History and Background of the Social Enterprise

Conceived at the request of the State of Tennessee and born on a kitchen table in 1986, the Advocacy and Resources Corp (d.b.a. ARC-Diversified, or ARC-D) was established for the purpose of utilizing “social enterprise, and earned income practices”[1] to establish an employment and community services system for persons with severe disabilities who reside in the rural Upper Cumberland region of Tennessee. A “social enterprise,” sometimes referred to as operating in the ‘third’ or ‘fourth sectors’[2] of the economy, is defined as ‘an organization or venture that advances its social mission through entrepreneurial, earned income strategies. Payments to the organization are earned and received in direct exchange for a product, service or privilege. Earned income for a nonprofit includes such elements as tuition and fees for service, commercial products or services, government contracts, consulting fees, membership dues (when dues purchase tangible benefits), sale of intellectual property, agreement to use the nonprofit’s identity, property rentals, etc. Earned income does not include such sources as corporate, foundation or government grants or subsidies, contributions from individuals, or in-kind donation of products or services. The intention of this strategy is defined as the extent to which a nonprofit is able to pursue its mission indefinitely through the use of earned income as a method for achieving financial self-sufficiency without relying in whole or in part on charitable contributions or public sector subsidies.’[3] This approach allows organizations much more flexibility in meeting the needs of communities without the constraints imposed by public funders for limiting their services by scope, time, or to specific populations.

Charged by it’s initial grant funding from the State of Tennessee in 1986 to become a financially self-sustaining engine for employment and service system creation in accordance with the definition and practice of social enterprise, the organization affiliated with the Javitts Wagner O’Day (JWOD) (now known as "AbilityOne"[4] program in 1992 after identifying nearly 1500 persons with severe disabilities who lived in the fourteen counties of the Upper Cumberland needing rehabilitation supports provided through a competitive employment model. This piece of legislation, originating in 1938 and periodically revised and amended through the years, was designed to ensure that Americans with severe disabilities who receive rehabilitation services through 501c3 tax exempt providers have the opportunity to participate in federal contract opportunities through the procurement and production of goods and services as part of their employment rehabilitation plan.

Operational oversight of the program is maintained by the Committee for Purchase from Persons who are Blind or Severely Handicapped (the Committee) and two central not for profit organizations, Nish[5] and National Industries for the Blind (NIB).[6] Participating not for profits must maintain strict requirements imposed by the federal government in order to participate, including reserving seventy five percent (75%) of direct labor hours for persons with severe disabilities who qualify for employment and training, maintaining records which prove participant eligibility, and providing evidence that the contract clauses to which federal contracts are subject, are duly implemented . ARC-D was the first affiliate to produce and manufacture government unique food products under the program, growing its set-aside contracts in a light industrial setting in support of both the Department of Defense subsistence feeding programs[7] and the United States Department of Agriculture, Farm Service Agency.[8]

Continuing its’ strategy of earned income through the business practice of social enterprise, ARC-D was a named partner in three government reinvention and modernization programs from 1992 through 2006 including (1) Prime Vendor, (2) the Unitized Group Rations (UGR-A) and (3) the USDA’s reinvention of inspection systems and conversion to Total Quality Systems Audit, modeled after international standards of quality. As a result, and primarily because of the organization’s commitment to and adoption of proactive business practices, quality production and customer service, the revenue basis grew over a seventeen year (17) period to an estimated $68,000,000 in annual revenues and ARC-D gained the technical capacity to produce a number of packaged government unique variants. The employee basis grew from three employees to two hundred fifty (250), and the entity grew from a simple manufacturer to a complex organization generating nearly three million dollars in earned income annually to support the creation of community programs designed to ensure the independence of persons with severe disabilities throughout the rural upper Cumberland region. These programs, funded entirely by net return generated by ARC’s manufacturing contracts, included case management, emergency housing, youth mentoring, drug court support, and an innovative representative payee program supporting approximately 1,800 unserved persons with severe disabilities annually. ARC was not a fundraising charitable organization, did not give away funds to individuals and was not registered with the State of Tennessee as such.

[1] For a complete description of ‘social enterprise’ visit www.sealliance.org
[2] Social purpose mission driven businesses using for profit or not for profit strategies to accomplish objectives.
[3] www.se-alliance.org
[4] For a complete description of the JWOD program, now referred to as “AbilityOne”, visit www.abilityone.gov
[5] For a complete description of the central not for profit known as “Nish” visit www.nish.org
[6] For a complete description of the central not for profit known as “National Industries for the Blind” visit www.nib.org
[7] For a complete description of DoD feeding programs visit www.dscp.dla.mil/subsistence
[8] For a complete description of FSA procurement programs visit www.fsa.usda.gov