Over the past several years, I have spent a great deal of time thinking about a question many intellectual and developmental disabilities (IDD) provider leaders are now confronting directly: how do we sustain our organizations when Medicaid funding alone no longer keeps pace with rising costs?
Labor, healthcare, utilities, food, housing, and regulatory compliance continue to increase. In many states, reimbursement has lagged behind those realities. That imbalance places growing pressure on organizations that already operate with limited flexibility.
In a recent column, 6 Revenue Strategies IDD Providers Should Be Evaluating Now, I explored several alternatives to exclusive reliance on Medicaid funding. One of those strategies deserves far more attention than it typically receives: the AbilityOne Program.
AbilityOne is a long-standing federal program with a demonstrated track record. When executed well, it has proven to be one of the most reliable sources of unrestricted revenue available to nonprofit disability service organizations.
AbilityOne is a federal set-aside employment program created to provide meaningful work for individuals with significant disabilities. Through this program, the federal government reserves certain contracts exclusively for qualified nonprofit organizations that employ people who meet the federal standard of being disabled for the work. Contract access is managed by two agencies: SourceAmerica, which focuses on organizations serving people with various disabilities, and the National Industries for the Blind (NIB).
Contracts span a wide range of services, including custodial work, facilities maintenance, logistics, food service, manufacturing, and administrative support. Federal agencies are the customers. Nonprofit organizations are the contractors. Individuals with disabilities perform the work with appropriate supervision and supports. As an AbilityOne fact sheet notes, every person working on an AbilityOne contract is now paid at least the federal minimum wage, the applicable local or state minimum wage, or the applicable prevailing wage, whichever is highest.
What continues to surprise IDD leaders is the scale. AbilityOne represents billions of dollars in annual federal spending, with clear commitments already in place to expand the program over the coming years. The program employs more than 39,000 people who are blind or have significant disabilities, including 2,500 veterans. At the same time, the number of participating nonprofit providers has declined, creating a growing gap between demand and capacity.
That gap represents a meaningful opportunity for IDD organizations prepared to operate in a performance-based contracting environment. To access these contracts, organizations must be 501(c)(3) nonprofits and employ a designated percentage of staff with significant disabilities. For organizations that meet those requirements, clear pathways exist for new providers, particularly those addressing underserved needs or introducing innovative approaches.
During my time serving as CEO of Chimes International, we evaluated and operated multiple alternative funding streams. Some produced modest results. Others aligned well with mission but offered limited financial impact. One consistently stood apart.
AbilityOne contracts generated more sustainable unrestricted revenue than any other alternative funding stream we pursued. In the fiscal year ending June 30, 2021, Chimes generated more than $15 million in unrestricted surplus from AbilityOne contracts. That result matters because it was achieved during a period when many Medicaid-funded programs were operating at a loss. AbilityOne revenue helped stabilize the organization while other service lines struggled to cover rising costs.
For organizations seeking both financial sustainability and mission alignment, AbilityOne offers a rare combination. AbilityOne contracts operate under a financial model that differs fundamentally from Medicaid-funded services. These are performance-based contracts with margins built into the pricing structure. When executed properly, they support both cost recovery and surplus generation.
Contract longevity is another important distinction. AbilityOne contracts remain in place as long as performance standards are met, often for many years. That continuity allows IDD organizations to plan, invest, and stabilize operations in ways that are difficult under rate-based reimbursement systems. For providers managing ongoing cost pressures without corresponding rate adjustments, that stability has real strategic value.
There is a clear reason AbilityOne remains underutilized, and it relates directly to execution. A critical success factor is data infrastructure. Organizations operating in the AbilityOne environment must have advanced, integrated electronic record systems. Today, that means systems that leverage artificial intelligence (AI) in ethical, responsible ways. Every service line requires robust, consistent, and defensible documentation. Workforce eligibility, service delivery, productivity, and performance outcomes must all be tracked accurately and made accessible on demand.
This is a data-intensive environment. Information must be audit-ready, easy to retrieve, and consistent across programs. Sampling and extrapolation methodologies create real financial exposure when documentation gaps exist. In this context, technology serves as the foundation that allows organizations to operate with confidence and scale responsibly.
Another common challenge arises when organizations attempt to absorb AbilityOne into existing leadership structures. Successful programs depend on dedicated leadership, clear accountability, and operational focus. Staffing models, supervision, productivity expectations, and quality controls must be intentionally designed. Performance standards are actively enforced, and contract retention depends on consistent execution.
Organizations that succeed in AbilityOne recognize that they are operating in a contracting environment that demands the same rigor as any commercial enterprise.
AbilityOne also connects to related opportunities at the state and local level. Many states operate set-aside employment programs, often referred to as state use contracts. These programs follow similar principles while operating through state procurement systems.
For some organizations, state use contracts provide an entry point into set-aside employment. For others, they become a complementary expansion strategy alongside federal contracts. In all cases, the same expectations around performance, documentation, and data integrity apply. The State Use Program Association (SUPRA) operates in roughly half of U.S. states, alongside state-specific agencies such as New York State Industries for the Disabled (NYSID).
In addition to federal and state-level set-aside programs, valuable opportunities also exist at the local level and are often overlooked. For example, in Freehold, New Jersey, county-level municipal court janitorial contracts have been awarded to nonprofit providers. Similar opportunities exist through township governments and school districts, offering stable, recurring sources of income that are often closer to home than many IDD organizations expect.
AbilityOne is not the right fit for every organization. It requires commitment, operational capacity, and investment in systems that support performance and compliance.
For organizations that are prepared, AbilityOne has proven to be the most effective alternative funding stream I have encountered in more than four decades in the field. It offers long-term contracts, unrestricted revenue, and direct alignment with the employment of people with disabilities.
Revenue diversification succeeds when organizations focus on opportunities that reward discipline, execution, and long-term thinking. AbilityOne stands out as one of those opportunities.