[Senate Hearing 106-528]
[From the U.S. Government Publishing Office]
S. Hrg. 106-528
BUREAU OF PRISONS OVERSIGHT: THE IMPORTANCE OF FEDERAL PRISON
INDUSTRIES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON CRIMINAL JUSTICE OVERSIGHT
of the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
on
THE BUREAU OF PRISONS OVERSIGHT OF THE ROLE AND IMPORTANCE OF THE
FEDERAL PRISON INDUSTRIES
__________
MAY 24, 1999
__________
Serial No. J-106-28
__________
Printed for the use of the Committee on the Judiciary
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 2000
65-147 cc
COMMITTEE ON THE JUDICIARY
ORRIN G. HATCH, Utah, Chairman
STROM THURMOND, South Carolina PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa EDWARD M. KENNEDY, Massachusetts
ARLEN SPECTER, Pennsylvania JOSEPH R. BIDEN, Jr., Delaware
JON KYL, Arizona HERBERT KOHL, Wisconsin
MIKE DeWINE, Ohio DIANNE FEINSTEIN, California
JOHN ASHCROFT, Missouri RUSSELL D. FEINGOLD, Wisconsin
SPENCER ABRAHAM, Michigan ROBERT G. TORRICELLI, New Jersey
JEFF SESSIONS, Alabama CHARLES E. SCHUMER, New York
BOB SMITH, New Hampshire
Manus Cooney, Chief Counsel and Staff Director
Bruce A. Cohen, Minority Chief Counsel
______
Subcommittee on Criminal Justice Oversight
STROM THURMOND, South Carolina, Chairman
MIKE DeWINE, Ohio CHARLES E. SCHUMER, New York
JOHN ASHCROFT, Missouri JOSEPH R. BIDEN, Jr., Delaware
SPENCER ABRAHAM, Michigan ROBERT G. TORRICELLI, New Jersey
JEFF SESSIONS, Alabama PATRICK J. LEAHY, Vermont
Garry Malphrus, Chief Counsel
Glen Shor, Legislative Assistant
(ii)
C O N T E N T S
----------
STATEMENTS OF COMMITTEE MEMBERS
Page
Thurmond, Hon. Strom, U.S. Senator from the State of South
Carolina....................................................... 1
DeWine, Hon. Mike, U.S. Senator from the State of Ohio........... 5
CHRONOLOGICAL LIST OF WITNESSES
Panel consisting of Kathleen Hawk Sawyer, Director, Federal
Bureau of Prisons, and Chief Executive Officer, Federal Prison
Industries, Washington, DC; Joseph M. Aragon, chairman, board
of directors, Federal Prison Industries, Washington, DC; and
Philip W. Glover, president, council of prison locals, American
Federation of Government Employees, Johnstown, PA.............. 7
Panel consisting of David R. Oliver, Principal Deputy Under
Secretary of Defense for Acquisition and Technology, Department
of Defense, Washington, DC; Ann F. Hoffman, legislative
director, Union of Needletraders, industrial and textile
employees, Washington, DC; and Steve Schwalb, Assistant
Director, Federal Bureau of Prisons, and Chief Operating
Officer, Federal Prison Industries, Washington, DC............. 23
ALPHABETICAL LIST AND MATERIAL SUBMITTED
Aragon, Joseph M.:
Testimony.................................................... 12
Prepared statement........................................... 13
Glover, Philip: Testimony........................................ 15
Hoffman, Ann F.:
Testimony.................................................... 25
Prepared statement........................................... 27
Oliver, David R.:
Testimony.................................................... 23
Prepared statement........................................... 23
Sawyer, Kathleen Hawk:
Testimony.................................................... 7
Prepared statement........................................... 9
Schwalb, Steve:
Testimony.................................................... 30
Prepared statement........................................... 32
Thurmond, Hon. Strom:
Charts:
FPI contracts awarded to private sector, fiscal year 1998 3
Growth in inmate population, Federal Bureau of Prisons
facilities............................................. 4
Prepared statement of Andrew S. Linder, president and owner
of Power Connector, representing the Correctional Vendors
Association................................................ 21
APPENDIX
Questions and Answers
Responses to questions of Senator Thurmond from:
Kathleen Hawk Sawyer......................................... 39
Joseph Aragon................................................ 40
David R. Oliver.............................................. 41
Ann Hoffman.................................................. 42
Steve Schwalb................................................ 43
Additional Submissions for the Record
Prepared statement of Administration Policy...................... 46
Chart of the Industrial Programs Locations, Inmate Employment,
and Net Sales as of September 1998............................. 49
Prepared statement of American Apparel Manufacturers Association. 50
Letter from Senators Phil Gramm, Orrin Hatch, and Strom Thurmond
to the U.S. Senate, dated May 21, 1999......................... 52
BUREAU OF PRISONS OVERSIGHT: THE IMPORTANCE OF FEDERAL PRISON
INDUSTRIES
----------
MONDAY, MAY 24, 1999
U.S. Senate,
Subcommittee on Criminal Justice Oversight,
Committee on the Judiciary,
Washington, DC.
The committee met, pursuant to notice, at 3:12 p.m., in
room SD-226, Dirksen Senate Office Building, Hon. Strom
Thurmond (chairman of the subcommittee) presiding.
OPENING STATEMENT OF HON. STROM THURMOND, A U.S. SENATOR FROM
THE STATE OF SOUTH CAROLINA
Senator Thurmond. The subcommittee will come to order.
I am pleased to hold this oversight hearing today regarding
Federal Prison Industries, the most important inmate program of
the Federal Bureau of Prisons. Created during the Great
Depression, FPI is a program for managing, training, and
rehabilitating inmates in Federal prisons.
The Bureau of Prisons plays a key role in America's fight
against crime. To protect our citizens, America is placing more
and more dangerous and violent criminals in prison. The number
of inmates in Federal prisons has more than doubled in the past
decade, and we can expect that trend to continue.
One of the main reasons crime rates in America are going
down is because the number of criminals we are putting behind
bars is increasing. The Bureau of Prisons has an extremely
important and complex task in housing and, to the extent
possible, rehabilitating these inmates. FPI is critical to this
task.
Prisoners must work. Idleness and boredom in prison leads
to mischief and violence. FPI keeps inmates productively
occupied, which helps maintain prison safety and security.
Moreover, prisoners who work in FPI develop job skills and
learn a work ethic. As a result, they adjust better in prison
and are better prepared to become productive members of society
when they leave.
FPI is a self-sufficient government corporation. It would
be extremely expensive to create programs that would provide
similar benefits to inmates and similar security to prison
facilities.
I am very concerned about current efforts to change the
mandatory source preference that FPI receives from Federal
agencies. FPI may only sell products to the Federal Government,
and further restricting FPI's limited market could endanger the
program.
The Department of Defense represents almost 60 percent of
FPI sales. If changes are made regarding procurement for
Federal agencies, such as Defense, then we should consider
providing Prison Industries other opportunities to sell its
products, such as allowing it to sell in the commercial market
products that are currently imported from foreign countries and
made with foreign labor.
The Department of Defense and Bureau of Prisons have just
completed a joint study that we ordered in a defense
authorization bill 2 years ago, and I am pleased that we will
hear about the findings of this study today.
Prison Industries does not have an advantage over the
private sector. Although inmates make less money than civilian
workers, FPI must deal with many hidden costs and constraints
that do not apply to the private sector. For example, working
inmates must be closely supervised, adding to labor costs, and
extensive time-consuming security procedures must be followed.
While the private sector often specializes in certain
products, FPI by law must diversify its product lines to lessen
its impact on any one industry. Also, the private sector tries
to keep labor costs low, while FPI keeps its factories as
labor-intensive as possible. Moreover, inmate workers generally
have little education and training and often have never held a
steady job.
Many private businesses depend on the program, providing
FPI raw materials and component parts. Contracts for such
purchases are awarded in nearly every State, and over half go
to small businesses.
Moreover, FPI helps victims of crime recover the money they
are due. The program requires that 50 percent of all inmate
wages be used to pay for victim restitution, fines, child
support, or other court-ordered payments. Last year, FPI
collected nearly $2 million for this purpose.
FPI is a correctional program that is essential to the safe
and efficient operation of our increasingly overcrowded Federal
prisons. While we are putting more and more criminals in
prison, we must maintain the program that keeps them occupied
and working.
While Prison Industries is essential, it is partly a
business, and it should operate as efficiently and effectively
as possible within the constraints imposed on it. Federal
agencies should be provided products that are of at least the
same quality and price as the private sector, and they should
receive them in a timely manner. Previous studies from GAO and
other sources have raised questions regarding customer service.
For example, the joint study with DOD found that timely
delivery remains a significant concern of Defense customers.
FPI must work tirelessly to address these issues.
I wish to thank the witnesses for appearing today, and I
look forward to discussing the importance of Federal Prison
Industries.
I wish to place in the record a listing of the total amount
of FPI contracts awarded by States to private sector companies
in 1998, and a chart showing the growth in inmate population. I
ask unanimous consent that that be done.
[The listing and chart follow:]
[GRAPHIC] [TIFF OMITTED] T5147.001
[GRAPHIC] [TIFF OMITTED] T5147.002
Senator Thurmond. Also I would like to put in the record
the prepared statement of Senator DeWine.
[The prepared statement of Senator DeWine follows:]
Prepared Statement of Hon. Mike DeWine, a U.S. Senator
From the State of Ohio
First, let me thank our chairman, Senator Thurmond, for holding a
hearing to review the Federal Prison Industries program and the federal
``mandatory source preference'' rule. In light of recently introduced
legislation designed to eliminate the Department of Defense's mandatory
source preference for FPI products, this issue has taken on new
immediacy. Today, the FPI provides numerous goods and services under
the trade name UNICOR to a variety of federal departments and agencies,
primarily the Department of Defense. In fact, federal mandatory
preferences for UNICOR products assist the FPI to remain entirely self-
supporting. In turn, FPI continues to strive towards the achievement of
two important goals--safer prisons and safer communities--goals which I
strongly support. FPI also continues to try and improve upon its
services and relationships with customers, while finding new ways to
wean itself from a reliance upon mandatory source preferences, which
some in the private sector have criticized. I appreciate the
willingness of all today's witnesses to come and explain their
positions regarding FPI to the Subcommittee.
Since the program's creation by Congress in 1934, FPI has sought to
make prisons more manageable institutions, and as a result safer places
for those who live and work in them. Idleness in prisons can lead to
misconduct. By occupying as many prisoners as possible in labor
intensive work activities, inmates have less opportunity to cause
disturbances, and management of correctional institutions should be
easier for staff. Work not only keeps inmates out of trouble; it can
also be an effective incentive to induce good behavior. Since good time
credit and parole opportunities have been reduced or eliminated in our
federal prisons, work programs remain as one of the best proven methods
of eliciting good behavior from inmates. Today, we will hear powerful
testimony from our corrections officials supporting FPI's value as a
prison safety and management tool.
Perhaps more importantly, work activities can teach inmates skills
and values that may allow them to reenter our communities as
productive, law abiding citizens. In fact, two recent studies indicate
that recidivism rates drop significantly among populations of former
inmates who have participated in prison work programs. The Bureau of
Prisons just completed a twelve year study of FPI which indicates that
inmates who participated in FPI were 24 percent more likely to find
work after release and, consequently, less likely to commit another
criminal act. Another study done by the California Board of Corrections
makes similar findings. I am encouraged by such findings, as I am
personally committed to finding ways in which the federal government
can reduce our Nation's unacceptably high crime rate.
FPI is not a business--it is a correctional program. Rather than
seeking standard business efficiencies, increasing productivity and
cutting costs to generate higher profit margins, FPI employs as many
inmates as possible in inefficient, labor-intensive work. However, by
law, the FPI must also function as a self sustaining program and
produce quality products that are cost competitive with similar private
sector products. Accordingly, the mandatory federal source referencing
rule was crafted to assist FPI overcome these various constraints and
secure a stable customer base for its products. The mandatory source
preference rule reduces the added expense of advertising goods and
services, and soliciting private sector partners that FPI would
otherwise incur. In practice, the mandatory rule seems to be quite
workable. FPI's federal government customers give the program high
marks. The DoD has just conducted a study of the mandatory source rule
and its procurement of FPI goods. The Department found that FPI rated
average to excellent in every category from quality to price of their
products. DoD and FPI are also currently exploring ways to improve
their procurement relationship to ensure that the source preference
rule remains mutually beneficial to both parties.
Recently, some in the private sector have expressed concern about
the potential negative impact of the mandatory preference rule and FPI
on their efforts to secure contracts with the Federal government. I am
impressed, however, with the FPI's efforts to reduce any adverse impact
on private sector business. First, the FPI, by law, must diversify its
goods and services in order to minimize the level of competition with
any one industry or type of business. Indeed, FPI provides a range of
goods and services to the Federal government from office equipment to
electronics. Further, FPI must avoid capturing more than a reasonable
share of the market among federal departments. I believe some of our
witnesses today will testify to the fact that FPI goods and services
currently account for less than 1 percent of federal government
purchases. Additionally, FPI maintains an Industry Involvement
Guidelines Process which allows interested industry officials to
comment on any proposed new line of FPI goods or services. And,
finally, FPI has adopted a long range strategy to direct more of their
efforts toward non-mandatory source preference work, such as providing
services, which do not fall under the mandatory source rule, or
subcontracting with other companies that already have government
contracts.
Other voices in the private sector have been raised in strong
support of FPI and the mandatory source preference rule. Many small
companies have secured government work, by teaming up with FPI, that
may otherwise not have had the resources to compete for these highly
sought-after contracts. In fact, today, we will hear from one small
businessman who credits FPI with enabling his business to begin and
grow through a partnership with the program on a DoD electronics
contract. FPI also aides business by purchasing raw materials and
services. In fact, for every dollar in FPI sales, it is estimated that
76 cents goes directly back to private sector companies. FPI accounted
for $419 million in private sector business last year. Sixty two
percent of these purchases were from small and/or minority owned or
disadvantaged businesses.
The Federal Prisons Industries program continues to aim for the
goals articulated by Congress over sixty years ago. On balance, the
program seems to be meeting these twin goals of making our prisons and
communities safer. Moreover, the program continues to seek new ways to
maximize its utility as a correctional tool, while limiting any
negative impact on private business. I support the aims of this long-
standing program. I know today's discussion will be thoughtful and
productive, and I look forward to hearing our witnesses' testimony.
Thank you again, Mr. Chairman.
Senator Thurmond. We have just received a statement of
administration policy on the defense authorization bill. It
states that the administration opposes section 806 in the bill
which would essentially eliminate the FPI mandatory sourcing
with the Defense Department. I wish to read this statement into
the record.
The administration opposes section 806 which would
essentially eliminate the Federal Prison Industries'
mandatory sourcing with the Defense Department. Such
action could harm the FPI program, which is fundamental
to the security of Federal prisons. In principle, the
administration believes that the Government should
support competition for the provision of goods and
services to Federal agencies. However, to ensure that
Federal inmates are employed in sufficient numbers, the
current mandatory sourcing requirement should not be
altered until an alternative program is designed and
put in place. Finally, this provision would only
address mandatory sourcing for the Defense Department
without regard to the rest of the Federal Government.
I will now introduce the first panel today. Our first
witness is Dr. Kathleen Hawk Sawyer. Dr. Sawyer, I am glad to
see you again.
Ms. Sawyer. Good to see you, Senator.
Senator Thurmond. I have had the pleasure of working with
you in the past, and you are a very efficient, able, and fine
lady.
Ms. Sawyer. Thank you, sir.
Senator Thurmond. She is the Director of the Justice
Department's Federal Bureau of Prisons with 23 years of
management and training experience in the Bureau of Prisons.
She doesn't look that old.
Ms. Sawyer. Thank you, Mr. Chairman.
Senator Thurmond. She currently oversees the operation of
94 Federal institutions. She holds a bachelor's degree from
Wheeling Jesuit College in West Virginia and both an M.A. and a
Doctor of Education degree from West Virginia University.
Our second witness is Phil Glover, president of the Council
of Prison Locals, American Federation of Government Employees,
and senior officer at the Federal correctional institution in
Loretto, PA. Mr. Glover worked as a line staff correctional
officer with the Bureau of Federal Prisons from 1990 to 1997.
Our third witness is Joseph Aragon, chairman of the board
of the Federal Prison Industries. He is president and chief
executive officer of ProServe Corporation, an award-winning
food service management company. Mr. Aragon, a graduate of
Florida State University, worked for the Bureau of Prisons for
4 years.
We will start with Director Sawyer and go down the line.
Thank you all for being here today.
PANEL CONSISTING OF KATHLEEN HAWK SAWYER, DIRECTOR, FEDERAL
BUREAU OF PRISONS, AND CHIEF EXECUTIVE OFFICER, FEDERAL PRISON
INDUSTRIES, WASHINGTON, DC; JOSEPH M. ARAGON, CHAIRMAN, BOARD
OF DIRECTORS, FEDERAL PRISON INDUSTRIES, WASHINGTON, DC; AND
PHILIP W. GLOVER, PRESIDENT, COUNCIL OF PRISON LOCALS, AMERICAN
FEDERATION OF GOVERNMENT EMPLOYEES, JOHNSTOWN, PA
STATEMENT OF KATHLEEN HAWK SAWYER
Ms. Sawyer. Thank you, Mr. Chairman. Good afternoon, and I
appreciate the opportunity to appear before you today to
discuss the Federal Prison Industries Program.
The debate about the role of FPI has certainly increased in
intensity over the past several years. The debate involved many
complex issues and involves parties with conflicting views. FPI
cannot address this important public policy on its own but
needs the input of all affected parties.
The Federal Bureau of Prisons believes, as you stated, Mr.
Chairman, that it has the obligation to provide realistic and
productive work opportunities for inmates in our custody. We
hope that the private sector business and labor communities
will work with us in crafting a mutually acceptable solution.
We hope we can establish a collective commitment from FPI,
elected officials, business, and labor to craft a reasonable
and viable solution. The task may not be easy, but we believe
that consensus can be achieved if the goal at the outset is a
win/win solution, and the administration is actively reviewing
options to reach such a solution.
FPI has been and continues to be the Bureau of Prisons'
most important, efficient, and cost-effective correctional
management program to teach inmates marketable work skills, to
relieve inmate idleness, and contribute to the orderly
operation of our prisons.
A comprehensive study conducted over a 12-year span by the
Bureau of Prisons demonstrates that FPI is an important
rehabilitation tool which provides inmates an opportunity to
develop work ethics and work skills that can be used upon
release from prison. Comparing inmates with similar
characteristics, the study found that FPI training programs
contribute substantially to lower recidivism rates and
increased job success for inmates after release. In fact,
inmates employed by FPI were found to be 24 percent more likely
to become employed upon release and remain crime-free for as
many as 12 years.
The FPI program also contributes significantly to the
safety and security of the Bureau's correctional institutions.
FPI helps keep inmates productively occupied and reduces inmate
idleness and the violence associated with that idleness. It is
important to the security of our prisons, our staff, our
inmates, and the communities in which they are located.
FPI's role as a correctional program has grown more
important in the face of a dramatically rising inmate
population. Overcrowding in prisons is a continuing problem,
and the Bureau relies heavily on its correctional programs as
management tools to combat the dangers caused by inmate
idleness. With the abolition of parole and the reduction of
good time credit, FPI is one of the few incentives left to
encourage positive inmate behavior. Inmates are required to
maintain clear conduct and participate in educational programs
in order to work in FPI.
FPI also reduces the costs of incarceration by being self-
sustaining and providing an important inmate program at no cost
to the taxpayer. As you indicated, Mr. Chairman, in your
comments, our inmates are required to contribute 50 percent of
their earnings toward victim restitution, child support, and
fines, and we collected nearly $2 million in 1998 from UNICOR
inmates to satisfy those obligations.
As I have testified in the past, I strongly believe that
FPI is the most successful prison industries model in America.
The evidence confirms that no other prison industries program
has done more comprehensive research to demonstrate the post-
release recidivism benefits of inmate employment. No other
program has so greatly diversified its production so as to
minimize impact on any particular industry, and it has been
continuously self-sustaining for over 60 years.
The elevated level of controversy about FPI is a relatively
recent development in its 64-year history. The intensity of
debate directly correlates with FPI's increased output of goods
and services which, in turn, has been driven by the bipartisan
Federal criminal justice policy for the past two decades, of
putting more people in prison for longer periods of time. There
is a clear and direct relationship, fully acknowledged by
former and the current administration and Congress, between the
number of Federal inmates and the number of FPI jobs needed.
The future challenge in this regard is daunting. The Bureau
of Prisons inmate population increased more in fiscal year 1998
than in any previous year, by more than 10,000 inmates. Current
forecasts for fiscal year 2006 project over 177,000 inmates in
our custody, a possible increase of almost 50,000 inmates in
just 7 years. The vast majority of these will be housed in
Bureau of Prisons institutions. We have provided as an
attachment a chart which illustrates the dramatic increase in
inmate population. As the Bureau's population grows, the need
for expansion of Federal Prison Industries grows
commensurately.
In conclusion, FPI is committed to the goal of providing
self-sustaining work programs for an inmate population, but we
need assistance in coming up with a mutually agreeable
solution.
That concludes my comments, Mr. Chairman, and I am very
willing to answer any questions you or other subcommittee
members may have.
[The prepared statement of Ms. Sawyer follows:]
Prepared Statement of Kathleen Hawk Sawyer
Mr. Chairman and Members of the Subcommittee, I appreciate the
opportunity to appear before you today to discuss the Federal Prison
Industries, Inc. (commonly referred to as FPI or UNICOR, its trade
name) program.
The debate about the role of FPI has increased in intensity over
the past several years. There are numerous reasons for this, some of
which I will discuss later on. The debate involves complex issues and
involves parties with conflicting views. FPI cannot address this
important public policy on its own but needs the input of all affected
parties.
The Federal Bureau of Prisons (BOP) believes it has an obligation
to provide realistic and productive work opportunities for its inmates.
We hope we can establish a collective commitment from FPI, elected
officials, business and labor to craft a reasonable, viable solution.
The task may not be easy, but we believe that consensus can be achieved
if the goal at the outset is a ``win-win'' solution, and the
Administration is actively reviewing options to reach such a solution.
the fpi program
FPI has been and continues to be the BOP's most important,
efficient, and cost effective correctional management program to teach
inmates marketable work skills, relieve inmate idleness, and contribute
to the orderly operation of federal prisons. FPI's statute carefully
balances key, and sometimes competing, public policy interests such as
the impact of prisoner production on the private sector, the need to
generate sufficient sales to employ and provide skills training to as
many inmates as practicable, and the expectation that the program be
self-sustaining. To maintain an appropriate balance between these
interests and to ensure that the FPI program is administered fairly and
effectively, the statute also provides for a Presidentially-appointed
Board of Directors to govern the affairs of the corporation.
A comprehensive review of FPI's statute strongly conveys that FPI
is first and foremost a correctional program, whose principal purpose
is to provide meaningful job skills training for inmates. A
comprehensive study conducted over a 12-year span by the BOP, entitled
the Post Release Employment Project (PREP), demonstrates that FPI is an
important rehabilitation tool which provides inmates an opportunity to
develop work ethics and skills that can be used upon release from
prison. Comparing inmates with similar characteristics, the study found
that FPI training programs contribute substantially to lower recidivism
and increased job-related success for inmates after their release.
Inmates employed by FPI were found to be 24 percent more likely, upon
release, to become employed and remain crime-free for as long as 12
years after release.
The FPI program also contributes significantly to the safety and
security of the BOP's correctional facilities. FPI helps keep inmates
productively occupied and reduces in-mate idleness and the violence
associated with it. It is essential to the security of the Federal
Prison System, its staff, inmates, and the communities in which they
are located.
FPI's role as a correctional program has grown more important,
particularly in the face of a dramatically rising inmate population.
Overcrowding in the nation's prisons is a continuing problem, and the
BOP relies heavily on its correctional programs as management tools to
combat the dangers caused by inmate idleness. With the abolishment of
parole and the reduction of good time credit, FPI is one of the few
incentives left to encourage positive inmate behavior. Further, inmates
are required to maintain clear conduct and participate in educational
programming in order to maintain employment in FPI.
FPI also reduces the costs of incarceration by being self-
sustaining, providing an important inmate program at no cost to the
taxpayers. An additional direct benefit to the taxpayer, is the
requirement that inmates employed by FPI contribute 50 percent of their
earnings toward victim restitution, child support, and fines. In fiscal
year 1998, nearly $2 million was collected from UNICOR inmates toward
these obligations.
As I have testified in the past, I strongly believe that FPI is the
most successful prison industries model in American history.
Specifically, the evidence confirms that no other prison industries
program: (1) employs a greater percentage of the inmate population; (2)
has done more comprehensive research to demonstrate the post-release
recidivism benefits of inmate employment in industries; (3) has so
greatly diversified its production so as to minimize impact on any
particular industry; (4) has been continuously self-sustaining for over
60 years; (5) creates as many jobs in the private sector, especially
among small and disadvantaged businesses, with its procurements; and,
very importantly, (6) is as integrated into the management of the
correctional agency and the individual prisons.
the source of the controversy
The elevated level of controversy about FPI is a relatively recent
development in its 64-year history. The intensity of debate directly
correlates with FPI's increased output of goods and services which, in
turn, has been driven by the bi-partisan federal criminal justice
policy for the past two decades, of putting more people in prison for
longer periods of time. There is, however, a clear and direct
relationship, fully acknowledged by former and the current
Administration and Congress, between the number of federal inmates and
the number of FPI inmate jobs needed.
The future challenge in this regard is daunting. The BOP inmate
population increased more in fiscal year 1998 (over 10,000) than in any
previous year. Current forecasts for fiscal year 2006 project over
177,000 inmates in BOP custody, a possible increase of approximately
50,000 inmates in just 7 years, the vast majority of which will be
housed in BOP facilities. This continued population increase is due
primarily to increased sentences, increased convictions for drug and
immigration offenses, and the absorption of the District of Columbia
prison population. See Attachment A. As BOP's population grows, the
need for expansion of FPI grows commensurately.
In conclusion, FPI is committed to the goal of providing self-
sustaining work programs for an inmate population which continues to
grow unabated. However, this challenge cannot be achieved by FPI alone.
As greater numbers of convictions occur, it is essential that there
also be commensurate support for realistic alternatives to create
additional inmate jobs.
Again, Mr. Chairman, I appreciate this opportunity to provide our
views concerning the BOP's most important correctional program. This
concludes my remarks. I would be happy to answer any questions you or
other members of the Subcommittee may have.
[GRAPHIC] [TIFF OMITTED] T5147.003
Senator Thurmond. Mr. Aragon.
STATEMENT OF JOSEPH M. ARAGON
Mr. Aragon. Thank you, Mr. Chairman. I appreciate the
opportunity to appear before you today to speak about Federal
Prison Industries, FPI.
I come here as a private citizen with no vested interest in
FPI except for that which has been bestowed upon me by the
President of the United States. I currently serve as Chairman
of FPI's Board of Directors, a board that I was appointed to by
the President almost 5 years ago.
By way of introduction, let me first provide you with a
brief overview of the board of directors and those who serve at
the will of the President.
The presidentially appointed board members are selected to
govern FPI's operations and advance its mission by establishing
general policies and long-range corporate plans. Commissioned
to serve without compensation, the board uses its diverse
background experience in business, government, and industry to
achieve FPI's statutory mandates. This responsibility evolves
from FPI's unique mission to: operate in a self-supporting
manner without appropriated funds from Congress; create
constructive activities for Federal inmates to relieve stress
and idleness; and to instill work ethics and job skills in
inmates to reduce the rate of recidivism.
The board itself is comprised of six members representing
industry, labor, agriculture, retailers, and consumers, the
Secretary of Defense, and the Attorney General.
The board consists of a wide variety of accomplished
individuals. Together, we are responsible for administering all
aspects of FPI's operations, key aspects of which are:
Approving FPI's financial operating plans, developing strategic
plans, approving the establishment and activation of new
factories, approving major capital expenditures, and approving
FPI proposals to produce a new product or expand its market
share of an existing product.
The majority of FPI's board members, however, are employed
in the private sector and are keenly aware of the challenges
that those in the private sector, and small business owners, in
particular, face.
Mr. Chairman, I am a small business owner and have operated
my business for 15 years. Some of the work that we do is
currently performed by UNICOR operations in various facilities.
However, I believe the program's overriding interest in
employing inmates supersedes that lack of market share that I
could possibly go after.
The challenge to the board is to be responsive to the
concerns and interests of a vast segment of private sector
groups ranging from professional trade organizations, business
corporations, and various manufacturers to organized labor
groups, public officials, and individual private citizens,
while guiding FPI on a course that will ensure its self-
sufficiency in the future.
Perhaps the most visible way in which the board fulfills
its responsibility is through the guidelines process. When FPI
proposes to produce a new product or significantly expand
production of an existing product, it must first conduct a
market impact study. This study must identify and consider: The
number of vendors currently meeting the requirements of the
Federal Government; the proportion of the Federal market for
the product currently served by small business and small
disadvantaged businesses or businesses operating in labor-
surplus areas. We also consider the size of the Federal and
non-Federal markets for the product, the projected growth in
the Federal Government's demand for the products, the projected
ability of the Federal market to sustain both FPI and private
vendors, and the trends of the commercial market for a
comparable product.
FPI must then announce in the Commerce Business Daily its
proposal and invite comments from private industry and
organized labor. FPI must also directly notify those trade
associations affected and allow them to provide comments. The
board of directors has provided copies of the market impact
study, the comments received, and FPI's recommendations. The
board also holds hearings at which the public can come and
provide testimony. At the conclusion of the above process, the
board renders its decision, which is also published in the
Commerce Business Daily.
As a member of the board, I can state that we take our
position and our representative status very seriously when
making these decisions. By Federal statute, we are called upon,
on the one hand, to provide employment for the greatest number
of inmates who are eligible to work but, on the other hand, to
represent a segment of society that often has competing
interests. This task is compounded by the continued spiraling
growth of the Federal inmate population, as noted by Director
Hawk Sawyer in her testimony.
We are constantly struggling with the challenge of
balancing the needs of FPI while minimizing the impact on the
private sector. When there has been persuasive information that
FPI might have an adverse impact on a particular industry,
especially one dominated by small business, the board has
restricted and even precluded FPI's presence in that industry.
Mr. Chairman, if there is one thing I know all the board
members would agree on, it is the fact that there are no easy
answers or magical solutions. The current process, I believe,
provides for wide-ranging input and representation, compels
full consideration of all the relevant issues, and allows
public policy to be implemented in the fairest and most
responsible manner. If we are going to change things, the
changes must be measured, balanced, and mutually beneficial.
There is no black or white nor right or wrong. Responsible
public policy must take into account all of the legitimate
interests involved.
Mr. Chairman, this concludes my remarks. I would be pleased
to answer any questions you or other members of the
subcommittee might have.
Thank you.
[The prepared statement of Mr. Aragon follows:]
Prepared Statement of Joseph M. Aragon
Mr. Chairman and members of the subcommittee, I appreciate the
opportunity to appear before you today to speak about Federal prison
Industries (FPI).
I come here as a private citizen with no vested interest in FPI
except for that which has been bestowed upon me by the President of the
United States. I currently serve as Chairman of FPI's Board of
Directors, a Board that I was appointed to by the President almost five
years ago.
By way of introduction, let me first provide you with a brief
overview of the Board of Directors and those who serve at the will of
the President.
board overview
The Presidentially-appointed Board members are selected to govern
FPI's operations and advance its mission by establishing general
policies and long range corporate plans. Commissioned to serve without
compensation, the Board uses its diverse background experience in
business, government, and industry to achieve FPI's statutory mandates.
This responsibility evolves from FPI's unique mission to : (a) operate
in a self-supporting manner without appropriated funds from Congress,
(b) create constructive activities for Federal inmates to relieve
stress and idleness, and (c) instill work ethics and job skills in
inmates to reduce the rate of recidivism.
The Board itself is comprised of six members representing industry,
labor, agriculture, retailers and consumers, the Secretary of Defense
and the Attorney General. They are as follows:
1. Susan Loewenberg represents industry. Ms. Loewenberg has worked in
the communications industry since 1974 and is currently Producing
Director of L.A. Theatre Works;
2. Richard Womack represents labor. Mr. Womack has served as Director
of the Office of Civil Rights for the AFL-CIO since 1986;
3. Todd Weiler represents the Secretary of Defense. Mr. Weiler is
Deputy Assistant Secretary of the Army for Reserve Affairs,
Mobilization, Readiness and Training (RAMRT);
4. Stephen Colgate represents the Attorney General. Mr. Colgate is
Assistant Attorney General for Administration;
5. Arthur White represents Agriculture. Mr. White is Vice Chairman of
Yankelovich Partners, Inc., where he has directed more than 200
research and consulting assignments for corporations, government
agencies, industry associations, media and non-profit
organizations, and universities;
6. I, myself, represent retailers and consumers. I founded and
continue to serve as President and CEO of ProServe Corporation, a
food service management company.
As you can see from the list of representatives, the Board consists
of a wide variety of accomplished individuals. Together we are
responsible for administering all aspects of FPI's operations, key
aspects of which are: approving FPI's financial operating plans,
developing strategic plans, approving the establishment and activation
of new factories, approving major capital expenditures, and approving
FPI proposals to produce a new product or expand its market share of an
existing product.
The majority of FPI's Board members, however, are employed in
private sector positions and are keenly aware of the challenges that
those in the private sector, and small business owners, in particular,
face.
Consequently, the challenge to the Board is to be responsive to the
concerns and interests of a vast segment of private sector groups
ranging from professional trade associations, business corporations,
and various manufacturers to organized labor groups, public officials,
and individual private citizens, while guiding FPI on a course that
will ensure its self-sufficiency in the future.
guidelines process
Perhaps the most visible way in which the Board fulfills its
responsibility is through the Guidelines Process. When FPI proposes to
produce a new product or significantly expand production of an existing
product, it must first conduct a market impact study. This study must
identify and consider: the number of vendors currently meeting the
requirements of the Federal Government; the proportion of the Federal
market for the product currently served by small business; small
disadvantaged business; or business operating in labor surplus areas;
the size of the Federal and non-Federal markets for the product; the
projected growth in the Federal Government demand for the product; the
projected ability of the Federal market to sustain both FPI and private
vendors; and the trends of the commercial market for a comparable
product. FPI must then announce in the Commerce Business Daily its
proposal and invite comments from private industry and organized labor.
FPI must also directly notify those trade associations affected and
allow them to provide comments. The Board of Directors is provided
copies of the market impact study, the comments received, and FPI's
recommendations. The Board also holds hearings at which the public can
come and provide testimony. At the conclusion of the above process, the
Board renders its decision, which is also published in the Commerce
Business Daily.
challenges faced by the board
As a member of the Board, I can state that we take our position and
our representative status very seriously when making decisions. By
Federal statute, we are called upon, on the one hand, to provide
employment for the greatest number of inmates who are eligible to work
and, on the other hand, to represent a segment of society that often
has competing interests. This task is compounded by the continued
spiraling growth of the Federal inmate population, noted by Director
Hawk Sawyer in her testimony.
We are constantly struggling with the challenge of balancing the
needs of FPI while minimizing the impact on the private sector. When
there has been persuasive information that FPI might have an adverse
impact on a particular industry, especially one dominated by small
businesses, the Board has restricted and even precluded FPI's presence
in that industry. For example, of the 28 separate proposals submitted
by FPI since the inception of the Guidelines process, the Board has
approved only eight without change. The rest were reduced, modified,
denied or later determined to be infeasible. The Board has invited
private industry and labor to bring to their attention any situation
wherein the impact of one of their decisions authorizing FPI's
production has been more significant than originally anticipated. To
date, no replies have been received.
As Chairman of the Board of Directors, I can say that, when
rendering decisions, our goal is to diversify FPI's product line so
that no single industry is forced to bear an undue burden and to reduce
to a minimum competition with private industry or free labor; that is
what is required of us under Federal law.
Mr. Chairman, if there is one thing I know all the Board members
would agree on is the fact that there are no easy answers or magical
solutions. The current process, I believe, provides for wide-ranging
input and representation, compels full consideration of all the
relevant issues and allows public policy to be implemented in the
fairest and most responsible manner. If we are going to change things,
the changes must be measured, balanced, and mutually beneficial. There
is no black and white, no right or wrong. Responsible public policy
must take into account all of the legitimate interests involved.
Mr. Chairman, this concludes my remarks. I would be pleased to
answer any questions you or other members of the subcommittee might
have.
Senator Thurmond. Thank you.
Mr. Glover.
STATEMENT OF PHILIP GLOVER
Mr. Glover. Mr. Chairman, I am the elected representative
of the 24,000 bargaining unit employees working in the Federal
Bureau of Prisons. I would like to thank the committee for
allowing me to appear before you today and express the views of
the line staff in the Bureau of Prisons.
Our organization, the Council of Prison Locals, American
Federation of Government Employees, believes it is imperative
for the safety of employees, the public, and inmates that we
provide a strong prison work program. That is what Federal
Prison Industries represents to employees working in the field.
In this debate, I am in the unenviable position of being a
strong advocate for labor, yet representing those of us working
in the prison system to keep staff safe. We must keep this
program intact until we decide as a Nation how to maintain an
increasing inmate population.
This is more than simply a cost issue or production issue
to us. It is first and foremost a health and safety issue. When
inmates have a productive, fully satisfying day at work, they
are less likely to pose a threat to the men and women working
inside the fences and walls of correctional facilities.
We cannot afford to simply warehouse inmates. Until a
comprehensive, well-thought-out approach is decided upon, with
all interested parties in concurrence, we oppose elimination or
erosion of mandatory source. It is a dangerous proposition to
accept changes in at this time.
I have heard complaints that FPI should compete for
contracts based on price, product, and quality. As a
representative of line employees, it is not our concern what
products or work the inmates are involved in, but there must be
work. As a correctional officer who has worked in the field for
nearly 10 years, let me explain something about competition in
prisons. Imagine having employees who have little or no
discipline, generally lack formal education, are difficult to
control, and whose values are often the opposite of yours and
mine. This essentially is an inmate worker. Although FPI and
BOP do a good job in getting these people to work, think of
competing with this workforce.
Additionally, think of coming to work on any given morning
and having a factory unable to produce products because of
adverse weather such as fog, because two inmate groups were in
a fight the night before, or the factory had to be searched for
contraband. Could you compete?
I have worked with inmates who are employed in FPI
custodial, general maintenance, and food preparation jobs. The
FPI inmates and those on the waiting list for FPI are generally
more manageable and concerned about their own behavior. Inmates
stand to earn the most money in FPI as opposed to other prison
jobs. This money enables them to meet some of their personal
financial responsibilities like fines, restitution, and child
support. They seem to interact with staff better than other
inmates. They take directions at work in a more positive way as
well.
Now, how does this relate to the issue before us? The
inmate population is expanding. We must keep the inmate
population occupied in at least a satisfactory manner. It has
been suggested that inmates be kept in perpetual vocational/
technical training modes. This is worthwhile. But are you going
to strain someone for 40 years? It has also been suggested that
inmates build something, take it apart, and build it again over
and over. How long does anyone expect a large inmate population
to continue doing this? How long would it take for them to get
frustrated, upset, and refuse to work and take it out on the
employees? I don't think very long. This makes it unsafe for
staff, the community, and other inmates.
Currently, mandatory source is the way we keep 20 to 25
percent of the inmate population productive and occupied. No
one advocating its elimination has given any productive ideas
on its replacement, just remove it and compete. In the next
several years, we will increase the country's Federal inmate
population. If a solution is to be found, it can't be during a
debate on an unrelated piece of legislation. It must be a
comprehensive public policy debate by the appropriate committee
with all viewpoints heard.
This concludes my statement. I will be happy to answer any
and all questions.
Senator Thurmond. Thank you.
Director Sawyer--or Dr. Sawyer, which do you----
Ms. Sawyer. Either is fine, sir.
Senator Thurmond. Please explain why Prison Industries is
the most important program you have for keeping inmates
occupied and teaching them skills they can use when they are
released.
Ms. Sawyer. I think there are several parts or reasons why
it is so important to us, and I think the first one really
addresses our responsibility to society, and that is the
evidence that was demonstrated through the PREP study, which
showed that inmates who have been through Prison Industries,
worked Prison Industries, learned work skills and the work
ethic, have a 24 percent less likelihood of recidivating and a
greater likelihood of being gainfully employed upon release.
Our responsibility is not just to house inmates in our
institutions, but to prepare them to do better and to remain
crime-free when released.
Any economist that has looked at this issue will say very
strongly that being able to reduce recidivism for inmates for
one year has a profound economic benefit to the community. If
we can show a 24 percent reduction over a 12-year span, it has
tremendous benefit to the community.
In addition to the community's benefit, it is also our
program that keeps inmates constructively occupied. It occupies
their minds, their hands, their time in very constructive
modes. As Mr. Glover indicated in his comments, the rate of
misconduct among inmates in Prison Industries is far less than
among the general population. It has a profound impact upon
keeping the peace, keeping it calm in the institution. They
don't become aggressors toward each other, and they don't
become aggressors toward staff. It is a very valuable program.
Senator Thurmond. Thank you.
Director Sawyer, your study that you conducted with the
Department of Defense made various recommendations to improve
efficiency and reduce costs between the two agencies. Does
Prison Industries intend to implement these recommendations?
Ms. Sawyer. We certainly do, Mr. Chairman. We worked hand
in hand in concern with the Department of Defense in crafting
the study and the recommendations, and we are very committed to
each of the--I guess three primary recommendations that have to
do with piloting a waiver on mandatory source because the
belief is from both sides that that needs to be tested before
it actually becomes policy or becomes a statutory change, and
also it looks at clarifying the waiver process to make sure it
is much better understood from the procurement standpoint among
Department of Defense staff, and looking more closely at our
deliveries.
The vast majority of our deliveries that were looked at in
the DOD study were on time. The vast majority is not good
enough. We need to get 100 percent of our deliveries on time,
and we vow to work closely with DOD to improve that and to
report to them on our success.
Senator Thurmond. Director Sawyer, if the Congress carved
out large exemptions from the mandatory source requirement for
the Defense Department, such as those proposed in section 806
of the defense authorization bill, what impact could this have
on Prison Industries?
Ms. Sawyer. We believe it would have a very serious impact,
Mr. Chairman, because 60 percent of our orders come from DOD.
And although the amendment simply references those orders under
$2,500, roughly three-quarters of all of our orders from the
Department of Defense are for orders under $2,500. So you have
immediately affected approximately three-quarters of our orders
from DOD, which would have a significant impact upon those
numbers of inmates who are involved in those operations. So we
believe the carving that has been done in that amendment could
have a very negative impact upon our sales, our orders, and our
inmate population employment.
Senator Thurmond. Mr. Aragon and Mr. Glover, do you agree
with Director Sawyer? Please explain.
Mr. Aragon. If I may, Mr. Chairman, I absolutely do agree
with the Director of the Bureau. As you mentioned in the brief
information about myself, I was an employee at a Federal
correctional--at several Federal correctional institutions some
years ago and knew firsthand that Federal Prison Industries was
just a critical, essential element to the orderly running of
our institutions.
In one of my positions with the Federal Prison System, I
was director of training for food service, and in that role it
was my responsibility to go into many, many other institutions
at the State level and correctional facilities in counties, et
cetera. And the lack of Federal Prison Industries and viable
work opportunities for inmates really did have a demonstrable
effect on managing the population, on keeping the institution
safe, and as the Director testified, in the effect it has on
recidivism and keeping these inmates from continuing the cycle.
Senator Thurmond. Mr. Glover, do you agree with Director
Sawyer?
Mr. Glover. Yes, I do, Mr. Chairman. Working inside the
prison as a line staff member, Federal Prison Industries
inmates are less likely to be confrontive with staff. They
listen to you a lot better. They don't want problems because
they want to keep their FPI job. There are waiting lists in
place. Those inmates don't cause problems because they want to
work in FPI. It is a better opportunity for them, and it keeps
them occupied 8 hours a day. When they come back to a housing
unit, they are tired. They don't want to--they don't cause
problems. They just want to come back and do their time. And
that is what we want as the line staff in the Federal Bureau of
Prisons.
Senator Thurmond. Director Sawyer, I am pleased that at
least half the wages of inmates in FPI must be applied to any
fines, restitution, or other court orders. Of course, many
inmates are paid for working in areas of the prison other than
FPI. Should all inmates who owe fines and restitution have to
put aside at least half of their income just as FPI
participants do?
Ms. Sawyer. Every inmate within our prison system, Mr.
Chairman, who have any monies at all, either sent it from home
or that they earn in the prison, are required to pay toward any
outstanding fines, victim restitution, child support, or
whatever it might be.
We know exactly how much the inmates are going to make in
Prison Industries because those salaries are set very firmly.
So we put a required 50 percent obligation on any inmate
working in Prison Industries.
For all the other inmates, the amount of money they have
varies, and so we negotiate--the unit team that works with each
inmate negotiates a fair amount, an appropriate amount, a
realistic amount that we can expect them to contribute monthly
toward any outstanding debts they receive.
The Bureau of Prisons last year in total collected about $5
million toward all of these different indebtedness on the part
of inmates. Our inmate financial responsibility program
collected about $5 million; $1.8 million of that was from
Prison Industries staff. The remaining $3.2 million was from
non-Prison Industries employees. So we collect, we believe, an
appropriate amount from every inmate who owes anything to
society while they are in prison. It is not all necessarily a
required 50 percent. Some is greater, some is lesser.
Senator Thurmond. Mr. Aragon, given that FPI can only
produce products for Federal agencies, it has a very limited
market. Should the Congress consider permitting FPI to sell in
the commercial market products that are currently imported from
foreign countries?
Mr. Aragon. Yes, Mr. Chairman. The board has formally taken
the position that because of the continued conflicts that we
have in creating new jobs because our marketplace, the Federal
Government, continues to constrict and we continue to have a
requirement for more inmate positions, we believe that by
repatriating work that has long since moved offshore, that
would be a constructive way to create new jobs and sell
products in the American marketplace and keep the dollars here
in this country, and by doing so, we will assist the economy to
continue to be strong, and we hopefully will have those jobs
back in the States and perhaps sometime private industry may
want to work in that arena again. And if so, we would be
certainly happy as a board to find a mutually acceptable
position in terms of the production that we manufacture.
Senator Thurmond. Mr. Aragon, as you know, the more Prison
Industries focuses on services, the less impact it has on
products such as furniture and clothing. What efforts are being
made to focus more on services, both to the Federal Government
and to the private sector?
Mr. Aragon. In this area, also, Mr. Chairman, the Federal
Prison Industries Board has taken the position that it would be
a very important complement to our ability to employ our rising
number of inmates if we had service work in our approved list
of work that we can do. Services is an arena that we have
worked in in Federal Prison Industries because various agencies
have brought that to us or we have had it historically.
However, mandatory source does not apply to services.
If we were able to more viably market our services and get
more service work, it would take the pressure off the
manufacturing work that we do in, again, the arenas that are
continually constricting availability of market share and the
need for our jobs.
Senator Thurmond. Mr. Glover, how is a typical inmate who
is employed in Prison Industries different from other Federal
inmates?
Mr. Glover. Mr. Chairman, again, the inmates that work in
FPI don't want problems inside the prison. They go to work in
the mornings. They don't fight with other inmates. This is in a
general sense. They work with staff better. They don't want to
end up with incident reports because that would eliminate them
from being able to work in an FPI position. And so they are
just a better-behaved type of inmate while they are working FPI
and while they are on the waiting list waiting for a job in
FPI, which benefits the staff greatly by making it easier to
control a large inmate population.
Senator Thurmond. Mr. Glover, are the criminals being
sentenced to Federal prison today younger and more violent than
they were in the past? And if so, does this make programs like
Prison Industries more important?
Mr. Glover. Yes, Mr. Chairman, they are much more
aggressive, younger inmates. For example, when I started at FCI
Loretto, our average inmate population was around 35 years old.
I think it is 28 years old now, somewhere in there. It is a
completely different atmosphere inside the prison as it was
then. And that is just in a span of 7 to 10 years. So, yes, the
inmate population is changing, and they are more aggressive.
And a program such as FPI helps us manage those inmates in an
appropriate way.
Senator Thurmond. Director Sawyer, please explain how
Prison Industries helps reduce the possibility that inmates
will return to a life of crime based on the results of the PREP
study?
Ms. Sawyer. Well, the PREP study indicated that any of the
inmates working in Prison Industries not only behave better in
the institution and have less misconduct, as was indicated, but
also have a far greater success rate in terms of staying free
on the street, not getting back in crime again, and in being
gainfully employed.
The study went on for a 12-year period. We actually tracked
inmates for 12 years, and these weren't just a specially
selected group of inmates. We matched every inmate that went
through Prison Industries with like inmates with similar
backgrounds, similar work histories, similar offenses and
characteristics, to ensure that we weren't simply creaming off
the good inmates and sending them to Prison Industries.
What we found was that there was clearly an impact of
Prison Industries, and it indicated that they had a 24 percent
less likelihood after 12 years to be crime-free on the streets,
to be gainfully employed, and actually the wages they were
actually making were higher than any other inmates who were
released without being in Prison Industries who also remained
on the street. So there is a significant positive benefit to
the inmate, to the society, and to the economy by these
individuals staying on the street, being productive for a long
period of time.
Senator Thurmond. Director Sawyer, as you know, the number
of inmates that you must manage has more than doubled in the
last 10 years and continues to rise sharply. Even without
statutory changes that could harm the mandatory source
requirement, are you concerned about being able to keep the
growing inmate population occupied?
Ms. Sawyer. We are very concerned, Mr. Chairman, about
keeping the growing population occupied, and that is why we
believe that it is going to take more than simply the Bureau of
Prisons and Prison Industries to address this concern. It is a
public policy issue. It is an issue that has been created by
trying to respond to crime in an aggressive way in this
country. But it means that we have a lot more inmates coming
our way who will stay for a long period of time.
The elimination of mandatory source in this era of our
existence is very threatening if there are not other viable
alternatives, viable authorities given to the Bureau of Prisons
to be able to maintain similar levels of employment of inmates
during our significant growth period here and our significantly
high populations. And, also, we need to ensure that if any
viable alternatives are identified, we need sufficient time to
implement any of those alternatives because there may be a
grand idea, but if it is implemented too quickly and we are not
able to bring up the work levels for the inmate population, we
could be sitting on institutions with minimal inmate employment
which would be very volatile situations because we need to have
a significant number of the inmates employed.
Senator Thurmond. I wish to thank all members of this first
panel. I appreciate your presence and appreciate your fine
testimony that you have given.
Now we will go to the second panel. On the second panel,
our first witness is David Oliver, Principal Deputy Under
Secretary of Defense for Acquisition and Technology. He holds a
bachelor's degree from the U.S. Naval Academy and an M.A. from
American University. While in the Navy, Mr. Oliver commanded
two submarine groups and served as chief of staff to the 7th
Fleet.
Our second witness is Ann Hoffman, legislative director for
the Union of Needletrades, Industrial and Textile Employees.
Ms. Hoffman has been both associate general counsel and a
lobbyist for the International Ladies Garment Workers Union.
She has also served as counsel to the Communication Workers of
America.
Our third witness is Steve Schwalb, Assistant Director of
the Bureau of Prisons, and Chief Operating Officer of Federal
Prison Industries. In this position, he is responsible for
managing a self-sufficient Government corporation which $600
million in annual sales, 1,800 staff, and 19,000 inmate
workers. Mr. Schwalb is a graduate of the University of
Washington.
We also intended to have Andrew Linder, president of Power
Connector, representing the Correctional Vendors Association.
Unfortunately, he could not be with us because of
transportation problems. However, I will place his statement in
the record.
[The prepared statement of Mr. Linder follows:]
Prepared Statement of Andrew S. Linder
Mr. Chairman and Members of the Subcommittee: I am Andy Linder,
President and Owner of Power Connector, a small electronics business
based on Long Island, NY employing 65 people. My company commenced
business on April 1, 1987 and has since concentrated its manufacturing
efforts primarily in the areas of electronic connectors and cable
hardware for the U.S. military. We supply these component parts
primarily to the Department of Defense, Federal Prison Industries (FPI)
and to our nation's primary defense contractors.
I am here today to relay my FPI story as a private sector, small
business owner and one which I believe many small businesses and other
members of the Correctional Vendors Association from around the country
could tell. It is a story that surprises many people involved in the
FPI debate as many do not realize the extent to which private sector
vendors are involved with FPI. But for the sake of a fair debate
regarding FPI's impact on private sector vendors, one needs to examine
how companies like mine who currently have contracts with FPI, who have
capitalized their businesses and hired employees based on FPI
contracts, could be impacted by changes to FPI. For example, in fiscal
year 1998 I was just one of some 15,000 private industry vendors
nationwide who were registered with FPI. Together we conducted $419
million in business with FPI and had thousands of employees and
families dependent on these same sales. That means that for every
dollar in FPI sales, some $.76 cents went directly back to private
sector companies like mine from FPI purchases of our raw materials and
services.
On a personal level, I can tell you without equivocation that my
company, Power Connector, would not be in business today without FPI's
efforts and mission to seek out small operations like mine with whom to
do business. I have personally witnessed the dedication of FPI's staff
and the commitment of resources to use the talent and skills of small
business in order to fulfill FPI contracts. FPI has achieved this by
breaking down their finished products into component parts and allowing
small companies like mine the opportunity to bid, resulting in
opportunities that we otherwise would not have had. I believe I can
best tell you the importance and value that FPI's subcontracting
endeavor has had on my business and me by telling you about my
business.
I was introduced to FPI through my work with a former employer who
had several contracts with FPI. I became very familiar with various
elements of the electronic connectors and cable hardware industry
through my work there. Unfortunately, that business like many others,
did not survive.
At that time, the U.S. Army's CECOM Division in Fort Monmouth, NJ
was seeking alternative suppliers to fulfill a contract for upgrading
their SINCGARS Program--the single channel ground to air radio system.
The Army had become frustrated by a large prime defense contractor that
had a monopoly on the supply of cable and components necessary for the
SINCGARS upgrade program and they turned to FPI seeking to develop
other sources for these labor intensive, high priced cables and
connectors.
FPI recognized the opportunity to reach out to small businesses
like myself. They broke down the contracts that they received from the
U.S. Army into component parts and requested small businesses,
including mine, to participate and bid on prototypes. They did this by
partnering with small businesses and providing the capital through
competitive bids for the costly testing and assembly, which allowed
them to participate.
By assuming the financial burden for the testing of prototypes, FPI
eliminated the major financial barrier, which precluded most small
companies like mine from competing for these contracts, which were
normally, reserved for larger companies who had the necessary capital
and human resources. Mine was a startup company, struggling to make
payroll and it was only through sharing expenses and subcontracts that
my company became successful.
As a result of FPI's efforts to work with the small business
community our products were approved. FPI provided the intensive labor
required, we provided the component parts. Bidding on these contracts
was required and I am proud to say my company won the bids for the
component parts enabling FPI to provide them to the Department of
Defense at \1/3\ of the price they had originally paid, thereby saving
taxpayers millions of dollars over the last nine years.
My point in relaying my story today is to make clear that a startup
business like mine could not have done this on its own.
FPI was interested in our ability to meet their requirements, not
our size or numbers. If we could meet the military standards and
perform, being a small, startup business was not a liability. It was
FPI's mission to afford fledgling companies like my own with this rare
opportunity to partner and it allowed us to gain contracts for which we
would otherwise not have been able to compete. Without FPI, these
contracts would have gone to and been absorbed by larger companies, at
higher prices. I am certain that the active involvement of FPI as a
significant source to the Army ensured small business growth and
opportunity that otherwise would not have materialized.
In my first few years of business, 100 percent of my employees and
my entire revenue was attributable to FPI business. My company's
survival was firmly rooted in its relationship with FPI.
Today, 17 out of my 65 employees or 25 percent of my labor force
are directly attributable to FPI business. This is a result of FPI's
efforts to reach out to small businesses like mine. I now have over 40
employees dedicated to fulfilling contracts with other U.S. government
agencies and military defense contractors obtained on my own. I can
honestly say that 100 percent of our capability to bid for and supply
this other work has come from our ability to establish a credible
performance track record as a result of FPI's business. By giving us
the opportunity to prove ourselves, when most agencies or defense
contractors would not look twice at a start up company, FPI gave us
that fighting chance to demonstrate our competitive spirit. In addition
to our own success, the amount of subcontracts and work we have
outsourced over the past nine years, to over 40 other small businesses
has generated the hiring of almost 120 full time employees.
I believe this is also a good opportunity to report that FPI has
implemented some very significant programs. There is a vigorous quality
control program and quality assurance program for both vendors and FPI.
FPI has implemented a thorough and aggressive campaign to encourage
timely vendor delivery. FPI has in place a rapid response and
accelerated procurement and delivery system in times of acute need such
as in Desert Storm and perhaps for the current conflict in the Balkans.
The FPI multi-institution network also provides for redundant
production assembly lines to assure consistent availability.
Mr. Chairman and Members of the Subcommittee, I respectfully
request very careful consideration of any attempts to curtail or
diminish FPI. FPI is a proven correctional tool for managing our
federal prisons and protecting both inmates and Bureau of Prison
employees. It is also a lifeline for many small businesses like my own.
I urge you to carefully weigh all sides of any debate that suggests
curtailment of FPI's ability to provide the important safeguards to our
prison system and to do business as usual with small companies like
mine.
Thank you for your time and consideration.
Senator Thurmond. We will now first hear from David Oliver.
PANEL CONSISTING OF DAVID R. OLIVER, PRINCIPAL DEPUTY UNDER
SECRETARY OF DEFENSE FOR ACQUISITION AND TECHNOLOGY, DEPARTMENT
OF DEFENSE, WASHINGTON, DC; ANN F. HOFFMAN, LEGISLATIVE
DIRECTOR, UNION OF NEEDLETRADES, INDUSTRIAL AND TEXTILE
EMPLOYEES, WASHINGTON, DC; AND STEVE SCHWALB, ASSISTANT
DIRECTOR, FEDERAL BUREAU OF PRISONS, AND CHIEF OPERATING
OFFICER, FEDERAL PRISON INDUSTRIES, WASHINGTON, DC
STATEMENT OF DAVID R. OLIVER
Mr. Oliver. Mr. Chairman, I have submitted my statement for
the record. We participated in this study----
Senator Thurmond. All of your entire statements will go in
the record. Just take about 5 minutes and summarize.
Mr. Oliver. Yes, sir. Essentially, the statement is for the
record, and it says that we participated in this study. We were
anxious to talk to our people and get their opinions.
Essentially, we found the quality of the products to be good.
We found that there were some problems with timeliness and
service. And we talked to the FPI, and we have initiated or are
going to initiate some pilot programs, including which is we
put on FPI on our electronic mall web on the Internet, which we
have already done, so that all of our people can get to that
access. But, also, we are very interested in eight pilot
programs by which we get waiver authority so that for buys up
to $2,500, the same amount that we use for our credit cards to
do micro purchases, that we can agree that we will exempt these
things from the mandatory sourcing policy.
I will be happy to answer any questions later, sir.
[The prepared statement of Mr. Oliver follows:]
Prepared Statement of David R. Oliver
Good afternoon, Mr. Chairman, and Members of the Subcommittee. I
want to thank you for this opportunity to share with you some aspects
of the relationship between the Federal Prison Industries and the
Department of Defense. The Department has worked closely with the
Federal Prison Industries (FPI) for almost seventy years and has
procured many mandatory items from them in times of war, cold war, and
peace. Generally, we have been in agreement on most procurement
matters.
In accordance with section 855 of The National Defense
Authorization Act for fiscal year 1998, P.L. 105-85, the Department of
Defense and the Federal Prison Industries reviewed the procurement
procedures, regulations, and statutes that govern procurement
transactions between DOD and FPI, and provided recommendations to
improve the process. Before I discuss the specifics of these
recommendations, I need to make some general observations.
DoD supports FPI's mission as a Federal correctional program to
employ and train inmates through its purchase of FPI products and
services produced in various Federal correctional facilities. FPI, in
its role as a preferred source of supply, offers DoD a number of
advantages in procurement (e.g., inter-government transfer of funds,
inter-agency agreements). FPI is a mandatory source of supply for
products listed on the FPI Schedule of Products; however, the defense
department is permitted to request a waiver to purchase from sources
other than FPI whenever FPI cannot meet our needs. FPI sales to DoD
represent about 60 percent of FPI's total sales to Federal government
agencies.
A comprehensive survey was conducted for this joint study and
provided a representative sample of DoD customers, based on dollar
amount purchased, experience using FPI, branch of military service, and
product purchased. As expected 76 percent of the total respondents
indicated the primary product purchased in the last 12 months was
office furniture, of which nearly 40 percent were for purchases under
$25,000. In response to questions regarding the quality of specific
products purchased in the last 12 months, FPI was generally rated good.
On the whole, respondents seem to be least satisfied with delivery and
ambivalent on price. This was especially true for furniture products
(office case goods, systems, and dorm and quarters furniture), where
over 40 percent rated FPI as fair or poor in delivery.
FPI was rated highest as an overall supplier in the area of
quality, where 42 percent of respondents rated FPI as excellent and 39
percent rated FPI as average. Of the 64 percent of total respondents
who had purchased products similar to those provided by FPI in the past
12 months, nearly three-fourths of them rated FPI the same in
comparison to outside sources in quality, while a majority rated FPI
about the same on efficiency (56 percent), and best value (52 percent).
When making a comparison on timeliness, 33 percent rated FPI the same
and 59 percent rated FPI worse than outside sources.
Open-ended comments and suggestions supported these findings as
well, indicating that timeliness in delivery is the principal concern
among FPI's DoD customers. Pricing concerns were also raised, although
to a much lesser extent. Improving communications and customer service
were recommended by over 10 percent of the total respondents. Some
respondents (6 percent of the 617 total respondents) also expressed a
concern with mandatory source.
From the survey results, DoD and FPI developed a set of three
recommendations and three administrative actions. DoD and FPI believe
that implementing the recommendations will improve the efficiency and
reduce the cost of procurement transactions between the two agencies.
Implementation of the administrative actions should facilitate and
enhance the working relationship between the two agencies.
In brief, DoD and FPI propose the following recommendations:
(1) Raising the Threshold for Waiver Exceptions. FPI will work with
the appropriate procurement officials to raise the exception to
waiver threshold from $25 to $250 for DoD purchases, or grant DoD
an administrative waiver for orders totaling $250 or less that
require delivery within 10 days. This recommendation should
increase the flexibility of DoD in its small purchasing, while
continuing to allow FPI to accomplish its mission of employing the
greatest number of inmates as possible;
(2) Expedited Waiver Process for Orders $2,500 or Less. FPI will
expedite the waiver process for all orders $2,500 and less. This
recommendation should address the concerns of those customers for
whom the time involved in waiting for a waiver response is
problematic, particularly on small dollar value orders; and
(3) Limited Pilot: Exception to FPI Clearance Procedures. DoD and FPI
will enter into a pilot program at eight DoD locations which will
provide that orders for listed items totaling no more than $2,500
that require delivery within 10 days, will be administratively
waived by FPI, in accordance with specific conditions described in
the recommendation. This recommendation will allow more flexibility
for DoD in purchasing, will examine the extent to which waiving all
items under $2,500 would affect FPI programs, and will correspond
with FPI's goal of offering enhanced services to its customers.
DoD and FPI further propose the following administrative actions be
taken:
(1) Timely Delivery of FPI Products. FPI should continue to evaluate
and monitor delivery performance and develop data to objectively
measure timeliness. The survey results clearly indicated that DoD
customers are concerned about the timely delivery of FPI products;
(2) Doing Business with FPI. FPI will develop a guide which will
demonstrate clearly and concisely how to efficiently conduct
business with FPI. The efficiency of the entire ordering process
could be increased if the procedures, points of contact, and areas
of responsibility are explained in an orderly and user-friendly
manner; and
(3) Full Use of Electronic Purchasing and Web Links. All DoD
locations with web sites should consider adding a link to the
UNICOR web site on their procurement pages. Having this link allows
DoD customers to take full advantage of all FPI has to offer, to
research FPI product choices, to compare prices, and to order on-
line.
As stated earlier, implementation of these recommendations and
administrative actions should improve the efficiency and reduce the
cost of procurement transactions between the two agencies. In addition,
the pilot program would provide us with the opportunity to obtain data
that would detail the impact of raising the waiver threshold to $2,500
prior to any full-scale implementation.
Mr. Chairman, thank you for this opportunity to share with you our
observations and study results. I stand ready to answer any questions
that you and the members may have.
Senator Thurmond. Thank you.
Ms. Hoffman.
STATEMENT OF ANN F. HOFFMAN
Ms. Hoffman. Thank you, Mr. Chairman. Thanks for the
opportunity to present the views of UNITE, the Union of
Needletrades, Industrial and Textile Employees, the largest
union of garment and textile workers in North America.
Our 250,000 members and the companies for whom they work,
most of which are small businesses, have been among the prime
victims, if I may use that word, of the practices of Federal
Prison Industries.
UNITE shares the view of the AFL-CIO and its other
affiliates that training opportunities should be provided for
prisoners, to help in their rehabilitation and to prepare them
for work life after prison. Prisoners should never be used,
however, in competition with nonprison labor or to replace
workers who are not in prison. Unfortunately, that is becoming
more and more the norm.
Crime is a serious national problem. It imposes real costs
on society. Prison Industries represent one element of that
cost--one method used to control the rapidly expanding prison
population.
Most social costs, including the direct costs of
incarceration, are spread relatively evenly throughout the
population through taxation and then appropriation of funds.
Federal Prison Industries is funded in a very different
way. It generates income by selling products and uses the funds
it generates to finance its activities. It receives no
appropriated funds.
We agreed with you, Mr. Chairman, that funding Federal
Prison Industries in any other way would be extremely
expensive, but we think that is an important fact, that the way
Prison Industries is funded suggests to the public and to
Congress that incarcerating increasing numbers of people costs
less than it actually does. The cost of FPI is thus levied not
against general revenues, but against those industries in which
FPI chooses to become involved.
Unfortunately for UNITE members and our employers, FPI has
frequently chosen to be involved in the manufacture of apparel
and textile products. These industries and their workers have
thus borne a grossly disproportionate share of the cost of
employing prisoners.
FPI dominates the Federal Government apparel market. In its
report to Congress for fiscal year 1998, FPI showed apparel
sales of $134 million, about 25 percent of their total net
sales. Thirty percent of the inmates employed by FPI were
engaged in the production of apparel and textiles. FPI is now
the single largest supplier of apparel to the Department of
Defense.
Not only are Federal Prison Industries competing with free
labor, their impact is most often borne by the most vulnerable
workers in this country. Industries that are most suitable to
prison-based factories tend to be lower-skilled, low-wage, not
highly capitalized and labor-intensive. These are, for the most
part, the same industries which have faced the greatest
competition from offshore production.
As you well know, Mr. Chairman, the apparel and textile
industries have lost an incredible number of jobs over the last
decades. Between December 1994 and January 1999, the U.S.
apparel industry lost 249,000 jobs and the textile industry
104,000 jobs, for a total loss of 353,000 jobs. FPI is thus
competing against a workforce that has already been battered by
import-related job losses. FPI is also competing in the vastly
decreased apparel and textile work that remains in the United
States, in particular work for the Department of Defense.
As you know, consideration is being given to encourage
manufacture of products that would otherwise be produced
offshore. This is not likely to help.
First, as you well know, Mr. Chairman, in the apparel
industry in particular, it is virtually impossible to determine
whether a particular item would be produced by foreign labor if
it were not prisonmade. There is not a fixed level of domestic
production of any particular product. A company may be
producing in this country one year, offshore the next, and back
here the next, or may produce a product offshore and here at
the same time. Doing that in the apparel industry would result
in a great deal of manipulation of the definition of the item.
It is significant that in determining whether FPI is
operating within its statutory limits the judge, the jury, and
the court of appeals is the Board of Directors of FPI. UNITE
has had direct experience with FPI's manipulation of its
procedures just 2 years ago in a case involving the production
of gloves for the military. That case is detailed in my
testimony. The most salient facts to me are that the board
initially considered the entire market for gloves in the United
States as the market, although the commercial market is almost
entirely manufactured offshore. When pressed, because the
industry came up with contrary information, they used a year as
their baseline that was already increased because of the Gulf
War.
We think a more appropriate solution for the problem of
employing more prisoners is to increase vocational training. If
somebody is not coming out for 40 years, a job is no more
important to antirecidivism than vocational training. If they
are coming out more rapidly, vocational training is every bit
as valuable as job training particularly in an industry in
which there are very few job opportunities.
The goal of Congress and the administration should be to
increase investment in education, afterschool programs, school
counselors, social services, and job training so that we can
lower our extraordinary rate of incarceration and the resulting
need for prison work programs.
Thank you.
[The prepared statement of Ms. Hoffman follows:]
Prepared Statement of Ann F. Hoffman
Mr. Chairman, Senator Schumer, Members of the Subcommittee, thank
you for the opportunity to present the views of UNITE, the Union of
Needletrades, Industrial and Textile Employees, as you look at the
operations of the Bureau of Prisons and particularly Federal Prison
Industries.
UNITE is the largest union of garment and textile workers in North
America. Our 250,000 members and the companies for whom they work have
been among the prime ``victims,'' if I may use that word, of the
practices of Federal Prison Industries. We welcome the Subcommittee's
interest in the issue and hope you can work with us and other unions
and employers adversely affected by FPI's actions to bring about
constructive change.
UNITE shares the view of the AFL-CIO and its other affiliates that
training opportunities should be provided for prisoners, to help in
their rehabilitation and to prepare them for work life after prison.
Prisoners should never be used, however, in competition with non-prison
labor or to replace workers who are not in prison. Unfortunately,
prison labor is increasingly being used, by both the states and the
federal government, to perform work in both the public and private
sectors ordinarily done by workers who are not incarcerated. This is
unacceptable.
the cost of fpi is unfairly borne by certain industries
Crime is a serious national problem. It imposes real costs on
society. Prison industries represent one element of that cost--one
method used, to control the rapidly expanding prison population.
Most social costs, including the direct costs of incarceration, are
spread relatively evenly throughout the population. Our representatives
in Congress and in the states decide what taxes should be levied and
what programs should exist, and they distribute revenues among all the
programs they choose to fund.
Federal Prison Industries is funded in a very different way. FPI is
``self sustaining.'' It generates income by selling products and uses
the funds it generates to finance its activities. 18 U.S.C. Sec. 4126.
It receives no appropriated funds. This has the effect of masking the
cost of Federal Prison Industries, suggesting to the public and to
Congress that incarcerating increasing numbers of people costs less
than it actually does. The cost of FPI is thus levied not against
general revenues, but against those industries in which FPI chooses to
be involved.
Unfortunately for UNITE members and their employers, FPI has
frequently chosen to be involved in the manufacture of apparel and
textile products. The apparel and textile industries and the workers in
those industries have thus borne a grossly disproportionate share of
the cost of employing prisoners.
FPI dominates the federal government apparel market. In its report
to Congress for Fiscal Year 1998, FPI showed apparel sales of $134
million, about 25 percent of their total net sales of $534.3 million
dollars. Thirty percent of the inmates employed by FPI, more than 6,000
people, were engaged in production of apparel and textiles. FPI is now
the single largest supplier of apparel to the Department of Defense.
This concentration violates the statute governing Federal Prison
Industries. The law requires FPI to
diversify * * * and so operate the prison shops that no
single private industry shall be forced to bear an undue burden
of competition from the products of the prison workshops, and
to reduce to a minimum competition with private industry or
free labor.
18 U.S.C. Sec. 4122 (b)(1) (emphasis added).
Not only are Federal Prison Industries competing with free labor,
their impact is most often being borne by the most vulnerable workers
in this country. By statute, FPI is mandated to
concentrate on * * * those products which permit employment
of the greatest number of those inmates who are eligible to
work as is reasonably possible.
18 U.S.C. Sec. 4122 (b)(2). Industries that are most suitable to
prison-based factories tend to be lower-skilled, low-wage, not highly
capitalized and labor intensive. These are, for the most part, the same
industries which have faced the greatest competition from offshore
production.
The apparel and textile industries have been particularly hard hit
by import penetration. According to a February, 1999 report of the
Bureau of Labor Statistics, between December of 1994 and January of
1999, the U.S. apparel industry lost 249,000 jobs and the textile
industry 104,000 jobs, for a total job loss of 353,000. FPI is thus
competing against a workforce that has already been battered by import-
related job losses. FPI is also competing with the decreased amount of
apparel and textile work that remains in the U.S., in particular work
for the Department of Defense.
The degree of job loss in apparel and textiles causes FPI to
violate its operating statute in another respect. FPI is mandated to
provide employment that will give inmates ``a maximum opportunity to
acquire a knowledge and skill in trades and occupations which will
provide them with a means of earning a livelihood upon release.'' 18
U.S.C. Sec. 4123. Prisoners trained to manufacture clothing, for
example, will find themselves upon release competing for work with
hundreds of thousands of unemployed garment workers who lost their jobs
as a result of imports.
Consideration is being given by the leadership of Federal Prison
Industries to encourage manufacture of products that would otherwise be
produced offshore. This is not likely to bring FPI into compliance with
its Congressional mandates.
First, in the apparel industry in particular, it is virtually
impossible to determine whether a particular item would be produced by
foreign labor if it were not prison-made. There is not a fixed level of
domestic production of any particular product in this country. A
company can manufacture products for the U.S. market either in this
country or elsewhere. A company may produce a product in this country
one year and elsewhere in the next year, or may manufacture the same
product both here and abroad at the same time. Identifying an apparel
product as one which would otherwise be made by a ``non-domestic''
contractor would be a sham, totally subject to manipulation.
Furthermore, having prisoners produce products that would otherwise
be made offshore guarantees the absence of related post-incarceration
employment. By definition, production of the products in question will
not exist in the United States. By implication, jobs in that industry
will not exist.
Finally, if an item that would otherwise be made offshore can be
made competitively in the United States, the first opportunity to make
that product should go to free labor, rather than to prisoners.
fpi's record on following its own rules is not good
Federal Prison Industries gives lip service to fulfilling its legal
obligation to minimize its harmful impact on industries and workers.
Its performance gives the lie to its pronouncements. Reviewing annual
reports of FPI, or the catalog and web site of UNICOR (the trade name
adopted by FPI) or the testimony of FPI officials, it is clear that FPI
views its highest priority as employing more and more prisoners. All of
its other statutory goals take a back seat.
FPI is able to accomplish this goal because of two peculiar
elements of its structure. First, federal agencies are required to buy
from FPI virtually any product FPI chooses to supply, even if the
agency could purchase a better and cheaper product from a private
sector provider and obtain more timely delivery. This is FPI's
jealously guarded ``mandatory source'' privilege.
Second, in determining whether FPI is operating within its
statutory limits, the judge, the jury and the court of appeals is the
Board of Directors of FPI. It is the Board that determines whether FPI
is ``capturing more than a reasonable share of the market * * * for any
specific product.'' It is the Board that determines whether FPI may
``produce a new product or significantly expand the production of an
existing product.'' And in determining whether these actions are
appropriate, it is FPI itself that provides the definitions and market
study upon which the Board must rely. Nothing in the statute
establishes the independence of the Board, and practice makes it clear
that the Board is the creature of the FPI administration, rather than
its master.
Not surprisingly, FPI designs the market study to support its
desired result. FPI may define the product it wishes to produce as
``gloves'' or ``leather gloves'' or ``dress military gloves'' or even
$50,000 worth of gloves.'' The definition determines the size of the
market. FPI may choose to include commercial products in its market
basket, even if the product under consideration is used only by the
military. By virtue of this type of manipulation, FPI has been
authorized to supply 100 percent of the needs of the Department of
Defense for certain products, notwithstanding its restriction to a
``reasonable share'' of the market.
UNITE had direct experience with FPI's manipulation of its
procedures just two years ago. FPI in January of 1997 asked its Board
of Directors to ratify its unlawful, unauthorized expansion of
production of gloves for sale to the military, and to permit further
expansion of that production. FPI had exceeded its permissible
production in fiscal year 1992, and continued to do so in the years
that followed. Between 1990 and 1997, FPI production of gloves doubled.
FPI produced 100 percent of the military's requirements for 5 different
types of gloves.
While FPI was illegally expanding its production of gloves, the
private sector companies manufacturing gloves for the military were
laying off employees, losing profits and, in two cases, going into
bankruptcy.
UNITE represented workers at four plants supplying gloves to the
military. Average seniority was over 15 years at four of the UNITE
plants. The glove-makers depended on their jobs, and did not have other
options for employment. The non-military glove industry has been
devastated by imports, and there are few comparable jobs available in
these communities.
The unauthorized expansion of glove production directly led to the
loss of private sector glove jobs, both through the bankruptcy of two
glove companies during this period, and through workforce reductions at
others. As an example, Knoxville Glove in Tennessee lost more than half
of its workforce, cutting its eighty person workforce to thirty-five.
This loss directly resulted from FPI claiming the military glove work
that Knoxville was doing. The loss of military glove production left
the plant struggling to survive and the remaining jobs in jeopardy.
FPI attempted to justify its predatory expansion through flawed
research and manipulation of data. Its initial market study, required
by law to be objective, exaggerated the market for domestic production;
exaggerated the size of the federal market; fabricated a theory of new
technology in the glove industry; and made unwarranted predictions of
future expansion of the federal market. Forced by the glove industry's
research to revise its study, FPI next attempted to minimize the size
of the unauthorized expansion by using as a baseline fiscal year 1991
sales, inflated some 20 percent above normal because of the Gulf War.
Based on FPI's behavior in the glove case, UNITE believes more
effective control of FPI by someone other than its own Board of
Directors is a more critical need than expansion of its mission.
some more appropriate solutions
FPI and its supporters have put forth a variety of proposals for
expansion of work opportunities in federal prisons. One is the ``import
substitution'' model discussed above. Another is taking over work in
the public sector. This would have the same adverse impact on free
labor as has already been experienced in the manufacturing and service
sectors. A third option posited is selling into the private commercial
market, an option expressly forbidden by law. 18 U.S.C. Sec. 4122 (a).
None of these schemes deals with the critical issue of keeping
inmates occupied without displacing other workers. UNITE believes that
this need can best be met in two ways: through enhanced training
programs, geared to industries in which growth is anticipated, and
through production of goods for which there is no commercial market.
The statute creating FPI authorizes it to provide vocational
training in addition to work opportunities. Within FPI, this appears to
be an opportunity lost. This is not the case at the state level.
Local unions have cooperated with state prisons in various areas to
establish apprenticeship programs in skilled trades. These programs
provide high-quality training for jobs that exist, and lead to
Department of Labor certified status at the conclusion of the program.
Such programs are appropriate, of course, only in areas with identified
anticipated shortages in certain skilled trades. It should be possible
to design similar rigorous training programs for other growing
occupations that not only keep inmates occupied but truly equip them
for life on the outside.
Good training programs require careful consultation with the
knowledgeable and affected people in the area to determine both the
need for trained workers in certain occupations in the future and the
nature of the training. They involve positive contact between inmates
and potential future co-workers. They lead to real jobs when an inmate
completes his or her term of confinement.
We believe this is one direction that the Bureau of Prisons should
be following as its inmate population expands. Unlike the current FPI
program, it would not be training inmates for jobs that will not exist
for them on the outside. It would not be increasing the tension between
the incarcerated population and those who are not confined. It would
not be competing with workers in either the private or public sector
for jobs.
Another option would be to have FPI provide products or services
for which there is no commercial market; for example, unprofitable
types of recycling or equipment for low-income social service
providers. UNITE suggests that Congress determine whether there are
products or services that could meet this definition; draft a specific
and narrow statute authorizing short-term pilot projects of this sort;
and establish a statutory review process outside of the Board of
Directors of FPI in which workers, companies and other interested
parties could present evidence on the success of the pilot programs.
UNITE does not wish to suggest that replacing the current FPI
program will be easy. We do believe it is both statutorily required and
necessary for continued public support of prison work programs.
The goal of Congress and the Administration should be to increase
investment in education, after-school programs, school counselors,
social services and job training so that we can lower our extraordinary
rate of incarceration and the resulting need for prison work programs.
We would be happy to work with the Subcommittee on any of these
suggestions. Thank you for your attention.
Senator Thurmond. Mr. Schwalb.
STATEMENT OF STEVE SCHWALB
Mr. Schwalb. Thank you, Mr. Chairman.
Mr. Chairman, we recognize there has been a lot of
criticism of FPI based on concerns of adverse impact or job
displacement. While we think these concerns are overstated,
nonetheless, FPI in response has diversified its production and
restricted its market share.
We believe these actions have minimized adverse impact, as
indicated in the private industry's own data. The furniture
industry, for example, as a whole has experienced increased
sales, earnings, and employment over the last 20 years, despite
our presence and our growth, and as Ms. Hoffman said, the
textile industry certainly has been decimated by imports which
we think is the bigger part of the problem than FPI.
We have heard much criticism about the unfair competitive
advantage that FPI has by mandatory source and below minimum
wages paid to inmates. But we think it is clear these
provisions do not provide an unfair advantage to FPI.
As a correctional work program, we must contend with
conditions which are inherent to a prison environment, such as
the high costs of training undereducated and underexperienced
workers, prison security procedures, labor-intensive work
practices, and high turnover from inmates being released and
transferred. Private sector businesses simply do not confront
these issues to the same extent as FPI.
In practice, our mandatory source provision is merely a
procurement vehicle to achieve an important social goal. The
principal benefits of mandatory source to FPI are the
attraction of private sector business partners and the
reduction of our marketing expenses. For many of our product
offerings, FPI relies on partnerships with private sector
companies. They bring their research, design, and manufacturing
expertise to the relationship, and FPI contributes inmate
labor. The sale of the resulting product under our mandatory
source affords these companies an additional distribution
channel for their products. And it should be noted that FPI
sales under mandatory source generate over $400 million a year
in purchases of materials equipment, machinery, and services
for our private sector vendors, 62 percent of whom are small,
minority-owned, women, and disadvantaged businesses.
Several companies have told the board in the past they
would not have responded to our solicitations for partnering in
the absence of mandatory source. Thus, it is very probable that
FPI would have to discontinue several major product lines if
mandatory source were eliminated or eroded.
The potential undesirable effects of FPI's mandatory source
are further minimized by the fact that in 1998, for instance,
90 percent of the waivers to our mandatory source which were
requested were approved.
Regarding our prices, GAO recently examined the prices of
several different FPI products and concluded that for virtually
every one FPI's prices were within the market range of
commercially comparable products.
Regarding earnings, our annual net margin is typically in
the 2 to 3 percent range, hardly an indication of low cost. In
short, we do not believe FPI derives an unfair advantage from
mandatory source or low inmate wages. And, in fact, any
benefits these provide are more than offset by market
restrictions, workforce constraints, and the prison environment
limitations.
Mr. Chairman, we are constantly searching for new
alternatives for inmate job creation which will not generate
opposition, recognizing, however, there are only so many things
you can make with inmates in a prison environment.
We have attempted over the years to reduce the ratio of our
sales derived from mandatory source, from traditional products,
and from the Federal market. Several such initiatives within
our current authority are underway.
For instance, we recently negotiated a pilot waiver of the
mandatory source for dorm furniture. This will take effect in
January 2000.
In addition, we have 2,500 inmates, about 15 percent of our
workforce in FPI, performing service work for Federal agencies,
services such as laundry, equipment repair, furniture
refinishing, computer recycling, and data processing.
We are considering establishing a commercial services
program on a pilot basis to seek business partners from the
commercial sector who are interested in bringing service work
back from overseas to have it performed by FPI inmates. Several
of our factories are currently performing subcontracting work
for such contractors as Northrup Grumman and Lockheed Martin to
the satisfaction of both companies.
We are currently working on joint proposals where FPI could
serve as a subcontractor to the blind and severely disabled
workshops, which, of course, produce products and services to
Federal agencies under the provisions of the Javits-Wagner-
O'Day Act.
Mr. Chairman, we are not advocating the maintenance of the
status quo. We are willing to work closely with those in
industry and labor to find that win/win solution the Director
referred to in her remarks. But as a matter of long-range
strategy, our objective is to reduce our reliance on sales
derived from mandatory source, from traditional products, and
from the Federal market, provided that we can maintain the
required inmate employment levels.
As a practical matter, Mr. Chairman, any change to the FPI
program must ensure a means to create the necessary number of
inmate jobs and must afford a realistic time period for the
transition.
Thank you, Mr. Chairman. I would be happy to answer any
questions you might have.
[The prepared statement of Mr. Schwalb follows:]
Prepared Statement of Steve Schwalb
Mr. Chairman and Members of the Subcommittee, I appreciate the
opportunity to appear before you today to discuss the Federal Prison
Industries, Inc. (commonly referred to as FPI or UNICOR, it's trade
name) program.
fpi's perceived adverse impact on the private sector
We recognize that there has been criticism of FPI based on concerns
of adverse impact or job displacement in the private sector, caused by
the program's mandatory source requirement. Our own assessments and
statements by various respected economists, however, do not generally
support such conclusions. Nonetheless, in response to these concerns,
FPI has diversified its production, concentrated on products where
total market expansion was forecast, unilaterally restricted market
share to reasonable levels and pursued business partnerships with the
private sector.
We believe these actions minimize adverse impact on the private
sector. Confirmation of FPI's impact is reflected in the private
industry's own data. The office furniture industry, for example, as a
whole, has experienced increased sales, earnings and employment over
the past 20 years, despite FPI's continuous presence and sales growth
in this product line.
fpi's perceived competitive advantage
We have heard much criticism about the unfair competitive advantage
FPI is afforded by the mandatory source provision and by below-minimum
wages paid to inmates. For the reasons I will outline, we think it is
clear that these provisions do not provide an unfair advantage to FPI.
First, FPI is not a business; it is a correctional work program
which operates in a self-sustaining manner. As a correctional work
program, FPI must contend with conditions inherent to a prison
environment, such as the high costs of training an under-educated and
under-experienced workforce; prison security procedures which reduce
efficiency (for example, last year FPI lost over 250 production days
due to lock downs); labor-intensive work practices which both limit
production and increase costs; high costs of supervising inmates who
are security risks; high turnover from inmates being released and
transferred (the turnover rate in FPI is approximately 5 percent per
month); and, the establishment of many half-day work programs in order
to afford inmates access to academic, vocational and drug treatment
programs.
Private sector businesses do not confront these issues to the same
extent as FPI.
In practice, the mandatory source provision is a means of
supporting an important social goal. Its effect is similar to many
other public policy programs, such as preferential procurement from
workshops for the blind and severely disabled or procurement set-asides
for small, disadvantaged, and women and minority owned businesses.
Restriction of choice is a deliberate and frequent public policy, such
as the requirement that veterans seek medical attention at government
operated Veterans Administration hospitals, instead of receiving
vouchers for the private hospital of their choice.
The principal benefits of the mandatory source to FPI are the
attraction of private sector business partners and the reduction of
marketing expenses. For many of its product offerings, FPI relies on
partnerships with private sector companies. These companies bring their
research, design and manufacturing expertise to the relationship; FPI
contributes inmate labor. The sale of the resulting product under FPI's
mandatory source affords these private sector companies an additional
distribution channel for their products. Several companies have told
the Board that they would not have responded to FPI's solicitations in
the absence of mandatory source. It is probable that FPI would have to
discontinue several major product lines if the mandatory source were
eliminated. This would affect the prospective sales of FPI's private
sector partners as well.
The potential undesirable effects of FPI's mandatory source are
minimized by statutory requirements that FPI diversify its production
to the maximum extent practicable, sell products only to the federal
government and produce no more than a reasonable share of the federal
market. Further, FPI has established and liberally applied procedures
to grant waivers of the mandatory source when it cannot meet a
customer's delivery requirements, technical specifications or price
needs. Customer requests for FPI to waive its mandatory source are
granted over 80 percent of the time. This gives the customers free
choice and re-directs hundreds of millions of dollars in sales to the
private sector. It should also be noted that FPI's sales under the
mandatory source generate nearly $400 million per year in purchases of
materials, equipment, machinery and services for FPI's private sector
vendors. In 1998, 62 percent of such purchases ($223 million) were made
from small/minority-owned, and disadvantaged businesses. Many of these
vendors have expressed concerns about the potential loss of business
associated with the elimination of FPI's mandatory source.
FPI's prices are not substantially below the market. In fact,
almost all of FPI's critics have suggested that FPI's prices are too
high. In August of 1998, a GAO study examined prices of several
different FPI products and concluded that for almost every product,
FPI's prices were within the range of commercial prices for comparable
products. FPI's enabling statute contemplated this pricing non sequitur
by requiring that FPI's products be sold at ``not to exceed the current
market price.'' There is no statutory or other restriction on selling
below the market price. Of all the complaints FPI has received over the
years about pricing, we have yet to hear that FPI's prices are too low
or that FPI is undercutting the market.
Regarding earnings, FPI's annual net margin is typically in the 2-3
percent range. Fred Braun, former CEO of Zephyr Products, and
considered by many to be the modern pioneer of private sector
employment of inmates, summed it up well recently in comments: ``I
continue to be frustrated by the many interested people who erroneously
believe that [inmate] wage rates are the same as labor costs.''
In summary, we do not believe FPI derives an unfair advantage from
mandatory source or low inmate wages. Any benefits these provide are
more than offset by market restrictions, workforce constraints and
prison environment limitations.
fpi's strategy to create more inmate jobs while minimizing impact
We are constantly searching for new alternatives for inmate job
creation which will not generate opposition. Pursuant to its statute,
FPI attempts to diversify to the maximum extent possible, recognizing,
however, that it must select product areas that are conducive to an
inmate working environment. FPI also attempts to select areas where it
foresees an increased federal market in order to reduce the potential
of impact on the private sector.
FPI has attempted over the years to reduce the ratio of its sales
derived from mandatory source, traditional products and the federal
market. Several such initiatives, within our current authority, are
currently underway.
With the approval of our Board of Directors, FPI has negotiated
with the industry association a pilot waiver of mandatory source for
dormitory furniture, which will take effect in January 2000.
Mandatory source does not apply to services provided by FPI. Over
the past several years, we have put a great emphasis on creating inmate
jobs by providing services to federal agencies. Today, over 2,500
inmates, approximately 15 percent of those employed by FPI, are
performing such service work. The services include laundry, equipment,
and vehicle component repair, furniture refinishing, computer
recycling, printing, sorting, textile repair, distribution, data
processing, and computer-aided design. This work is, of necessity,
labor intensive, and we continue to look for other opportunities to
provide such services.
FPI is considering establishing a Commercial Services Program, on a
pilot basis, to seek business partners from the commercial sector who
are interested in bringing service work back from overseas for
performance by FPI inmates. We are still evaluating this new area but
we believe it may have future potential.
Mandatory source also does not apply when FPI performs as a
subcontractor to a federal government contractor. Several of our
factories are performing work for such contractors as Northrup Grumman
and Lockheed Martin. We believe this area offers considerable potential
and we are pursuing several additional contracts.
We have also had several meetings with the national organizations
representing the blind and severely disabled, which provide products
and services to the federal government under the provisions of the
Javits-Wagner-O'Day Act. We are currently working on joint proposals
whereby FPI would serve as a non-mandatory source subcontractor to
these workshops for work normally not performed by the blind and
disabled workers. We believe this option offers an outstanding mutual
benefit to our respective constituents.
fpi's strategy for the future
So where do we go from here? We are not advocating the maintenance
of the status quo. We are willing to work closely with those in
industry and labor to find that ``win-win'' solution the Director
stated in her remarks.
Recently, a Congressionally mandated joint study of the
procurement, procedures, regulations and statutes that govern
procurement transactions between the Department of Defense and FPI was
completed. The study concluded that no legislative changes were
necessary, but did make three recommendations, which we are adopting.
These include:
(1) Raising the threshold for waiver exceptions;
(2) Expediting the waiver process for orders under $2,500; and
(3) Initiating a pilot waiver of the mandatory source at eight DoD
locations for items which cost less than $2,500 and require
delivery within 10 days. As a matter of long-range strategy, FPI's
objective is to reduce its reliance on sales derived from mandatory
source, traditional products and the federal market, provided that
we can maintain the required inmate employment levels. As a
practical matter, any change to the FPI program must ensure a means
to create the necessary number of inmate jobs and must afford a
realistic time period for transition.
Mr. Chairman, this concludes my remarks. I would be happy to answer
any questions you or other members of the Subcommittee may have.
Senator Thurmond. Thank you very much.
Mr. Oliver, do you generally consider the Defense
Department and Prison Industries to have a mutually beneficial
and cooperative relationship, both currently and historically?
Mr. Oliver. Mr. Chairman, we have been working together
since 1934. I think that the study pointed out that there is a
mutually good relationship with the exception that many of the
respondents to the study, which is really what I am talking
about because just with respondents to the study, many of the
respondents to the study were not completely happy with the
timeliness or the service of the products. The quality they
thought was good and the price was--they weren't permitted to
check on the prices, but they felt the others were good.
Senator Thurmond. Mr. Oliver, do you consider the joint
study between DOD and FPI to be a complete, comprehensive
study, and does it adequately address the major issues
regarding the relationship between DOD and FPI?
Mr. Oliver. I think that the study, sir, really was a poll
of several hundred people to see what they thought about what
they had--what they thought with respect to the prices they had
paid in the last year and last 24 months and what they thought
about the product. And the study really focused on getting
those people's opinion. I think 631 people. And I think that
that is--the study is a good study and reflects that in the
data, provides a great depth of data.
Senator Thurmond. Mr. Oliver, the joint study survey of DOD
customers found that FPI could improve in some areas such as
timeliness of delivery. However, overall it appears that the
survey found that DOD customers were generally satisfied with
Prison Industries as a supplier. Do you agree?
Mr. Oliver. Mr. Chairman, I would say that if you looked at
the study, you would actually see that people were generally
not satisfied with it as a provider, and I can't find the page,
but I was looking at the percentages, and essentially the
people are--with respect to efficiency, timeliness, best value,
they found them worse than the other people they bought from.
Senator Thurmond. Mr. Oliver, the joint study concludes
that no legislative changes are needed in the procurement
practices between DOD and FPI. For example, it recommends a
pilot program to determine the impact of raising the waiver
threshold from $250 to $2,500 for DOD orders. Do you agree with
the joint study that legislative changes are not warranted?
Mr. Oliver. Mr. Chairman, we are really anxious to get
together with FPI and develop the eight places to look at the
pilot studies to raise the limit to $2,500 and believe that we
should do these pilot studies as soon as possible.
Senator Thurmond. Ms. Hoffman, I understand that Harvard
economist Richard Freeman suggested last week that prisoners
should make for the commercial market products that are
currently imported from other countries and produced by foreign
labor. He said it would help the trade balance, help prisoners,
and help U.S. businesses. Do you agree with that?
Ms. Hoffman. Not at all. In addition to what I said in my
statement, the businesses that used to do that work have now
gone out of business. The businesses that would be helped are
the retailers here who are doing just fine. It would do nothing
to build up the U.S. economy. It would just create replacement
products for what is currently being sold, and I think it is
not a positive thing to do at all.
Senator Thurmond. Ms. Hoffman, you suggest in your
testimony that Prison Industries should provide products or
services from which there is no commercial market. How could
Prison Industries remain a self-sufficient corporation if it
made products without a commercial market?
Ms. Hoffman. I think the concept of self-sufficiency is
wrong. I think that all that is doing is putting on to whatever
industries and workers Federal Prison Industries compete with
the cost of Federal Prison Industries. It is not self-
sustaining. It is making money from the economy, and it does
that by taking work away from people who are not in prisons and
companies that ought to be able to continue performing that
work.
Senator Thurmond. Mr. Schwalb, do inmates in Prison
Industries generally pay more restitution than other inmates
who work in other areas of the prisons?
Mr. Schwalb. Yes, Mr. Chairman, they do. Because they earn
a higher wage and because we have a minimum 50 percent
requirement for them to pay, our data shows that they pay
roughly about twice as much per capita toward restitution as
inmates who are not in Prison Industries.
Senator Thurmond. Mr. Schwalb, I understand that DOD and
other Federal agencies are working to create more flexibility
in their procurement practices such as by making more credit
card purchases. Does FPI interfere in Defense or other
agencies' streamlining efforts?
Mr. Schwalb. Well, we certainly don't attempt to, Mr.
Chairman. We are trying to assist all the Federal agencies in
their efforts. We accept credit cards for our orders. We are
doing Internet orders. We are doing electronic transmission of
invoicing and ordering data. We are trying to parallel the
efforts of all the Federal agencies so that we can be viewed as
an attractive alternative rather than an impediment to their
streamlining efforts.
Senator Thurmond. Mr. Schwalb, as proposed in the defense
authorization bill, FPI could lose its preference for making
certain products because they are part of a larger product that
is used for military intelligence or weaponry. What impact
could this have?
Mr. Schwalb. Well, Mr. Chairman, we think that could have a
substantial impact, particularly on our electronic product
line. The majority of the products we make for the Defense
Department are cable assemblies and other related items that,
in fact, are components of other products, and especially if it
was broadly construed, we think it would have a very
substantial impact on that entire product line, which is about
20 percent of our sales.
Senator Thurmond. Mr. Schwalb, if Congress were to create
broad exemptions from the mandatory source preference for
Defense Department procurement, such as those proposed in
section 806 of this year's defense authorization bill, would
you explain how such a provision would specifically affect
Federal Prison Industries?
Mr. Schwalb. Well, Mr. Chairman, as the Director mentioned
in her comments earlier, the impact of the provisions of the
current amendment we believe could affect about 75 to 80
percent of the orders that we receive from DOD. And, of course,
when you translate that into the number of inmates, it could
affect adversely about half of our inmate workforce who work in
those factories that produce those products.
Mr. Chairman, as I have said and as the Director has said,
we are not opposed to the idea of revisiting or reforming the
way FPI's mandatory source works. What we are opposed to are
all this nibbling around the edges, whether it is an amendment
to this bill or a restriction in that category without stepping
back and collectively in a consensus way addressing all of the
concerns and providing, in the absence of mandatory source,
alternative means for us to create the jobs for the burgeoning
inmate population in enough time to make the transition.
Senator Thurmond. Mr. Schwalb, the joint study between DOD
and FPI found that FPI should develop a guide to explain how to
conduct business with FPI. Also, an October 1998 DOD inspector
general study found that DOD often lacks effective means for
appealing waiver requests. Is FPI attempting to better educate
its customers in areas such as the waiver process?
Mr. Schwalb. Absolutely, Mr. Chairman. As Mr. Oliver
suggested, we are collaborating with them on their purchasing
vehicles, like their e-mail that they use for their customers.
We are also collaborating as a result of the joint study on the
joint development of a procurement brochure, if you will, that
will go out to all the DOD customers. It will explain
everything from what FPI is, how to do business, how to secure
waivers. The most efficient transaction relationship we can
have is what we are trying to secure.
Senator Thurmond. Mr. Oliver, the executive summary of the
joint study states, ``On the whole, respondents seemed to be
very satisfied with quality and service, most satisfied with
price, and least satisfied with delivery.'' The study also
states, ``Most respondents rated FPI either good or average as
an overall supplier in efficiency, timeliness, and best
value.''
Is this your understanding of the study?
Mr. Oliver. Mr. Chairman, that is an accurate statement of
the executive summary, and I think it is an accurate summing of
the numbers in the respondents.
Senator Thurmond. Mr. Oliver, given that Prison Industries
is a preferred source of supply, does Prison Industries offer
DOD some advantages in procurement over private suppliers?
Mr. Oliver. Mr. Chairman, first of all, there are two
facts. One is that the Congress does the balancing between
various programs, and the second is the administration
establishes policy for me and other appointees. But with
respect to defense alone, and with respect to what we are
trying to do with best value and improving our procurement,
many of the things with respect to a specified source are
opposite to what we are trying to teach our buyers to do. We
are trying to teach them to look for best value in the
marketplace and be very adaptive to market conditions.
Senator Thurmond. Mr. Schwalb, some are proposing that the
Department of Defense determine whether an FPI product is as
comparable in price, quality, and timely delivery as the
private sector. Are you concerned about permitting agencies to
decide for themselves whether the FPI preference is applicable?
Mr. Schwalb. Well, Mr. Chairman, we certainly don't have
any suggestion that customers shouldn't determine what they
need and whether or not we can satisfy that. The current
process provides for the customer to review what we offer and
make a comparison, and then if they believe that we cannot
satisfy their needs, they submit a waiver request. We granted
last year, as I mentioned, 90 percent of the waiver requests,
and we did it within 4 days. So we try to be very liberal and
reasonable about the application of the mandatory source.
But it seems to me that if you take it beyond the concept
of the waiver process and say that everybody essentially must
buy from us if they think they should--that is essentially what
happens when you say the customer makes the determination--then
you might as well cancel the mandatory source outright because
that will be the practical effect.
Senator Thurmond. Mr. Schwalb, a June 1998 GAO report found
that problems remain in FPI's delivery performance. Also, the
joint DOD and BOP study found that timely delivery remains a
major concern of DOD customers and that FPI should develop data
to objectively measure timeliness. How are you working to
address this problem, especially for defense customers?
Mr. Schwalb. Mr. Chairman, we agreed with the
recommendations of both of those reports, and we have taken a
lot of efforts to improve our deliveries. It has improved every
year since we have been at this effort. In 1998, the average
on-time delivery for the entire year was 91 percent. As the
Director said earlier, 91 is not as good as 100, and we are not
going to be satisfied until we improve it. But we have
continued to improve this year, and I am happy to report that
at the end of April our on-time delivery for this year was 93
percent. So we continue to improve that, and that is for all
customers, including DOD.
Senator Thurmond. I think that completes the testimony
unless somebody has something you want to add. Mr. Oliver or
Ms. Hoffman or Mr. Schwalb, do you have anything else you want
to say?
Mr. Oliver. No, sir.
Ms. Hoffman. No, sir.
Mr. Schwalb. No, sir.
Senator Thurmond. Well, we thank you for your presence and
thank you for your testimony. It adds greatly to this record.
Now, we will leave the hearing record open for 1 week for
additional material and for followup questions. If that is all,
the hearing is adjourned.
[Whereupon, at 4:22 p.m., the subcommittee was adjourned.]
A P P E N D I X
----------
Questions and Answers
----------
U.S. Department of Justice,
Federal Bureau of Prisons,
Washington, DC, October 1, 1999.
The Honorable Strom Thurmond,
Chairman, Subcommittee on Criminal Justice Oversight,
Committee on the Judiciary, U.S. Senate, Washington, DC.
Dear Mr. Chairman: This is in response to follow-up questions from
the May 24, 1999 hearing entitled ``Bureau of Prisons Oversight: The
Importance of Federal Prison Industries.''
Responses of Kathleen Hawk Sawyer to Questions From Senator Thurmond
Question 1. The Inmate Financial Responsibility Program.(IFRP),
which began in 1987, provides a means for collecting special
assessments, debts to the IRS, court-ordered child support or alimony,
and fines or restitution from the incarcerated debtor. In fiscal year
1998, nearly $2 million was collected from UNICOR inmates toward these
obligations, $1.4 million of which provided restitution to victims. It
appears to me that all inmates, whether they are in Prison Industries
or work in other jobs, should have to pay fifty percent of their income
toward court ordered fines and restitution. Will you consider
implementing such a program for all inmates?
Ansewr 1. All federal inmates are encouraged to participate in the
IFRP, and inmates who refuse to participate suffer a host of
consequences including being quartered in the lowest status housing,
denied participation in community-based programs, denied incentive for
participation in drug treatment programs (including sentence
reductions), and denied the opportunity to purchase particular items
from the commissary. Inmates who work in UNICOR are required to
contribute 50 percent of their earnings toward obligations that are
tracked through IFRP; other inmates contribute an amount (at least $25
per quarter) established by the staff who work closely with the
inmates. Please note that in establishing this amount, staff review
both inmate earnings and outside contributions to inmate accounts to
encourage higher payments from inmates with significant community
resources.
It would not seem appropriate to require all inmates who
participate in IFRP to contribute 50 percent of their earnings for two
reasons. First, we currently require inmates to purchase several items
from the inmate commissary. For example, inmates are encouraged to
purchase over-the-counter medication from the commissary. This results
in savings to the Bureau in the form of pharmacy expenditures and staff
processing time. The Bureau of Prisons also generally urges inmates to
purchase stamps and personal hygiene items through the commissary.
Mandating that all inmates relinquish 50 percent of their performance
pay may result in inmates in low-paid positions (and without community
resources) being unable to make commissary purchases, ultimately
driving up Bureau costs. Moreover, such a requirement would also put
greater undue pressure on inmate families: when inmates deplete
earnings to meet the 50 percent requirement, families may feel even
greater pressure to send money to support inmate commissary and
telephone purchases.
Second, as a result of the Inmate Telephone System (ITS) court
settlement, all inmates are permitted to maintain $75.00 per month in
their inmate trust fund account exclusively for use toward telephone
calls. The Bureau must exclude that $75.00 from the IFRP financial
plan. Mandating that all inmates contribute 50 percent of their
performance pay to IFRP would necessitate court intervention to address
the impact of the ITS exclusion in light of a mandatory IFRP
contribution.
Question 2 Would Federal-Prison Industries (FPI) agree to give up
its mandatory source regarding federal agencies if it could make
products to sell in the commercial market that are now being made in
foreign countries? Also, what type of repatriated work is FPI
interested in pursuing?
Answer 2. FPI is strongly in favor of gaining new authorities from
Congress to pursue new markets that will help us create the requisite
number of jobs to accommodate our increasing inmate population. Not
only will repatriation help us achieve this goal, but it will also
benefit private industry and labor. FPI repatriation programs will
create additional jobs for U.S. citizens as FPI operations purchase raw
materials, supplies, transportation, and other services. In addition,
FPI repatriation programs will provide relief for our business partners
from foreign language challenges, tariffs, unstable host economies, and
overseas transportation costs.
However, repatriation alone will not create sufficient market
opportunity to completely offset the loss of the mandatory source in
the federal market. In order to create the necessary number of jobs
needed in the future to employ and train a burgeoning federal prison
population, and to replace existing FPI jobs that may be lost as a
result of elimination of the mandatory source, FPI will need the
ability to sell other products that are currently being produced in the
U.S. domestic market as well. It is expected that such authority will
be accompanied by appropriate protections, including the payment of
minimum wage to inmates for the manufacture of certain products, that
will afford protection to private industry and minimize any impact on
labor it is worthwhile to note that states have had similar authority
available to them for twenty years through the Prison Industry
Enhancement (PIE) program, and both business and organized labor agreed
to the provisions involved in the PIE legislation.
Please do not hesitate to contact me if you would like additional
assistance with this or any other matter.
Sincerely,
Kathleen Hawk Sawyer,
Director.
__________
U.S. Department of Justice, UNICOR,
Federal Prison Industries, Inc.,
Washington, DC, October 1, 1999.
The Honorable Strom Thurmond, Chairman,
Subcommittee on Criminal Justice Oversight,
Committee on the Judiciary, U.S. Senate, Washington, DC.
Dear Mr. Chairman: I appreciate the opportunity to respond to your
follow-up questions pursuant to the May 24, 1999, Bureau of Prisons
Oversight hearing.
Responses of Joseph Aragon to Questions From Senator Thurmond
Answer 1. You ask what role the Ombudsman has played in improving
Federal Prison Industries (FPI) relationship with its customers, and
what avenues have been made available to the private sector for sharing
its concerns about FPI's development and significant expansion efforts.
The Office of Ombudsman was established by FPI's Board of Directors
in 1992 as a ``focal point'' for channeling and resolving issues of
importance and concern to FPI from industry, trade associations, labor
and federal agencies.
More specifically, the Ombudsman routinely assesses FPI's internal
operations policies to ensure that they impact fairly on federal
customers and the private sector. To this end, the Ombudsman has taken
significant strides towards the elimination of delinquent orders and
the expeditious resolution of waiver requests (the current average
being 3 days), The Ombudsman has 'demystified the waiver process by
presenting workshops to both federal customers and the private sector.
The Ombudsman is called upon to resolve a myriad of issues from
external sources and has been instrumental, over the years, in
maintaining open lines of communication with industry representatives.
The Ombudsman also regularly updates the Board about FPI customers'
evolving needs and candidly discusses FPIs ability to satisfy them in
terms of its product offerings, servicing expertise, and quality
assurance levels. The Ombudsman offers an impartial avenue through
which federal agencies' appeals to denied waivers can be negotiated and
equitably resolved.
Answer 2. As a segue to your second question, the ombudsman acts as
a facilitator of the guidelines process, formulates outsiders' market
share concerns in their most representative light, and relays them to
the Board for consideration. It is not unusual for the ombudsman to
meet in private session with the Board to convey industry's concerns
about FPI's intent to introduce new products, or significantly expand
production levels. Further, FPIs public involvement procedures call for
it to contact known parties having interest in a proposal, announce its
proposed changes in the Commerce Business Daily (CBD), furnish copies
of FPI's impact studies to all interested parties, and solicit comments
from the private sector within 45 days of the announcement. Such
comments are submitted to the Board, intact, for consideration prior to
voting. Industry representatives are welcome and encouraged to testify
during FPI's new product/product expansion hearings, which are
generally convened just prior to the Board's deliberations (and
decisions made by majority vote).
If you have any further questions, please do not hesitate to
contact me.
Sincerely,
Joseph Aragon,
Chairman, FPI Board of Directors.
__________
Responses of David R. Oliver to Questions From Senator Thurmond
fpi performance level
Question 1. You stated during your testimony that ``if you looked
at the study, you would actually see that people were generally not
satisfied with [FPI] as a provider, and I can't find the page, but I
was looking at the percentages, and essentially the people are--with
respect to efficiency, timeliness, best value, they found them worse
than the other people they bought from.'' The Executive Summary of the
Joint Study provides: ``In response to questions regarding the price,
quality, delivery, and service of specific products purchased in the
last 12 months, FPI generally rated in the good to excellent or average
ranges in all categories. On the whole, respondents seem to be very
satisfied with quality and service, mostly satisfied with price, and
least satisfied with delivery * * * Most respondents rated FPI either
good or averages, as an overall supplier, in efficiency, timeliness,
and best value.'' Please explain how your oral answer is consistent
with the findings of the study.
Answer 1. The statement quoted in your question was intended to
describe what the study revealed about the overall view of FPI as a
supplier expressed by the respondents to the Department of Defense
(DoD)/Federal Prisons Industries (FPI) Study. Table IV-4, page 31 of
the study reflects the ratings given to FPI as an overall supplier. In
three out of the four categories identified, a majority of the
respondents rated FPI as average, fair, or poor as an overall supplier.
The three categories in which a majority of the respondents rated FPI
as average, fair or poor are timeliness, quality, and best value. In
only one category, efficiency, did a majority of the respondents rate
FPI as either excellent or good. The fact that the overwhelming
majority of the study respondents indicated that they used FPI because
it is a mandatory source (87 percent), indicates to me that the
majority of respondents continue to use FPI because of its status as a
mandatory source and not because they are satisfied. If other sources
could be used, the data suggests that a majority of respondents,
seeking sources that were better than just average, would not use FPI.
waivers from purchasing fpi products
Question 2. A Department of Defense Inspector General Report stated
the DOD does not have a service-wide procedure for obtaining waivers
from purchasing Federal Prison Industries products, and does not
maintain waiver data. Has the DOD initiated a program to inform and
educate your procurement officials concerning the waiver process and
establish a way to keep track of the waivers which are requested and
received?
Answer 2. There is no need to establish a service-wide procedure to
obtain waivers from FPI. The process and procedures for obtaining
waivers from FPI are established and controlled by FPI and implemented
by each purchasing organization. Procurement personnel are fully
educated in acquisition from FPI and the waiver process is part of
mandatory training for all 1102 personnel. Since FPI maintains waiver
data for all Government organizations, it would be a wasteful
duplication of effort with no additional value added for DoD to collect
and maintain a separate database.
dod inspector general findings
Question 3. In October 1998, the Department of Defense Inspector
General conducted an audit of Defense Logistics Agency procurements
from Federal Prison Industries. In this report the IG reported that in
a majority of purchases, the price of FPI supplies compares favorably
with the price for the same supplies purchased from the commercial
sector and both had the same quality defect rate of one percent. Are
you aware of these findings, and do you believe they are accurate?
Answer 3. We are aware of the findings in the DoD Inspector General
Report that the price of FPI supplies compares favorably with the price
for the same supplies purchased from the commercial sector and both had
the same quality defect rate of one percent. The findings of the report
are not inconsistent with the findings of the DoD-FPI Study. Generally,
FPI products are reasonably priced and are not defective. However, it
should also be pointed out that the DoDIG report found that the Defense
Logistics Agency ``* * * could have purchased the supplies in our
comparisons at a lower price if its buyers had purchased or been able
to purchase the supplies at the lower of the FPI or commercial price *
* * For the 20 percent of the supplies that matched, FPI prices were
higher than commercial sector prices. Had DLA been authorized to
purchase these supplies at the lower of commercial unit prices or
negotiated a comparable price with FPI, DLA could have reduced its
costs by $2.6 million.''
defective supply items
Question 4. Of the items reported to have a deficiency, the IG
reported that the Defense Supply Centers did not exercise FPI's
warranty provisions and missed the opportunity to replace about
$127,000 in defective supply items. Why did the Defense Supply Centers
not follow through with FPI's warranty provisions? Has the Defenses
Logistics Agency established a new procedures that can track this types
of items and allow them to replace detective items through FPI's
warranty provisions?
Answer 4. There is no single answer why the Defense Supply Centers
did not exercise warranty rights against FPI for defective products.
DLA activities may generally be less likely than their Service
counterparts to exercise warranty rights because they often are not the
ultimate consumers of the items they purchase. Under commercial
warranty conditions, by the time a DLA inventory control point (ICP)
becomes aware of a quality defect in a tendered item via the product
quality deficiency report (PQDR) process, the warranty may have
expired. The ICPs may not previously have been aware that the FPI
``escape proof guarantee'' amounts to a lifetime warranty with no
expiration date. DLA has taken steps since the publication of the cited
DoD Inspector General Report to ensure that the buying activities
familiarize themselves with this FPI consumer policy. The revised DLA
Instruction 4155.2, Quality Assurance Program Instruction for DLA ICPs,
which already required PQDRs to be provided through Defense Contract
Management Command to the contractor for source inspected items, and
directly to the contractor for destination-inspected items, now
emphasizes applicability of the FPI escape proof guarantee to this
process. Tracking of replacement items, though, is beyond DLA's purview
as a wholesale supplier.
In addition the Department has linked FPI's data base and ordering
systems to our web sites to facilitate easy of use by our contracting
officers. We have initiated discussions with FPI regarding the
recommendations included in the report to pilot-test abbreviated waiver
procedures. However, FPI has informed us that they wish to study the
issue instead of testing.
__________
Union of Needletrades, Industrial
and Textile Employees,
New York, NY, October 1, 1999.
RE: Hearing on ``Bureau of Prisons Oversight''
The Honorable Strom Thurmond, Chairman,
Subcommittee on Criminal Justice Oversight,
U.S. Senate, Washington, DC.
Dear Senator Thurmond: I am writing in response to the follow-up
questions you submitted to me, based on my testimony at the May 24,
1999 Oversight Hearing on BOP. The questions and answers are as
follows:
Responses of Ann Hoffman to Questions From Senator Thurmond
Question 1. You stated in your prepared testimony that one reason
prisoners should not make products only made overseas is that this work
will not provide them with specific, employable job skills. You also
state that inmates should make products for which there is no
commercial market. How will making products [for] which there is no
commercial market provide inmates with specific employable skills?
Answer 1. I suggested as examples of the kinds of products and
services that might be appropriate ``unprofitable types of recycling or
equipment for low-income social service providers.'' The skills
involved in performing recycling work or making equipment for low-
income social service providers are clearly applicable to profitable
recycling, and to equipment manufacture for the commercial market.
In addition, I suggested that ``Congress determine whether there
are products or services that could meet this definition and authorize
pilot projects subject to review and analysis by someone other than the
Board of Directors of FPl. I am confident that such a process might
result in more consensus than exists currently.
Question 2. At a symposium on May 14th, several nationally
respected economists argued that the sale of inmate-made products in
the commercial market would not have an adverse effect on the economy.
Do you agree with this assessment? Why or why not?
Answer 2. I am not aware of a symposium on May 14th, so I cannot
react to the premise of the question. I believe the thrust of my
testimony was to the effect that expansion of prison industries, into
the commercial market or otherwise, will have an adverse impact on the
economy for the reasons stated therein.
Sincerely,
Ann Hoffman,
Legislative Director.
__________
U.S. Department of Justice,
Federal Bureau of Prisons,
Washington, DC, September 21, 1999.
The Honorable Strom Thurmond, Chairman,
Subcommittee on Criminal Justice Oversight,
Committee on the Judiciary, U.S. Senate Washington, DC.
Dear Mr. Chairman: I appreciate the opportunity to respond to your
follow-up questions pursuant to the May 24, 1999, Bureau of Prisons
Oversight hearing. Our responses are as follows:
Responses of Steve Schwalb to Questions From Senator Thurmond
Question 1. You mentioned in your testimony that FPI is pursuing a
commercial services initiative as an example of an initiative which
does not rely on mandatory source. How will FPI's Commercial Services
Program be implemented? (No. 1 and No. 7 are the exact same question.)
Answer 1. FPI's commercial market services (CMS) initiative is
being pursued cautiously, with the authorization of the Department of
Justice and approval by FPI's Board of Directors. The CMS initiative is
being undertaken as a pilot effort, with the first projects to be
implemented all involving service work that is currently being
performed outside of the United States. FPI will repatriate that work,
thus having no adverse impact on domestic U.S. jobs. In fact, the CMS
initiative may result in the creation of new U.S. jobs (e.g., inmate
supervision and purchases of equipment, supplies, and services) in
support of the work that will be done by inmates inside our Federal
prisons. The work we will focus on seeking will be labor intensive,
such as data services, sorting, and packaging.
Question 2. Some have argued that for every job an inmate has in
Federal Prison Industries, there is one less job for a law-abiding
citizen losing his or her job. Why do you not believe that to be the
case?
Answer 2. Since one of FPI's mandates is to employ the greatest
number of inmates, it does not conduct its manufacturing process in the
same manner the private sector does. FPI uses techniques that are labor
intensive, thereby minimizing any impact on private sector jobs. It has
been established and well documented (Deloitte & Touche, market study
report to Congress, 1991) that on average, prison industries output
equates to approximately one fourth that of a worker producing
comparable goods in the free world. Thus, even at a superficial level,
it would take four inmate workers to equate to one private sector job.
There are several other factors that should be considered before
any FPI sales are assumed to result in any job displacement in private
industry. A principal consideration is growth in the economy. As long
as the economy is growing, inmate jobs do not come at the expense of
private sector workers. This is because inmate jobs are created out of
an overall expanding market pie. Take the furniture industry, for
example. The overall U.S. market for office furniture grew from
approximately $10 billion in 1996 to nearly $13 billion in 1999. The
expanded inmate jobs created during this time period are simply a small
fraction of the overall growth. Thus, inmate jobs do not come at the
expense of someone's job in the private sector, since private industry
is hiring and creating new jobs at the same time.
In a more stable, or even declining, market such as textiles, any
impact would be dispersed across multiple manufacturers in the
industry. Thus if the contracts awarded to FPI were to be awarded to
the private sector instead, the work would likely be divided up among
several different firms. Thus any impact of FPI's having this work is
likewise dispersed among several companies in the industry.
Another factor to consider is attrition. That is, even if a company
does reduce the size of it workforce, a certain amount of that
reduction will occur through normal attrition, i.e., retirements,
turnover, etc. Thus the most often asserted scenario by FPI critics,
i.e., actual direct displacement of persons in existing jobs, is one
that is the least likely to occur.
A company's capacity utilization is also a factor. Much of FPI's
work, if it were not being performed by FPI, would be absorbed into the
existing capacity of a number of firms across the industries in which
FPI operates. If FPI sales were to go to the private sector, it is
highly unlikely that these sales would result in the creation of new
jobs. FPI's impact is most likely felt in a slightly reduced profit
margin on the part of private companies rather than on employment per
se.
On the positive side of the ledger, it cannot be overlooked that
FPI actually creates jobs. First, FPI employs nearly 2,000 civilian
staff in support of its operations. Second, of every dollar spent by
FPI, 94 cents is returned to the private sector in the way of purchases
of raw materials, staff salaries, utilities, equipment maintenance and
supplies. These contributions by FPI help create private sector jobs.
Therefore, in lieu of FPI's existence in the marketplace, the jobs
directly supported by FPI operations would be adversely affected,
resulting in a loss of jobs to the economy.
Question 3. Please discuss the percentage of products and services
that the Federal government purchases from FPI compared to other
suppliers.
Answer 3. FPI's share of total Federal government purchases is
about one quarter of one percent (i.e., FPI sales of roughly $600
million out of total Federal procurements of nearly $200 billion).
FPI's market share in only those 88 Federal Supply Class (FSC) codes in
which FPI provides goods and services is slightly higher, at 3.6
percent. FPI has a market share higher than 20 percent in only 15 out
of the 88 FSC codes in which it operates. (Four of these FSCs are in
services, for which FPI is not mandatory.) If we include the broader
overall commercial market for the products and services that FPI
provides, its market share in most cases is only a fraction of one
percent.
Question 4. Based on the May 21st symposium that you attended, do
economists believe that FPI has an economically significant impact on
the American economy? Please explain.
Answer 4. An article was published in the May 20, 1999, edition of
the Wall Street Journal entitled ``Economists Join Debate on Prison
Work.'' The article was published the day before George Washington
University hosted a day-long seminar of nationally recognized
economists and others to discuss this critical issue of prison work.
There was virtual consensus among those in attendance at this seminar
that increased opportunities for prison work could be beneficial rather
than detrimental to the overall U.S. economy. Professor Richard
Freeman, a respected labor economist from Harvard University, in
discussing the benefits of inmates repatriating work to the U.S.,
stated, ``That helps the trade balance, it helps the prisoners, it
helps U.S. businesses, at almost no cost to the people who are free.''
In that same article, Morgan Reynolds, a Texas A&M economist stated
``Production by prisoners creates rather than destroys jobs'' as a
result of the multiplier effect, whereby workers making things require
other workers to produce and deliver their raw materials, transport
their finished goods, etc.
Similarly, at a recent House Crime Subcommittee hearing held on
August 5, 1999, chaired by Congressman McCollum, representatives for
both the textile and office furniture industries testified in response
to a question from Congressman Bobby Scott, that FPI's impact on their
overall industries is relatively insignificant.
Question 5. Federal Prison Industries has received criticism in the
past for employing non-citizen inmates in your factories which learn
skills and then upon their release they take these skills back to their
country. Does FPI employ foreign nationals in your factories, and what
is your policy in this regard?
Answer 5. In accordance with a final rule published in the Federal
Register on June 15, 1999, inmates or detainees who are currently under
an order of deportation, exclusion, or removal, are no longer permitted
to work in FPI (UNICOR). Inmates or detainees for whom no decision has
been made are unaffected by this policy. The only exception to this
policy is where a deportation order has been issued, and the inmate is
from a country that will not accept them back, in which cases such
inmates may be permitted to work in UNICOR.
Question 6. FPI recently published a proposed rule that some have
claimed precludes agencies from comparing FPI's products to commercial
sources. Can you please address this?
Answer 6. FPI's proposed rules were intended only to codify long
standing policies and practices. In light of renewed legislative
efforts to pass comprehensive legislation that would grant FPI new
market authorities and overhaul the current way FPI operates, FPI has
withdrawn the draft rules referenced.
Question 7. You mentioned in your testimony that FPI is pursuing a
commercial services initiative as an example of an initiative which
does not rely on mandatory source. How will FPI's Commercial Services
Program be implemented?
Answer 7. Same as Question #1 (see response to Q. #1)
Question 8. A March 1998 GAO report said that FPI is unable to
demonstrate with any degree of certainty the level of customer
satisfaction it delivers. It remains vulnerable to assertions by its
critics that federal customers are dissatisfied and should no longer be
required to buy FPI products, and misses opportunities to improve its
operations by having better data on how federal customers view its
performance. What is FPI doing to improve their management information
systems to obtain feedback on timeliness, price, and quality from
federal customers?
Answer 8. In April 1999, FPI and the Department of Defense
submitted its joint study of business transactions conducted between
the two agencies. The study was directed by the Congress as part of an
Amendment to the 1998 DoD authorization bill sponsored by Senator Phil
Gramm. As part of the study, DOD and FPI conducted a comprehensive
survey of DOD customers to determine their views about FPI.
In the jointly conducted survey, questions were asked regarding the
price, quality, delivery, and service of specific products purchased
within the last 12 months, with FPI generally rated in the average,
good, or excellent ranges in all categories of the DOD customers
surveyed, 88 percent rated FPI average to excellent for efficiency, 69
percent rated FPI as average to excellent for timeliness, 85 percent
rated FPI's prices average to excellent, and 88 percent rated FPI as
average to excellent for quality.
In addition to this in depth review of DoD customer satisfaction,
FPI is in the process of developing a customer satisfaction database.
We continue to develop survey questions for implementation. The surveys
are expected to begin in October 1999. The database will be started
concurrently with the implementation of the surveys.
Question 9. A June 1998 GAO report showed that FPI's delivery times
continue to need improvement. What specific steps has FPI taken in the
past year to increase the timeliness of its customers orders?
Answer 9. One of the questions posed to DoD customers in the joint
DoD-FPI study was whether FPI had improved in the past year. Of those
surveyed, 63 percent indicated that FPI had indeed improved,
empirically substantiating verbal feedback that FPI has received from
its Customer Advisory Group and others.
Moreover, FPI has been closely tracking progress on achieving its
on-time customer delivery goals. In fiscal year 1999, FPI's on-time
deliveries have improved from 85 percent in October to almost 92
percent at the end of July. Other specific steps that are being taken
by FPI include plans to reduce its standard (non quick ship orders)
delivery lead times in its office seating line from 90 to 60 days.
Finally, FPI is currently preparing for implementation of a new
Enterprise Resource Planning system in May of 2000. This new management
information system will provide enhanced capability for tracking, on a
real-time basis, customer status and requirements for price,
specifications, and timeliness, and will result in improved overall
customer service.
Again, we appreciate the opportunity to respond to your concerns.
Please do not hesitate to contact me if you require additional
information.
Sincerely,
Steve Schwalb,
Assistant Director, Industries, Education, and Vocational Training.
Additional Submissions for the Record
----------
Prepared Statement of Administration Policy
(this statement has been coordinated by omb with the concerned
agencies.)
The Administration supports prompt congressional action on the
national defense authorization bill for fiscal year 2000; however, S.
1059 raises serious budget concerns and a number of policy concerns
outlined below.
funding levels
The Administration opposes the extent of the base funding increases
for defense programs S. 1059. The President's defense budget for fiscal
year 2000 provides a $9 billion increase proposed in over the fiscal
year 1999 enacted level, excluding emergencies enacted in the fiscal
year 1999 Omnibus Appropriations Act. The Presidents budget ensures
that critical readiness needs are met, allows for weapons
modernization, and proposes an appropriately generous military
compensation plan, while ensuring, that other critical U.S. priorities
receive sufficient funding. The Senate bill, in contrast would
authorize $8 billion more in total spending for defense than the $280.8
billion requested in the President's budget, potentially draining
critical resources, from other programs. The Administration believes
that S. 1059 must be considered in the context of deliberations on a
comprehensive budget framework that addresses Social Security,
Medicare, and all discretionary spending. For these reasons, the
Administration opposes the magnitude of the base funding levels of S.
1059.
base realignment and closure (brac)
The Administration is disappointed that the bill fails to support
the Department of Defense's proposal to authorize two additional rounds
of base closures and realignment. Defenses base in a structure is far
too large for its military forces and must be reduced. The failure to
downsize Defense's base infrastructure proportionately is apparent in
the fact that since fiscal year 1989 force structure has been cut 36
percent compared to only 21 percent in base structure through four BRAC
rounds. Future BRAC rounds are critical to secure funds for readiness,
modernization, and quality of life priority programs and to allow the
Department to reshape its base infrastructure to match changing mission
requirements for the 21st century.
military pay and benefits
While the Administration is pleased that S. 1059 endorses the key
elements of the President's plan to improve military compensation, we
are concerned about the excessive costs of the committee bill. The
Administration is concerned that program costs of the bill's military
pay increases exceed the Defense program for fiscal year 2000-2005 by
nearly $6 billion. They also create a disparity with civilian pay
raises. The bill's retirement reform would be significantly more costly
in the long run than the Administration's proposal.
central transfer account to fund programs to combat terrorism
The Administration objects to Section 1007, which creates a central
transfer account to fund the combating terrorism aspect of the force
protection mission. This central funding of a fundamental command
responsibility would impede efforts by commanders to insure the
security and readiness of their forces. Additionally, the total amount
of funding consolidated into section 1007 exceeds the amounts for
combating terrorism in the President's budget request that would be
otherwise located in other titles of the bill. This has the effect of
unintentionally cutting critical readiness spending. The Administration
would strongly prefer to work with Congress to finalize the
Administration's proposed process to provide the committee with the
oversight information it now finds lacking.
department of energy issues
The Administration is pleased with the bill's support for most of
the programs under the President's Extended Threat Reduction initiative
to improve the security of weapons of mass destruction in Russia. The
Administration, however, is disappointed with reductions to the Nuclear
Cities Initiative (NCI) and the Initiative for Proliferation Prevention
programs. Furthermore, the bill would place burdensome restrictions on
these programs that could bring them to a halt. The most problematic is
requiring agreement from Russia to close weapons production facilities
as a condition for assistance from the NCI program.
The Secretary of Energy has taken decisive measures with regard to
counter-intelligence, safeguards and security issues at Department of
Energy (DOE) facilities. His efforts will be strengthened by a number
of provisions in this bill. However, the Administration objects to the
proposed moratorium on cooperative program with Russia. China, and
other nations pending certain security-related certifications. This
provision could negatively impact a number of vital national security
programs, such as disposition of Russian missile material. With respect
to the provision requiring detailed background investigations for all
employees who work in the vicinity of restricted data, the
Administration believes that this costly and intrusive provision is
inconsistent with procedures throughout the Executive Branch
established by Executive Order 12968. DOE is implementing measures that
will more effectively deal with the concerns this provision seeks to
address, including improved security, use of polygraphs, and counter-
intelligence initiatives. While Supporting accelerated completion of
DOE closure projects, the Administration opposes the provision that
would authorize the Secretary of Energy to accept loans from cleanup
contractors and use the funds for additional cleanup. This provision is
detrimental to ongoing contract and management reform initiatives at
the DOE and is inconsistent with longstanding policy on Federal agency
borrowing.
spectrum
The Administration strongly opposes Section 1049, which would
elevate the Defense Department's use of the spectrum above all other
Federal, State and local government, and private sector uses. It would
undermine the President's authority to set spectrum management
priorities for the Federal Government and impair the Federal
Communications Commission's (FCC) ability to manage the spectrum for
the private sector and State and local governments. It could also
discourage investment in new and more spectrum-efficient technologies,
create disincentives for spectrum sharing, and impose significant costs
on Federal, State and local governments, and the private sector.
The Administration also opposes Section 1050 which prohibits the
Federal Government from providing licenses, permits and funding to
entities broadcasting without specific authorization from outside the
United States into the country on frequencies reserved to or used by
the Defense Department. This provision infringes upon international
spectrum management, which is appropriately addressed by the FCC and
others through the International Telecommunications Union (ITU). It
would be inconsistent with U.S. obligations under the ITU and could set
a precedent that other countries could follow to the detriment of U.S.
interests abroad.
federal prison industries mandatory source exemption
The Administration opposes Section 806 which would essentially
eliminate the Federal Prison Industries (FPI) mandatory source with the
Defense Department. Such action could harm the FP1 program which is
fundamental to the security in Federal prisons. In principle, the
Administration believes that the Government should support competition
for the provision of goods and services to Federal agencies. However,
to ensure that Federal inmates are employed in sufficient numbers, the
current mandatory source requirement should not be altered until an
alternative program is designed and put in place. Finally, this
provision would only address mandatory sourcing for the Defense
Department, without regard to the rest of federal government.
strategic force structure
The Administration appreciates the bill's endorsement of our plan
to reduce the Trident submarine force from 18 to 14 boats, while
maintaining a survivable, effective START 1-capable force. However, we
prefer repealing the bill's general provision that maintains the
prohibition, first enacted in the fiscal year 1998 Defense
Authorization Act, against obligating funds to retire or dismantle any
other strategic nuclear delivery systems below specified levels unless
START II enters in force. The Administration believes this provision
would unnecessarily restrict the President's national security
authority and ability to structure the most capable, cost-effective
force possible.
theater missile defense upper-tier acquisition strategy
The Administration strongly opposes Section 221, which proposes a
management and funding structure that negates the Department's overall
Ballistic Missile Defense strategy. The Department's strategy will
allow for the earliest, affordable delivery of an effective upper-tier
system. This would not be the case if the Department had to develop the
Theater High Altitude Area Defense and the Navy Theater Wide systems
concurrently. The provision cannot be implemented with the resources
provided and would seriously impact the safety of our troops on the
ground.
patriot anti-cruise missile (pacm)
The Defense Department's top Theater Missile Defense system
priority is the Patriot Advanced Capability--3 (PAC-3) missile, and it
supports the $212 million increase for this program. However the
Department did not request funding for and does not support the bill's
$60 million authorization for the Patriot Anti-Cruise Missile (PACM),
for which the Army does not have an operational requirement.
inventory of major end items
The Department of Defense objects to Section 1024, which requires
each military service to conduct an inventory of all major end items
(i.e. aircraft, ships, missiles etc.) and report the results, including
the status and location of each accountable item. This would be a
costly duplication of thorough inventories already conducted and is
based on the incorrect assumption that our military commanders are
derelict in their oversight of their assigned end items.
troops-to-teachers
The Administration believes that the Department of Defense should
continue to have authority to administer the current Troops-to-Teachers
program until the Administration's proposed ``Transition to Teaching:
Troops to Teachers'' initiative is enacted to expand this important
effort as part of the reauthorization of the Elementary and Secondary
Education Act.
land withdrawal
The Administration agrees that legislation on renewal of military
land withdrawals is needed and looks forward to presenting its proposal
to and working with the Congress on this issue.
procurement reform
The Administration urges the incorporation of our proposed
provisions that would further improve the acquisition process and its
ability to support the Defense mission. Activities would include, among
other things, reducing government-unique accounting requirements,
streamlining the acquisition of commercial items, and taking greater
advantage of electronic commerce.
voluntary early retirement authority
The Administration does not oppose the provision accelerating the
effective date of the Defense Department's Voluntary Early Retirement
Authority. However, the Administration urges the Congress to adopt the
Administration's proposal to extend the availability of comparable
early out authority government-wide.
pay-as-you-go scoring
S. 1059 would affect receipts and direct spending; therefore, it is
subject to the pay-as-you-go requirements of the Omnibus Budget
Reconciliation Act of 1990. This office's pay-as-you-go scoring of S.
1059 is under development.
The Administration will continue its review of the bill and may
identify other issues. The Administration looks forward to working with
congressional leaders to forge a strong Authorization Act for fiscal
year 2000.
[GRAPHIC] [TIFF OMITTED] T5147.004
Prepared Statement of American Apparel Manufacturers Association
Thank you for providing an opportunity for American Apparel
Manufacturers Association (AAMA) to present its views on Federal Prison
Industries.
AAMA is the central trade association for US companies that produce
clothing. Our members are responsible for about 85 percent of the $100
billion worth of garments sold at wholesale in this country every year.
While the industry is large, most of the companies are relatively
small. Three-fourths of our members have sales under $20 million and
more than half have sales under $10 million. Our members manufacture
every type of garment and are located in nearly every state. About 50
of our members supply uniforms and clothing to the military and,
therefore, are in direct competition with FPI. Our industry employs
more than 700,000 Americans.
AAMA is not seeking the dissolution of FPI or seeking special
protection for the apparel industry. Rather, we are suggesting two
simple solutions that can resolve current complaints with FPI's
operations and provide a groundwork for how FPI's future activities can
be evaluated.
And those solutions are relatively straightforward. First, FPI must
operate within its statutory mandate to cause no undue damage to the
private sector. Second, oversight should be strengthened to ensure FPI
adherence to this mandate.
background on apparel industry
AAMA's 50 or so government contracting companies have a long
history of making specialized products to exacting military standards.
Many only make a handful of distinct products and most of them only
have one customer--the US military. They represent a key component of
the warm industrial base that is so critical for our ``ready to go to
war'' capability. Without them, we would not be able to respond easily
to US security threats, such as those posed by Saddam or Milosevic.
But outside of this role, these apparel companies have few options.
They have little or no experience in the already overcrowded commercial
marketplace. Half of that market already has been taken by imports,
while the other half is contested by about 12,000 domestic firms.
Moreover, the apparel industry in the United States is shrinking
dramatically. In the last five years, we have lost more than 220,000
jobs.
At the same time, FPI now dominates the government contracting
market for apparel. In its fiscal year 1998 report, FPI's apparel sales
equaled $134 million, or about 25 percent of FPI's total net sales. It
operates 23 textile and apparel plants in 17 states and employs more
than 5000 inmates. FPI is now the single largest apparel supplier to
the Defense Department.
Our government contracting companies have a long history dealing
with FPI and their repeated expansions into the apparel industry. It is
this perspective that we want to share as you evaluate FPI's
operations.
the current situation
FPI responds to a clear social need--controlling an ever-expanding
inmate population. But it is doing so at the expense of a very small
segment of our country. Because the hurt is concentrated in a few
industries, such as apparel, we are shouldering a disproportionate
share of the burden. We are rapidly being driven out of business. This
is not a healthy model and is clearly not what the Congress intended
when FPI was originally authorized 65 years ago. Congressman Connery of
Massachusetts said it best in 1934--during the debate on legislation
authorizing FPI--when he stated ``The only solution is to permit them
to make a little of this, a little of that, so that there will not be
undue competition with the private sector.''
So what should we do?
Reform of FPI starts with the fundamental realization that FPI
currently exceeds its statutory authorization. FPI authorizing law
requires it to diversify its production, minimize competition with the
private sector, and avoid capturing more than a reasonable share of the
Federal Government market for any specific product. The experience of
government contractors in the apparel industry is that each of these
mandates has been routinely disregarded.
Attached to this testimony is a list of apparel products for which
FPI has been authorized to produce 100 percent of defense procurement
needs. Even though FPI is expressly prohibited from taking more than a
reasonable share of the market for any specific product, it has done so
repeatedly as this list shows. How? Because there is no clear
definition of ``reasonable'' or ``specific product.'' FPI often
measures its expansion plans by looking at the entire industry--both
commercial and military. Such analyses overstate the size of a
particular market and, in so doing, mask the damage FPI does to
government contractors.
Like the proverbial camel's nose under the tent, the other mandates
fall in quick succession. As it consumes such high percentages of the
market share of specific products, FPI is also clearly failing to
diversify its industries. In many cases, it is far easier to consume a
larger share of an existing product than expand production into
completely new areas. Again, with no guidelines on reasonable market
share, FPI finds it relatively easy to ignore its diversification
mandate as well.
Finally, by concentrating in existing industries and certain
product lines, FPI finds itself unable to minimize competition with the
private sector. This is especially true when you remember that some of
these contractors produce only one or two distinct products. By
consuming one hundred percent of a specific product, FPI may force
three of the firms that manufacture that product to close entirely and
two others to fire half their production staff.
We believe FPI has been able to disregard these mandates because of
two fatal flaws built into the FPI system itself. First, FPI enjoys
incredible power as an unlimited mandatory source provider to the
Federal Government. Quite simply, FPI has the ability to take
practically any federal contract it wants. This is a power that is all
too easy to abuse--especially when FPI is under pressure to expand its
operations to absorb new inmates. Because its mandates on not competing
with the private sector are so loosely worded, FPI has little incentive
to NOT use this mandatory source power.
Second, there is little institutional oversight to restrict FPI's
activities. In many respects, it seems as if FPI answers to no one--not
Congress, not its Federal customers and certainly not private industry.
From our experience, its public decision-making process appears largely
designed to ratify previously approved decisions. Nor are we convinced
that the Board exercises any oversight or independence. Several years
ago, for example, we negotiated with the FPI Board to secure specific
limits on future expansion in the battle dress uniforms (BDUs). Several
weeks later, those limits were disregarded when FPI staff went forward
with a dramatic increase in the expansion anyway.
FPI also uses its role as a quasi-public agency to maximize its
power and minimize its restrictions. For example, it claims status as a
federal agency to exempt itself from Federal Acquisition Regulations
(FAR) provisions governing purchases from the private sector. Yet it
claims status as a private corporation to justify the fact that, after
65 years of operation, it is only now attempting to codify its rules of
operation. While we have considerable disagreement over the substance
of these rules, we find it incredible that it has taken so long for FPI
to even issue such guidelines.
recommendations
As mentioned before, we believe there are two principles that would
help rectify the current situation while ensuring smooth operations in
the future. We believe these principles should be at the heart of any
reform proposal.
1. Require FPI to live within the confines of its statutory
authorities regarding competition with the private sector. FPI should
be compelled to refrain from taking more than a ``reasonable share'' of
any ``specific product'' as required by 18 USC 4122(b)(2) Since FPI has
shown it is incapable of establishing limits for these two phrases, we
would propose Congress perform this task. A reasonable market share
should be defined as 10 percent. That is, FPI can either exercise its
mandatory source or compete, but only up to a 10 percent limit of a
specific product. The term ``specific products'' in turn should be
narrowly defined to refer to actual, specific items not generic product
groupings or dollar amounts. Finally, FPI should be compelled to
rollback its existing production so that it meets these newly
articulated guidelines.
We also strongly support language (Section 806) in the Senate Armed
Services Committee version of the fiscal year 2000 Defense
Authorization Bill that limits FPI by empowering the Defense Department
to void mandatory source in cases where FPI products do not compare
with private sector products in terms of price, quality, and delivery
time. We see this as an important first step in asserting limitations
over FPI's operations.
2. Improve oversight of FPI activities to prevent undue burden to
private sector. To ensure that FPI lives up to its statutory
requirements, Congress should establish more effective oversight over
FPI operations. Such oversight could include submission of annual
statements to assess FPI's impact on the private sector, Senate
confirmation of FPI Board members, and establishment of penalties if
FPI exceeds its authorization in the future.
UNICOR Generic Items--100 Percent Authorized
1. Bag, Flyer's Helmet 2. Bag, Mail 3. BDU Coat (all types) 4. BDU
Coat, Camouflage, Woodland 5. BDU Trousers (all types) 6. BDU Trousers,
Camouflage, Wood 7. BDU Trousers, Camouflage, Wood 8. Blanket, Disaster
9. Body Armor, Fragmentation Vest 10. Case, Flag 11. Case, Small Arms
Ammunition 12. Cloth, Terry 13. Coat, Aircrew BDU, Tan 14. Coat,
Aircrew BDU, Woodland 15. Coat, Combat, Black, 357, Type VIII 16. Coat,
Combat, Desert Camouflage 17. Cover, Bivy 18. Cover, Body Armor,
Fragmentation 19. Cover, Field Pack 20. Cover, Individual, Desert
Camouflage 21. Cover, Individual, Snow, Camouflage 22. Cover,
Individual Woodland Camo 23. Cover, Water Canteen (2-quart) 24. Cover,
Water Canteen, 2 quart 25. Gaiter, Neck 26. Glove Insert, Chem Prot
(LGE) 27. Glove Insert, Chem Prot (MED) 28. Glove Insert, Radioactive
Cont 29. Gloves, Anti-Flash 30. Gloves, Anti-Flash, Flame Resi 31.
Gloves, Cloth, Flannel 32. Gloves, Cloth, Leather Palm 33. Gloves,
Cloth, Work, Leather P 34. Gloves, Driver, Work, All Leather 35.
Gloves, Heavy Duty Cattlehide 36. Gloves, Leather, Anti-Contact 37.
Gloves, Leather, Work 38. Gloves, Men's 39. Gloves, Men's and Women's,
Leather 40. Gloves, Men's/Women's Light Du 41. Gloves, Work, All
Leather 42. Helmet Shell, CVC 43. Helmet, Combat Vehicle Crewman 44.
Helmet, Pasgt (Kevlar) 45. Helmet, Phonetalker, Navy 46. Helmet,
Shipboard Battle 47. Jacket, Man's Utility 48. Jacket, Utility, Unisex
49. Jacket, Utility, Unisex, Coast Guard 50. Jacket, Woman's Utility
51. Liner, Coat, Cold Weather 52. Pillowcase, Fire Retardant 53.
Screen, Latrine W/Cover, Pins 54. Sheet, Muslin, White 55. Shirt, Cold
Weather (ECWCS) 56. Shirt, Man's 57. Shirt, Man's Ctn/Ply, Poplin 58.
Shirt, Man's Enlisted, Blue 59. Shirt, Man's Navy White 60. Shirt,
Man's P/W, Long Sleeve 61. Shirt, Man's Short Sleeve 62. Shirt, Man's
Utility, Ctn/Poly 63. Shirt, Man's, Enlisted, Navy W 64. Shirt, Man's,
L/S, Utility 65. Shirt, Man's, Officer, Navy Wh 66. Shirt, Man's, S/S,
Utility 67. Shirt, Qtr Length Sleeve 68. Shirt, Woman's 69. Shirt,
Woman's Long Sleeve, PO 70. Shirt, Woman's Tuck-in, L/S 71. Shirt,
Woman's Tuck-in, S/S 72. Shirt, Woman's Type I Khaki 73. Shirt, Woman's
Utility 74. Shirt, Woman's Utility, Frt 75. Shirt, Woman's, L/S,
Utility 76. Shirt, Woman's, S/S, Utility 77. Smock, General Purpose 78.
Suspension Assembly 79. Sweatpants 80. T-Shirt 81. T-Shirt, PCU 82. T-
Shirt, PFU 83. Tarpaulin 84. Tarpaulin, Laminated, Blu/Wh 85. Towel,
Bath, Cotton Terry, BR 86. Towel, Bath, Cotton Type 1, W 87. Towel,
Bath, Cotton/Poly, Whit 88. Trousers, Aircrew BDU, Tan 89. Trousers,
Aircrew BDU, Woodland 90. Trousers, BDU 91. Trousers, Combat, Black,
357, Type 92. Trousers, Combat, Hot Weather 93. Trousers, ECWCS 94.
Trousers, Men's Medical Assistant 95. Trousers, Woodland Camouflage 96.
Trunks, General Purpose 97. Trunks, General Purpose (MC) 98. Trucks,
PCU 99. Trunks, PFU 100. Trunks, Swim 101. Undershirt, Man's Brown 102.
Undershirt, Man's Crewneck 103. Undershirt, Man's White Crew N 104.
Undershirt, Man's, White Crew 105. Undershirt, Man's, White V-Nec 106.
Washcloth, Terry, White
Source: DSCP
__________
U.S. Senate,
Washington, DC, May 21, 1999.
Dear Colleague: S. 1059, the fiscal year 2000 Defense Authorization
bill, contains a provision which would destroy the ability of the
Federal Bureau of Prisons to keep inmates engaged in constructive work
and vocational training.
Section 806 of the bill, sponsored by Senator Levin, would
undermine federal inmate labor activities by carving out for the
Department of Defense (DoD) special exemptions to the current statutory
requirement that Federal agencies, including DoD, purchase the products
of the Federal Prison Industries when such goods meet the needs and
specifications of the agency. For 65 years, this program has played a
key role in the safe and effective administration of the federal prison
system, and has dramatically reduced the recidivism rate among those
federal prisoners who work while in prison.
Two years ago, you joined us in soundly defeating a similar
amendment to the fiscal year 1998 Defense Authorization bill. At that
time, we directed the Defense Department and the Federal Prison
Industries to undertake a joint study of the policies and regulations
that govern their procurement transactions and how they could be
improved. Last month, Congress received the results of that lengthy and
exhaustive review.
In their summary of the study's results, David R. Oliver, Jr.,
Principal Deputy Under Secretary of Defense (Acquisition and
Technology), and Kathleen Hawk Sawyer, Director of the Federal Bureau
of Prisons and Chief Executive Officer of Federal Prison Industries,
stated that ``* * * the study has afforded us the opportunity to fully
explore the issues involved and offer viable recommendations that will
improve the efficiency and reduce the cost of procurement transactions
between the two agencies. The recommendations proposed herein can be
accomplished within existing statutory authority and do not require
legislative action.'' (emphasis added)
Clearly, there is no reason to reduce the size of the only market
in which prison-made goods are permitted to be sold in America. The
Levin amendment threatens to idle over 8,000 inmates, or more than 40
percent of those now employed in a productive capacity. Restitution
payments to victims of crime would be dramatically reduced and, as the
Federal Prison Industries lose revenue, the taxpayer would be forced to
bear a greater burden of prison operating costs.
When the fiscal year 2000 Defense Authorization bill is considered
by the Senate next week, we once again intend to oppose the Levin
language. With your help, we defeated the amendment two years ago by a
vote of 62 to 37. We ask for your continued support in the effort to
ensure that inmates continue to work and build the skills that will
allow them to lead productive lives outside prison.
If you have any questions, please call us or have your staff
contact Pete Olson in Senator Gramm's office at 4-0715.
Yours respectfully,
Phil Gramm,
Orrin Hatch,
Strom Thurmond.