NEWPORT NEWS, Va. — The process by which the U.S. Navy supplies the stores on its ships could soon change.
Right now, dozens of businesses work to supply more than 6,000 items to the Navy’s Ships Stores Program.
But a 13News Now investigation confirms the Navy is now looking to dismantle the current system, and it has some small business owners crying foul.
The Small Business Model
For decades, a big chunk of Cynthia Chillous’ business has been with the U.S. Navy.
Her business, Destinee Distributors in Newport News, supplies everything from potato chips and coffee mugs to beef jerky and belt buckles to sailors serving overseas.
Chillous said she operates on a contract that she first inked 25 years ago with Naval Supply Systems Command (NAVSUP). But now, she’s learned she’s in jeopardy of losing what she estimates is 70% of her business.
“It could pretty much put me out of business,” she said.
Chillous said she was under the impression that her contract with the Navy would always be there, so long as she upheld her end of the deal.
“I was under the understanding that we would always have this contract. I never knew it could be in jeopardy at any point,” Chillous said.
But word has trickled out to some of the current contract holders that the Navy could be close to a new deal not with them, but with AbilityOne.
What is AbilityOne?
AbilityOne is an independent federal agency providing jobs to 37,000 people nationwide who are blind or disabled. More than 18,000 of those employees currently work on contracts with the Department of Defense (DOD).
Government agencies, like the DOD, must consider the use of AbilityOne sources if approached by the agency.
No contract has been awarded yet, but NAVSUP confirmed to 13NewsNow that the Navy intends to utilize AbilityOne.
“Instead of dealing with a bunch of small vendors, they can just deal with one,” Chillous said. “Now AbilityOne is coming in, and swooping, and knocking all the little guys out and pretty much putting us out of business.”
The Small Business Administration (SBA) said the directive to use AbilityOne is not meant to hurt small businesses, but rather to carve out jobs for blind and disabled Americans.
But Chillous points out that NAVSUP already has a contract with disabled veterans through Destinee Distributors.
“Well, my company is run by disabled veterans who are severely disabled, so, they’re taking it from one disabled company to give to another?” Chillous questioned. “That makes no sense.”
Chillous isn’t the only one with questions.
Behind the Scenes Discussions
Emails reviewed by 13News Now between some business owners and NAVSUP officials show frustration from some of the current contract holders. When one current contract holder emailed NAVSUP asking what was happening with their contracts, a NAVSUP official replied that they anticipate awarding the contract to AbilityOne this summer.
One small business owner likened the current Ship’s Stores vendors to the local mom-and-pop restaurants.
“Taking those carefully crafted agreements and lumping their content into a single source with thousands of other line items, funneling the sales back up through at least two more layers of bureaucracy and expecting the same support nationally and internationally when many of the small vendors offer geographically specific support, is a recipe for disaster,” the business owner, who wished to remain anonymous, wrote to 13News Now.
As part of the deal, AbilityOne would source more than 6,000 items currently purchased from multiple vendors by various distributors.
“AbilityOne is a mandatory source and a nonprofit entity that will serve as the Prime contractor,” one NAVSUP official wrote in an email correspondence with a current contract holder.
While NAVSUP declined an on-camera interview, their spokesperson did provide written answers to our questions.
NAVSUP contends it is complying with Federal Acquisition Regulations (FAR) by opting to use AbilityOne, which is known as a “mandatory source.”
Federal contracts that have incorporated FAR Clause Part 8 – Use of Mandatory Government Sources – require the use of AbilityOne products.
“We reviewed and analyzed this requirement in detail and determined the use of FAR Part 8 procedures to be appropriate,” the NAVSUP spokesperson said.
If awarded the contract, AbilityOne could choose to enter into subcontractor agreements with people like Cynthia Chillous at Destinee Distributors.
But Chillous is concerned that could spell higher costs for sailors.
“I think the morale of the service members will take a hit,” Chillous said. “That would take the prices through the roof for the sailors, because everyone has to make money, so why go through the middleman when you can go through the source?”
Brian Hoey, senior advisor to the U.S. AbilityOne Commission, told 13News Now that they are confident “their customers will obtain the best value” based on the terms of the contract.
A NAVSUP spokesperson said they will advocate for the use of small business vendors as subcontractors to AbilityOne.
Hoey said this week that subcontracting specifics continue to be discussed.
A Congressional Inquiry
Both Senator Tim Kaine and Congresswoman Jen Kiggans were made aware of some of their constituents' concerns and sought answers from the U.S. Navy.
Senator Kaine’s office told 13NewsNow that they were monitoring the situation closely.
“As a member of the Armed Services Committee, Senator Kaine will continue to advocate on behalf of Virginia’s many defense contractors and their contributions to our national security,” a Kaine spokesperson said.
Congresswoman Kiggans’ spokesperson said they met with stakeholders in June and added, “We are reviewing these concerns and are in the process of seeking answers from the U.S. Navy.”
In response to the congressional inquiry, a Navy Captain wrote in a letter to Sen. Kaine that NAVSUP could decide to contract with AbilityOne as a mandatory Government source.
“However, no contract has been awarded to date,” the captain noted.
NAVSUP said the contract awarding process has not been stalled by the congressional inquiry.
A History of Working with Small Businesses
This could just be the start of future business opportunities for AbilityOne within the Department of Defense.
“Over the past several years, [the DOD] has placed a significant emphasis on increasing procurement opportunities to AbilityOne,” the NAVSUP spokesperson revealed.
The DOD has a goal of obligating one percent of total spending to AbilityOne by 2027, which would nearly double the current amount.
The Small Business Administration was unaware of that “aspirational goal,” 13News Now has learned.
The SBA works closely with government buyers to prioritize contracting with small businesses. In fact, the SBA issues an annual report card for how well each government agency did that fiscal year to procure contracts with small businesses.
It’s not yet clear how, if at all, the DOD’s goal to obligate more spending to AbilityOne could impact that grade in future years.
“While we certainly look to expand and preserve the support from our Small Business industry partners, we also proudly work to ensure we are doing our best to identify opportunities to support the employment of over 37,000 blind and disabled American workers within the Ability One Program,” a NAVSUP spokesperson said.
Historically, the DOD has made “exceptional efforts” to comply with congressional mandates and award contracts to small businesses, the SBA said.
For more than two decades, Cynthia Chillous at Destinee Distributors in Newport News was the beneficiary of the DOD’s “A” rating with the SBA. Now, she says she’s blindsided by the changes that could be coming.
“There’s a lot of businesses that are gonna be affected by this, if they take over,” she said. “And that’s a disgrace because if this is happening, at least give us small businesses a chance to regroup and shift and find something else to do instead of snatching the rug out from under all these small businesses all at once.”
A NAVSUP spokesperson said they anticipate awarding the contract under the AbilityOne program by the end of September.