Lawmakers weigh end to prison purchase rule
Industry associations and small business owners urged lawmakers Wednesday to support legislation allowing federal agencies to shop for products they've traditionally had to buy from prison workshops.
The bill, sponsored by Sens. Carl Levin, D-Mich., and Craig Thomas, R-Wyo., would unravel the near monopoly the Federal Prison Industries Inc., established in 1934 to help inmates develop the work skills and habits necessary to hold down jobs upon release, has enjoyed on government contracts. With some exceptions, agencies currently must purchase items from FPI before looking to competing companies.
Proponents of Levin and Thomas' legislation (S. 346) say that while FPI serves a worthwhile purpose, federal agencies should reserve the right to look for the best deal. The bill's supporters also note that FPI's preferential treatment comes at the expense of struggling small businesses and manufacturing companies.
FPI employs about 12 percent of federal prisoners, or 21,000 inmates. The inmates supply a variety of products to the government, ranging from furniture to military gear. Prisoners also print information distributed to Thrift Savings Plan participants.
The program is designed to "provide inmates with job skills training and work experience, thereby reducing recidivism and undesirable inmate idleness," said Harley Lappin, chief executive officer of FPI, in testimony before the Senate Governmental Affairs Subcommittee on Financial Management, the Budget and International Security. The subcommittee held a hearing Wednesday to gather input on Levin and Thomas' legislation.
Prisoners working for FPI are 24 percent less likely to commit crimes and 14 percent more likely to be employed for a 12-year stretch after release, than inmates not participating in the program, Lappin said. He declined to offer an opinion on the details of the bill since the Bush administration has taken a "neutral stance." Lappin also serves as director of the Federal Bureau of Prisons.
For similar reasons, Jack Williams Jr., assistant regional administrator for the General Services Administration's Federal Supply Service Region 3, did not express a view on the legislation. But he noted that GSA supports reforms of the FPI and "looks forward to working with [lawmakers] in making sure our procurement system is based on competitive procedures that are focused on achieving results."
The FPI's monopoly on government contracts is hurting the garment industry and other depressed sectors of the economy, the bill's supporters testified. By forcing agencies to buy products from FPI, the government ends up "paying above market prices for lower quality goods and in doing so, is squandering American taxpayer dollars while completely ignoring the very rules it enforces in the commercial market," said John Palatiello, testifying on behalf of the U.S. Chamber of Commerce.
"It is ironic that in recent months as we have been debating the issue of off-shoring of American jobs, we continue to lose good paying American jobs to a government sponsored prison labor program," Thomas said in prepared testimony. "Frankly, it is alarming that our workers are losing their jobs in this manner."
The subcommittee invited Thomas and Sen. Debbie Stabenow, D-Mich., to participate in the hearing.
FPI expanded sales of automotive parts and furniture in 2002, at a time when Michigan companies offering similar products laid off high percentages of workers, Stabenow said. "Hundreds of small businesses from Michigan and around the country have seen FPI take jobs away from their companies and give them to inmates at federal prisons, even when these businesses could have supplied the government with a better quality product on a better timeline, at a lower price, she said.
But Lappin noted that in 2003, the FPI program spent almost $500 million buying raw materials, equipment and services from other companies. More than 53 percent of that money went to small businesses, including businesses owned by women, minorities and those who are disadvantaged, he said. "As a result of the FPI program's purchases, there are thousands of jobs in the private sector that are tied directly to the continued viability of the FPI program."
FPI "pumps some $78 million back into local communities through contracts for supplies and shipping," said American Federation of Government Employees President John Gage. "Once the contracts currently filled by FPI are farmed out to the big contractors, a ripple effect will be felt throughout the American economy."
Recent policy changes already have loosened the FPI's hold on government business, Lappin testified. For instance, the program's board of directors in May 2003 decided to let agencies choose where to buy items worth less than $2,500. The previous threshold was $25.
The fiscal 2002 Defense Authorization Act exempts the Pentagon from FPI purchase requirements, Williams noted in his testimony. "Before purchasing a product from FPI, Defense must determine whether the product is comparable in price, quality and time of delivery to products available from the private sector," he explained. Language in the fiscal 2004 omnibus bill extends similar flexibilities to civilian agencies, he said.
Thomas said his proposed bill would ensure that all federal agencies could continue to shop around for the best deal. Even though lawmakers opened FPI to competition for Defense contracts, FPI moved up from 72 on the 2002 list of top Pentagon contractors to 69 on the 2003 list. "Clearly, FPI continues to do well in this area, despite new measures which allow the private sector to compete," he said.