ^s^1,979^1,888^1,819^1,811^1,768^1,726^1,618^1,669^1,681^1,657
^T^o^tal²^,953^2,716^2,729^2,711^2,⁶⁸⁰^2,631^2,529^2,564^2,575^2,545
^Num^b^{er o}^f^Vending^Fa^cilit^ies
^Fed^e^r^a^l
^l^o^catⁱ^oⁿ^s^1,135^1,119^1,114^1,111^1,097^1,096^1,110^1,115^1,069^1,070
^N^o^n-fe^d^e^r^a^l
^l^o^catⁱ^oⁿ^s^2,256^2,232^2,178^2,083^2,030^2,023^1,994^1,965^1,971^1,961
^T^o^tal³^,391^3,351^3,292^3,194^3,¹²⁷^3,119^3,104^3,080^3,040^3,031
^A^v^{erage E}^a^rnⁱⁿ^gs^{of V}^eⁿ^d^o^rs^a
^To^t^a^l^$29,815^$32,556^$34,298^$34,921^$37,246^$38,147^$40,503^$43,584^$46,963^$46,753
^Source:^D^a^t^a^provⁱ^d^{ed by}^U^.^S^.^D^e^p^a^r^t^m^eⁿ^t^of^Edu^cation^,^Of^fⁱ^{ce of}^{Special Edu}^cation^an^d
^R^e^h^a^bilitativ^{e Serv}^ices^{, J}^uⁿ^e^{16, 2008.}
^a^.^Ca^l^c^ul^a^t^e^d^b^y^dⁱ^vi^dⁱ^{ng t}^o^t^a^l^ve^nd^o^r^e^a^rⁿⁱ^{ngs b}^y^ve^nd^o^r^p^e^r^s^oⁿ^-y^e^a^r^s.
Table 2 details gross income and net earnings for Randolph-Sheppard vendors
for each year from FY1998 to FY2007. In FY2007, the program generated $713.2
million in gross income (meaning overall sales and vending machine income
combined), with $116.3 million in net earnings (meaning aggregate profit) going to
vendors.

Table 2. Earnings and Funding Sources of the
Randolph-Sheppard Program, FY1998-FY2007
($ in millions)
^FY¹⁹⁹⁸^FY¹⁹⁹⁹^FY²⁰⁰⁰^FY²⁰⁰¹^FY²⁰⁰²^FY²⁰⁰³^FY²⁰⁰⁴^FY²⁰⁰⁵^FY²⁰⁰⁶^FY²⁰⁰⁷
^Iⁿ^com^e^{and E}^a^rnings
^o^{ss inc}^o^m^e^a^$425.5^$448.1^$471.1^$466.3^$453.6^$475.9^$620.4^b^$661.3^$692.2^$713.2
^eⁿ^dors^Earnⁱⁿ^g^s^86.4^90.6^93.9^95.0^96.8^98.7^105.2^111.2^115.7^116.3
^Funding^So^urces
^e^ndⁱ^{ng m}^a^c^hⁱⁿ^e
ⁿ^com^eⁿ^/^a^15.3^16.0^14.5^16.6^15.2^18.7^17.2^20.0^21.9
^eⁿ^{dor l}^e^vⁱ^{ed s}^e^t^-^asⁱ^d^eⁿ^/^a^15.3^14.2^12.0^11.5^12.5^11.1^12.8^13.1^14.4
^t^at^{e appropri}^a^tⁱ^oⁿⁿ^/^a^6.6⁶^.6^5.9⁶^.2^6.7⁶^.7^9.2⁷^.1^7.0
^d^e^r^a^l^fund^s^cⁿ^/^a^34.0^38.5^32.3^31.4^27.8^37.5^37.1^35.2^39.3
^o^talⁿ^/^a^71.1^75.3^64.7^65.8^62.2^74.0^76.3^75.4^82.6
^Source:^D^a^t^a^provⁱ^d^{ed by}^t^h^{e U}^.^S^.^D^e^part^m^eⁿ^t^of^Edu^cation^,^Of^fⁱ^{ce of}^{Special Edu}^cation^an^d
^R^e^h^a^bilitativ^{e Serv}^ices^{, J}^uⁿ^e^{16, 2008.}
^No^te:ⁿ^/^{a = n}^o^{t av}^ailable.
^{a. Gros}^s^s^a^les^,^v^eⁿ^dⁱⁿ^g^m^achⁱⁿ^{e in}^com^e^{, an}^{d f}^a^{ir m}ⁱⁿⁱ^m^u^m^retu^rn^.
^b^.^Th^eⁿ^o^t^a^b^l^eⁱⁿ^c^r^e^a^s^eⁱⁿ^“^g^r^o^s^s^s^a^l^e^s^”^a^f^t^e^r^F^Y²⁰⁰³ⁱ^s^at^t^rⁱ^b^u^t^a^b^l^e^t^o^a^c^h^aⁿ^g^eⁱⁿ^r^e^p^o^r^tⁱⁿ^g
^p^r^o^ced^u^r^{es r}^e^l^a^t^e^d^to^m^ilitar^y^dⁱⁿⁱⁿ^g^f^acility^coⁿ^t^r^{acts g}^r^an^ted^to^{state licen}^sin^g^ag^en^cies.
^Begⁱⁿⁿⁱⁿ^gⁱⁿ^F^Y^{2004, t}^h^es^{e ag}^en^ci^es^w^e^{re adv}ⁱ^s^e^d^t^o^report^al^lⁱⁿ^f^o^rm^atⁱ^oⁿ^abou^t^D^e^part^m^eⁿ^t
^o^f^Def^eⁿ^s^{e co}ⁿ^t^r^{acts in}^th^eir^r^e^p^o^r^{ts to}^th^{e Reh}^a^b^ilitatioⁿ^Ser^v^{ices A}^d^mⁱⁿⁱ^str^a^tioⁿ^.
^c^.^Fund^{s a}^llo^c^a^t^e^d^thr^o^{ugh the}^Vo^c^a^tio^na^{l Re}^ha^b^ilita^tio^{n Sta}^t^e^Gr^aⁿ^{t p}^r^o^g^r^a^m^.
Intersection Between the Randolph-Sheppard and
AbilityOne Programs
The 1974 amendments have also raised questions about the scope of the
Randolph-Sheppard preference. Specifically, disability rights advocates and various
food service contractors have contended that the R-SA’s blind vendor priority
conflicts with other set-aside programs, such as AbilityOne. AbilityOne, formerly
the Javits-Wagner-O’Day program (JWOD), is a federal program that helps provide
jobs for individuals with disabilities through federal contracts.
Signed by President Franklin D. Roosevelt in 1938, the Wagner-O’Day Act¹⁵
sought to provide employment opportunities for people who were blind by allowing
them to manufacture mops and brooms to sell to the federal government. In 1971,

¹⁵ P.L. 75-739.

Congress amended this Act¹⁶ to include people with severe disabilities and to enable
the program to sell services — not just material goods — to the federal government.
Today, through the products and services it offers to federal entities, AbilityOne
facilitates employment opportunities for thousands of individuals with disabilities.
The Committee for Purchase From People Who Are Blind or Severely Disabled
(hereafter, the Committee) is the federal agency authorized to administer AbilityOne.
The Committee is responsible for determining which products and services will be
furnished to the government by people who are blind or severely disabled. It also
determines the fair market prices to be paid for those items. Two nonprofit agencies,
the National Industries for the Blind (NIB) and NISH (formerly the National Institute
for the Severely Handicapped), have been designated to assist AbilityOne with
program implementation and the production of goods and services.
The AbilityOne and the Randolph-Sheppard programs both provide contracting
preferences for the blind. However, AbilityOne typically offers visually impaired and
severely disabled individuals employment in “sheltered” work environments, while
R-SA provides a somewhat broader array of opportunities, including management
positions.¹⁷
Table 3 outlines the structural differences between AbilityOne and Randolph-
Sheppard. Under the Randolph-Sheppard program, contracts are typically awarded
through direct negotiations or competitive bidding; by contrast, competition is a non-
issue with AbilityOne, because goods or services are purchased by federal agencies
off of a procurement list established by the Committee.

¹⁶ P.L. 92-28, 85 Stat. 77, 41 U.S.C. §§ 46-48c.
¹⁷ The AbilityOne employees are paid hourly wages, according to federal government rules
and regulations; R-SA vendors typically receive a percentage of contract profits. The
Government Accountability Office estimated that in 2007 the average wage of an
AbilityOne employee was $13.15 per hour, including fringe benefits (see Defense
Contracts: Contracting for Military Services under the Randolph-Sheppard and Javits-
Wagner-O’Day Programs, GAO-08-3, October 2007).

Table 3. Comparison of the Randolph-Sheppard and
AbilityOne Programs
Randolph- Sheppard AbilityOne
StatuteP.L. 74-732, 49 Stat. 1559, asP.L. 92-28, 85 Stat. 77, 41 U.S.C. §§
amended by P.L. 83-565 and46-48c
P.L. 93-516
20 U.S.C. §§ 107-107f
Date authority expiresIndefinite.Indefinite.
Regulations34 CFR 395, 41 CFR 101-20.241 CFR 51
Program participantsBlind vendor, usually with theLocal nonprofit agency using blind or
or beneficiariesassistance of a “teamingseverely disabled workers.
partner.”
Type of servicesThe Randolph-SheppardMany products (e.g., office supplies) are
offeredprogram provides opportunitiesavailable under the AbilityOne Program,
for legally blind individuals toas are a wide range of services, including
manage a broad array of administrative, janitorial, and laundry
food-service operations,services
including commissary shelf stocking
cafeterias full food service
coffee shops grounds maintenance
snack bars
vending locations
AdministrationDepartment of Education isThe Committee for Purchase from
responsible for oversight, butPeople Who Are Blind or Severely
program is operated at the stateDisabled is the AbilityOne program’s
level by a state licensing agencyfederal overseer. It works with two
under the auspices of the stateCentral Nonprofit Agencies, NISH and
vocational rehabilitationNIB, to coordinate the provision of
program.goods and services to the federal
government.
Competitiveness ofThe Randolph-Sheppard ActNo. The Javits-Wagner-O’Day Act
contracts requires that federal governmentrequires that federal government
agencies give priority for theagencies purchase certain products and
operation of vending facilities onservices from a procurement list
federal property to blind personsmaintained by The Committee and
licensed by a state agency.updated in the Federal Register.
Purchasers of servicesFederal government, primarily.Federal government, primarily. Once a
or material goodsTwo of the largest purchasersproduct or service is on the AbilityOne
are the Department of DefenseProcurement List, the government must
and the General Servicesbuy it from an the designated nonprofit
Admi nistration. agency.
Requirements toNo specific requirement thatThe Committee requires that at least
employ individualsblind managers hire workers75% of the total number of direct labor
with disabilitieswith disabilities.hours procured from a participating
agency be completed by persons with
disabilities.
^Source:^A^d^a^p^t^e^{d by}^C^oⁿ^g^r^es^sⁱ^on^al^R^e^s^earch^S^e^rvⁱ^{ce f}^r^om^G^A^O^-^08-^3,^Coⁿ^t^ra^ctin^g^fo^{r Milita}^ry
^Ser^vⁱ^ces^under^t^h^{e Randol}^ph-Sheppar^{d and Javi}^t^s^-W^agner^-^O^’^D^a^{y Pr}^ogr^am^s^{, O}^c^t^{ober 2007.}

Despite the fundamental distinctions between these two programs, the fact that
each provides food services, loosely defined, has led some observers to argue that
Randolph-Sheppard and AbilityOne are de facto competitors in certain
circumstances. For instance, tensions have mounted around food service operations
on military bases in recent years. Because many of the items that may be purchased
off of the Committee’s (JWOD) Procurement List are also tasks that a Randolph-
Sheppard vendor could or would supply as part of a cafeteria contract, including mess
hall attendant services (e.g., waiters), sales support (e.g., cashiers), and cleaning
assistance (e.g., table busing, dishwashing), JWOD and the R-SA have been
perceived to be in conflict, or in competition. Moreover, R-SA vendors argue that
they are at a competitive disadvantage for a number of reasons. First, JWOD services
have a fixed price, predetermined by the Committee; second, JWOD companies do
not have to go through a laborious, and often time-consuming, competitive bidding
process. Most importantly, federal agencies/departments are prohibited from
acquiring goods and services (equivalent to JWOD items) from sources other than
the National Industries for the Blind and NISH nonprofit agencies.¹⁸
Legislative Activity
The Javits-Wagner-O’Day (JWOD) and Randolph-Sheppard (R-SA)
Modernization Act of 2008 (S. 3112) was introduced by Senator Michael Enzi on
June 11, 2008. This comprehensive bill would reauthorize, reconfigure, and expand
both programs, bolstering the job training aspects of each and increasing regulatory
oversight to prevent waste, fraud, and abuse. S. 3112 changes the name of the
existing Committee for Purchase From People Who Are Blind or Severely Disabled
to the Committee for the Advancement of Individuals with Disabilities, giving this
entity responsibility for administering both the R-SA program and the
AbilityOne/JWOD procurement program. This bill also places an explicit emphasis
on greater oversight of both JWOD and R-SA, including regular financial audits of
Randolph-Sheppard’s central nonprofit agencies and of state licensing agencies
participating in the JWOD program. Finally, S. 3112 underscores the importance of
converting nonintegrated community rehabilitation programs into programs that offer
integrated, community-based employment opportunities.
Other significant changes that would occur if S. 3112 were to become law
include the following:
^!A requirement that SLAs train and give R-SA permits to persons
with other severe disabilities beyond blindness (starting three years
after enactment of the legislation).
^!A requirement that any existing state VR self-employment program
be merged with the R-SA to create a single self-employment
framework for all persons who are blind or have severe disabilities.
^!A limit of three years on contracts between R-SA vendors and their
teaming partners.

¹⁸ Only the Federal Prison Industries can override JWOD’s priority for products/services.

Provisions specific to R-SA military contracting include the following:
^!A clarification which states that, in the context of military
contracting, the term cafeteria refers only to “services pertaining to
a full food service military dining facility.” It does not include
auxiliary services such as dish washing, maintenance, cleaning, or
related support.
^!An order that prohibits the AbilityOne program from competing for
full food contracts. Any full food contract that AbilityOne currently
has on its procurement list will be removed five years after this bill
becomes law.
^!A decree that state licensing agencies will no longer receive
preferences when competing for full food service contracts with the
military.
S. 3112 was referred to the Senate Committee on Health, Education, Labor, and
Pensions. No similar legislation has been introduced in the House of
R epresent at i v es.