[House Report 108-286]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    108-286
======================================================================
 
    FEDERAL PRISON INDUSTRIES COMPETITION IN CONTRACTING ACT OF 2003

                                _______
                                

 September 25, 2003.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 1829]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 1829) to amend title 18, United States Code, to 
require Federal Prison Industries to compete for its contracts 
minimizing its unfair competition with private sector firms and 
their non-inmate workers and empowering Federal agencies to get 
the best value for taxpayers' dollars, to provide a five-year 
period during which Federal Prison Industries adjusts to 
obtaining inmate work opportunities through other than its 
mandatory source status, to enhance inmate access to remedial 
and vocational opportunities and other rehabilitative 
opportunities to better prepare inmates for a successful return 
to society, to authorize alternative inmate work opportunities 
in support of non-profit organizations, and for other purposes, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................    14
Background and Need for the Legislation..........................    18
Hearings.........................................................    22
Committee Consideration..........................................    22
Vote of the Committee............................................    22
Committee Oversight Findings.....................................    24
New Budget Authority and Tax Expenditures........................    24
Congressional Budget Office Cost Estimate........................    24
Committee Response to Congressional Budget Office Cost Estimate..    29
Performance Goals and Objectives.................................    34
Constitutional Authority Statement...............................    34
Section-by-Section Analysis and Discussion.......................    34
Changes in Existing Law Made by the Bill, as Reported............    50
Markup Transcript................................................    63
Dissenting Views.................................................   177

                             The Amendment

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Federal Prison 
Industries Competition in Contracting Act of 2003''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Governmentwide procurement policy relating to purchases from 
Federal Prison Industries.
Sec. 3. Public participation regarding expansion proposals by Federal 
Prison Industries.
Sec. 4. Transitional mandatory source authority.
Sec. 5. Authority to perform as a Federal subcontractor.
Sec. 6. Inmate wages and deductions.
Sec. 7. Clarifying amendment relating to services.
Sec. 8. Conforming amendment.
Sec. 9. Rules of construction relating to chapter 307.
Sec. 10. Providing additional rehabilitative opportunities for inmates.
Sec. 11. Restructuring the Board of Directors.
Sec. 12. Providing additional management flexibility to Federal Prison 
Industries operations.
Sec. 13. Transitional personnel management authority.
Sec. 14. Federal Prison Industries report to Congress.
Sec. 15. Independent study to determine the effects of eliminating the 
Federal Prison Industries mandatory source authority.
Sec. 16. Sense of Congress.
Sec. 17. Definitions.
Sec. 18. Implementing regulations and procedures.
Sec. 19. Rule of construction.
Sec. 20. Effective date and applicability.
Sec. 21. Clerical amendments.

SEC. 2. GOVERNMENTWIDE PROCUREMENT POLICY RELATING TO PURCHASES FROM 
                    FEDERAL PRISON INDUSTRIES.

    Section 4124 of title 18, United States Code, is amended to read as 
follows:

``Sec. 4124. Governmentwide procurement policy relating to purchases 
                    from Federal Prison Industries

    ``(a) In General.--Purchases from Federal Prison Industries, 
Incorporated, a wholly owned Government corporation, as referred to in 
section 9101(3)(E) of title 31, may be made by a Federal department or 
agency only in accordance with this section.
    ``(b) Solicitation and Evaluation of Offers and Contract Awards.--
(1) If a procurement activity of a Federal department or agency has a 
requirement for a specific product or service that is authorized to be 
offered for sale by Federal Prison Industries, in accordance with 
section 4122 of this title, and is listed in the catalog referred to in 
subsection (g), the procurement activity shall solicit an offer from 
Federal Prison Industries, if the purchase is expected to be in excess 
of the micro-purchase threshold (as defined by section 32(f) of the 
Office of Federal Procurement Policy Act (41 U.S.C. 428(f))).
    ``(2) A contract award for such product or service shall be made 
using competitive procedures in accordance with the applicable 
evaluation factors, unless a determination is made by the Attorney 
General pursuant to paragraph (3) or an award using other than 
competitive procedures is authorized pursuant to paragraph (7).
    ``(3) The procurement activity shall negotiate with Federal Prison 
Industries on a noncompetitive basis for the award of a contract if the 
Attorney General determines that--
            ``(A) Federal Prison Industries cannot reasonably expect 
        fair consideration to receive the contract award on a 
        competitive basis; and
            ``(B) the contract award is necessary to maintain work 
        opportunities otherwise unavailable at the penal or 
        correctional facility at which the contract is to be performed 
        to prevent circumstances that could reasonably be expected to 
        significantly endanger the safe and effective administration of 
        such facility.
    ``(4) Except in the case of an award to be made pursuant to 
paragraph (3), a contract award shall be made with Federal Prison 
Industries only if the contracting officer for the procurement activity 
determines that--
            ``(A) the specific product or service to be furnished will 
        meet the requirements of the procurement activity (including 
        any applicable prequalification requirements and all specified 
        commercial or governmental standards pertaining to quality, 
        testing, safety, serviceability, and warranties);
            ``(B) timely performance of the contract can be reasonably 
        expected; and
            ``(C) the contract price does not exceed a current market 
        price.
    ``(5) A determination by the Attorney General pursuant to paragraph 
(3) shall be--
            ``(A) supported by specific findings by the warden of the 
        penal or correctional institution at which a Federal Prison 
        Industries workshop is scheduled to perform the contract;
            ``(B) supported by specific findings by Federal Prison 
        Industries regarding why it does not expect to win the contract 
        on a competitive basis; and
            ``(C) made and reported in the same manner as a 
        determination made pursuant to section 303(c)(7) of the Federal 
        Property and Administrative Services Act of 1949 (41 U.S.C. 
        253(c)(7)).
    ``(6) If the Attorney General has not made the determination 
described in paragraph (3) within 30 days after Federal Prison 
Industries has been informed of a contracting opportunity by a 
procurement activity, the procurement activity may proceed to conduct a 
procurement for the product or service in accordance with the 
procedures generally applicable to such procurements by the procurement 
activity.
    ``(7) A contract award may be made to Federal Prison Industries 
using other than competitive procedures if such product or service is 
only available from Federal Prison Industries and the contract may be 
awarded under the authority of section 2304(c)(1) of title 10 or 
section 303(c) of the Federal Property and Administrative Services Act 
of 1949 (41 U.S.C. 252(c)(1)), as may be applicable, and pursuant to 
the justification and approval requirements relating to such 
noncompetitive procurements specified by law and the Governmentwide 
Federal Acquisition Regulation.
    ``(c) Offers From Federal Prison Industries.--A timely offer 
received from Federal Prison Industries to furnish a product or service 
to a Federal department or agency shall be considered for award without 
limitation as to the dollar value of the proposed purchase.
    ``(d) Performance by Federal Prison Industries.--Federal Prison 
Industries shall perform its contractual obligations under a contract 
awarded by a Federal department or agency to the same extent as any 
other contractor.
    ``(e) Finality of Contracting Officer's Decision.--(1) A decision 
by a contracting officer regarding the award of a contract to Federal 
Prison Industries or relating to the performance of such contract shall 
be final, unless reversed on appeal pursuant to paragraph (2) or (3).
    ``(2) The Chief Executive Officer of Federal Prison Industries may 
appeal to the head of a Federal department or agency a decision by a 
contracting officer not to award a contract to Federal Prison 
Industries pursuant to subsection (b)(4). The decision of the head of a 
Federal department or agency on appeal shall be final.
    ``(3) A dispute between Federal Prison Industries and a procurement 
activity regarding performance of a contract shall be subject to--
            ``(A) alternative means of dispute resolution pursuant to 
        subchapter IV of chapter 5 of title 5; or
            ``(B) final resolution by the board of contract appeals 
        having jurisdiction over the procurement activity's contract 
        performance disputes pursuant to the Contract Disputes Act of 
        1978 (41 U.S.C. 601 et seq.).
    ``(f) Reporting of Purchases.--Each Federal department or agency 
shall report purchases from Federal Prison Industries to the Federal 
Procurement Data System (as referred to in section 6(d)(4) of the 
Office of Federal Procurement Policy Act (41 U.S.C. 405(d)(4))) in the 
same manner as it reports to such System any acquisition in an amount 
in excess of the simplified acquisition threshold (as defined by 
section 4(11) of the Office of Federal Procurement Policy Act (41 
U.S.C. 403(11))).
    ``(g) Catalog of Products.--Federal Prison Industries shall publish 
and maintain a catalog of all specific products and services that it is 
authorized to offer for sale. Such catalog shall be periodically 
revised as products and services are added or deleted by its board of 
directors (in accordance with section 4122(b) of this title).
    ``(h) Compliance With Standards.--Federal Prison Industries shall 
comply with Federal occupational, health, and safety standards with 
respect to the operation of its industrial operations.''.

SEC. 3. PUBLIC PARTICIPATION REGARDING EXPANSION PROPOSALS BY FEDERAL 
                    PRISON INDUSTRIES.

    Section 4122(b) of title 18, United States Code, is amended--
            (1) by redesignating paragraph (6) as paragraph (12); and
            (2) by striking paragraphs (4) and (5) and inserting the 
        following new paragraphs:
    ``(4) A decision to authorize Federal Prison Industries to offer a 
new specific product or specific service or to expand the production of 
an existing product or service shall be made by its board of directors 
in conformance with the requirements of subsections (b), (c), (d), and 
(e) of section 553 of title 5, and this chapter.
    ``(5)(A) Whenever Federal Prison Industries proposes to offer for 
sale a new specific product or specific service or to expand production 
of a currently authorized product or service, the Chief Operating 
Officer of Federal Prison Industries shall submit an appropriate 
proposal to the board of directors and obtain the board's approval 
before initiating any such expansion. The proposal submitted to the 
board shall include a detailed analysis of the probable impact of the 
proposed expansion of sales within the Federal market by Federal Prison 
Industries on private sector firms and their non-inmate workers.
    ``(B)(i) The analysis required by subparagraph (A) shall be 
performed by an interagency team on a reimbursable basis or by a 
private contractor paid by Federal Prison Industries.
    ``(ii) If the analysis is to be performed by an interagency team, 
such team shall be led by the Administrator of the Small Business 
Administration or the designee of such officer with representatives of 
the Department of Labor, the Department of Commerce, and the Federal 
Procurement Data Center.
    ``(iii) If the analysis is to be performed by a private contractor, 
the selection of the contractor and the administration of the contract 
shall be conducted by one of the entities referenced in clause (ii) as 
an independent executive agent for the board of directors. Maximum 
consideration shall be given to any proposed statement of work 
furnished by the Chief Operating Officer of Federal Prison Industries.
    ``(C) The analysis required by subparagraph (A) shall identify and 
consider--
            ``(i) the number of vendors that currently meet the 
        requirements of the Federal Government for the specific product 
        or specific service;
            ``(ii) the proportion of the Federal Government market for 
        the specific product or specific service currently furnished by 
        small businesses during the previous 3 fiscal years;
            ``(iii) the share of the Federal market for the specific 
        product or specific service projected for Federal Prison 
        Industries for the fiscal year in which production or 
        performance will commence or expand and the subsequent 4 fiscal 
        years;
            ``(iv) whether the industry producing the specific product 
        or specific service in the private sector--
                    ``(I) has an unemployment rate higher than the 
                national average; or
                    ``(II) has a rate of unemployment for workers that 
                has consistently shown an increase during the previous 
                5 years;
            ``(v) whether the specific product is an import-sensitive 
        product;
            ``(vi) the requirements of the Federal Government and the 
        demands of entities other than the Federal Government for the 
        specific product or service during the previous 3 fiscal years;
            ``(vii) the projected growth or decline in the demand of 
        the Federal Government for the specific product or specific 
        service;
            ``(viii) the capability of the projected demand of the 
        Federal Government for the specific product or service to 
        sustain both Federal Prison Industries and private vendors; and
            ``(ix) whether authorizing the production of the new 
        product or performance of a new service will provide inmates 
        with the maximum opportunity to acquire knowledge and skill in 
        trades and occupations that will provide them with a means of 
        earning a livelihood upon release.
    ``(D)(i) The board of directors may not approve a proposal to 
authorize the production and sale of a new specific product or 
continued sale of a previously authorized product unless--
            ``(I) the product to be furnished is a prison-made product; 
        or
            ``(II) the service to be furnished is to be performed by 
        inmate workers.
    ``(ii) The board of directors may not approve a proposal to 
authorize the production and sale of a new prison-made product or to 
expand production of a currently authorized product if the product is--
            ``(I) produced in the private sector by an industry which 
        has reflected during the previous year an unemployment rate 
        above the national average; or
            ``(II) an import-sensitive product.
    ``(iii) The board of directors may not approve a proposal for 
inmates to provide a service in which an inmate worker has access to--
            ``(I) personal or financial information about individual 
        private citizens, including information relating to such 
        person's real property, however described, without giving prior 
        notice to such persons or class of persons to the greatest 
        extent practicable;
            ``(II) geographic data regarding the location of surface 
        and subsurface infrastructure providing communications, water 
        and electrical power distribution, pipelines for the 
        distribution of natural gas, bulk petroleum products and other 
        commodities, and other utilities; or
            ``(III) data that is classified.
    ``(iv)(I) Federal Prison Industries is prohibited from furnishing 
through inmate labor construction services, unless to be performed 
within a Federal correctional institution pursuant to the participation 
of an inmate in an apprenticeship or other vocational education program 
teaching the skills of the various building trades.
    ``(II) For purposes of this clause, the term `construction' has the 
meaning given such term by section 2.101 of the Federal Acquisition 
Regulation (48 CFR part 2.101), as in effect on June 1, 2002, including 
the repair, alteration, or maintenance of real property in being.
    ``(6) To provide further opportunities for participation by 
interested parties, the board of directors shall--
            ``(A) give additional notice of a proposal to authorize the 
        production and sale of a new product or service, or expand the 
        production of a currently authorized product or service, in a 
        publication designed to most effectively provide notice to 
        private vendors and labor unions representing private sector 
        workers who could reasonably be expected to be affected by 
        approval of the proposal, which notice shall offer to furnish 
        copies of the analysis required by paragraph (5) and shall 
        solicit comment on the analysis;
            ``(B) solicit comments on the analysis required by 
        paragraph (5) from trade associations representing vendors and 
        labor unions representing private sector workers who could 
        reasonably be expected to be affected by approval of the 
        proposal to authorize the production and sale of a new product 
        or service (or expand the production of a currently authorized 
        product or service); and
            ``(C) afford an opportunity, on request, for a 
        representative of an established trade association, labor 
        union, or other private sector representatives to present 
        comments on the proposal directly to the board of directors.
    ``(7) The board of directors shall be provided copies of all 
comments received on the expansion proposal.
    ``(8) Based on the comments received on the initial expansion 
proposal, the Chief Operating Officer of Federal Prison Industries may 
provide the board of directors a revised expansion proposal. If such 
revised proposal provides for expansion of inmate work opportunities in 
an industry different from that initially proposed, such revised 
proposal shall reflect the analysis required by paragraph (5)(C) and be 
subject to the public comment requirements of paragraph (6).
    ``(9) The board of directors shall consider a proposal to authorize 
the sale of a new specific product or specific service (or to expand 
the volume of sales for a currently authorized product or service) and 
take any action with respect to such proposal, during a meeting that is 
open to the public, unless closed pursuant to section 552(b) of title 
5.
    ``(10) In conformity with the requirements of paragraphs (5) 
through (9) of this subsection, the board of directors may--
            ``(A) authorize the donation of products produced or 
        services furnished by Federal industries and available for 
        sale;
            ``(B) authorize the production of a new specific product or 
        the furnishing of a new specific service for donation; or
            ``(C) authorize a proposal to expand production of a 
        currently authorized specific product or specific service in an 
        amount in excess of a reasonable share of the market for such 
        product or service, if--
                    ``(i) a Federal agency or department, purchasing 
                such product or service, has requested that Federal 
                Prison Industries be authorized to furnish such product 
                or service in amounts that are needed by such agency or 
                department; or
                    ``(ii) the proposal is justified for other good 
                cause and supported by at least eight members of the 
                board.''.

SEC. 4. TRANSITIONAL MANDATORY SOURCE AUTHORITY.

    (a) In General.--Notwithstanding the requirements of section 4124 
of title 18, United States Code (as amended by section 2 of this Act), 
a Federal department or agency having a requirement for a product that 
is authorized for sale by Federal Prison Industries and is listed in 
its catalog (referred to in section 4124(g) of title 18, United States 
Code) shall first solicit an offer from Federal Prison Industries and 
make purchases on a noncompetitive basis in accordance with this 
section.
    (b) Preferential Source Status.--Subject to the limitations of 
subsection (d), a contract award shall be made on a noncompetitive 
basis to Federal Prison Industries if the contracting officer for the 
procurement activity determines that--
            (1) the product offered by Federal Prison Industries will 
        meet the requirements of the procurement activity (including 
        commercial or governmental standards or specifications 
        pertaining to design, performance, testing, safety, 
        serviceability, and warranties as may be imposed upon a private 
        sector supplier of the type being offered by Federal Prison 
        Industries);
            (2) timely performance of the contract by Federal Prison 
        Industries can be reasonably expected; and
            (3) the negotiated price does not exceed a fair and 
        reasonable price.
    (c) Contractual Terms.--The terms and conditions of the contract 
and the price to be paid to Federal Prison Industries shall be 
determined by negotiation between Federal Prison Industries and the 
Federal agency making the purchase. The negotiated price shall not 
exceed a fair and reasonable price determined in accordance with the 
procedures of the Federal Acquisition Regulation.
    (d) Performance of Contractual Obligations.--
            (1) In general.--Federal Prison Industries shall perform 
        the obligations of the contract negotiated pursuant to 
        subsection (c).
            (2) Performance disputes.--If the head of the contracting 
        activity and the Chief Operating Officer of Federal Prison 
        Industries are unable to resolve a contract performance dispute 
        to their mutual satisfaction, such dispute shall be resolved 
        pursuant to section 4124(e)(3) of title 18, United States Code 
        (as added by section 2 of this Act).
    (e) Limitations on Use of Authority.--
            (1) In general.--As a percentage of the sales made by 
        Federal Prison Industries during the base period, the total 
        dollar value of sales to the Government made pursuant to 
        subsection (b) and subsection (c) of this section shall not 
        exceed--
                    (A) 90 percent in fiscal year 2005;
                    (B) 85 percent in fiscal year 2006;
                    (C) 70 percent in fiscal year 2007;
                    (D) 55 percent in fiscal year 2008; and
                    (E) 40 percent in fiscal year 2009.
            (2) Sales within various business sectors.--Use of the 
        authority provided by subsections (b) and (c) shall not result 
        in sales by Federal Prison Industries to the Government that 
        are in excess of its total sales during the base year for each 
        business sector.
            (3) Limitations relating to specific products.--Use of the 
        authorities provided by subsections (b) and (c) shall not 
        result in contract awards to Federal Prison Industries that are 
        in excess of its total sales during the base period for such 
        product.
            (4) Changes in design specifications.--The limitations on 
        sales specified in paragraphs (2) and (3) shall not be affected 
        by any increases in the unit cost of production of a specific 
        product arising from changes in the design specification of 
        such product directed by the buying agency.
    (f) Duration of Authority.--The preferential contracting 
authorities authorized by subsection (b) may not be used on or after 
October 1, 2009, and become effective on the effective date of the 
final regulations issued pursuant to section 18.
    (g) Definitions.--For the purposes of this section--
            (1) the term ``base period'' means the total sales of 
        Federal Prison Industries during the period October 1, 2001, 
        and September 30, 2002 (Fiscal Year 2002);
            (2) the term ``business sectors'' means the eight product/
        service business groups identified in the 2002 Federal Prison 
        Industries annual report as the Clothing and Textiles Business 
        Group, the Electronics Business Group, the Fleet Management and 
        Vehicular Components Business Group, the Graphics Business 
        Group, the Industrial Products Business Group, the Office 
        Furniture Business Group, the Recycling Activities Business 
        Group, and the Services Business Group; and
            (3) the term ``fair and reasonable price'' shall be given 
        the same meaning as, and be determined pursuant to, part 15.8 
        of the Federal Acquisition Regulation (48 C.F.R. 15.8).
    (h) Finding by Attorney General With Respect to Public Safety.--(1) 
Not later than 60 days prior to the end of each fiscal year specified 
in subsection (e)(1), the Attorney General shall make a finding 
regarding the effects of the percentage limitation imposed by such 
subsection for such fiscal year and the likely effects of the 
limitation imposed by such subsection for the following fiscal year.
    (2) The Attorney General's finding shall include a determination 
whether such limitation has resulted or is likely to result in a 
substantial reduction in inmate industrial employment and whether such 
reductions, if any, present a significant risk of adverse effects on 
safe prison operation or public safety.
    (3) If the Attorney General finds a significant risk of adverse 
effects on either safe prison management or public safety, he shall so 
advise the Congress.
    (4) In advising the Congress pursuant to paragraph (3), the 
Attorney General shall make recommendations for additional 
authorizations of appropriations to provide additional alternative 
inmate rehabilitative opportunities and additional correctional 
staffing, as may be appropriate.

SEC. 5. AUTHORITY TO PERFORM AS A FEDERAL SUBCONTRACTOR.

    (a) In General.--Federal Prison Industries is authorized to enter 
into a contract with a Federal contractor (or a subcontractor of such 
contractor at any tier) to produce products as a subcontractor or 
supplier in the performance of a Federal procurement contract. The use 
of Federal Prison Industries as a subcontractor or supplier shall be a 
wholly voluntary business decision by the Federal prime contractor or 
subcontractor, subject to any prior approval of subcontractors or 
suppliers by the contracting officer which may be imposed by the 
Federal Acquisition Regulation or by the contract.
    (b) Commercial Sales Prohibited.--The authority provided by 
subsection (a) shall not result, either directly or indirectly, in the 
sale in the commercial market of a product or service resulting from 
the labor of Federal inmate workers in violation of section 1761(a) of 
title 18, United States Code. A Federal contractor (or subcontractor at 
any tier) using Federal Prison Industries as a subcontractor or 
supplier in furnishing a commercial product pursuant to a Federal 
contract shall implement appropriate management procedures to prevent 
introducing an inmate-produced product into the commercial market.
    (c) Prohibitions on Mandating Subcontracting With Federal Prison 
Industries.--Except as authorized under the Federal Acquisition 
Regulation, the use of Federal Prison Industries as a subcontractor or 
supplier of products or provider of services shall not be imposed upon 
prospective or actual Federal prime contractors or a subcontractors at 
any tier by means of--
            (1) a contract solicitation provision requiring a 
        contractor to offer to make use of Federal Prison Industries, 
        its products or services;
            (2) specifications requiring the contractor to use specific 
        products or services (or classes of products or services) 
        offered by Federal Prison Industries in the performance of the 
        contract;
            (3) any contract modification directing the use of Federal 
        Prison Industries, its products or services; or
            (4) any other means.

SEC. 6. INMATE WAGES AND DEDUCTIONS.

    Section 4122(b) of title 18, United States Code (as amended by 
section 3 of this Act), is further amended by adding after paragraph 
(10) a new paragraph (11) as follows:
    ``(11)(A) The Board of Directors of Federal Prison Industries shall 
prescribe the rates of hourly wages to be paid inmates performing work 
for or through Federal Prison Industries. The Director of the Federal 
Bureau of Prisons shall prescribe the rates of hourly wages for other 
work assignments within the various Federal correctional institutions.
    ``(B) The various inmate wage rates shall be reviewed and 
considered for increase on not less than a biannual basis.
    ``(C) Wages earned by an inmate worker shall be paid in the name of 
the inmate. Deductions, aggregating to not more than 80 percent of 
gross wages, shall be taken from the wages due for--
            ``(i) applicable taxes (Federal, State, and local);
            ``(ii) payment of fines and restitution pursuant to court 
        order;
            ``(iii) payment of additional restitution for victims of 
        the inmate's crimes (at a rate not less than 10 percent of 
        gross wages);
            ``(iv) allocations for support of the inmate's family 
        pursuant to statute, court order, or agreement with the inmate;
            ``(v) allocations to a fund in the inmate's name to 
        facilitate such inmate's assimilation back into society, 
        payable at the conclusion of incarceration; and
            ``(vi) such other deductions as may be specified by the 
        Director of the Bureau of Prisons.
    ``(D) Each inmate worker working for Federal Prison Industries 
shall indicate in writing that such person--
            ``(i) is participating voluntarily; and
            ``(ii) understands and agrees to the wages to be paid and 
        deductions to be taken from such wages.''.

SEC. 7. CLARIFYING AMENDMENT RELATING TO SERVICES.

    (a) In General.--Section 1761 of title 18, United States Code, is 
amended in subsection (a), by striking ``any goods, wares, or 
merchandise manufactured, produced, or mined'' and inserting ``products 
manufactured, services furnished, or minerals mined''.
    (b) Completion of Existing Agreements.--Any prisoner work program 
operated by a prison or jail of a State or local jurisdiction of a 
State which is providing services for the commercial market through 
inmate labor on October 1, 2002, may continue to provide such 
commercial services until--
            (1) the expiration date specified in the contract or other 
        agreement with a commercial partner on October 1, 2002, or
            (2) until September 30, 2005, if the prison work program is 
        directly furnishing the services to the commercial market.
    (c) Approval Required for Long-Term Operation.--A prison work 
program operated by a correctional institution operated by a State or 
local jurisdiction of a State may continue to provide inmate labor to 
furnish services for sale in the commercial market after the dates 
specified in subsection (b) if such program has been certified pursuant 
to section 1761(c)(1) of title 18, United States Code, and is in 
compliance with the requirements of such subsection and its 
implementing regulations.

SEC. 8. CONFORMING AMENDMENT.

    Section 4122(a) of title 18, United States Code, is amended by 
striking ``production of commodities'' and inserting ``production of 
products or furnishing of services''.

SEC. 9. RULES OF CONSTRUCTION RELATING TO CHAPTER 307.

    Chapter 307 of title 18, United States Code, is further amended by 
adding the following:

``Sec. 4130. Construction of provisions

    ``Nothing in this chapter shall be construed--
            ``(1) to establish an entitlement of any inmate to--
                    ``(A) employment in a Federal Prison Industries 
                facility; or
                    ``(B) any particular wage, compensation, or benefit 
                on demand, except as otherwise specifically provided by 
                law or regulation;
            ``(2) to establish that inmates are employees for the 
        purposes of any law or program; or
            ``(3) to establish any cause of action by or on behalf of 
        any inmate against the United States or any officer, employee, 
        or contractor thereof.''.

SEC. 10. PROVIDING ADDITIONAL REHABILITATIVE OPPORTUNITIES FOR INMATES.

    (a) Additional Educational, Training, and Release-Preparation 
Opportunities.--
            (1) Program established.--There is hereby established the 
        Enhanced In-Prison Educational and Vocational Assessment and 
        Training Program within the Federal Bureau of Prisons.
            (2) Comprehensive program.--In addition to such other 
        components as the Director of the Bureau of Prisons deems 
        appropriate to reduce inmate idleness and better prepare 
        inmates for a successful reentry into the community upon 
        release, the program shall provide--
                    (A) in-prison assessments of inmates' needs and 
                aptitudes;
                    (B) a full range of educational opportunities;
                    (C) vocational training and apprenticeships; and
                    (D) comprehensive release-readiness preparation.
            (3) Authorization of appropriations.--For the purposes of 
        carrying out the program established by paragraph (1), 
        $75,000,000 is authorized for each fiscal year after fiscal 
        year 2003, to remain available until expended. Funds shall be 
        allocated from the gross profits within the Federal Prison 
        Industries Fund, and, to the extent such amounts are 
        inadequate, from the General Treasury.
            (4) Schedule for implementation.--All components of the 
        program shall be established--
                    (A) in at least 25 percent of all Federal prisons 
                not later than 2 years after the date of the enactment 
                of this Act;
                    (B) in at least 50 percent of all Federal prisons 
                not later than 4 years after such date of enactment;
                    (C) in at least 75 percent of all Federal prisons 
                not later than 6 years after such date of enactment; 
                and
                    (D) in all Federal prisons not later than 8 years 
                after such date of enactment.
    (b) Inmate Work Opportunities in Support of Not-for-Profit 
Entities.--
            (1) Proposals for donation programs.--The Chief Operating 
        Officer of Federal Prison Industries shall develop and present 
        to the Board of Directors of Federal Prison Industries 
        proposals to have Federal Prison Industries donate products and 
        services to eligible entities that provide goods or services to 
        low-income individuals who would likely otherwise have 
        difficulty purchasing such products or services in the 
        commercial market.
            (2) Schedule for submission and consideration of donation 
        programs.--
                    (A) Initial proposals.--The Chief Operating Officer 
                shall submit the initial group of proposals for 
                programs of the type described in paragraph (1) within 
                180 days after the date of the enactment of this Act. 
                The Board of Directors of Federal Prison Industries 
                shall consider such proposals from the Chief Operating 
                Officer not later than the date that is 270 days after 
                the date of the enactment of this Act.
                    (B) Annual operating plan.--The Board of Directors 
                of Federal Prison Industries shall consider proposals 
                by the Chief Operating Officer for programs of the type 
                described in paragraph (1) as part of the annual 
                operating plan for Federal Prison Industries.
                    (C) Other proposals.--In addition to proposals 
                submitted by the Chief Operating Officer, the Board of 
                Directors may, from time to time, consider proposals 
                presented by prospective eligible entities.
            (3) Definition of eligible entities.--For the purposes of 
        this subsection, the term ``eligible entity'' means an entity--
                    (A) that is an organization described in section 
                501(c)(3) of the Internal Revenue Code of 1986 and 
                exempt from taxation under section 501(a) of such Code 
                and that has been such an organization for a period of 
                not less than 36 months prior to inclusion in a 
                proposal of the type described in paragraph (1), or
                    (B) that is a religious organization described in 
                section 501(d) of such Code and exempt from taxation 
                under section 501(a) of such Code.
            (4) Authorization of appropriations.--There are authorized 
        to be appropriated $7,000,000 for each of the fiscal years 2004 
        through 2008 for the purposes of paying the wages of inmates 
        and otherwise carrying out programs of the type described in 
        paragraph (1).
    (c) Maximizing Inmate Rehabilitative Opportunities Through 
Cognitive Abilities Assessments.--
            (1) Demonstration program authorized.--
                    (A) In general.--There is hereby established within 
                the Federal Bureau of Prisons a program to be known as 
                the ``Cognitive Abilities Assessment Demonstration 
                Program''. The purpose of the demonstration program is 
                to determine the effectiveness of a program that 
                assesses the cognitive abilities and perceptual skills 
                of Federal inmates to maximize the benefits of various 
                rehabilitative opportunities designed to prepare each 
                inmate for a successful return to society and reduce 
                recidivism. The demonstration program shall be 
                undertaken by a contractor with a demonstrated record 
                of enabling the behavioral and academic improvement of 
                adults through the use of research-based systems that 
                maximize the development of both the cognitive and 
                perceptual capabilities of a participating individual, 
                including adults in a correctional setting.
                    (B) Scope of demonstration program.--The 
                demonstration program shall to the maximum extent 
                practicable, be--
                            (i) conducted during a period of three 
                        consecutive fiscal years, commencing during 
                        fiscal year 2004;
                            (ii) conducted at 12 Federal correctional 
                        institutions; and
                            (iii) offered to 6,000 inmates, who are 
                        categorized as minimum security or less, and 
                        are within five years of release.
                    (C) Report on results of program.--Not later than 
                60 days after completion of the demonstration program, 
                the Director shall submit to Congress a report on the 
                results of the program. At a minimum, the report shall 
                include an analysis of employment stability, stability 
                of residence, and rates of recidivism among inmates who 
                participated in the program after 18 months of release.
            (2) Authorization of appropriations.--There is authorized 
        to be appropriated $3,000,000 in each of the three fiscal years 
        after fiscal year 2003, to remain available until expended, for 
        the purposes of conducting the demonstration program authorized 
        by subsection (a).
    (d) Prerelease Employment Assistance.--
            (1) In general.--The Director of the Federal Bureau of 
        Prisons shall, to the maximum extent practicable, afford to 
        inmates opportunities to participate in programs and activities 
        designed to help prepare such inmates to obtain employment upon 
        release.
            (2) Prerelease employment placement assistance.--Such 
        prerelease employment placement assistance required by 
        subsection (a) shall include--
                    (A) training in the preparation of resumes and job 
                applications;
                    (B) training in interviewing skills;
                    (C) training and assistance in job search 
                techniques;
                    (D) conduct of job fairs; and
                    (E) such other methods deemed appropriate by the 
                Director.
            (3) Priority participation.--Priority in program 
        participation shall be accorded to inmates who are 
        participating in work opportunities afforded by Federal Prison 
        Industries and are within 24 months of release from 
        incarceration.

SEC. 11. RESTRUCTURING THE BOARD OF DIRECTORS.

    Section 4121 of title 18, United States Code, is amended to read as 
follows:

``Sec. 4121. Federal Prison Industries; Board of Directors: executive 
                    management

    ``(a) Federal Prison Industries is a government corporation of the 
District of Columbia organized to carry on such industrial operations 
in Federal correctional institutions as authorized by its Board of 
Directors. The manner and extent to which such industrial operations 
are carried on in the various Federal correctional institutions shall 
be determined by the Attorney General.
    ``(b)(1) The corporation shall be governed by a board of 11 
directors appointed by the President.
    ``(2) In making appointments to the Board, the President shall 
assure that 3 members represent the business community, 3 members 
represent organized labor, 1 member shall have special expertise in 
inmate rehabilitation techniques, 1 member represents victims of crime, 
1 member represents the interests of Federal inmate workers, and 2 
additional members whose background and expertise the President deems 
appropriate. The members of the Board representing the business 
community shall include, to the maximum extent practicable, 
representation of firms furnishing services as well as firms producing 
products, especially from those industry categories from which Federal 
Prison Industries derives substantial sales. The members of the Board 
representing organized labor shall, to the maximum practicable, include 
representation from labor unions whose members are likely to be most 
affected by the sales of Federal Prison Industries.
    ``(3) Each member shall be appointed for a term of 5 years, except 
that of members first appointed--
            ``(A) 2 members representing the business community shall 
        be appointed for a term of 3 years;
            ``(B) 2 members representing labor shall be appointed for a 
        term of 3 years;
            ``(C) 2 members whose background and expertise the 
        President deems appropriate for a term of 3 years;
            ``(D) 1 member representing victims of crime shall be 
        appointed for a term of 3 years;
            ``(E) 1 member representing the interests of Federal inmate 
        workers shall be appointed for a term of 3 years;
            ``(F) 1 member representing the business community shall be 
        appointed for a term of 4 years;
            ``(G) 1 member representing the business community shall be 
        appointed for a term of 4 years; and
            ``(H) the members having special expertise in inmate 
        rehabilitation techniques shall be appointed for a term of 5 
        years.
    ``(4) The President shall designate 1 member of the Board as 
Chairperson. The Chairperson may designate a Vice Chairperson.
    ``(5) Members of the Board may be reappointed.
    ``(6) Any vacancy on the Board shall be filled in the same manner 
as the original appointment. Any member appointed to fill a vacancy 
occurring before the expiration of the term for which the member's 
predecessor was appointed shall be appointed for the remainder of that 
term.
    ``(7) The members of the Board shall serve without compensation. 
The members of the Board shall be allowed travel expenses, including 
per diem in lieu of subsistence, at rates authorized for employees of 
agencies under subchapter I of chapter 57 of title 5, United States 
Code, to attend meetings of the Board and, with the advance approval of 
the Chairperson of the Board, while otherwise away from their homes or 
regular places of business for purposes of duties as a member of the 
Board.
    ``(8)(A) The Chairperson of the Board may appoint and terminate any 
personnel that may be necessary to enable the Board to perform its 
duties.
    ``(B) Upon request of the Chairperson of the Board, a Federal 
agency may detail a Federal Government employee to the Board without 
reimbursement. Such detail shall be without interruption or loss of 
civil service status or privilege.
    ``(9) The Chairperson of the Board may procure temporary and 
intermittent services under section 3109(b) of title 5, United States 
Code.
    ``(c) The Director of the Bureau of Prisons shall serve as Chief 
Executive Officer of the Corporation. The Director shall designate a 
person to serve as Chief Operating Officer of the Corporation.''.

SEC. 12. PROVIDING ADDITIONAL MANAGEMENT FLEXIBILITY TO FEDERAL PRISON 
                    INDUSTRIES OPERATIONS.

    Section 4122(b)(3) of title 18, United States Code, is amended--
            (1) by striking ``(3)'' and inserting ``(3)(A)''; and
            (2) by adding at the end the following new paragraphs:
    ``(B) Federal Prison Industries may locate more than one workshop 
at a Federal correctional facility.
    ``(C) Federal Prison Industries may operate a workshop outside of a 
correctional facility if all of the inmates working in such workshop 
are classified as minimum security inmates.''.

SEC. 13. TRANSITIONAL PERSONNEL MANAGEMENT AUTHORITY.

    Any correctional officer or other employee of Federal Prison 
Industries being paid with nonappropriated funds who would be separated 
from service because of a reduction in the net income of Federal Prison 
Industries during any fiscal year specified in section 4(e)(1) shall 
be--
            (1) eligible for appointment (or reappointment) in the 
        competitive service pursuant to title 5, United States Code;
            (2) registered on a Bureau of Prisons reemployment priority 
        list; and
            (3) given priority for any other position within the Bureau 
        of Prisons for which such employee is qualified.

SEC. 14. FEDERAL PRISON INDUSTRIES REPORT TO CONGRESS.

    Section 4127 of title 18, United States Code, is amended to read as 
follows:

``Sec. 4127. Federal Prison Industries report to Congress

    ``(a) In General.--Pursuant to chapter 91 of title 31, the board of 
directors of Federal Prison Industries shall submit an annual report to 
Congress on the conduct of the business of the corporation during each 
fiscal year and the condition of its funds during the fiscal year.
    ``(b) Contents of Report.--In addition to the matters required by 
section 9106 of title 31, and such other matters as the board considers 
appropriate, a report under subsection (a) shall include--
            ``(1) a statement of the amount of obligations issued under 
        section 4129(a)(1) of this title during the fiscal year;
            ``(2) an estimate of the amount of obligations that will be 
        issued in the following fiscal year;
            ``(3) an analysis of--
                    ``(A) the corporation's total sales for each 
                specific product and type of service sold to the 
                Federal agencies and the commercial market;
                    ``(B) the total purchases by each Federal agency of 
                each specific product and type of service;
                    ``(C) the corporation's share of such total Federal 
                Government purchases by specific product and type of 
                service; and
                    ``(D) the number and disposition of disputes 
                submitted to the heads of the Federal departments and 
                agencies pursuant to section 4124(e) of this title;
            ``(4) an analysis of the inmate workforce that includes--
                    ``(A) the number of inmates employed;
                    ``(B) the number of inmates utilized to produce 
                products or furnish services sold in the commercial 
                market;
                    ``(C) the number and percentage of employed inmates 
                by the term of their incarceration; and
                    ``(D) the various hourly wages paid to inmates 
                employed with respect to the production of the various 
                specific products and types of services authorized for 
                production and sale to Federal agencies and in the 
                commercial market; and
            ``(5) data concerning employment obtained by former inmates 
        upon release to determine whether the employment provided by 
        Federal Prison Industries during incarceration provided such 
        inmates with knowledge and skill in a trade or occupation that 
        enabled such former inmate to earn a livelihood upon release.
    ``(c) Public Availability.--Copies of an annual report under 
subsection (a) shall be made available to the public at a price not 
exceeding the cost of printing the report.''.

SEC. 15. INDEPENDENT STUDY TO DETERMINE THE EFFECTS OF ELIMINATING THE 
                    FEDERAL PRISON INDUSTRIES MANDATORY SOURCE 
                    AUTHORITY.

    (a) Study Required.--The Comptroller General shall undertake to 
have an independent study conducted on the effects of eliminating the 
Federal Prison Industries mandatory source authority.
    (b) Solicitation of Views.--The Comptroller General shall ensure 
that in developing the statement of work and the methodology for the 
study, the views and input of private industry, organized labor groups, 
Members and staff of the relevant Congressional committees, officials 
of the executive branch, and the public are solicited.
    (c) Submission.--Not later than June 30, 2004, the Comptroller 
General shall submit the results of the study to Congress, including 
any recommendations for legislation.

SEC. 16. SENSE OF CONGRESS.

    It is the sense of Congress that it is important to study the 
concept of implementing a ``good time'' release program for non-violent 
criminals in the Federal prison system.

SEC. 17. DEFINITIONS.

    Chapter 307 of title 18, United States Code, is amended by adding 
at the end the following new section:

``Sec. 4131. Definitions

    ``As used in this chapter--
            ``(1) the term `assembly' means the process of uniting or 
        combining articles or components (including ancillary finished 
        components or assemblies) so as to produce a significant change 
        in form or utility, without necessarily changing or altering 
        the component parts;
            ``(2) the term `current market price' means, with respect 
        to a specific product, the fair market price of the product 
        within the meaning of section 15(a) of the Small Business Act 
        (15 U.S.C. 644(a)), at the time that the contract is to be 
        awarded, verified through appropriate price analysis or cost 
        analysis, including any costs relating to transportation or the 
        furnishing of any ancillary services;
            ``(3) the term `import-sensitive product' means a product 
        which, according to Department of Commerce data, has 
        experienced competition from imports at an import to domestic 
        production ratio of 25 percent or greater;
            ``(4) the term `labor-intensive manufacture' means a 
        manufacturing activity in which the value of inmate labor 
        constitutes at least 10 percent of the estimate unit cost to 
        produce the item by Federal Prison Industries;
            ``(5) the term `manufacture' means the process of 
        fabricating from raw or prepared materials, so as to impart to 
        those materials new forms, qualities, properties, and 
        combinations;
            ``(6) the term `reasonable share of the market' means a 
        share of the total purchases by the Federal departments and 
        agencies, as reported to the Federal Procurement Data System 
        for--
                    ``(A) any specific product during the 3 preceding 
                fiscal years, that does not exceed 20 percent of the 
                Federal market for the specific product; and
                    ``(B) any specific service during the 3 preceding 
                fiscal years, that does not exceed 5 percent of the 
                Federal market for the specific service; and
            ``(7) the term `services' has the meaning given the term 
        `service contract' by section 37.101 of the Federal Acquisition 
        Regulation (48 C.F.R. 36.102), as in effect on July 1, 2002.''.

SEC. 18. IMPLEMENTING REGULATIONS AND PROCEDURES.

    (a) Federal Acquisition Regulation.--
            (1) Proposed revisions.--Proposed revisions to the 
        Governmentwide Federal Acquisition Regulation to implement the 
        amendments made by this Act shall be published not later than 
        60 days after the date of the enactment of this Act and provide 
        not less than 60 days for public comment.
            (2) Final regulations.--Final regulations shall be 
        published not later than 180 days after the date of the 
        enactment of this Act and shall be effective on the date that 
        is 30 days after the date of publication.
            (3) Public participation.--The proposed regulations 
        required by subsection (a) and the final regulations required 
        by subsection (b) shall afford an opportunity for public 
        participation in accordance with section 22 of the Office of 
        Federal Procurement Policy Act (41 U.S.C. 418b).
    (b) Board of Directors.--
            (1) In general.--The Board of Directors of Federal Prison 
        Industries shall issue regulations defining the terms specified 
        in paragraph (2).
            (2) Terms to be defined.--The Board of Directors shall 
        issue regulations for the following terms:
                    (A) Prison-made product.
                    (B) Prison-furnished service.
                    (C) Specific product.
                    (D) Specific service.
            (3) Schedule for regulatory definitions.--
                    (A) Proposed regulations relating to the matter 
                described in subsection (b)(2) shall be published not 
                later than 60 days after the date of enactment of this 
                Act and provide not less than 60 days for public 
                comment.
                    (B) Final regulations relating to the matters 
                described in subsection (b)(2) shall be published not 
                less than 180 days after the date of enactment of this 
                Act and shall be effective on the date that is 30 days 
                after the date of publication.
            (4) Enhanced opportunities for public participation and 
        scrutiny.--
                    (A) Administrative procedure act.--Regulations 
                issued by the Board of Directors shall be subject to 
                notice and comment rulemaking pursuant to section 553 
                of title 5, United States Code. Unless determined 
                wholly impracticable or unnecessary by the Board of 
                Directors, the public shall be afforded 60 days for 
                comment on proposed regulations.
                    (B) Enhanced outreach.--The Board of Directors 
                shall use means designed to most effectively solicit 
                public comment on proposed regulations, procedures, and 
                policies and to inform the affected public of final 
                regulations, procedures, and policies.
                    (C) Open meeting processes.--The Board of Directors 
                shall take all actions relating to the adoption of 
                regulations, operating procedures, guidelines, and any 
                other matter relating to the governance and operation 
                of Federal Prison Industries based on deliberations and 
                a recorded vote conducted during a meeting open to the 
                public, unless closed pursuant to section 552(b) of 
                title 5, United States Code.

SEC. 19. RULES OF CONSTRUCTION.

    (a) Agency Bid Protests.--Subsection (e) of section 4124 of title 
18, United States Code, as amended by section 2, is not intended to 
alter any rights of any offeror other than Federal Prison Industries to 
file a bid protest in accordance with other law or regulation in effect 
on the date of the enactment of this Act.
    (b) Javits-Wagner-O'Day Act.--Nothing in this Act is intended to 
modify the Javits-Wagner-O'Day Act (41 U.S.C. 46, et seq.).

SEC. 20. EFFECTIVE DATE AND APPLICABILITY.

    (a) Effective Date.--Except as provided in subsection (b), this Act 
and the amendments made by this Act shall take effect on the date of 
enactment of this Act.
    (b) Applicability.--Section 4124 of title 18, United States Code, 
as amended by section 2, shall apply to any requirement for a product 
or service offered by Federal Prison Industries needed by a Federal 
department or agency after the effective date of the final regulations 
issued pursuant to section 18(a)(2), or after September 30, 2004, 
whichever is earlier.

SEC. 21. CLERICAL AMENDMENTS.

    The table of sections for chapter 307 of title 18, United States 
Code, is amended--
            (1) by amending the item relating to section 4121 to read 
        as follows:

``4121. Federal Prison Industries; Board of Directors: executive 
management.'';
            (2) by amending the item relating to section 4124 to read 
        as follows:

``4124. Governmentwide procurement policy relating to purchases from 
Federal Prison Industries.'';
            (3) by amending the item relating to section 4127 to read 
        as follows:

``4127. Federal Prison Industries report to Congress.'';
        and
            (4) by adding at the end the following new items:

``4130. Construction of provisions.
``4131. Definitions.''.

                          Purpose and Summary

    H.R. 1829, the ``Federal Prison Industries Competition in 
Contracting Act of 2003,'' fundamentally and comprehensively 
reforms the 1934 authorizing statute of Federal Prison 
Industries, Inc. (FPI). The bill redefines the relationship 
between FPI and its currently captive Federal agency 
``customers,'' by empowering Federal agency managers to use 
competitive contracting procedures to acquire products and 
services from FPI to improve the prospects of getting ``best 
value'' for the taxpayer dollars.
    Under H.R. 1829, the buying Federal agency, rather than 
FPI, will now determine whether the product or service being 
offered by FPI best meets the agency's needs in terms of 
quality and time of delivery. The buying agency, rather than 
FPI, will now determine the reasonableness of FPI's offered 
price. The buying agency will now be able to require FPI to 
fully and timely perform its contractual obligations in the 
same manner as it can currently do with any private sector 
contractor. Like any other supplier to the Government, FPI will 
now have to be cost-effective and reliable.
    H.R. 1829 opens to competition Federal contracting 
opportunities now reserved for FPI. Private sector firms, and 
their non-inmate workers, will, for the first time, be able to 
bid on these Federal business opportunities funded with their 
tax dollars.
    Under current law (18 U.S.C. 4124(a)), FPI has the status 
of a mandatory supplier under the Government-wide Federal 
Acquisition Regulation (FAR) in FAR Subpart 8.6 (Acquisition 
from Federal Prison Industries, Inc.) (48 CFR 8.6). A Federal 
agency is currently required to acquire from FPI, on a sole-
source basis, any product of the type listed in the Schedule of 
Products published by FPI. In order to make a purchase from a 
source other than FPI, FAR 8.605 (Clearances) requires the 
buying agency to obtain FPI's authorization, referred to by FPI 
as a ``waiver.''
    Under FPI's current waiver procedures, the decision to 
grant a waiver is made unilaterally by FPI. FPI, rather than 
the buying agency, determines whether the FPI-offered product 
meets the buying agency's needs. Similarly, FPI, rather than 
the buying agency, determines if FPI's proposed delivery 
schedule meets the buying agency's needs. Finally, FPI, rather 
than the buying agency, determines the reasonableness of FPI's 
price. FPI's price must simply meet the statutory standard of 
``current market.'' This standard is met if FPI's offered price 
does not exceed the highest price offered to the Government for 
a comparable item, even if no actual sales have been made to 
the Government at that price.
    Under H.R. 1829, FPI will generally have to competitively 
win its contracts to provide products or services to Federal 
agencies. To enable FPI to adjust to the requirement that it 
obtain its contracts on a competitive basis, H.R. 1829 provides 
FPI with a 5-year transitional period to phase-out its sole-
source dealings with its Federal agency customers. Under the 
transitional authority, Federal agencies are authorized to 
contract with FPI on a non-competitive basis, subject to 
annually declining caps on the use of the transitional 
preferential contracting authority. During the first 
transitional year, FY 2005, Federal agencies may make 
noncompetitive awards to FPI in amounts not to exceed 90 
percent of FPI's total sales in FY 2002. The authorized 
aggregate levels of noncompetitive awards decrease to 85 
percent in FY 2006, to 70 percent in FY 2007, to 55 percent in 
FY 2008, and to 40 percent in the final transitional year, FY 
2009.
    During the transitional period, the bill requires the 
Attorney General to annually assess the impact of the phase-out 
on the number of inmates being employed by FPI and to determine 
whether such reductions, if any, ``present a significant risk 
of adverse effects on safe prison operation or public safety.'' 
If the Attorney General makes such a finding, he shall advise 
the Congress and make recommendations ``for additional 
authorizations of appropriations to provide additional 
alternative inmate rehabilitative opportunities and additional 
correctional staffing, as may be appropriate.''
    H.R. 1829 also contains permanent authority for a Federal 
agency to make a sole-source award of an individual contract to 
FPI, if the Attorney General determines that ``the contract 
award is necessary to maintain work opportunities otherwise 
unavailable at the penal or correctional facility at which the 
contract is to be performed to prevent circumstances that could 
reasonably be expected to significantly endanger the safe and 
effective administration of such facility.'' This provision is 
designed to be an institutional ``safety valve'' to protect 
correctional officers, other staff, and inmates. To prevent 
abuse, the determinations must be made on a contract-by-
contract basis and be supported by findings by the warden of 
the affected correctional facility.
    To further help FPI to maintain inmate work opportunities, 
H.R. 1829, for the first time, provides statutory authority for 
FPI to enter into a contract with a Federal contractor or 
subcontractor at any tier to produce products as a 
subcontractor or supplier in the performance of a Federal 
contract. The bill makes explicit that Federal prime 
contractors or subcontractors may not be compelled to use FPI 
as a subcontractor or supplier.
    H.R. 1829, when fully implemented, will generally require 
FPI to compete for its Federal business opportunities. However, 
the bill does not alter a broad array of advantages that FPI 
now enjoys in comparison to private sector firms. Inmate 
workers of FPI will continue to be paid at wage rates 
substantially less than the Federal minimum wage, prescribed by 
the Fair Labor Standards Act. Currently, FPI's highest wage is 
$1.15 per hour. The bill does not alter the current situation 
in which FPI's factory space is provided by the host 
correctional institution and is constructed at taxpayer 
expense. Similarly, FPI will continue to receive its utilities 
from the host institution. As a Government corporation, FPI has 
a preferential status to receive, without cost, industrial 
equipment deemed to be in excess of the needs of the various 
Federal departments and agencies, including the substantial 
quantities of industrial equipment returned to the Department 
of Defense by its contractors. As a Government-owned 
corporation, FPI is exempt from any Federal and State income 
tax, gross receipts tax, excise tax, or State and local sales 
taxes on any of its purchases. Finally, FPI has had a $20 
million line-of-credit from the U.S. Treasury on an interest-
free basis since 1988.
    H.R. 1829 builds upon the improvements made during the 
Committee's consideration of H.R. 1577 during the 107th 
Congress to expand inmates' access to alternative 
rehabilitative opportunities. The bill reflects the improved 
access to educational opportunities, both remedial and modern 
``hands-on'' vocational programs, which were added to H.R. 1577 
through a Conyers-Frank amendment. That amendment established 
an Enhanced In-Prison Educational and Vocational Assessment and 
Training Program and provided $ 75 million annually to fund it. 
The bill also authorizes a ``Cognitive Abilities Assessment 
Demonstration Program'' within the Federal Bureau of Prisons. 
Use of such assessment techniques in the special adult 
education setting has shown important results in better 
matching education and training programs with needs of the 
individual. H.R. 1829 retains the pre-release employment 
assistance program first added to H.R. 1577 at the suggestion 
of the AFL-CIO.
    H.R. 1829, for the first time, establishes statutory 
prioritization regarding authorized deductions from inmate 
wages. The provision places a increased focus on deductions 
associated with restorative justice, such as increased 
deductions for victim restitution, and to help the inmate make 
a successful return to society, such as authorization for so-
called ``gate funds,'' savings payable at the end of the term 
of incarceration. These provisions were first added to H.R. 
1577 based on testimony provided by the President of the 
Justice Fellowship, the public policy arm of Prison Fellowship 
Ministries.
    H.R. 1829 improves the process through which FPI's Board of 
Directors considers expansion proposals from FPI's career 
management staff. It improves, and makes independent, the 
process for evaluating the impact on the private sector of a 
staff-proposed expansion. It increases the opportunity for 
public comment on proposed expansions and assures that the 
Board will have direct access to the public comments received. 
Most importantly, the assessment and public comment process is 
applied to expansion proposals to offer a new service or a 
product as well as to expand substantially the production of a 
currently offered product or service. Finally, the bill 
provides clearer standards to guide the Board's deliberations 
regarding a staff-proposed expansion.
    H.R. 1829 substantially modifies the structure of FPI's 
Board of Directors. Currently, the Board is composed of six 
members, appointed by the President. Two are public members, 
one representing the Attorney General and the other 
representing the Secretary of Defense. Of the four private 
sector members, representing industry, labor, agriculture; and 
retailers and consumers.
    H.R. 1829 replaces the current board with an 11-member 
board, with three members representing business, three members 
representing labor, one member with special expertise in inmate 
rehabilitation techniques, one member representing victims of 
crime, one member representing inmate workers, and two 
additional members ``whose background and expertise the 
President deems appropriate.'' The restructuring of the Board 
was modeled after the Internal Revenue Service Oversight Board.
    Most importantly, the bill imposes a requirement that the 
Board deliberate and take actions in public and on the record, 
a fundamental change. Although repeatedly called upon to impose 
such a requirement upon itself by administrative action, no FPI 
Board of Directors has deemed it appropriate to do so.
    H.R. 1829 mandates improvements in the scope of the matters 
contained in FPI's annual report to the Congress. These 
improvements to provide more relevant information to facilitate 
oversight by the Congress. The bill also seeks to preserve 
public access to the annual report.
    H.R. 1829 contains a provision making explicit that the 
statutory prohibition on the sale of the results of inmate 
labor in interstate commerce or foreign commerce, 18 U.S.C. 
1761(a), applies equally to services as well as products. For 
65 years, this statute was consistently interpreted to prohibit 
the commercial sale of the results of inmate labor, products as 
well as services, although the statute does not explicitly 
mention services, which is not surprising given that a broad 
service economy did not exist in the 1930's.
    A statutory exception to the broad statutory prohibition 
was provided in 1979 when Congress established the Prison 
Industry Enhancement (PIE) Program, codified at 18 U.S.C. 
1761(c). Under the PIE Program, a State and local prison 
industry authorized to sell prison-made products and inmate-
furnished services, after receiving approval, referred to as 
``certification,'' from the Bureau of Justice Assistance within 
the Department of Justice (DOJ), for each individual project.
    Eager to provide services in the commercial market, FPI got 
a new interpretation of 18 U.S.C. 1761(a) in February 1998 
finding no statutory prohibition on the commercial sale of 
inmate furnished services. The new interpretation did not come 
in the usual form of a formal legal opinion from DOJ's Office 
of Legal Counsel, but in a legal memorandum from a special 
counsel in the Office of Enforcement Operations in DOJ's 
Criminal Division, which provides legal services to FPI and the 
Bureau of Prisons.
    This ``new'' interpretation provided FPI and the prison 
industries of the States and their local governments, authority 
to sell inmate-furnished services, either directly or in 
partnerships with private sector firms, without meeting the 
standards for PIE certification. Notable among the restrictions 
that could now be bypassed are the prohibition against 
displacement of non-inmate workers to provide jobs for inmate 
workers and the requirement to pay inmate workers providing 
products or services to the commercial market at rates 
comparable to wages being paid non-inmate workers of private 
firms providing the same types of products or services. Without 
the protection of a comparable wage requirement, with a floor 
of the minimum wage set by the Fair Labor Standards Act, 
private sector firms using non-inmate workers faced unfair 
competition from firms using inmate workers being paid inmate 
wages.
    When FPI announced its Commercial Services Market 
Initiative in August 1998, the business community and labor 
raised strong objections. The Subcommittee on Oversight and 
Investigations of the Committee on Education and the Workforce 
held a hearing on September 20, 2000. Efforts to persuade the 
Executive Office of the President to call for a legal review of 
the new interpretation of 18 U.S.C. 1761(a) and to impose a 
moratorium on any additional use by FPI have been ignored.
    A number of States have reasonably relied upon the new 
interpretation of 18 U.S.C. 1761(a) emanating from DOJ and 
begun offering inmate-furnished services to the commercial 
market, either directly or in partnership with private firms. 
Recognizing this, H.R. 1829, like the reported version of H.R. 
1577, contains a ``grandfathering'' provision, which permits 
the completion of any existing agreement with a private sector 
partner or gives a State program making direct sales a 2-year 
grace period, after which the activity can only be operated 
pursuant to a PIE Program certification.

                Background and Need for the Legislation

                          INMATE WORK PROGRAMS

    Prison systems at all levels use work opportunities to 
combat idleness and to impart basic work skills that contribute 
to an inmate's successful return to society upon release. In 
the Federal Bureau of Prisons (BOP), as in most State prison 
systems, the vast majority of inmates work at jobs directly 
related to the operation and maintenance of the correctional 
facility. Work assignments encompass the full gamut of 
activities providing basic services, such as kitchens, 
laundries, plumbing, and work repairs, performing carpentry, 
painting, and groundskeeping to help maintain the Federal 
correctional institution.
    A much smaller percentage of inmates have work assignments 
in prison industry programs, which assemble products or furnish 
services which are generally sold exclusively to governmental 
agencies. Within the BOP, only about 18 percent of the inmates 
work for FPI. The remaining 82 percent of the able-bodied 
inmates within BOP are engaged in institutional work 
assignments. It should be noted that the percentages of inmates 
employed by prison industry programs at the State and local 
levels are substantially lower than the percentage employed by 
FPI.
    Proponents of FPI often assert that participating in FPI 
helps reduce recidivism. The data underlying that assertion are 
drawn from the Post Release Employment Project (PREP) study. 
Since in 1983, BOP has conducted a on going study of the 
effects of vocational training and inmate work experiences on 
post-release success. The most recent analysis of the Post 
Release Employment Project (PREP) data covering 1984 through 
1987, issued in 1997, shows that work experiences result in a 
24% reduction in recidivism. What is infrequently cited is that 
same PREP data showed that vocational and remedial education 
programs have an result in a larger 33% reduction in 
recidivism.
    Recognizing the PREP study's finding regarding the 
superiority of vocational and remedial education to reduce 
recidivism, H.R. 1829 contains a broad provision to expand such 
programs within the Federal prison system. This provision was 
added to H.R. 1577 by a Conyers-Frank amendment in the 107th 
Congress.
    Further, the legislation supplements these programs with a 
demonstration program of cognitive ability assessment 
techniques which improve the application of educational and 
training resources to maximize the benefits to the recipients 
in this case Federal inmates. Such programs have a persuasive 
record of success in the special needs adult education setting.
    To further enhance the prospects of Federal inmates making 
a successful return to society, H.R. 1829 makes available pre-
release assistance to improve their prospects of finding and 
keeping a job upon release. Research has consistently shown 
that being able to find and maintain employment paying a 
liveable wage is central to avoiding a return to criminal 
activity and ultimately returning to prison.
Competition from Prison Industry Programs
    While prison industry programs at the State level presently 
employ only small percentages of able-bodied inmates, when 
added to the substantial Federal Government sales of FPI, 
prison industry programs are estimated to have generated total 
sales of almost $1.5 billion during 2001, according to 
statistics reported for 2002 by the National Correctional 
Industries Association (NCIA). These NCIA statistics do not 
include the sales of the prison industry programs operated by 
the Nation's jails.
    All of these sales by prison industry programs, Federal, 
State, and local, are potential Government business 
opportunities foreclosed to private sector firms, and their 
non-inmate workers. Yet, all of those foregone Government 
business opportunities were funded with the tax dollars of 
those workers and those businesses.
    During 2002, FPI had $678.7 million in ``sales'' to Federal 
agencies up from $583.5 million during 2001. With such Federal 
``sales,'' FPI would rank as the 32nd largest Federal 
contractor among the 100 largest Federal contractors listed in 
the annual report of the Federal Procurement Data Center, but 
FPI's ``sales'' are considered ``interagency transfers'' and 
not procurement contract awards that must be reported to the 
Federal Procurement Data System. To put FPI's Federal sales in 
context, FPI's Federal ``sales'' exceeded those of Exxon-Mobil 
Corporation and General Motors Corporation.
    During 2002, FPI operated a centrally-managed chain of 111 
factories located at 71 institutions across the Nation. At the 
end of 2002, FPI provided work assignments to 21,778 inmates. 
FPI offers over 250 broad categories of products and services 
through what FPI refers to as its eight ``Business Groups.'' 
They are: (a) the Clothing and Textiles Business Group; (b) the 
Electronics Business Group; (c) the Fleet Management and 
Vehicular Components Business Group; (d) the Graphics Business 
Group; (e) the Industrial Products Business Group; (f) Office 
Furniture Business Group; (g) the Recycling Business Group; and 
(h) the Services Business Group.
    FPI has been expanding its offerings by entering into 
contractual partnerships with private sector firms, who are 
able to market their products to Federal agencies on a non-
competitive basis under the authority of FPI's mandatory source 
status. Such contractual arrangements are helping FPI to 
improve the quality of the end-products being delivered to the 
Federal agencies and the timeliness of those deliveries.
    Such arrangements raise substantial questions regarding the 
amount of inmate labor actually represented in the products 
being furnished. In these situations, contract between FPI and 
its various contractual partners generally provides some 
indication of the amount of inmate labor. Most provide simply 
for some inmate assembly from complete kits furnished by the 
contractual partner.
    Somewhat mirroring the growth of the Federal inmate 
population, FPI's sales have grown exponentially since the mid-
1980's. FPI's sales were $29 million in 1960. They reached $117 
million in 1980. By 1985, they had grown to $240 million. FPI's 
sales grew to $339 million in 1990, while total Federal 
procurement expenditures began dropping. By 1995, FPI had grown 
to $459.1 million in sales. By 2000, FPI had sales of $546.3 
million. By the next year, FPI sales were $583.5 million.
    From the viewpoint of those supporting fundamental and 
comprehensive reform of FPI's preferential status within the 
Federal procurement system, growth in FPI sales simply 
diminishes Federal business opportunities for private sector 
firms and their non-inmate workers. Such diminished Government 
sales opportunities reduce work opportunities for their law-
abiding workers. FPI's unfair competition can be especially job 
threatening in the context of a ``specific product'' targeted 
for an FPI expansion, in which FPI may ultimately take 100 
percent of the Federal market.
Mandatory Source Status
    FPI's sales growth would be praiseworthy, if these contract 
opportunities were won competitively. They are not. Rather they 
are won because FPI has been granted extraordinary preferential 
treatment in dealing with its Federal agency ``customers'' as a 
mandatory source.
Preferential Status Regarding Contract Performance
    In addition to being able to take contract opportunities on 
a non-competitive basis, FPI's authorizing statute also 
empowers FPI, rather than its Federal agency ``customers'' to 
determine the adequacy of FPI's own contract performance. Under 
FPI's statute, if any dispute as to ``price, quality, 
character, or suitability'' of an FPI-furnished product arises 
it must be referred to a high-level arbitration panel comprised 
of the President (delegated to the Director of the Office of 
Management and Budget), the Attorney General, and the 
Administrator of General Services. According to the General 
Accounting Office (GAO), this Arbitration Board had not met 
since the 1930's, until it was reactivated at the request of 
FPI in 1998. At that time, the jurisdiction of the arbitration 
board was focused exclusively on reviewing appeals of a denial 
of a waiver request. FPI refers to the arbitration board as the 
``Waiver Review Panel.''
Unique Pricing Standard
    FPI's authorizing statute requires that the price FPI 
charges its Federal agency customers cannot exceed a ``current 
market price.'' The statute and the FAR do not define current 
market price. Rather FPI operates on the basis of a 1931 
Arbitration Board decision that says that FPI's price meets the 
statutory ``current market price'' standard, if the price FPI 
intends to charge its Federal agency customer does not exceed 
the highest price at which a comparable product was offered to 
the Government. FPI the determines the comparability of 
products as well as the time-period for which any price survey 
it may conduct remains valid.
Over-Pricing as the Source of FPI's Asserted Self-sufficiency
    Those advocating reform of FPI's authorizing statute assert 
that this unique standard permits FPI to charge prices that 
exceed prices that an agency customer could obtain for 
comparable or higher quality products furnished by private 
sector vendors with better performance records of timeliness 
and compliance with specifications. FPI routinely asserts that 
it is wholly self-sufficient based on its sales. Proponents of 
reform respond that FPI's asserted self-sufficiency is founded 
upon its ability to overcharge its agency customers for 
products of lesser quality insulated from any means of 
effective challenge by the aggrieved buying agency.
    With regard to over-pricing, corroboration is provided by a 
1991 report by the DOD Inspector General and GAO reports in 
1993 and 1998. On October 11, 1991, the DOD IG issued Audit 
Report No. 92-005, DOD Procurements from Federal Prison 
Industries. The DOD IG reviewed a sample of FPI contracts, over 
a 7-year period (FY84 to FY90) to supply electronic and 
electrical cables to DOD. The audit report found overpricing in 
89% of the contracts that averaged 15%.
    On October 5, 1998, the DOD IG issued Audit Report No. 99-
001, Defense Logistics Agency Procurements from Federal Prison 
Industries, Inc. The DOD IG reviewed 1,786 contracts awarded 
during FY96 and FY97 for items, 87% of the textiles, for which 
DLA made purchases from FPI and commercial sources. Even for 
textiles, items for which FPI is especially competitive due to 
its lower labor costs, FPI's prices were higher than commercial 
vendors in 42% of the contracts reviewed.
    On July 7, 1993, GAO issued Report No. GGD 93-51R, entitled 
FPI Systems Furniture. In accessing FPI pricing for systems 
furniture, the GAO compared FPI's pricing with the prices 
available from commercial vendors through the GSA's Multiple 
Award Schedule Program. FPI's prices were higher than the 
offered prices of 9 of the 11 commercial systems furniture 
vendors under the MAS Program. FPI's prices averaged 15% higher 
than the prices of the three commercial vendors whose sales in 
1992 aggregated to 60% of the systems furniture sales under the 
MAS Program. Further, the three most successful commercial 
suppliers were not simply ``low-end product'' vendors.
Late Deliveries
    FPI's captive Federal agency customers have consistently 
complained about the timeliness of FPI's deliveries. On July 
31, 1998, GAO issued FEDERAL PRISON INDUSTRIES: Delivery 
Performance Improving But Problems Remain (GAO/GGD-98-118; June 
30, 1998) that provides current support for such criticism.
Quality Problems
    While FPI asserts that it only provides quality products to 
its Federal agency customers, on time, and at fair prices, 
these assertions are routinely challenged by those supporting 
fundamental and comprehensive reform of FPI's authorizing 
statute. A 1998 report by GAO, FEDERAL PRISON INDUSTRIES: 
Limited Data Available on Customer Satisfaction (GAO/GGD-98-50; 
March 16, 1998) calls into question FPI's ability to 
substantiate their assertions of being a quality contractor. 
GAO found that ``FPI lacks sufficient data to support any 
overall conclusions about whether Federal customers who buy and 
use its products and services are satisfied with their 
timeliness, price, and quality. FPI's management systems are 
not designed to systematically collect and analyze Federal 
customers' views about its products and services.''
    With regard to those who question FPI's assertion that it 
only deliver to its Federal agency customers products that 
meets their specifications, persuasive corroboration is 
provided in a comprehensive 1992 report by the DOD Inspector 
General, Quality Assurance Actions Resulting from Electronic 
Component Screening, Report No. 92-099. During a review of DOD 
quality assurance programs for accessing the quality of 
electronic components and cables furnished to DOD during FY 88-
90, the DOD IG found that among the top-20 suppliers of 
electronic components, FPI ranked 8th in terms of sales, but 
first in number of Product Quality Deficiency Reports (PQDRs) 
identified, 106 out of 170. Among all the contractors 
furnishing electronic components and cables to DOD during the 
review period, the DOD IG identified the contractors with most 
PQDRs. Three FPI factories were among the top-15 poor 
performers, with 100 PQDRs out of 245, or 40.1% of the total. 
The seriousness of these quality deficiencies by the DOD IG is 
amplified when it is recognized that many contracting officers 
don't even bother to cite FPI for quality deficiencies, since, 
in practical terms, FPI determines the validity of any quality 
delinquency report made against any FPI product.
    The Federal Prison Industries Competition in Contracting 
Act of 2003 thoroughly restructures the relationship between 
FPI and its Federal agency customers. The bill empowers them to 
use competitive contracting procedures to obtain ``best value'' 
for the taxpayer dollars being expended. Similarly, H.R. 1829 
assures that the buying agencies will be able to avail 
themselves of generally-applicable contract administration 
tools currently available for use with respect to any private 
sector supplier. Finally, such a fundamental restructuring of 
the relationship between the Federal agencies and FPI will 
provide opportunities for private sector firms, and their non-
inmate workers, to compete for Federal contracting 
opportunities funded with their tax dollars.

                                Hearings

    No hearings were held on H.R. 1829in this Congress. 
Hopwever, H.R. 1829 is substantially identical to H.R. 1577, as 
reported by the Committee in the 107th Congress. The 
Committee's Subcommittee on Crime, Terrorism, and Homeland 
Security held a hearing on H.R. 1577 on April 26, 2001.

                        Committee Consideration

    On July 25, 2003, the Committee met in open session and 
ordered favorably reported the bill H.R. 1829 with an amendment 
by voice vote, a quorum being present.

                         Vote of the Committee

    In compliance with clause 3(b) of Rule XIII of the Rules of 
the House of Representatives, the Committee notes that the 
following votes occurred during the Committee's consideration 
of H.R. 1829.

                            GREEN AMENDMENT

    Mr. Green of Wisconsin offered an amendment which was 
defeated by a roll-call vote of 8 ayes to 19 noes. The Green 
amendment would have empowered the Attorney General to suspend 
FPI's transition to competition by making certain findings.

                                                   ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Coble.......................................................                              X
Mr. Smith.......................................................
Mr. Gallegly....................................................
Mr. Goodlatte...................................................              X
Mr. Chabot......................................................              X
Mr. Jenkins.....................................................                              X
Mr. Cannon......................................................                              X
Mr. Bachus......................................................              X
Mr. Hostettler..................................................                              X
Mr. Green.......................................................              X
Mr. Keller......................................................                              X
Ms. Hart........................................................                              X
Mr. Flake.......................................................                              X
Mr. Pence.......................................................                              X
Mr. Forbes......................................................                              X
Mr. King........................................................                              X
Mr. Carter......................................................                              X
Mr. Feeney......................................................                              X
Mrs. Blackburn..................................................                              X
Mr. Conyers.....................................................                              X
Mr. Berman......................................................
Mr. Boucher.....................................................
Mr. Nadler......................................................                              X
Mr. Scott.......................................................              X
Mr. Watt........................................................                              X
Ms. Lofgren.....................................................              X
Ms. Jackson Lee.................................................              X
Ms. Waters......................................................              X
Mr. Meehan......................................................
Mr. Delahunt....................................................
Mr. Wexler......................................................
Ms. Baldwin.....................................................
Mr. Weiner......................................................
Mr. Schiff......................................................                              X
Ms. Sanchez.....................................................                              X
Mr. Sensenbrenner, Chairman.....................................                              X
                                                                 -----------------------------------------------
    Total.......................................................              8              19
----------------------------------------------------------------------------------------------------------------

                            WATERS AMENDMENT

    Ms. Waters offered an amendment which was defeated on a 
roll-call vote of 5 ayes to 22 noes. The amendment would have 
mandated a minimum wage of $2.50 for inmates with work 
assignments with Federal Prison Industries, Inc.

                                                   ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Coble.......................................................                              X
Mr. Smith.......................................................                              X
Mr. Gallegly....................................................
Mr. Goodlatte...................................................                              X
Mr. Chabot......................................................                              X
Mr. Jenkins.....................................................                              X
Mr. Cannon......................................................                              X
Mr. Bachus......................................................                              X
Mr. Hostettler..................................................                              X
Mr. Green.......................................................                              X
Mr. Keller......................................................                              X
Ms. Hart........................................................                              X
Mr. Flake.......................................................                              X
Mr. Pence.......................................................                              X
Mr. Forbes......................................................                              X
Mr. King........................................................                              X
Mr. Carter......................................................                              X
Mr. Feeney......................................................                              X
Mrs. Blackburn..................................................                              X
Mr. Conyers.....................................................              X
Mr. Berman......................................................
Mr. Boucher.....................................................
Mr. Nadler......................................................
Mr. Scott.......................................................                              X
Mr. Watt........................................................              X
Ms. Lofgren.....................................................              X
Ms. Jackson Lee.................................................              X
Ms. Waters......................................................              X
Mr. Meehan......................................................
Mr. Delahunt....................................................
Mr. Wexler......................................................
Ms. Baldwin.....................................................
Mr. Weiner......................................................
Mr. Schiff......................................................                              X
Ms. Sanchez.....................................................                              X
Mr. Sensenbrenner, Chairman.....................................                              X
                                                                 -----------------------------------------------
    Total.......................................................              5              22
----------------------------------------------------------------------------------------------------------------

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of Rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of Rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of Rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of Rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 1829, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 17, 2003.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1829, the Federal 
Prison Industries Competition in Contracting Act of 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Lanette J. 
Walker, who can be reached at 226-2860.
            Sincerely,
                                       Douglas Holtz-Eakin.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member
H.R. 1829--Federal Prison Industries Competition in Contracting Act of 
        2003.

                                SUMMARY

    The proposed legislation would amend the laws that 
authorize the Federal Prison Industries (FPI), a Government-
owned corporation that produces goods and services for the 
Federal Government with prison labor. Under current law, 
Federal agencies are required to purchase products from FPI if 
products are available to meet the agencies' needs and the cost 
would not exceed current market prices. Such products include 
office furniture, textiles, vehicle tags, and fiber optics. 
Under the proposed legislation, this requirement would be 
reduced over the next several years, and the share of the 
Federal market that FPI holds for the products and services it 
provides would be limited to 20 percent and 5 percent, 
respectively.
    CBO estimates that implementing H.R. 1829 would cost $587 
million over the 2004-2008 period, subject to appropriation of 
the necessary amounts. The bill also would affect direct 
spending by FPI, but CBO estimates that net changes in direct 
spending would be insignificant for each year. Major elements 
of that cost estimate are summarized below.
    The legislation would direct FPI to establish a program 
that would produce products that would be donated to nonprofit 
organizations. It would authorize the appropriation of $7 
million a year for fiscal years 2004 through 2008 to carry out 
the new donation program. Assuming the appropriation of the 
authorized amounts, CBO estimates that implementing this 
program would cost about $35 million over the 2004-2008 period. 
All costs of the donation program would be subject to 
appropriation action.
    Section 10 would authorize the Attorney General to 
establish a Federal Enhanced In-Prison Vocational Assessment 
and Training Program in Federal institutions and would 
authorize the appropriation of $75 million each year beginning 
in 2004 for such training. Assuming the appropriation of the 
specified amounts, CBO estimates that implementing this new 
program would cost $366 million over the 2004-2008 period.
    As FPI operations decline under the legislation, additional 
security costs paid for with appropriated funds would be 
incurred. CBO estimates that the Federal Bureau of Prisons 
would initially need about 300 security officers to guard the 
inmates that would no longer be working at FPI facilities as a 
result of the legislation. (Some security costs are paid for 
now out of FPI's direct spending.) We estimate that 
implementing H.R. 1829 would cost $21 million in 2004 and $177 
million over the 5-year period for the salaries and benefits of 
security officers, assuming the appropriation of the necessary 
amounts.
    H.R. 1829 contains an intergovernmental mandate as defined 
in the Unfunded Mandates Reform Act (UMRA), but CBO estimates 
the cost to State, local, and tribal governments for complying 
with this mandate would be insignificant and thus well below 
the threshold established in the act ($59 million in 2003, 
adjusted for inflation). This bill contains no new private-
sector mandates as defined in UMRA.

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    The estimated budgetary impact of the amendment is shown in 
the following table. The cost of this legislation falls within 
budget function 750 (administration of justice).

                 By Fiscal Year, in Millions of Dollars
------------------------------------------------------------------------
                                        2004   2005   2006   2007   2008
------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO APPROPRIATION
FPI Donation Program
  Authorization Level                      7      7      7      7      7
  Estimated Outlays                        7      7      7      7      7
 Enhanced Vocational Assessment and
 Training
  Authorization Level                     75     75     75     75     75
  Estimated Outlays                       66     75     75     75     75
 Cognitive Abilities Assessment
 Demonstration Program
  Authorization Level                      3      3      3      0      0
  Estimated Outlays                        2      3      3      1      0
 Additional Discretionary Security
 Costs
  Estimated Authorization Level           24     30     37     43     49
  Estimated Outlays                       21     30     36     42     48
   Total Changes
    Estimated Authorization Level        109    115    122    125    131
    Estimated Outlays                     96    115    121    125    130
------------------------------------------------------------------------

    CBO assumes that the proposed legislation would be enacted 
near the beginning of fiscal year 2004 and that the authorized 
amounts will be appropriated for each year. We estimate that 
implementing the programs authorized in section 10 of H.R. 1829 
would cost $410 million over the 2004-2008 period. In addition, 
CBO estimates that implementing H.R. 1829 would cost the 
Federal Bureau of Prisons $21 million in 2004 and about $177 
million over the 5-year period for additional security officers 
to supervise inmates that would no longer be working as a 
result of enacting this legislation. The costs to implement the 
bill's provisions would be subject to appropriation of the 
necessary amounts.
FPI Donation Program
    The legislation would authorize the Attorney General to 
establish a new FPI program in Federal institutions that, 
subject to appropriation of the necessary amounts, would 
produce goods and services to be donated to nonprofit 
organizations instead of being offered for purchase to the 
Federal Government. It would authorize the appropriation of $7 
million in fiscal year 2004 and $35 million over the 2004-2008 
period to operate the new donation program in Federal 
institutions. Costs would include inmate and civilian salaries, 
raw materials, maintenance, and other expenses to convert 
manufacturing facilities to produce products desirable to 
nonprofit organizations.
Enhanced In-Prison Vocational Assessment and Training
    Section 10 would authorize the Attorney General to 
establish a Federal Enhanced In-Prison Vocational Assessment 
and Training Program in Federal institutions and would 
authorize the appropriation of $75 million each year after 2003 
for such program. Federal institutions currently participate in 
vocational assessment and training programs, and we assume that 
the program that would be authorized by the amendment would be 
an expanded version of the current program. Assuming the 
appropriation of the specified amounts, CBO estimates that the 
enhanced program would cost $366 million over the 2004-2008 
period to increase the number of inmates who participate in the 
training and to expand the services provided by the program.
Cognitive Abilities Assessment Demonstration Program
    Section 10 also would authorize the appropriation of $3 
million in fiscal years 2004, 2005, and 2006 to the Bureau to 
establish the Cognitive Abilities Assessment Demonstration 
Program in 12 Federal institutions. The project would assess 
inmate cognitive abilities and perceptual skills to determine 
what rehabilitative activities would be most successful for the 
project's participants. CBO estimates that this provision would 
cost $9 million over the 2004-2008 period, assuming the 
appropriation of the authorized amounts.
Additional Discretionary Security Costs
    The bill would restrict the portion of the Federal market 
for goods and services that FPI can serve and reduce the 
requirement for Federal agencies to purchase such goods and 
services from FPI. Based on information from the Department of 
Justice (DOJ) and major Federal customers of FPI, we expect 
that FPI's total sales to the Federal Government would decrease 
under the bill by 20 percent of projected sales in 2004 and 
that such sales would continue to decline--eroding by 40 
percent of anticipated sales by 2008. Because of the reduction 
in Federal sales, CBO expects there would be a corresponding 
reduction in the number of inmates employed by FPI.
    Because the demand for FPI goods and services is expected 
to decline under H.R. 1829, FPI would provide security for 
fewer inmates during work hours. The costs of FPI operations, 
including security, are directly financed from the sale of its 
goods and services. No discretionary costs are incurred to 
provide security to prisoners participating in FPI programs 
during work hours.
    Based on information from DOJ about the number of prison 
security personnel needed to guard the prison population, CBO 
estimates that the Federal Bureau of Prisons would need to 
increase discretionary spending to pay for 300 security 
officers to supervise prisoners no longer supervised by FPI 
during the work day. We estimate the number of guards required 
would grow to 600 by 2008 as the operations of FPI decline. We 
estimate that implementing H.R. 1829 would cost $21 million in 
2004 and $177 million over the 5-year period for the salaries 
and benefits of such officers, assuming the appropriation of 
the necessary amounts.
Changes in FPI Direct Spending
    The legislation would limit the portion of the Federal 
market for any product or service that FPI can provide to the 
Government to 20 percent and 5 percent, respectively. For 
example, FPI provides 94 percent of all mail carrier bag repair 
for the U.S. Postal Service. The legislation would prevent FPI 
from providing more than 5 percent of that service. In 
addition, it would gradually reduce the requirement for Federal 
agencies to purchase FPI products and services. Based on 
information from the DOJ, and major Federal customers of FPI, 
we expect that FPI's total sales to the Federal Government 
would decrease by 20 percent of projected sales in 2004 and 
that such sales would continue to decline--eroding by 40 
percent of anticipated sales by 2008.
    The cost to Federal Prison Industries to manage and produce 
products for the Federal Government is currently funded 
entirely by collections from the agencies that purchase FPI 
products. Those current collections and FPI's spending are 
considered direct spending. CBO estimates that the total amount 
collected by FPI would decrease over the 5-year period under 
the proposed legislation as agencies procure fewer FPI 
products. But that reduction in collections would be offset by 
a reduction in the cost to produce such products. Therefore, 
CBO estimates that enacting this legislation would result in no 
significant net change in direct spending for each year.

        ESTIMATED IMPACT ON STATE, LOCAL, AND TRIBAL GOVERNMENTS

    H.R. 1829 contains an intergovernmental mandate as defined 
in UMRA because it would require work programs in State and 
local prisons that provide services in interstate commerce to 
obtain Federal certification in order to continue operating 
after September 2005 or the end of their current contract. CBO 
estimates that the administrative cost to obtain this 
certification would be insignificant and well below the 
threshold established in UMRA ($59 million in 2003, adjusted 
annually for inflation). This bill would impose no other 
significant costs on State, local, or tribal governments.

                 ESTIMATED IMPACT ON THE PRIVATE SECTOR

    This bill contains no new private-sector mandates as 
defined in UMRA.

                         ESTIMATE PREPARED BY:

Federal Costs: Lanette J. Walker (226-2860)
Impact on State, Local, and Tribal Governments: Melissa Merrell 
    (225-3220)
Impact on the Private Sector: Paige Piper/Bach (226-2940)

                         ESTIMATE APPROVED BY:

Peter H. Fontaine
Deputy Assistant Director for Budget Analysis

                         Committee Response to 
               Congressional Budget Office Cost Estimate

    The Committee disagrees with the cost estimate prepared by 
the Congressional Budget Office (CBO) relating to the reported 
text of H.R. 1829. This response will address matters that the 
cost estimate fails to address and matters in which CBO's 
conclusions regarding the impact of the bill are not supported 
by the provisions of the bill as reported.
    First, the CBO cost estimate fails to acknowledge the 
savings that can be expected from the use of competitive 
procurement procedures required by the bill rather than sole-
source contracting procedures that federal agencies now must 
use in buying from Federal Prison Industry (FPI).
    Use of competitive procurement techniques to obtain goods 
and services, rather than relying on non-competitive contract 
awards to a sole-source supplier, have consistently resulted in 
procurement savings of between 10 and 30 percent. This standard 
was first established through the substantial work done by the 
U.S. General Accounting Office (GAO) during the mid-1980s in 
response to the case of egregious spare parts overpricing 
confronted by the Department of Defense. The benefits of 
competitive acquisition techniques have been consistently 
validated through subsequent work by GAO and the various 
Inspectors General (IG), most notably the DOD IG. Some of this 
subsequent work suggests savings at the higher end of the 
range.
    The Committee understands that CBO has highlighted the 
benefits of competitive acquisition techniques in estimates 
related to various legislative proposals relating to reforms of 
the Federal procurement process. Similarly, the Committee 
understands that CBO has highlighted the benefits of a 
competitive procurement in other work. Inexplicably, the CBO 
cost estimate with respect to H.R. 1829 failed to do so.
    In FY 2002, FPI had sales of $678.7 million, up from $583.5 
in FY 2001. Such sales make FPI the 32d largest contractor to 
the Federal Government. All of FPI sales to the Federal 
agencies are on a non-competitive basis.
    H.R. 1829 empowers FPI's currently captive Federal agency 
customers to regularly use competitive procurement techniques. 
Based on FPI's sales in FY 2002 that means that potential 
savings in acquisition costs in the range of $6.9 million to 
$203.6 are predictable and should have been acknowledged by 
CBO.
    Further, competitive procurement techniques have been 
consistently shown to improve the quality of the products being 
offered. They, too, should have been acknowledged.
    Competitive procurement techniques also improve the 
timeliness of deliveries by vendors who know that their past 
performance records will have a significant impact on the 
likelihood of winning future business. Timely deliveries can 
result in savings through cost avoidance. If a Federal agency 
does not have to extend on a month-to-month basis the lease on 
its current space because late deliveries preclude the 
occupancy of its new leased space, the agency avoids paying 
taxpayer money for space that cannot be occupied. Such cost 
avoidances, too, are real savings and should have been, at 
least, acknowledged.
    Next, the CBO makes a series of conclusions regarding the 
impact of H.R. 1829 that are directly contradicted by express 
provisions of the bill, ass reported, or ignore other 
provisions that provide alternative inmate work opportunities 
or rehabilitative opportunities that also combat idleness and 
better prepare inmates for a successful return to society.
    The cost estimate concludes that FPI operations will 
``decline under the legislation'', necessitating the hiring of 
additional correctional officers ``to guard the inmates that 
would nolonger be working at FPI facilities as a result of the 
legislation.'' Specifically, CBO asserts that FPI's sales will decline 
due to the enactment of H.R. 1829 by 20 percent in FY 2004, the year of 
enactment. CBO goes on to assert that such reduced sales will require 
the hiring of 300 additional correctional officers in FY 2004 at an 
estimated cost of $21 million. The CBO-forecasted decline in FPI 
Federal sales and the resulting projected need for additional 
correctional officers in FY 2004 projected by CBO have no basis. They 
are contradicted by the provisions of the reported bill. Under Section 
20 (Effective Date and Applicability) of the bill, there is no change 
to FPI's status as a mandatory source to its captive Federal agency 
customers during the year following the date of enactment. FY 2004 is 
devoted to the promulgation of modifications to the Government-wide 
Federal Acquisition Regulation (FAR) and associated rule-making by the 
FPI Board of Directors, with ample opportunity for public comment, as 
prescribed by Section 18 (Implementing Regulations and Procedures).
    The CBO cost estimate goes on to assert that FPI's sales 
will continue to decline, ``eroding by 40 percent'' by FY 2008. 
CBO offers two reasons to support its forecasted 40 percent 
decline in the FPI sales.
    First, the cost estimate erroneously asserts that H.R. 1829 
would ``restrict the portion of the federal market for goods 
and services that FPI can serve'', to 20 percent and 5 percent 
respectively. The CBO estimate specifically cites as an example 
the fact that FPI provides 94 percent of the mail bag repair 
for the U.S. Postal Services (USPS). CBO then states that ``the 
legislation would prevent FPI from providing more than 5 
percent of that service.''
    Again, the plain text of the bill, as reported, contradicts 
the basis for CBO's assertion. As introduced, the bill defined 
the term ``reasonable share of the market,'' specifying that a 
20 percent market share for a specific product and 5 percent 
market share for a specific service. As introduced, the bill 
precluded the FPI Board of Directors from authorizing FPI sales 
of a specific product or a specific service in amounts in 
excess of a ``reasonable share of the market''. To address the 
example cited by CBO, the Chairman, joined by the Ranking 
Democratic Member, offered an amendment that provided 
flexibility to the Board to authorize FPI sales of specific 
products and services at amounts in excess of market shares of 
20 percent and 5 percent respectively. Such higher sales could 
be authorized when requested by the buying agency, such as the 
USPS. The provision also provided a broader ``for good cause 
shown'' standard, that is restricted only by the necessity of 
being approved by eight members of the eleven-member Board 
rather than a simple majority.
    Second, the CBO erroneously asserts that H.R. 1829 would 
``reduce the requirement for federal agencies to purchase goods 
and services from FPI.'' Again, the text of the bill 
contradicts CBO's assertion.
    H.R. 1829 places an affirmative responsibility on a buying 
agency to solicit an offer from FPI whenever it has a 
requirement to purchase a product or service authorized to be 
offered by sale by FPI and listed in its catalog of offerings. 
Private sector vendors to the Federal Government must find 
their contracting opportunities on their own. FPI's offer is 
considered under the same evaluation criteria as a product or 
service offered by a private sector offeror. Award of a 
contract to the offeror, whether FPI or a private-sector 
offeror, is made after being determined by the buying agency's 
contracting officer to represent the ``best value'' to the 
taxpayer on the basis of the offered-purchase price, past 
performance evaluation, and other price-related selection 
criteria.
    What is changed by H.R. 1829 is that FPI must now offer a 
product or service that represents the ``best value'' for the 
taxpayer dollars being spent and to fully and timely perform 
itscontractual obligations as required of all other Federal 
contractors. As CBO notes, under FPI's existing statute, Federal 
agencies are by statute required to purchase products offered by FPI 
that ``meet their requirements'', are ``available'' to meet those 
needs, and are offered at prices that do ``not exceed a current market 
price''.
    Under the implementing FAR regulations that essentially 
created FPI's status as a mandatory source of supply and FPI's 
procedures and practices regarding the exercise of that status, 
FPI, rather the buying agency, makes the key buying decisions. 
FPI, rather than the buying agency, determines whether the FPI-
offered product meets the buying agency's needs. FPI, rather 
than the buying agency, determines if FPI's proposed delivery 
schedule meets the buying agency's needs. FPI, rather than the 
buying agency, determines the reasonableness of FPI's price.
    Today, FPI's price meets ``current market'' standard, if 
FPI's offered price does not exceed the highest price offered 
to the Government for a comparable item. There is no 
requirement that actual purchases have been made by a Federal 
agency at that price.
    The amount of FPI's sales to the various Federal agencies, 
like the sales volume of any private sector contractor, will be 
determined by the extent that FPI is able to provide a high 
quality product, when needed, at the best price, all tested in 
the crucible of competition.
    If FPI's sales fall, it confirms that FPI's captive Federal 
agency customers have been forced by FPI's mandatory source 
status to accept products and contract performance at prices 
that are not even an approximation of ``best value''. In 
essence, these currently captive federal agencies have been 
involuntarily subsidizing FPI's operations with the taxpayer 
dollars appropriated for the conduct of their missions on 
behalf of the public.
    The CBO cost estimate also ignores that H.R. 1829 provides 
a five-year period during which FPI can phase-out its sole 
dealings with its federal agency customers and adjust to the 
requirement that it obtain its contracts on a competitive 
basis. Under the transitional authority, Federal agencies are 
authorized to contract with FPI on a non-competitive basis, 
subject to annually declining caps on the use of the 
transitional preferential contracting authority. During the 
first transitional year, FY 2005, Federal agencies may make 
noncompetitive awards to FPI in amounts not to exceed 90 
percent of FPI's total sales in FY 2002. The authorized 
aggregate levels of noncompetitive awards decreases to 85 
percent in FY 2006, to 70 percent in FY 2007, to 55 percent in 
FY 2008, and 40 percent in the final transitional year, FY 
2009.
    This transitional authority raises additional substantial 
questions regarding the validity of CBO's dire estimates 
regarding the loss of FPI sales during the period FY 2004 
through FY 2008. Obviously, the CBO estimates about additional 
correctional staff that will be required are without basis if 
their estimate regarding declining sales lacks a credible 
basis.
    The CBO cost estimate fails to even acknowledge the 
potential to provide alternative inmate work opportunities in 
performing work for non-profit organizations. Inmates derive no 
benefit from the corrosive manner in which FPI is currently 
able to compel its captive Federal agencies to purchase 
products offered by FPI. Inmates benefit equally in terms of 
reduced idleness and rehabilitation whether they are doing work 
for non-profit organizations or doing traditional industrial 
work that has to be sold in the same competitive economic 
environment in which they will have to operate upon release.
    Similarly, CBO has chosen to ignore the benefits of the 
alternative inmate rehabilitative opportunities provided by the 
bill. Such programs help combat idleness as well. Further, the 
Bureau of Prisons' own Post Release Employment Project (PREP) 
study confirms that inmates participating in focused remedial 
and vocational educational programs are 32 percent less likely 
to return to prison than those who participate in traditional 
industrial programs who are 24 percent less likely to 
recidivate.
    Finally, the CBO cost estimate erroneously asserts that 
H.R. 1829 establishes a new intergovernmental mandate and it 
does not. Rather, it clarifies that long-existing law, which 
has been called into question by an erroneous legal opinion, 
still applies. There is nothing new in that clarification.
    Section 1761(a) of Title 18, United States Code, prohibits 
the results of inmate labor from being sold in interstate or 
foreign commerce. This prohibition applies equally to inmates 
incarcerated by State and local governments and the Federal 
Bureau of Prisons.
    Section 1761(c) of Title 18, first enacted in 1979, 
provides the principal exception to the general prohibition on 
the commercial sale of the results of inmate labor contained in 
18 U.S.C. 1761(a). It authorizes the Prison Industry 
Enhancement (PIE) Program under which a State-sponsored prison 
industry program may be authorized to sell in the commercial 
market, either directly or through a private-sector partner, 
products produced, or services furnished, by inmates 
incarcerated by the State or one of its units of local 
government. Each proposed PIE project must apply for PIE 
certification from the Bureau of Justice Assistance (BJA) at 
the Department of Justice. Application is voluntary. Obtaining 
PIE Certification requires the PIE-certified program to make 
quarterly reports to BJA during the term of the program's 
operation.
    These reports are compiled for BJA by the National 
Correctional Industries Association (NCIA). A review of those 
NCIA reports reflects that programs in which State or local 
inmates are furnishing services for sale in the commercial 
market have sought and been granted PIE certification, since 
the PIE Program's expansion to all 50 States, which was 
statutorily authorizedin 1990.
    As previously described, Section 7 (Clarifying Amendment 
Relating to Services) of H.R. 1829 makes explicit that the 
statutory prohibition on the sale of the results of inmate 
labor in interstate commerce or foreign commerce contained in 
18 U.S.C. 1761(a) applies equally to services as well as 
products. For 65 years, this statute was consistently 
interpreted to prohibit the commercial sale of inmate-furnished 
services as well as inmate-produced products.
    In February, 1998, FPI obtained a ``new'' interpretation of 
18 U.S.C. 1761(a) finding no statutory prohibition on the 
commercial sale of inmate furnished services. The ``new'' 
interpretation did not come in the usual form of a formal legal 
opinion from DOJ's Office of Legal Counsel, but in a legal 
memorandum from a special counsel in the Office of Enforcement 
Operations in DOJ's Criminal Division, which provides legal 
services to FPI and the Bureau of Prisons.
    This ``new'' interpretation provided FPI and the prison 
industries of the States and their local governments, authority 
to sell inmate-furnished services, either directly or in 
partnerships with private sector firms, without meeting the 
standards for PIE certification. Notable among the restrictions 
that could now be bypassed are the prohibition against 
displacement of non-inmate workers to provide jobs for inmate 
workers and the requirement to pay inmate workers providing 
products or services to the commercial market at creates 
comparable to wages being paid non-inmate workers of private 
firms providing the same types of products or services. Without 
the protection of a comparable wage requirement, with a floor 
of the minimum wage set by the Fair Labor Standards Act, 
private sector firms using non-inmate workers faced unfair 
competition from firms using inmate workers being paid inmate 
wages.
    A number of States have reasonably relied upon the new 
interpretation of 18 U.S.C. 1761(a) emanating from DOJ and 
began offering inmate-furnished services to the commercial 
market, either directly or in partnership with private firms. 
Recognizing this, Section 7 contains a ``grandfathering'' 
provision, which permits the completion of any existing 
agreement with a private sector partner or gives a state 
program making direct sales a 2-year grace period. The 
provision makes explicit that after the expiration of the 
specified ``grace periods,'' a State-sponsored prison industry 
program wishing to offer for commercial sale inmate furnished 
services do so pursuant to the existing requirements of the PIE 
Program.
    Making explicit the continuing application of the 
prescriptions of 18 U.S.C. 1761(c), and its implementing 
procedures on this provision, CBO appears to base its assertion 
that H.R. 1829 establishes a new intergovernmental mandate on 
this provision Committee respectfully disagrees.
    For the foregoing reasons, the Committee believes the 
analysis provided in the CBO cost estimate suffers from several 
fundamental flaws that undermine its conclusions.

                    Performance Goals and Objectives

    In compliance with clause 3(c)(4) of Rule XIII of the Rules 
of the House of Representatives, the Committee makes the 
following statement of performance goals and objectives.
    H.R. 1829 provides authorizations of appropriations for 
programs relating to improving the prospects for Federal 
inmates to make a successful return to society thus reducing 
the current levels of recidivism within the Federal Bureau of 
Prisons. Section 10(a)(3) provides $75 million annually, 
beginning in FY 2004, to support the Enhanced In-Prison 
Educational and Vocational Assessment and Training Program, 
authorized by section 10(a)(1). Section 10(b)(4) provides $7 
million for each of the fiscal years 2004 through 2008 in 
support of the inmate work opportunities in support of not-for-
profit entities authorized by section 10(b) principally to pay 
the wages of inmates performing work for such entities on a 
non-reimbursable basis. Section 10(c)(2) provides $3 million 
annually in fiscal year 2004 through 2006 to support the 
Cognitive Abilities Assessment Demonstration Program 
established by section 10(c)(1)(A). Various provisions of the 
bill provide for on-going monitoring and assessment of the 
reforms contemplated by the legislation by the Attorney General 
as well as other external monitoring under the direction of the 
Comptroller General of the United States. Taken together, these 
monitoring requirements as well as the enhanced statutorily-
mandate annual reports to the Congress regarding FPI's 
activities, impacts, and benefits will provide the Congress 
with adequate information to conduct effective oversight of the 
various improvements made by H.R. 1829.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of Rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in article I, section 8, of the Constitution.

               Section-by-Section Analysis and Discussion


Sec. 1. Short Title; Table of Contents

    Subsection (a) of this section establishes the bill's 
citation as the ``Federal Prison Industries Competition in 
Contracting Act of 2003.''
    Subsection (b) sets forth a table of contents of headings 
of the various sections of the bill.

Sec. 2. Government-wide Procurement Policy Relating to Purchases From 
        Federal Prison Industries

    Section 2 contains a revised section 4124 of title 18. 
Subsection (a) of revised section 4124, makes explicit that a 
purchase of a product or service from Federal Prison 
Industries, Inc. (FPI) by a Federal agency shall be purchased 
through a procurement made on a competitive basis, except to 
the extent that an other than competitive award is expressly 
authorized.
    Revised section 4124 is intended to change the mandatory 
source relationship between a Federal agency and FPI and 
realign that relationship to mirror the business relationship 
that exists between a Federal agency and a private sector 
supplier and eliminate the revised section 4124 also makes 
explicit that services obtained from FPI by a Federal agency 
must be obtained through procurement contracts.
    The proposed substitution of the terms ``Federal 
departments and agencies,'' defined in 18 U.S.C. 5, for the 
terms ``Federal departments, agencies, and all other 
institutions of the United States'' is not intended to alter 
the overall reach of the current statute.
    New subsection (b) of revised section 4124 addresses the 
solicitation of offers from FPI by the various Federal agencies 
and the subsequent award of a contract to FPI on either a 
competitive or sole-source basis.
    New paragraph (1) of subsection (b) places an affirmative 
responsibility on the various Federal agencies to solicit an 
offer from FPI when making a purchase, above $ 2,500, for any 
product or service authorized by FPI's Board of Directors to be 
offered for sale by FPI and listed in it's Schedule of 
Products.
    New paragraph (2) of subsection (b) requires the use of 
competitive procedures for the solicitation and award of the 
contract, unless the use of other than competitive procedures 
is authorized by paragraph (3) or by section 303(c) of the 
Federal Property and Administrative Services Act of 1949 (41 
U.S.C 253(c)). The contract shall be awarded to FPI, if the 
contracting officer determines that FPI's offer represents the 
``best value.''
    New paragraph (3) of subsection (b) requires the non-
competitive negotiation of a contract award to FPI, if the 
Attorney General makes a determination that: (i) there is no 
reasonable expectation that FPI will win the contract award 
competitively, and (ii) the inmate work opportunities provided 
by the contract are necessary ``to prevent circumstances that 
could reasonably be expected to significantly endanger the safe 
and effective administration'' of the correctional facility at 
which the contract is to be performed.
    New paragraph (4) of subsection (b) makes explicit the 
authority of the contracting officer to evaluate FPI's offer 
with respect to whether: (i) FPI's offered product or service 
will meet the agency's requirements; (ii) timely performance by 
FPI can reasonably be expected; and (iii) the price offered by 
FPI represents a current market price. These authorities of the 
contracting officer apply equally whether the contract is for a 
product or a service, is to be awarded after a competition or 
on a sole-source basis, unless the award is made pursuant to 
new paragraph (3) of subsection (b).
    New paragraph (4) of subsection (b) is intended to make 
explicit that any product or service offered by FPI must comply 
with the full range of performance and specifications that 
would be demanded of a product or service furnished by a 
private sector offeror. For example, FPI or its product or 
service would have to comply with any pre-qualification 
requirements, such as a QML (Qualified Manufacturers List) or 
QPL (Qualified Products List). Similarly, design specifications 
(relating to quality of materials used or manner of 
manufacture) or performance specifications (relating to 
durability, serviceability, or interoperability) would have to 
be met. Further, products furnished by FPI should be required 
to conform to the same commercial or governmental standards and 
tests required of products furnished by private sector vendors. 
Finally, any product furnished by FPI should carry a warranty 
that affords the Federal Government protection equal to that 
provided the Federal Government by a private sector vendor. 
FPI's current status as a preferred source of supply should not 
diminish, in any degree, its responsibility to furnish to a 
Federal agency a quality product or service that meets the 
agency's needs to the same extent as a product or service 
furnished by a private sector supplier.
    New paragraph (4) of subsection (b) is also intended to 
make of explicit the contracting officer's authority regarding 
the time of performance being offered by FPI. Timely 
performance is frequently as important as the quality of the 
product or service being furnished. Under the new provision the 
contracting officer may independently evaluate promises of 
timely performance being made by FPI. Pursuant to section 1091 
of Public Law 103-355, the ``Federal Acquisition Streamlining 
Act of 1994,'' and implementing FAR coverage, a contracting 
officer is now required to accord substantial weight to each 
offeror's history of timely performance with respect to prior 
contracts, especially for the product or service being offered, 
when making the decision to award a new contract. Such an 
evaluation on the basis of ``past performance'' now applies 
equally to FPI.
    New subsection (b)(4) is further intended to make explicit 
the contracting officer's authority to make an independent 
determination as to whether the price being offered by FPI 
represents a current market price. This applies equally with 
regard to whether FPI is offering a product or service. 
Currently, the term ``current market price'' is not defined in 
FPI's authorizing statute or in the Government-wide Federal 
Acquisition Regulation (FAR) provisions pertaining to purchases 
from FPI. Section 17(2) of the bill adds such a definition. The 
proposed definition includes explicit recognition of the 
contracting officer's authority to employ generally available 
price analysis or cost analysis techniques to determine whether 
FPI's offered price meets the standard.
    The provisions of revised section 4124, making explicit a 
contracting officer's authority in dealing with FPI, are 
intended to overturn a sweeping legal opinion by the Assistant 
Attorney General for the Office of Legal Counsel. Issued on 
September 13, 1993, the opinion, Application of the Federal 
Acquisition Regulations to Procurement from Federal Prison 
Industries, unequivocally holds that FPI is not subject to the 
Federal Acquisition Regulation (FAR), except the FAR provisions 
relating to FPI as a mandatory source of supply. A Federal 
agency cannot compel FPI, like a private contractor, to meet 
the agency's contractual terms and conditions regarding: (i) 
quality of product delivered or services furnished; (ii) the 
reasonableness of offered prices (or require the justification 
of any price increases); or (iii) delivery schedules for 
products (or performance schedule for a service).
    The legal opinion was issued at FPI's request to respond to 
a 1991 report by the Inspector General of the Department of 
Defense. In DOD Procurements from Federal Prison Industries, 
(Audit Report No. 92-005; October 11, 1991), overpricing, 
averaging 15 percent, was identified in 48 of 54 contracts 
(89%) awarded to FPI by various DOD buying centers for 
electronic and electrical cables during a 7-year period, FY 
1984 through FY 1990. Although the contracts were awarded on a 
non-competitive basis, FPI did not provide the current, 
accurate, and complete cost data or pricing data needed by the 
contracting officer to determine whether the Government is 
being charged a fair and reasonable price. Further, FPI was 
found to lack the accounting systems to generate reliable cost 
or pricing data. DOD recommended that FPI refund the over-
pricing.
    The legal opinion specifically held that ``DOD lacks the 
necessary contracting freedom to make FPI accept the FAR's 
constraints.'' ``[A]s a matter of law, it [FPI] retains 
ultimate statutory authority to set its own prices, subject to 
arbitration'' by a statutorily-specified board composed of the 
President (delegated to the Director of the Office of 
Management and Budget), the Attorney General, and the 
Administrator of General Services, which according to the GAO 
last met in the 1930's.
    New paragraph (5) of subsection (b) requires that the 
Attorney General's determination made pursuant to subsection 
(b)(3) must be supported by two specific findings. First, the 
warden of the correctional institution containing the factory 
scheduled to perform the work required by the contract must 
provide substantiated findings that without the work the ``safe 
and effective administration of such facility'' would be 
``significantly endangered.'' Second, FPI's chief operating 
officer must provide substantiated findings regarding why FPI 
``does not expect to win the contract on a competitive basis.''
    The requirements proposed in new section 4124(b)(5) mirror 
the current requirements applicable to the Department of 
Justice in order to make a sole-source purchase under the 
authority of section 303(c)(7) of the Federal Property and 
Administrative Services Act of 1947 (41 U.S.C. 253(c)(7)), 
which requires the Attorney General to make a personal 
determination that a contract award cannot be made 
competitively, but is ``necessary in the public interest.''
    New paragraph (6) of subsection (b) provides that the 
buying agency may resume its generally applicable contract 
solicitation and award procedures, if the Attorney General has 
not authorized a sole source negotiation pursuant to new 
section 4124(b)(3), within 30 days.
    It is anticipated that any notice of a contracting 
opportunity published prior to the release of a solicitation 
for competitive offers will specify that an offer is required 
to be solicited from FPI and that the Attorney General may 
determine that the contracting opportunity must be negotiated 
non-competitively with FPI.
    New paragraph (7) of subsection (b) provides further 
authority for a Federal agency to make a purchase from FPI on 
an other than competitive basis when the buying agency 
determines that the needed product or service is currently only 
available from FPI.
    New subsection (c) of revised section 4124 makes explicit 
that a competitive offer timely received from FPI will always 
be considered, even if the competition is restricted, such as 
in the case of a so-called ``small business set-aside,'' a 
competition exclusively among small firms conducted pursuant to 
section 15(a) of the Small Business Act (15 U.S.C. 644(a)), and 
its implementing regulations.
    New subsection (d) of revised section 4124 codifies the 
fundamental principle that FPI is required to perform its 
contractual obligations to the same extent as any private 
sector contractor. Attainment of FPI's prison management and 
inmate-rehabilitation objectives do not authorize FPI to 
furnish non-conforming products or services, perform late, or 
unilaterally increase prices to the detriment of Federal agency 
customers who require timely performance of the services or 
delivery of products to attain their missions and program 
objectives.
    It is intended that the implementation of this provision 
through the Government-wide Federal Acquisition Regulation 
(FAR) will afford to an agency contracting officer 
administering a contract with FPI the same array of contract 
administration techniques, authorities, and remedies available 
when administering a contract with a private contractor. 
Disputes between the administrative contracting officer and FPI 
regarding whether FPI's performance conforms to the terms of 
the contract would be subject to appeal rights granted to FPI 
pursuant to new subsection (e) of revised section 4124.
    New subsection (e) of revised section 4124 is intended to 
eliminate the existing bias in favor of FPI in the resolution 
of disputes arising during the negotiation of a sole-source 
contract award to FPI or during the subsequent performance of 
the contract by FPI.
    Under current section 4124(b), and the FAR provisions 
implementing the statute, any dispute relating to the ``price, 
quality, character, or suitability of such [FPI] products shall 
be arbitrated by an arbitration board consisting of the 
President (delegated to the Director of the Office of 
Management and Budget), the Attorney General, and the 
Administrator of General Services. ``Their decision shall be 
final and binding upon all parties.'' This statutory disputes 
resolution provision gives FPI total dominance over its Federal 
agency customers in practical business terms.
    First, if a contracting officer seeks to obtain a FPI-
offered product from an alternative source, the contracting 
officer must obtain FPI's permission through a waiver process. 
FPI will grant the waiver only if the contracting officer 
proves to FPI's satisfaction that: (i) the FPI-offered product 
does not meet the agency's requirements; (ii) FPI's delivery 
schedule will not meet the agency's mission requirements, or 
(iii) FPI's price does not represent a ``current market 
price.''
    FPI's waiver process has no statutory basis. However, it 
discourages contracting officers from scrutinizing FPI's offers 
since disagreements are settled by FPI. Only with respect to 
FPI must a Government buyer meet the seller's standards, and, 
in the event of a disagreement, live by the seller's decisions 
regarding what performance the Government may expect under the 
contract.
    FPI is accorded the same superior position with respect to 
disputes arising during the performance of the contract. FPI's 
decision regarding the adequacy of its performance prevails 
unless overturned by a decision of the arbitration board. Like 
the waiver process during the contract-award phase, FPI's 
statutorily-sanctioned dominance makes futile a contracting 
officer's demand for timely performance or fully conforming 
products or services. Except with respect to FPI, a contracting 
officer's final decision regarding contract performance is 
otherwise binding with respect to a private sector contractor, 
unless over-turned on appeal by an administrative board of 
contract appeals or a court-forums available for the 
independent review of such contract performance disputes.
    New paragraph (1) of subsection (e) specifies that the 
decision of a contracting officer regarding the award of a 
contract to FPI or relating to the performance of a contract 
awarded to FPI shall be final unless the decision is overturned 
pursuant to new procedures regarding the disposition of an 
appeal made by FPI. The intent of the proposed amendments is to 
eliminate any appeal processes other than those specified in 
paragraphs (2) and (3) of revised section 4124(e).
    New paragraph (2) of subsection (e) authorizes FPI's Chief 
Executive Officer to appeal to the agency head an adverse 
decision of the agency contracting officer relating to the 
award of a contract to FPI pursuant to new section 4124(b)(4). 
The decision of the departmental secretary or agency head shall 
be final.
    Such a final resolution by the departmental secretary or 
agency head mirrors current procedures under the Small Business 
Act authorizing an appeal by the Administrator of the Small 
Business Administration relating to a decision by an agency 
contracting officer that a specific contracting opportunity is 
not suitable for award to a small business through a 
competition restricted to small firms.
    It is intended that a protest regarding an adverse decision 
relating to a contracting officer's decision not to make an 
award to FPI will be handled through the agency protest 
procedures established and conducted pursuant to FAR Part 
33.103 (48 C.F.R. 33.103). Authority for FPI to file a protest 
with the General Accounting Office was specifically not 
granted.
    New paragraph (3) of subsection (e) gives FPI the right to 
have an adverse decision by the agency contracting officer 
regarding the adequacy of FPI's contract performance subjected 
to an independent review.
    FPI can have an adverse decision decided through one of the 
various forms of alternative disputes resolution provided in 
subchapter IV of title 5 which were made permanent by Pub. L. 
No. 104-320, the ``Administrative Dispute Resolution Act of 
1996.'' Such alternative means include mediation or binding 
arbitration by an independent neutral party. To assure the 
impartiality of the selected neutral, both parties must agree 
to the use of an alternative disputes resolution technique.
    FPI has the right to appeal an adverse contracting 
officer's decision relating to FPI's performance of a contract 
to one of the independent administrative boards of contract 
appeals, already established pursuant the Contract Disputes Act 
of 1978 (41 U.S.C. 601, et seq.), to resolve contract 
performance disputes between an agency and a private 
contractor. Thirteen boards currently exist. Certain 
departments and agencies with very substantial procurement 
activities, such as the Department of Defense and the General 
Services Administration, maintain their own boards. Other 
agencies, with very limited procurement activities, have 
entered into agreements to have their contract performance 
disputes handled by another agency's board.
    Given the intra-governmental character of the dispute 
between FPI and one of its agency customers, an appeal to the 
Court of Federal Claims or the United States District Court is 
expressly not made available to FPI. Similarly, the decision of 
the independent board of contract appeals is final.
    New subsection (f) of revised section 4124 requires each 
Federal agency and department reporting to the Government-wide 
Federal Procurement Data System (FPDS) to report all 
acquisitions from Federal Prison Industries in the same manner 
it reports purchases from private sector vendors in excess of 
the simplified acquisition threshold as defined in section 
4(11) of the Office of Federal Procurement Policy Act (41 
U.S.C. 403(11), $100,000. Section 2901 of the ``Crime Control 
Act of 1990,'' Pub. L. No. 101-647, amended 18 U.S.C. 4124 to 
provide for the reporting of all purchases from FPI. This 
provision is intended to make explicit the reporting format and 
level of detail.
    Until the 1990 amendment, there was no requirement that 
purchases from FPI be reported to the FPDS by the various 
Executive agencies because the purchases are considered to be 
non-reportable interagency transfers rather than contracts. The 
absence of full FPDS data on Federal agency purchases from FPI 
has made virtually unworkable market-share determinations 
relating to the FPI Board's consideration of proposals to 
approve new products to be offered for sale by FPI or to expand 
production of currently approved products, pursuant to current 
section 4122(b). The validity of the market share analyses 
prepared by FPI staff are generally questioned by the private 
vendor community because of the inability to compare agency 
purchases from private sector sources and those made from FPI.
    New subsection (g) of revised section 4124 requires FPI to 
publish and keep current its UNICOR Schedule of Products which 
lists the products and services it offers.

Sec. 3. Public Participation Regarding Expansion Proposals by Federal 
        Prison Industries

    This section amends section 4122(b) of title 18, relating 
to the procedures for approving the addition of a new product 
or service to be offered for sale by Federal Prison Industries 
(FPI) or the expansion of production or performance of a 
currently approved product or service. The amendments will: (i) 
conform the public participation processes used by FPI's Board 
with those currently used by a similar Federal preference 
program for purchases from rehabilitative work centers 
employing the blind and severely handicapped; (ii) clarify the 
analytical process to determine if an adverse private-sector 
impact will result from the approval of an espansion proposal; 
and (iii) distinguish more clearly between the analytical and 
advisory responsibilities of FPI's career staff and the 
decision-making authorities of the FPI Board.
    New paragraph (4) of amended section 4122(b) would apply 
the public notice and comment requirements of the 
Administrative Procedure Act to the procedures used by FPI's 
Board when considering a new product or service for authorized 
sale or any significant expansion of the production or 
performance of a currently approved product or service. These 
APA requirements, currently apply to almost identical decisions 
made by the Committee for Purchase from the Blind and Other 
Severely Handicapped.
    New paragraph (5) of amended section 4122(b) specifies the 
analytical requirements that must accompany an expansion 
proposal from FPI's career management staff. Rather than being 
conducted by FPI as is presently done, new section (b)(5) would 
require that the impact analysis be conducted by an independent 
entity--either an interagency team or a private contractor.
    The interagency team would consist of representatives of 
the Department of Labor, the Department of Commerce, and the 
Federal Procurement Data Center, led by a representative of the 
Small Business Administration. If the impact analysis is to be 
conducted by a private contractor, the selection of the 
contractor and the administration of the contract is to be 
handled by one of the statutorily designated Federal agencies, 
operating as an independent executive agent of the FPI Board. 
To maintain independence, the participation of FPI staff would 
be limited to submitting to the buying agency contracting 
officer a proposed statement of work for the contractor.
    New subparagraph (C) of revised section 4122(b)(5) 
specifies the matters to be considered in conducting the impact 
analysis relating to the expansion proposed by FPI staff.
    New subparagraph (D) of revised section 4122(b)(5) sets 
forth limitations on the authority of the FPI Board to 
authorize or expand the production of a product or service.
    First, the provision would preclude the Board from 
approving a proposal for a new product (or continued sale of a 
previously authorized product) unless the product is a 
``prison-made product.'' Prison industry programs are 
justified, in part, on the basis that they keep inmates 
occupied through labor-intensive work.
    Second, the provision would preclude the Board from 
approving a proposal for a new product or expansion with 
respect to products that are ``import-sensitive products'' or 
which are produced by an industry with chronic high 
unemployment. ``Import-sensitive products'' are designated by 
the Department of Commerce for other statutory purposes. The 
Department of Labor currently identifies such industries for 
other statutory purposes.
    Third, the provision would preclude the Board from 
approving a proposal to authorize inmates to perform a service 
if such work would provide inmate workers with access to 
personal or financial information about individual private 
citizens. It would also preclude inmates performing a service 
that would give them access to geographic data regarding the 
location of surface and subsurface infrastructure providing 
communications, water and electrical power distribution, 
pipelines for the distribution of natural gas, bulk petroleum 
products, and other commodities, as well as other utilities.
    Fourth, the provision would preclude the Board from 
authorizing FPI from furnishing construction services to 
Federal agencies. The provision adopts the definition of 
``construction'' that has been a part of the Government-wide 
Federal Acquisition Regulation for more than two decades. 
Construction services, almost always provided on the owner's 
property, are manifestly unsuitable for performance by prison 
labor. The provision would not preclude Federal prisoners from 
continuing to provide maintenance, repair, or even minor 
alteration of the prison facilities in which they are 
incarcerated.
    New paragraph (6) of amended section 4122(b) places in a 
separate paragraph the ``outreach'' mechanisms specified in 
section 4122(b)(4) of current law, to emphasize that they are 
``supplemental'' techniques to broaden participation by known 
interested parties.
    New paragraph (7) of amended section 4122(b) specifies in a 
separate paragraph the requirement in section 4122(b)(4) of 
current law that the FPI staff's final recommendation to FPI's 
Board specify how the staff's initial production proposal was 
modified in response to public comments received and the 
supporting analysis for those modifications.
    New paragraph (8) of amended section 4122(b) requires the 
FPI Board to consider and act upon a recommendation to 
authorize new or increased production of products or services 
at a meeting open to the public.
    New paragraph (9) of amended section 4122(b) provides the 
Board authority to authorize the donation rather than sale of 
products produced by FPI factories. Such a decision by the FPI 
Board would be subject to the analytical, public participation, 
and other safeguards applicable to a decision to authorize 
production a new product or expandsion.
    New paragraph (10) of amended section 4122(b) empowers the 
FPI Board to authorize the donation of products or services. 
Implementation of this authority is specified in section 10(b) 
of the bill.
    New paragraph (10)(C) empowers the Board to authorize an 
expansion that could be expected to result in FPI's share of 
the Federal market exceeding a ``reasonable share of the 
market,'' as that term is defined in section 17(6) of the bill. 
Such authority could be used if such an expansion was 
specifically requested by the Federal agency having a need for 
the product or service or is justified for ``other good 
cause.'' Eight members of FPI's eleven-Member Board would have 
to support an expansion above a reasonable share of the market 
justified on the basis of ``other good cause.''

Sec. 4. Transitional Mandatory Source Authority

    Subsection (a) provides authority to the various Executive 
agencies to make purchases from FPI on a non-competitive basis 
during a 5-year transition period. This transitional period is 
intended to provide a period during which FPI adjusts to the 
requirement that it obtain its business opportunities on a 
competitive basis rather than a non-competitive basis through 
its status as a mandatory source. Subsequent subsections 
provide direction to the buying agencies regarding the use of 
this special authority.
    Subsection (b) makes clear that the buying agency, rather 
than FPI, is empowered to determine the product offered by FPI 
meets the needs of the buying agency. The FPI-offered product 
is expected to meet the same standards and specifications as 
the buying agency would apply to a product being offered by a 
private sector supplier. Similarly, the buying agency is 
empowered to determine if timely performance by FPI can be 
reasonably expected before entering into a sole-source 
negotiation with FPI. Finally, the buying agency need not make 
a sole-source award to FPI if the buying agency determines that 
the award price will exceed a ``fair and reasonable price.''
    Subsection (c) makes explicit that Subpart 15.4 (Contract 
Pricing) of the Government-wide Federal Acquisition Regulation 
(FAR) shall guide the buying agency's determination of ``fair 
and reasonable price.''
    Subsection (d) makes explicit that, despite the award of 
the contract pursuant to the special sole-source authority, FPI 
remains responsible for fully performing its contractual 
obligations. Performance disputes between the buying agency and 
FPI are to be resolved pursuant to 18 U.S.C. 4124(e)(3), as 
added by section 2 of the bill.
    Subsection (e) imposes a number of limitations on the 
buying agencies' use of the transitional sole-source authority 
during the 5-year ``phase-out'' of FPI's reliance on contracts 
awarded on a sole-source basis pursuant to FPI's mandatory 
source status. In general, these limitations are intended to 
assure that FPI's sales expand on the basis of competitive 
awards and by taking advantage of this transitional sole-source 
authority.
    First, contract awards to FPI through use of the 
transitional sole-source authority cannot exceed a specified 
percentage of FPI's total sales during the base year of fiscal 
year 2002. During the first year of the 5-year transitional 
period, fiscal year 2005, use of the special sole source 
contracting authority cannot aggregate to more than 90 percent 
of FPI's total sales during the base year. The percentage 
decreases to 85 percent in fiscal year 2006, to 70 percent in 
fiscal year 2007, to 55 percent in fiscal year 2008, and to 40 
percent during the final transition year, fiscal year 2009.
    Second, use of the special transitional sole-source 
contract authority cannot result in sales by any of FPI's eight 
business groups that are in excess of the total sales for each 
such business group during the base year. Similarly, the use of 
the transitional authority is prohibited from increasing FPI's 
sales for a specific product over its total sales of such 
products during the base year. Because FPI, rather than the 
buying agency, will have access to information regarding the 
dollar value of various awards made to FPI pursuant to the 
transitional authority, the implementing FAR provision relating 
to this provision should empower the buying agency's 
contracting officer to obtain an appropriate compliance 
certification from FPI prior to contract award.
    The limitations with respect to specific products or 
business groups may be waived in the event that the buying 
agency has modified the design specification of one or more 
specific products, which has increased the unit cost of 
production. FPI's compliance certification associated with the 
implementing FAR provisions should require FPI to identify the 
source and specify the cost associated with design-
specification based deviations.
    Subsection (f) specifies this special 5-year transition 
sole-source authority may not be used by an buying agency on or 
after October 1, 2009. The provision also makes clear that its 
use is contingent upon issuance of the essential implementing 
FAR provisions, pursuant to section 18 of the bill.
    Subsection (g) defines terms relating to this section.
    Subsection (h) requires the Attorney General to monitor 
FPI's transition from obtaining work exclusively through sole-
source awards pursuant to its mandatory source authority to 
obtaining them from Federal procurement contracts obtained on a 
competitive basis. Specifically, the subsection requires the 
Attorney General to make a determination regarding whether the 
limitations on the use of the special transitional sole-source 
authority has resulted, or is likely to result, in a 
substantial reduction in inmate work opportunities with FPI and 
``whether such reductions, if any, present a significant risk 
of adverse effects on safe prison operations or public 
safety.'' Such a determination and finding is to be made 
annually, 60 days prior to the end of each of the five fiscal 
years of the transition period.
    If the Attorney General finds a significant risk of adverse 
effects on either safe prison management or public safety, the 
Attorney General is required to advise Congress. In advising 
Congress, the Attorney General is required to make 
recommendations for additional funding to provide additional 
alternative inmate rehabilitative opportunities and additional 
correctional staffing, as may be appropriate.

Sec. 5. Authority To Perform as a Federal Subcontractor

    Subsection (a) of this section provides, for the first 
time, explicit statutory authority for FPI to perform as a 
subcontractor or supplier to private-sector firm performing a 
Federal contract as a prime contractor or a subcontractor at 
any tier. This provision was included to provide FPI a clear 
path to the inmate work opportunities that are available from 
producing products for the Federal subcontract market.
    FPI's authorizing statute is silent with respect to its 
authority to act as a subcontractor or supplier. At various 
times during the 1990's, proposals were advanced to grant FPI 
specific authority to operate as a subcontractor. Section 
4122(a) only specifically authorizes FPI ``to produce 
commodities for consumption in such institutions or for sale to 
the departments of agencies of the United States, but not for 
sale to the public in competition with private enterprise.''
    FPI currently acts as a subcontractor to a number of major 
prime contractors (or major subsystem subcontractors) 
furnishing equipment to the Department of Defense. FPI also 
provides inmate-furnished services to these firms.
    At various times, FPI has claimed an inherent authority to 
operate as a subcontractor derived from 18 U.S.C. 4124(a). When 
challenged by the Department of Justice Inspector General, FPI 
cited the authority granted by a World War II-era Attorney 
General's opinion (40 Op. Atty Gen. 207 (1942)). Entitled 
``Procurement of War Materials from Federal and State 
Prisons,'' it was issued on May 6, 1942 by Attorney General 
Francis Biddle in response to an inquiry from President 
Franklin D. Roosevelt regarding ``whether industrial facilities 
at the prisons of the United States can be utilized in the 
production of essential war materials,'' despite the 
prohibition of the Hawes-Cooper Act of 1920, relating to 
selling convict-made goods in interstate or foreign commerce.
    Given the critical need to maximize the Nation's total 
productive capacity for the War effort, Attorney General Biddle 
found that FPI, and the various States prison industry 
programs, could operate as a subcontractor. Subsequently, on 
June 20, 1942, Assistant Solicitor General Oscar Cox wrote to 
the Chairman of the War Production Board further clarifying the 
authority granted by the opinion of the Attorney General. In 
pertinent part, he found that a prison industry program could 
function as a subcontractor or supplier only if ``there is no 
other source of supply readily available to him [the Government 
prime contractor] on the open [commercial] market.
    Given long-prevailing competitive market conditions among 
subcontractors on Federal contracts, it is highly unlikely that 
this explicit limitation on the World War II authority could be 
met today. Further, the authority cited by FPI was based on the 
Nation's exigent productions needs during the Second World War.
    Subsection (b) makes explicit that exercise of the 
authority to perform as a subcontractor or supplier on a 
Federal contract shall not result, either directly or 
indirectly, in the sale in the commercial market of a product 
or service resulting from the labor of Federal inmate workers 
in violation of 18 U.S.C. 1761(a). A Federal contractor or 
subcontractor using FPI to perform a Federal contract to 
furnish a commercial product is required to have in place 
management procedures to prevent the introduction of an inmate-
produced product into the commercial market.
    Subsection (c) makes explicit that the use of FPI as a 
subcontractor or supplier is to be a voluntary business 
decision of the Federal prime contractor or subcontractor. It 
explicitly prohibits imposing on a Federal prime contractor or 
subcontractor, directly or indirectly, any requirement to make 
use of FPI, its products, or services.

Sec. 6. Inmate Wages and Deductions

    This section provides explicit statutory authority for the 
FPI Board to prescribe the rates of hourly wages to be paid 
inmates with work assignments at FPI. Similarly, it makes 
explicit the authority of the Director of the Federal Bureau of 
Prisons to specify the hourly wages for inmates with 
institutional and other work assignments other than with FPI.
    The provision requires a review of inmate wage rates, both 
those for FPI and others, on not less than a biannual basis. 
Such reviews are expected to result in increases in inmate 
wages, recognizing that just compensation is a core element of 
the work ethic that such work assignments seek to develop as a 
necessary preparation for a successful return to society. 
Similarly, the provision requires that the wages earned be paid 
in the name of the inmate. Finally, the provision provides 
explicit statutory authorization to establish a savings 
account, often referred to as a ``gate fund,'' payable to the 
inmate upon release.
    The section also establishes a statutory priority for 
deductions that are to be taken from wages earned. Enhanced 
priority is given to deductions for the payment of restitution 
to the victims of the inmates crime. A increased allocation 
rate for this purpose is specified in furtherance of the 
concepts of restorative justice.
    The provision also contemplates that the inmate may have 
deductions from wages taken for the purpose of maintaining 
contact with the inmate's family during the term of 
incarceration. Travel and even telephone costs can be 
substantial, especially if the inmate is incarcerated a long 
distance from where the inmate's family resides.

Sec. 7. Clarifying Amendment Relating to Services

    Subsection (a) of this section makes explicit that the 
statutory prohibition on the sale of the results of inmate 
labor in interstate commerce or foreign commerce, codified at 
18 U.S.C. 1761(a), applies equally to services as well as 
products. For 65 years, this statute was consistently 
interpreted to prohibit the commercial sale of the results of 
inmate labor, products as well as services. Section 1761(a) 
does not include the word ``service,'' which is not surprising 
given that a broad service economy did not exist at the time of 
enactment in the 1930's. However, it seems implausible that a 
provision, enacted during the Great Depression, to protect 
workers against unfair competition from low-cost prison labor 
would have been intended to afford no protection to workers 
providing services in the commercial market.
    A statutory exception to the broad statutory prohibition 
was provided in 1979 when Congress established the Prison 
Industry Enhancement (PIE) Program, codified at 18 U.S.C. 
1761(c). Under the PIE Program, a State and local prison 
industry program may be authorized to sell prison-made products 
and inmate-furnished services, after receiving approval, 
commonly referred to as ``certification,'' from the Bureau of 
Justice Assistance for each individual project.
    FPI sought and obtained a new interpretation of 18 U.S.C. 
1761 (a) in February 1998. This interpretation provided FPI, 
and the prison industries of the States and their local 
governments, authority to sell inmate-furnished services, 
either directly or in partnerships with private sector firms, 
without meeting the standards for PIE certification. Among the 
restrictions associated with the PIE Program that could now be 
bypassed is the prohibition against displacement of non-inmate 
workers to provide jobs for inmate workers. Similarly, there 
would no longer be any requirement to pay inmate workers 
providing services to the commercial market at rates comparable 
to wages being paid non-inmate workers of private firms 
providing the same types of services. Without the protection of 
a comparable wage requirement, with a floor of the minimum 
wage, private sector firms using non-inmate workers were faced 
unfair competition from firms using inmate workers being paid 
inmate wages.
    Subsection (b) of this section provides a 
``grandfathering'' provision, to provide relief to State prison 
industry programs that reasonably relied upon the new 
interpretation of 18 U.S.C. 1761(a) emanating from DOJ and 
began offering inmate-furnished services to the commercial 
market. First, the provision permits the completion of an 
agreement between a private sector firm and a State or local 
prison industry program, for whatever term of years is 
specified in their agreement on October 1, 2002. Similarly, it 
permits a State program making direct sales to continue until 
September 30, 2005, after which the activity can only be 
operated pursuant to a PIE Program certification.
    Subsection (c) makes explicit that any inmate work program 
operated by a State or a local jurisdiction of a State may 
continue to provide inmate labor to furnish services for sale 
in the commercial market if such program has obtained 
certification pursuant to the PIE Program.

Sec. 8. Conforming Amendment

    This section provides FPI with explicit statutory authority 
to offer services to the various Federal departments and 
agencies. Presently, FPI's authorizing statute only 
specifically addresses the sale of products.

Sec. 9. Rules of Construction Relating to Chapter 307

    This section adds a new section 4130 to chapter 307 of 
title 18, which establishes a series of rules of construction 
for such chapter. First, it would make explicit that no inmate 
has a right to a work assignment with FPI or the payment any 
particular wage except as provided by law or regulation. Next, 
the provision makes explicit that no inmate worker has the 
status of an employee for the purposes of any law or 
regulation. Finally, the new section makes explicit that 
nothing in chapter 307 establishes any cause of action against 
the United States by or on behalf of any inmate.

Sec. 10. Providing Additional Rehabilitative Opportunities for Inmates

    H.R. 1829 builds upon the improvements made during the 
Committee's consideration of H.R. 1577 during the 107th 
Congress to expand inmates' access to alternative 
rehabilitative opportunities. The bill reflects the improved 
access to educational opportunities, both remedial and modern 
``hands-on'' vocational programs, which were added to H.R. 1577 
through a Conyers-Frank amendment establishing an Enhanced In-
Prison Educational and Vocational Assessment and Training 
Program and providing $75 million annually to fund it. The bill 
also authorizes a ``Cognitive Abilities Assessment 
Demonstration Program'' within the Federal Bureau of Prisons. 
H.R. 1829 retains the pre-release employment assistance program 
first added to H.R. 1577 at the suggestion of the AFL-CIO.

Sec. 11. Restructuring the Board of Directors

    This section fundamentally restructures FPI's governing 
Board of Directors. It replaces the current 6-member Board, 
unchanged since 1934, with an eleven-member Board. The Board's 
members would continue to be appointed by the President, but 
not be subject to Senate confirmation.
    The current six-member Board has two public members and 
four private sector members. One of the public members 
represents the Attorney General and the other represents the 
Secretary of Defense. Of the four private sector members, one 
represents industry, one represents labor, one represents 
agriculture and one represents retailers and consumers.
    Under this section, the new 11-member Board would be 
comprised of three members representing business, three members 
representing labor, one member with special expertise in inmate 
rehabilitation techniques, one member representing victims of 
crime, one member representing inmate workers, and two 
additional members ``whose background and expertise the 
President deems appropriate.''
    The provision establishes procedures for the initial 
appointment of each of the eleven members, with staggered 
terms, and provides for their reappointment. It also provides 
for the filling of any Board vacancies that may occur.
    The section empowers the President to designate a 
Chairperson, who in turn is empowered to designate the Vice 
Chairperson.
    To provide the Board with needed staff support, in addition 
to the staff of the corporation, the provision authorizes the 
Chairperson to procure temporary and intermittent personal 
services and to utilize Federal detailees on a non-reimbursable 
basis.
    The provision recognizes the Director of the Bureau of 
Prisons as the Chief Executive Officer of the corporation and 
empowers the Director to designate a person as the Chief 
Operating Officer of the Corporation. The Chief Operating 
Officer need not necessarily be the incumbent Assistant 
Director of the Federal Bureau of Prisons for Industries, 
Education, and Vocational Training, which has been the past 
practice.

Sec. 12. Providing Additional Management Flexibility to Federal Prison 
        Industries Operations

    This section makes explicit FPI's authority to locate more 
than one factory at a single Federal correction institution. It 
also provides statutory authority for FPI to operate a factory 
outside of a correctional institution if all of its inmate 
workers are classified as minimum security inmates.

Sec. 13. Transitional Personnel Management Authority

    This section provides some relief to correctional officers 
and other staff whose salaries are paid from the revenues of 
the corporation and who might be separated from service due to 
a reduction in the income derived from FPI activities. Such 
reductions might arise from an unexpectedly rapid shift to 
alternative rehabilitative work opportunities with non-profit 
entities, which may maintain inmate work opportunities but 
result in reduced corporate income. Under the provision, such 
correctional officers and other staff would be eligible for 
appointment or reappointment in the competitive services and 
given priority for placement for available positions within the 
Federal Bureau of Prisons through a priority placement list.

Sec. 14. Federal Prison Industries Report to Congress

    This section amends section 4127 of title 18, to 
substantially enhance the existing requirement for FPI's Annual 
Report to the Congress. It adds specificity to the information 
to be reported regarding FPI sales of products and services and 
FPI's resulting share of the total Federal Government market. 
For the first time, it requires FPI to report some data 
regarding the inmates with rehabilitative work opportunities 
with FPI and their post-release employment. Finally, the 
provision seeks to maintain the guarantee of public access to 
the annual report.

Sec. 15. Independent Study To Determine the Effects of Eliminating the 
        Federal Prison Industries mandatory Source Authority

    Subsection (a) of this section directs the Comptroller 
General of the United States to have undertaken an independent 
study of the effects of eliminating the mandatory source 
authority of FPI. This study may be conducted by the General 
Accounting Office or by another entity selected by the 
Comptroller General, provided that the Comptroller General 
warrants that the conduct of the study by such other entity can 
reasonably be expected to result in an assessment that meets 
statutory standard of being ``independent.''
    Subsection (b) requires the Comptroller General to develop 
the statement of work and assessment methodology for the 
conduct of the study, whether the resulting study is conducted 
by the General Accounting Office or by another entity. It is 
intended that in developing the statement of work and the 
assessment methodology for the study, the Comptroller General 
will, to the maximum extent practicable, provide for 
suggestions by the general public, organizations representing 
business organizations and labor unions, especially those 
adversely affected by FPI's current status as a mandatory 
source of supply. Similarly, the provision expects that the 
Comptroller General will solicit, and carefully consider, 
suggestions submitted by the Congress, and by representatives 
of the Executive Branch.
    Subsection (c) prescribes June 30, 2004 as the date by 
which the Comptroller General must submit to the Congress a 
report on the results of the study, including such 
recommendations for legislation as deemed appropriate.

Sec. 16. Sense of Congress

    This section expresses the sense of the Congress that it is 
timely and important to undertake a review of the concept of 
again implementing a program for good time early release 
program for Federal inmates incarcerated for non-violent 
offenses. Currently, the term of incarceration of any inmate 
within the Federal system is not subject to being reduced on 
the basis of the quality of the inmate's conduct during the 
term of incarceration.

Sec. 17. Definitions

    This section amends chapter 307 of title 18, by adding a 
new section 4130 specifying definitions for key terms used in 
sections 4122 and 4124.
    Paragraph (1) of proposed new section 4130 adds a 
definition of the term ``assembly'' derived from Department of 
Labor regulations implementing the Walsh-Healey Public 
Contracts Act (41 U.S.C. 35).
    Paragraph (2) of proposed new section 4130 adds a 
definition of the term ``current market price.'' The definition 
equates the term ``current market price'' to the term ``fair 
market price'' as defined in the Small Business Act (15 U.S.C. 
644(a)), which is the standard that must be met by a small 
business concern selling to the Government.
    Paragraph (3) of proposed new section 4130 adds a 
definition of the term ``import-sensitive product'' derived 
from a standard used by the Office of the United States Trade 
Representative.
    Paragraph (4) of proposed new section 4130 adds a 
definition of the term ``labor-intensive manufacture'' derived 
from a standard used by the Bureau of Economic Analysis at the 
Department of Commerce.
    Paragraph (5) of proposed new section 4130 adds a 
definition of the term ``manufacture'' derived from Department 
of Labor regulations implementing the Walsh-Healey Public 
Contracts Act (41 U.S.C. 35)
    Paragraph (7) of proposed new section 4130 adds a 
definition of the term ``reasonable share of the market.'' 
FPI's share of the Federal market for a specific product would 
be recognized as a ``reasonable share of the market,'' if FPI's 
share of the total Federal purchases for a specific product, 
averaged over a 3-year period, does not exceed 20 percent.
    It should be noted that new section 4122(b)(10)(C), added 
by section 3, provides to the FPI Board limited authority to 
approve, on a case-by-case basis, a proposed FPI expansion that 
would result in FPI sales in excess of percentages specified.
    Paragraph (8) of proposed new section 4130 adds a 
definition of the term ``services'' through a cross-reference 
to the Government-wide Federal Acquisition Regulation (FAR).

Sec. 18. Implementation Regulations and Procedures

    Subsection (a) of this section requires regulatory 
implementation through the Government-wide Federal Acquisition 
Regulation (FAR), specifying a schedule for the publication of 
proposed and final regulations and their effective date. The 
provision provides for 60 days for public comment on the 
proposed regulations.
    Subsection (b) directs the FPI Board to issue, through a 
notice and comment rulemaking, definitions relating to four 
terms: (a) ``prison-made product;'' (b) ``prison-furnished 
service;'' (c) ``specific product;'' and ``specific service.'' 
The public is accorded 60 days to comment on the Board's 
proposals.
    Subsection (b)(4)(C) also requires that the Board act on 
the basis of deliberations and a recorded vote conducted during 
a public meeting unless the meeting is closed pursuant to the 
standards of the Administrative Procedure Act. This requirement 
applies to the full range of regulations, procedures, and 
guidelines relating to the governance of the corporation.

Sec. 19. Rule of Construction

    This section set forth a rule of construction relating to 
new section 4124(e)(2), added by section 2. New section 
4124(e)(2) specifies FPI's right to appeal an adverse decision 
by an agency contracting officer regarding an agency's decision 
not to make a contract award to FPI. This provision applies 
exclusively to FPI. There is no intention to alter the existing 
bid protest processes available to a private sector vendor with 
the agency making the purchase, the U.S. General Accounting 
Office, or the Federal courts.

Sec. 20. Effective Date and Applicability

    This section establishes the effective dates for the 
various provisions of H.R. 1829.

Sec. 21. Clerical Amendments

    This section makes clerical amendments to the table of 
sections for chapter 307 of title 18.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of Rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 18, UNITED STATES CODE

           *       *       *       *       *       *       *



PART I--CRIMES

           *       *       *       *       *       *       *


CHAPTER 85--PRISON-MADE GOODS

           *       *       *       *       *       *       *



Sec. 1761. Transportation or importation

    (a) Whoever knowingly transports in interstate commerce or 
from any foreign country into the United States [any goods, 
wares, or merchandise manufactured, produced, or mined] 
products manufactured, services furnished, or minerals mined, 
wholly or in part by convicts or prisoners, except convicts or 
prisoners on parole, supervised release, or probation, or in 
any penal or reformatory institution, shall be fined under this 
title or imprisoned not more than two years, or both.

           *       *       *       *       *       *       *


PART III--PRISONS AND PRISONERS

           *       *       *       *       *       *       *


                        CHAPTER 307--EMPLOYMENT

Sec.
[4121.  Federal Prison Industries; board of directors.]
4121.  Federal Prison Industries; Board of Directors: executive 
          management.
     * * * * * * *
[4124.  Purchase of prison-made products by Federal departments.]
4124.  Governmentwide procurement policy relating to purchases from 
          Federal Prison Industries.
     * * * * * * *
[4127.  Prison Industries report to Congress.]
4127.  Federal Prison Industries report to Congress.
     * * * * * * *
4130.  Construction of provisions.
4131.  Definitions.

           *       *       *       *       *       *       *


[Sec. 4121. Federal Prison Industries; board of directors

    [``Federal Prison Industries'', a government corporation of 
the District of Columbia, shall be administered by a board of 
six directors, appointed by the President to serve at the will 
of the President without compensation.
    [The directors shall be representatives of (1) industry, 
(2) labor, (3) agriculture, (4) retailers and consumers, (5) 
the Secretary of Defense, and (6) the Attorney General, 
respectively.]

Sec. 4121. Federal Prison Industries; Board of Directors: executive 
                    management

    (a) Federal Prison Industries is a government corporation 
of the District of Columbia organized to carry on such 
industrial operations in Federal correctional institutions as 
authorized by its Board of Directors. The manner and extent to 
which such industrial operations are carried on in the various 
Federal correctional institutions shall be determined by the 
Attorney General.
    (b)(1) The corporation shall be governed by a board of 11 
directors appointed by the President.
    (2) In making appointments to the Board, the President 
shall assure that 3 members represent the business community, 3 
members represent organized labor, 1 member shall have special 
expertise in inmate rehabilitation techniques, 1 member 
represents victims of crime, 1 member represents the interests 
of Federal inmate workers, and 2 additional members whose 
background and expertise the President deems appropriate. The 
members of the Board representing the business community shall 
include, to the maximum extent practicable, representation of 
firms furnishing services as well as firms producing products, 
especially from those industry categories from which Federal 
Prison Industries derives substantial sales. The members of the 
Board representing organized labor shall, to the maximum 
practicable, include representation from labor unions whose 
members are likely to be most affected by the sales of Federal 
Prison Industries.
    (3) Each member shall be appointed for a term of 5 years, 
except that of members first appointed--
            (A) 2 members representing the business community 
        shall be appointed for a term of 3 years;
            (B) 2 members representing labor shall be appointed 
        for a term of 3 years;
            (C) 2 members whose background and expertise the 
        President deems appropriate for a term of 3 years;
            (D) 1 member representing victims of crime shall be 
        appointed for a term of 3 years;
            (E) 1 member representing the interests of Federal 
        inmate workers shall be appointed for a term of 3 
        years;
            (F) 1 member representing the business community 
        shall be appointed for a term of 4 years;
            (G) 1 member representing the business community 
        shall be appointed for a term of 4 years; and
            (H) the members having special expertise in inmate 
        rehabilitation techniques shall be appointed for a term 
        of 5 years.
    (4) The President shall designate 1 member of the Board as 
Chairperson. The Chairperson may designate a Vice Chairperson.
    (5) Members of the Board may be reappointed.
    (6) Any vacancy on the Board shall be filled in the same 
manner as the original appointment. Any member appointed to 
fill a vacancy occurring before the expiration of the term for 
which the member's predecessor was appointed shall be appointed 
for the remainder of that term.
    (7) The members of the Board shall serve without 
compensation. The members of the Board shall be allowed travel 
expenses, including per diem in lieu of subsistence, at rates 
authorized for employees of agencies under subchapter I of 
chapter 57 of title 5, United States Code, to attend meetings 
of the Board and, with the advance approval of the Chairperson 
of the Board, while otherwise away from their homes or regular 
places of business for purposes of duties as a member of the 
Board.
    (8)(A) The Chairperson of the Board may appoint and 
terminate any personnel that may be necessary to enable the 
Board to perform its duties.
    (B) Upon request of the Chairperson of the Board, a Federal 
agency may detail a Federal Government employee to the Board 
without reimbursement. Such detail shall be without 
interruption or loss of civil service status or privilege.
    (9) The Chairperson of the Board may procure temporary and 
intermittent services under section 3109(b) of title 5, United 
States Code.
    (c) The Director of the Bureau of Prisons shall serve as 
Chief Executive Officer of the Corporation. The Director shall 
designate a person to serve as Chief Operating Officer of the 
Corporation.

Sec. 4122. Administration of Federal Prison Industries

    (a) Federal Prison Industries shall determine in what 
manner and to what extent industrial operations shall be 
carried on in Federal penal and correctional institutions for 
the [production of commodities] production of products or 
furnishing of services for consumption in such institutions or 
for sale to the departments or agencies of the United States, 
but not for sale to the public in competition with private 
enterprise.
    (b)(1) * * *

           *       *       *       *       *       *       *

    [(3)] (3)(A) Federal Prison Industries shall diversify its 
products so that its sales are distributed among its industries 
as broadly as possible.
    (B) Federal Prison Industries may locate more than one 
workshop at a Federal correctional facility.
    (C) Federal Prison Industries may operate a workshop 
outside of a correctional facility if all of the inmates 
working in such workshop are classified as minimum security 
inmates.
    [(4) Any decision by Federal Prison Industries to produce a 
new product or to significantly expand the production of an 
existing product shall be made by the board of directors of the 
corporation. Before the board of directors makes a final 
decision, the corporation shall do the following:
            [(A) The corporation shall prepare a detailed 
        written analysis of the probable impact on industry and 
        free labor of the plans for new production or expanded 
        production. In such written analysis the corporation 
        shall, at a minimum, identify and consider--
                    [(i) the number of vendors currently 
                meeting the requirements of the Federal 
                Government for the product;
                    [(ii) the proportion of the Federal 
                Government market for the product currently 
                served by small businesses, small disadvantaged 
                businesses, or businesses operating in labor 
                surplus areas;
                    [(iii) the size of the Federal Government 
                and non-Federal Government markets for the 
                product;
                    [(iv) the projected growth in the Federal 
                Government demand for the product; and
                    [(v) the projected ability of the Federal 
                Government market to sustain both Federal 
                Prison Industries and private vendors.
            [(B) The corporation shall announce in a 
        publication designed to most effectively provide notice 
        to potentially affected private vendors the plans to 
        produce any new product or to significantly expand 
        production of an existing product. The announcement 
        shall also indicate that the analysis prepared under 
        subparagraph (A) is available through the corporation 
        and shall invite comments from private industry 
        regarding the new production or expanded production.
            [(C) The corporation shall directly advise those 
        affected trade associations that the corporation can 
        reasonably identify the plans for new production or 
        expanded production, and the corporation shall invite 
        such trade associations to submit comments on those 
        plans.
            [(D) The corporation shall provide to the board of 
        directors--
                    [(i) the analysis prepared under 
                subparagraph (A) on the proposal to produce a 
                new product or to significantly expand the 
                production of an existing product,
                    [(ii) comments submitted to the corporation 
                on the proposal, and
                    [(iii) the corporation's recommendations 
                for action on the proposal in light of such 
                comments.
In addition, the board of directors, before making a final 
decision under this paragraph on a proposal, shall, upon the 
request of an established trade association or other interested 
representatives of private industry, provide a reasonable 
opportunity to such trade association or other representatives 
to present comments directly to the board of directors on the 
proposal.
    [(5) Federal Prison Industries shall publish in the manner 
specified in paragraph (4)(B) the final decision of the board 
with respect to the production of a new product or the 
significant expansion of the production of an existing 
product.]
    (4) A decision to authorize Federal Prison Industries to 
offer a new specific product or specific service or to expand 
the production of an existing product or service shall be made 
by its board of directors in conformance with the requirements 
of subsections (b), (c), (d), and (e) of section 553 of title 
5, and this chapter.
    (5)(A) Whenever Federal Prison Industries proposes to offer 
for sale a new specific product or specific service or to 
expand production of a currently authorized product or service, 
the Chief Operating Officer of Federal Prison Industries shall 
submit an appropriate proposal to the board of directors and 
obtain the board's approval before initiating any such 
expansion. The proposal submitted to the board shall include a 
detailed analysis of the probable impact of the proposed 
expansion of sales within the Federal market by Federal Prison 
Industries on private sector firms and their non-inmate 
workers.
    (B)(i) The analysis required by subparagraph (A) shall be 
performed by an interagency team on a reimbursable basis or by 
a private contractor paid by Federal Prison Industries.
    (ii) If the analysis is to be performed by an interagency 
team, such team shall be led by the Administrator of the Small 
Business Administration or the designee of such officer with 
representatives of the Department of Labor, the Department of 
Commerce, and the Federal Procurement Data Center.
    (iii) If the analysis is to be performed by a private 
contractor, the selection of the contractor and the 
administration of the contract shall be conducted by one of the 
entities referenced in clause (ii) as an independent executive 
agent for the board of directors. Maximum consideration shall 
be given to any proposed statement of work furnished by the 
Chief Operating Officer of Federal Prison Industries.
    (C) The analysis required by subparagraph (A) shall 
identify and consider--
            (i) the number of vendors that currently meet the 
        requirements of the Federal Government for the specific 
        product or specific service;
            (ii) the proportion of the Federal Government 
        market for the specific product or specific service 
        currently furnished by small businesses during the 
        previous 3 fiscal years;
            (iii) the share of the Federal market for the 
        specific product or specific service projected for 
        Federal Prison Industries for the fiscal year in which 
        production or performance will commence or expand and 
        the subsequent 4 fiscal years;
            (iv) whether the industry producing the specific 
        product or specific service in the private sector--
                    (I) has an unemployment rate higher than 
                the national average; or
                    (II) has a rate of unemployment for workers 
                that has consistently shown an increase during 
                the previous 5 years;
            (v) whether the specific product is an import-
        sensitive product;
            (vi) the requirements of the Federal Government and 
        the demands of entities other than the Federal 
        Government for the specific product or service during 
        the previous 3 fiscal years;
            (vii) the projected growth or decline in the demand 
        of the Federal Government for the specific product or 
        specific service;
            (viii) the capability of the projected demand of 
        the Federal Government for the specific product or 
        service to sustain both Federal Prison Industries and 
        private vendors; and
            (ix) whether authorizing the production of the new 
        product or performance of a new service will provide 
        inmates with the maximum opportunity to acquire 
        knowledge and skill in trades and occupations that will 
        provide them with a means of earning a livelihood upon 
        release.
    (D)(i) The board of directors may not approve a proposal to 
authorize the production and sale of a new specific product or 
continued sale of a previously authorized product unless--
            (I) the product to be furnished is a prison-made 
        product; or
            (II) the service to be furnished is to be performed 
        by inmate workers.
    (ii) The board of directors may not approve a proposal to 
authorize the production and sale of a new prison-made product 
or to expand production of a currently authorized product if 
the product is--
            (I) produced in the private sector by an industry 
        which has reflected during the previous year an 
        unemployment rate above the national average; or
            (II) an import-sensitive product.
    (iii) The board of directors may not approve a proposal for 
inmates to provide a service in which an inmate worker has 
access to--
            (I) personal or financial information about 
        individual private citizens, including information 
        relating to such person's real property, however 
        described, without giving prior notice to such persons 
        or class of persons to the greatest extent practicable;
            (II) geographic data regarding the location of 
        surface and subsurface infrastructure providing 
        communications, water and electrical power 
        distribution, pipelines for the distribution of natural 
        gas, bulk petroleum products and other commodities, and 
        other utilities; or
            (III) data that is classified.
    (iv)(I) Federal Prison Industries is prohibited from 
furnishing through inmate labor construction services, unless 
to be performed within a Federal correctional institution 
pursuant to the participation of an inmate in an apprenticeship 
or other vocational education program teaching the skills of 
the various building trades.
    (II) For purposes of this clause, the term ``construction'' 
has the meaning given such term by section 2.101 of the Federal 
Acquisition Regulation (48 CFR part 2.101), as in effect on 
June 1, 2002, including the repair, alteration, or maintenance 
of real property in being.
    (6) To provide further opportunities for participation by 
interested parties, the board of directors shall--
            (A) give additional notice of a proposal to 
        authorize the production and sale of a new product or 
        service, or expand the production of a currently 
        authorized product or service, in a publication 
        designed to most effectively provide notice to private 
        vendors and labor unions representing private sector 
        workers who could reasonably be expected to be affected 
        by approval of the proposal, which notice shall offer 
        to furnish copies of the analysis required by paragraph 
        (5) and shall solicit comment on the analysis;
            (B) solicit comments on the analysis required by 
        paragraph (5) from trade associations representing 
        vendors and labor unions representing private sector 
        workers who could reasonably be expected to be affected 
        by approval of the proposal to authorize the production 
        and sale of a new product or service (or expand the 
        production of a currently authorized product or 
        service); and
            (C) afford an opportunity, on request, for a 
        representative of an established trade association, 
        labor union, or other private sector representatives to 
        present comments on the proposal directly to the board 
        of directors.
    (7) The board of directors shall be provided copies of all 
comments received on the expansion proposal.
    (8) Based on the comments received on the initial expansion 
proposal, the Chief Operating Officer of Federal Prison 
Industries may provide the board of directors a revised 
expansion proposal. If such revised proposal provides for 
expansion of inmate work opportunities in an industry different 
from that initially proposed, such revised proposal shall 
reflect the analysis required by paragraph (5)(C) and be 
subject to the public comment requirements of paragraph (6).
    (9) The board of directors shall consider a proposal to 
authorize the sale of a new specific product or specific 
service (or to expand the volume of sales for a currently 
authorized product or service) and take any action with respect 
to such proposal, during a meeting that is open to the public, 
unless closed pursuant to section 552(b) of title 5.
    (10) In conformity with the requirements of paragraphs (5) 
through (9) of this subsection, the board of directors may--
            (A) authorize the donation of products produced or 
        services furnished by Federal industries and available 
        for sale;
            (B) authorize the production of a new specific 
        product or the furnishing of a new specific service for 
        donation; or
            (C) authorize a proposal to expand production of a 
        currently authorized specific product or specific 
        service in an amount in excess of a reasonable share of 
        the market for such product or service, if--
                    (i) a Federal agency or department, 
                purchasing such product or service, has 
                requested that Federal Prison Industries be 
                authorized to furnish such product or service 
                in amounts that are needed by such agency or 
                department; or
                    (ii) the proposal is justified for other 
                good cause and supported by at least eight 
                members of the board.
    (11)(A) The Board of Directors of Federal Prison Industries 
shall prescribe the rates of hourly wages to be paid inmates 
performing work for or through Federal Prison Industries. The 
Director of the Federal Bureau of Prisons shall prescribe the 
rates of hourly wages for other work assignments within the 
various Federal correctional institutions.
    (B) The various inmate wage rates shall be reviewed and 
considered for increase on not less than a biannual basis.
    (C) Wages earned by an inmate worker shall be paid in the 
name of the inmate. Deductions, aggregating to not more than 80 
percent of gross wages, shall be taken from the wages due for--
            (i) applicable taxes (Federal, State, and local);
            (ii) payment of fines and restitution pursuant to 
        court order;
            (iii) payment of additional restitution for victims 
        of the inmate's crimes (at a rate not less than 10 
        percent of gross wages);
            (iv) allocations for support of the inmate's family 
        pursuant to statute, court order, or agreement with the 
        inmate;
            (v) allocations to a fund in the inmate's name to 
        facilitate such inmate's assimilation back into 
        society, payable at the conclusion of incarceration; 
        and
            (vi) such other deductions as may be specified by 
        the Director of the Bureau of Prisons.
    (D) Each inmate worker working for Federal Prison 
Industries shall indicate in writing that such person--
            (i) is participating voluntarily; and
            (ii) understands and agrees to the wages to be paid 
        and deductions to be taken from such wages.
    [(6)] (12) Federal Prison Industries shall publish, after 
the end of each 6-month period, a list of sales by the 
corporation for that 6-month period. Such list shall be made 
available to all interested parties.

           *       *       *       *       *       *       *


[Sec. 4124. Purchase of prison-made products by Federal departments

    [(a) The several Federal departments and agencies and all 
other Government institutions of the United States shall 
purchase at not to exceed current market prices, such products 
of the industries authorized by this chapter as meet their 
requirements and may be available.
    [(b) Disputes as to the price, quality, character, or 
suitability of such products shall be arbitrated by a board 
consisting of the Attorney General, the Administrator of 
General Services, and the President, or their representatives. 
Their decision shall be final and binding upon all parties.
    [(c) Each Federal department, agency, and institution 
subject to the requirements of subsection (a) shall separately 
report acquisitions of products and services from Federal 
Prison Industries to the Federal Procurement Data System (as 
referred to in section 6(d)(4) of the Office of Federal 
Procurement Policy Act) in the same manner as it reports other 
acquisitions. Each report published by the Federal Procurement 
Data System that contains the information collected by the 
System shall include a statement to accompany the information 
reported by the department, agency, or institution under the 
preceding sentence as follows: ``Under current law, sales by 
Federal Prison Industries are considered intragovernmental 
transfers. The purpose of reporting sales by Federal Prison 
Industries is to provide a complete overview of acquisitions by 
the Federal Government during the reporting period.''.
    [(d) Within 90 days after the date of the enactment of this 
subsection, Federal Prison Industries shall publish a catalog 
of all products and services which it offers for sale. This 
catalog shall be updated periodically to the extent necessary 
to ensure that the information in the catalog is complete and 
accurate.]

Sec. 4124. Governmentwide procurement policy relating to purchases from 
                    Federal Prison Industries

    (a) In General.--Purchases from Federal Prison Industries, 
Incorporated, a wholly owned Government corporation, as 
referred to in section 9101(3)(E) of title 31, may be made by a 
Federal department or agency only in accordance with this 
section.
    (b) Solicitation and Evaluation of Offers and Contract 
Awards.--(1) If a procurement activity of a Federal department 
or agency has a requirement for a specific product or service 
that is authorized to be offered for sale by Federal Prison 
Industries, in accordance with section 4122 of this title, and 
is listed in the catalog referred to in subsection (g), the 
procurement activity shall solicit an offer from Federal Prison 
Industries, if the purchase is expected to be in excess of the 
micro-purchase threshold (as defined by section 32(f) of the 
Office of Federal Procurement Policy Act (41 U.S.C. 428(f))).
    (2) A contract award for such product or service shall be 
made using competitive procedures in accordance with the 
applicable evaluation factors, unless a determination is made 
by the Attorney General pursuant to paragraph (3) or an award 
using other than competitive procedures is authorized pursuant 
to paragraph (7).
    (3) The procurement activity shall negotiate with Federal 
Prison Industries on a noncompetitive basis for the award of a 
contract if the Attorney General determines that--
            (A) Federal Prison Industries cannot reasonably 
        expect fair consideration to receive the contract award 
        on a competitive basis; and
            (B) the contract award is necessary to maintain 
        work opportunities otherwise unavailable at the penal 
        or correctional facility at which the contract is to be 
        performed to prevent circumstances that could 
        reasonably be expected to significantly endanger the 
        safe and effective administration of such facility.
    (4) Except in the case of an award to be made pursuant to 
paragraph (3), a contract award shall be made with Federal 
Prison Industries only if the contracting officer for the 
procurement activity determines that--
            (A) the specific product or service to be furnished 
        will meet the requirements of the procurement activity 
        (including any applicable prequalification requirements 
        and all specified commercial or governmental standards 
        pertaining to quality, testing, safety, serviceability, 
        and warranties);
            (B) timely performance of the contract can be 
        reasonably expected; and
            (C) the contract price does not exceed a current 
        market price.
    (5) A determination by the Attorney General pursuant to 
paragraph (3) shall be--
            (A) supported by specific findings by the warden of 
        the penal or correctional institution at which a 
        Federal Prison Industries workshop is scheduled to 
        perform the contract;
            (B) supported by specific findings by Federal 
        Prison Industries regarding why it does not expect to 
        win the contract on a competitive basis; and
            (C) made and reported in the same manner as a 
        determination made pursuant to section 303(c)(7) of the 
        Federal Property and Administrative Services Act of 
        1949 (41 U.S.C. 253(c)(7)).
    (6) If the Attorney General has not made the determination 
described in paragraph (3) within 30 days after Federal Prison 
Industries has been informed of a contracting opportunity by a 
procurement activity, the procurement activity may proceed to 
conduct a procurement for the product or service in accordance 
with the procedures generally applicable to such procurements 
by the procurement activity.
    (7) A contract award may be made to Federal Prison 
Industries using other than competitive procedures if such 
product or service is only available from Federal Prison 
Industries and the contract may be awarded under the authority 
of section 2304(c)(1) of title 10 or section 303(c) of the 
Federal Property and Administrative Services Act of 1949 (41 
U.S.C. 252(c)(1)), as may be applicable, and pursuant to the 
justification and approval requirements relating to such 
noncompetitive procurements specified by law and the 
Governmentwide Federal Acquisition Regulation.
    (c) Offers From Federal Prison Industries.--A timely offer 
received from Federal Prison Industries to furnish a product or 
service to a Federal department or agency shall be considered 
for award without limitation as to the dollar value of the 
proposed purchase.
    (d) Performance by Federal Prison Industries.--Federal 
Prison Industries shall perform its contractual obligations 
under a contract awarded by a Federal department or agency to 
the same extent as any other contractor.
    (e) Finality of Contracting Officer's Decision.--(1) A 
decision by a contracting officer regarding the award of a 
contract to Federal Prison Industries or relating to the 
performance of such contract shall be final, unless reversed on 
appeal pursuant to paragraph (2) or (3).
    (2) The Chief Executive Officer of Federal Prison 
Industries may appeal to the head of a Federal department or 
agency a decision by a contracting officer not to award a 
contract to Federal Prison Industries pursuant to subsection 
(b)(4). The decision of the head of a Federal department or 
agency on appeal shall be final.
    (3) A dispute between Federal Prison Industries and a 
procurement activity regarding performance of a contract shall 
be subject to--
            (A) alternative means of dispute resolution 
        pursuant to subchapter IV of chapter 5 of title 5; or
            (B) final resolution by the board of contract 
        appeals having jurisdiction over the procurement 
        activity's contract performance disputes pursuant to 
        the Contract Disputes Act of 1978 (41 U.S.C. 601 et 
        seq.).
    (f) Reporting of Purchases.--Each Federal department or 
agency shall report purchases from Federal Prison Industries to 
the Federal Procurement Data System (as referred to in section 
6(d)(4) of the Office of Federal Procurement Policy Act (41 
U.S.C. 405(d)(4))) in the same manner as it reports to such 
System any acquisition in an amount in excess of the simplified 
acquisition threshold (as defined by section 4(11) of the 
Office of Federal Procurement Policy Act (41 U.S.C. 403(11))).
    (g) Catalog of Products.--Federal Prison Industries shall 
publish and maintain a catalog of all specific products and 
services that it is authorized to offer for sale. Such catalog 
shall be periodically revised as products and services are 
added or deleted by its board of directors (in accordance with 
section 4122(b) of this title).
    (h) Compliance With Standards.--Federal Prison Industries 
shall comply with Federal occupational, health, and safety 
standards with respect to the operation of its industrial 
operations.

           *       *       *       *       *       *       *


[Sec. 4127. Prison Industries report to Congress

    [The board of directors of Federal Prison Industries shall 
submit an annual report to the Congress on the conduct of the 
business of the corporation during each fiscal year, and on the 
condition of its funds during such fiscal year. Such report 
shall include a statement of the amount of obligations issued 
under section 4129(a)(1) during such fiscal year, and an 
estimate of the amount of obligations that will be so issued in 
the following fiscal year.]

Sec. 4127. Federal Prison Industries report to Congress

    (a) In General.--Pursuant to chapter 91 of title 31, the 
board of directors of Federal Prison Industries shall submit an 
annual report to Congress on the conduct of the business of the 
corporation during each fiscal year and the condition of its 
funds during the fiscal year.
    (b) Contents of Report.--In addition to the matters 
required by section 9106 of title 31, and such other matters as 
the board considers appropriate, a report under subsection (a) 
shall include--
            (1) a statement of the amount of obligations issued 
        under section 4129(a)(1) of this title during the 
        fiscal year;
            (2) an estimate of the amount of obligations that 
        will be issued in the following fiscal year;
            (3) an analysis of--
                    (A) the corporation's total sales for each 
                specific product and type of service sold to 
                the Federal agencies and the commercial market;
                    (B) the total purchases by each Federal 
                agency of each specific product and type of 
                service;
                    (C) the corporation's share of such total 
                Federal Government purchases by specific 
                product and type of service; and
                    (D) the number and disposition of disputes 
                submitted to the heads of the Federal 
                departments and agencies pursuant to section 
                4124(e) of this title;
            (4) an analysis of the inmate workforce that 
        includes--
                    (A) the number of inmates employed;
                    (B) the number of inmates utilized to 
                produce products or furnish services sold in 
                the commercial market;
                    (C) the number and percentage of employed 
                inmates by the term of their incarceration; and
                    (D) the various hourly wages paid to 
                inmates employed with respect to the production 
                of the various specific products and types of 
                services authorized for production and sale to 
                Federal agencies and in the commercial market; 
                and
            (5) data concerning employment obtained by former 
        inmates upon release to determine whether the 
        employment provided by Federal Prison Industries during 
        incarceration provided such inmates with knowledge and 
        skill in a trade or occupation that enabled such former 
        inmate to earn a livelihood upon release.
    (c) Public Availability.--Copies of an annual report under 
subsection (a) shall be made available to the public at a price 
not exceeding the cost of printing the report.

           *       *       *       *       *       *       *


Sec. 4130. Construction of provisions

    Nothing in this chapter shall be construed--
            (1) to establish an entitlement of any inmate to--
                    (A) employment in a Federal Prison 
                Industries facility; or
                    (B) any particular wage, compensation, or 
                benefit on demand, except as otherwise 
                specifically provided by law or regulation;
            (2) to establish that inmates are employees for the 
        purposes of any law or program; or
            (3) to establish any cause of action by or on 
        behalf of any inmate against the United States or any 
        officer, employee, or contractor thereof.

Sec. 4131. Definitions

    As used in this chapter--
            (1) the term ``assembly'' means the process of 
        uniting or combining articles or components (including 
        ancillary finished components or assemblies) so as to 
        produce a significant change in form or utility, 
        without necessarily changing or altering the component 
        parts;
            (2) the term ``current market price'' means, with 
        respect to a specific product, the fair market price of 
        the product within the meaning of section 15(a) of the 
        Small Business Act (15 U.S.C. 644(a)), at the time that 
        the contract is to be awarded, verified through 
        appropriate price analysis or cost analysis, including 
        any costs relating to transportation or the furnishing 
        of any ancillary services;
            (3) the term ``import-sensitive product'' means a 
        product which, according to Department of Commerce 
        data, has experienced competition from imports at an 
        import to domestic production ratio of 25 percent or 
        greater;
            (4) the term ``labor-intensive manufacture'' means 
        a manufacturing activity in which the value of inmate 
        labor constitutes at least 10 percent of the estimate 
        unit cost to produce the item by Federal Prison 
        Industries;
            (5) the term ``manufacture'' means the process of 
        fabricating from raw or prepared materials, so as to 
        impart to those materials new forms, qualities, 
        properties, and combinations;
            (6) the term ``reasonable share of the market'' 
        means a share of the total purchases by the Federal 
        departments and agencies, as reported to the Federal 
        Procurement Data System for--
                    (A) any specific product during the 3 
                preceding fiscal years, that does not exceed 20 
                percent of the Federal market for the specific 
                product; and
                    (B) any specific service during the 3 
                preceding fiscal years, that does not exceed 5 
                percent of the Federal market for the specific 
                service; and
            (7) the term ``services'' has the meaning given the 
        term ``service contract'' by section 37.101 of the 
        Federal Acquisition Regulation (48 C.F.R. 36.102), as 
        in effect on July 1, 2002.

           *       *       *       *       *       *       *


                           Markup Transcript






                            BUSINESS MEETING

                         FRIDAY, JULY 25, 2003

                  House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 9:40 a.m., in 
Room 2141, Rayburn House Office Building, Hon. F. James 
Sensenbrenner, Jr., [Chairman of the Committee] presiding.
    [Intervening business.]
    Chairman Sensenbrenner. The last bill on the agenda is H.R. 
1829, and pursuant to notice I now call up the bill H.R. 1829, 
the ``Federal Prison Industries Competition in Contracting Act 
of 2003,'' for purposes of markup and move its favorable 
recommendation to the House.
    Without objection, the bill will be considered as read and 
open for amendment at any point.
    [The bill, H.R. 1829, follows:]
      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


    Chairman Sensenbrenner. The Chair recognizes himself 
briefly to explain this bill.
    This bill is similar to legislation which the Committee 
reported in the last Congress and includes improvements agreed 
to by the Committee last year.
    Today we take up the issue of reform of Federal Prison 
Industries. FPI enjoys a mandatory market for its goods, a 
facility to produce them and a large workforce that can be 
forced to manufacture them. They pay their workers less than 
the minimum wage, and they force the workers to work for the 
profit of Federal Prison Industries. The result is that Federal 
Prison Industries is able to drive tax-paying, law-abiding 
small businesses out of the market.
    At a time when we are facing a recovering economy, driving 
small business out of the marketplace and costing the economy 
jobs is not the thing that we want to do.
    One of the reasons that FPI is able to do what it does is 
that for nondefense contracting, it allows FPI to have 
mandatory source supply for Government agencies that are in the 
market to buy things that are produced by the Federal Prison 
Industries. And even when a private sector firm makes a low 
bid, Federal Prison Industries can match the bid and then 
require that the Federal Government procure the goods from FPI 
rather than the low bidder.
    Now, if this type of bid-rigging was done anyplace else, it 
would probably land those who were responsible in jail. I think 
most Members of the Committee have received complaints about 
Federal Prison Industries going into markets that have been 
well served by small businesses within their constituency. It 
is my hope that we can pass this legislation not to put FPI out 
of business, but to level the playing field so that FPI is able 
to compete with small business on an even playing field, and 
that would be a victory for labor, for business, for industry 
and for the American taxpayer.
    And I yield back the balance of my time.
    The gentleman from Michigan Mr. Conyers.
    Mr. Conyers. Thank you, Mr. Chairman.
    This bill presents one of the more difficult problems. How 
do you take people who have been imprisoned and engage them in 
the kinds of activity behind prison walls that will 
rehabilitate? Now, that is not an easy job in some of our 
prisons where there may be as much errant conduct going on 
within the prison as without a prison, and so we have been 
struggling with this.
    One way was through the idea of retraining people 
incarcerated; that is to say that they learn skills that they 
did not possess. I think most people realize how little 
education, formal education, that many people incarcerated 
have. It is abysmal, and so what we were trying to do in this 
measure--and this started in the last Congress--was to come up 
with constructive activity in terms of preparing people to 
return to our communities. And so it was with that generally in 
mind that the Federal Prison Industries was conceived as a way 
to do this.
    What it involves is taking realtime work and having 
prisoners trained, and then having their products, which are 
absolute products, brought back into the market. Well, there is 
where the problems began, because what we have to do then is 
determine what the relationship of Prison Industries is to the 
rest of the commercial market in America. Prison Industries, I 
think, pays about $1 an hour.
    Then there was some exclusivity in terms of the contracts, 
another problem. And then to really make things unnecessarily 
difficult, we began to have the Federal Prison Industries 
bidding on competitive contracts against businesses that do not 
have the benefit of $1-an-hour workers, and the program grew 
from 29 million to 675 million. And they were sole-source 
sales, and so we had a problem that we have tried to resolve in 
1829.
    The amendment that has been worked out by the Chairman of 
this Committee, and the Subcommittee Chairman, and Ranking 
Member and many of the Members of Judiciary, and with the 
prison systems correctional leaders themselves, and I think 
with CURE and Mr. Charlie Sullivan and other groups that work 
in this area, we have come up with a plan to establish a 
reentry demonstration project for inmates to prepare their 
successful return to society, a vocational education training 
program, $75 million toward educating inmates and teaching 
vocational skills, and to provide the Federal Prison Industries 
program with the resources to construct and donate industry 
profits to not-for-profit organizations. So this is a very 
important new direction that I think that we are all heading to 
take care of the problems that exist.
    Now, all of that being said, there is a much larger 
challenge facing us. The prison systems in America are in--and 
especially the Federal prisons--need a lot of assistance. We 
need far more attention than is being given them at this point. 
And so for those who think that this is the only way we can--
may I get an additional minute?
    Chairman Sensenbrenner. Without objection.
    Mr. Conyers. For those who think that the only way you can 
rehabilitate inmates is through the Federal Prison Industries 
is seriously mistaken. There are many other ways. There are 
many training and educational activities and programs that can 
be introduced into the prison system, and so this is a small, 
modest step towards the Industries' component of this, and I am 
hoping that our colleagues will join in in getting this back 
onto the--out of the Committee and onto the floor and to get 
the other body's approval.
    Thank you, Mr. Chairman.
    [Intervening business.]
    [The prepared statement of Mr. Coble follows:]
 Prepared Statement of the Honorable Howard Coble, a Representative in 
               Congress From the State of North Carolina
    Mr. Chairman and Members of the Committee,
    Current federal statute authorizes Federal Prison Industries (FPI), 
the government corporation that employs federal inmates, to sell the 
goods and services produced by these inmates to federal agencies but 
not to the public in competition with the private sector. Federal law 
also mandates that federal agencies purchase FPI products. This 
requirement is generally referred to as ``FPI's mandatory source 
status.''
    While I support efforts to train prisoners to become productive 
members of society, I strongly believe that such efforts should take 
great care not to threaten the jobs of hard-working taxpayers. This 
issue is especially important to the 6th Congressional District of 
North Carolina, home to more than 40,000 textile and furniture workers, 
since two major classes of items produced by FPI are textiles and 
furniture. The mandatory source status gives FPI an unfair advantage 
over private manufacturers contending for federal contracts. Therefore, 
many of my constituents are deprived of employment opportunities in 
order to give work to federal inmates. The furniture industry in North 
Carolina is already competing with an increasing number of furniture 
imports arriving to the U.S. from countries such as China. In addition, 
the North Carolina textile industry has suffered over 10,000 job losses 
in the past year.
    For these reasons, I am greatly concerned about FPI's proposal to 
begin selling inmate-furnished services in the commercial marketplace. 
It is my opinion that FPI is in need of reform before it is allowed to 
expand.
    I am a strong proponent of H.R. 1829 because it does just that--
eliminates FPI's mandatory source advantage. It also limits FPI's 
ability to enter the commercial market which I believe may have an 
adverse effect on private companies not able to compete with the low 
wages and cost benefits enjoyed by FPI. Further, the bill incorporates 
vocational and educational programs to teach inmates job-hunting and 
professional skills and coordinates funding to help inmates transition 
back into society.
    In my opinion, these are real and necessary reforms that will 
preserve FPI's goal of providing inmates with essential skills while 
allowing for a better marketplace for competition. I have cosponsored 
legislation similar to H.R. 1829 in past Congress and will continue to 
be a strong and vocal proponent of eliminating mandatory source 
privileges and reforming FPI.
    Hardworking, taxpaying citizens of the 6th District of North 
Carolina who are employed in the furniture and textile industries can 
compete with anyone in the world. They should not have to compete with 
their own government which is using their tax dollars to train federal 
prisoners how to be textile and furniture workers. It is not fair and 
is not right.

    [The prepared statement of Ms. Jackson Lee follows:]
       Prepared Statement of the Honorable Sheila Jackson Lee, a 
           Representative in Congress From the State of Texas
    I would like to thank Chairman Sensenbrenner and Ranking Member 
Conyers for convening this Full Committee Markup opportunity concerning 
``Federal Prison Industries.'' Prison reform is an important matter 
that deserves serious review by this Subcommittee.
    Over 2 million offenders are incarcerated in the nation's prisons 
and jails. At midyear 2002, 665,475 inmates were held in the Nation's 
local jails, up from 631,240 at midyear 2001. Projections indicate that 
the inmate population will unfortunately continue to rise over the 
years to come.
    The Bureau of Prisons of the U.S. Department of Justice administers 
the federal prison system. Clearly, the Bureau is expanding the 
capacity of the federal system in anticipating of accommodating an 
inmate population exceeding 178,000 by the year 2006. Clearly, the 
overcrowding of prisons is a serious matter.
    To illustrate the impact that this bill will potentially have on 
Texas, the Federal prison population for the years 2000, 2001, and 2002 
reached 39,679, 36,138, and 36,635 persons respectively; the State 
prison population for the same years reached 20,200, 20,898, and 23,561 
persons. These numbers have grown since 2002, so the impact is indeed 
significant and the State of Texas is an important stakeholder.
    In 1934, Congress established Federal Prison Industries (FPI). FPI 
is a government corporation that employs offenders incarcerated in 
federal prisons. FPI provides job-training opportunities to federal 
inmates in the form of goods production and services for federal 
agencies. Currently, the state of Texas alone employs 7,700 inmates in 
prison industries. Nationally, 25% of those held in federal prisons are 
employed by FPI. Items produced by inmates include furniture, metal 
products, textile items, optical and plastic hardware, and electronic 
cable assemblies. Inmates are also able to use automated systems to 
prepare data and information aids.
    By statute, FPI products and services must be purchased by federal 
agencies (a requirement referred to as a ``mandatory source'' or ``sole 
source'') and not available for sale in interstate commerce or to non-
federal entities. Federal agencies can obtain products from the private 
sector through a waiver issued by FPI if the corporation is unable to 
make the needed product or provide the required service.
    FPI is a self-supporting government operation. Revenue generated by 
the corporation is used to purchase equipment and raw materials, pay 
wages to inmates and staff, and expand facilities. Last year, FPI 
generated over $566 million in revenue, $418 million of which went to 
purchasing goods and services from the private sector, 74% of which 
went to small and minority owned businesses in local communities across 
this country.
    The Bureau of Prisons clearly appreciates the advantage the program 
can have on inmates and society at large. First, there is some security 
benefit to FPI system because inmates are productively occupied. 
Second, FPI programs are said to provide inmates with training and 
experience that develop job skills and a strong work ethic. This is 
certainly important.
    On the other hand, there are some groups that represent working 
Americans that suggest that job opportunities, particularly jobs needed 
by low-income families, are lost because FPI receives federal 
contracts. However, current law prohibits FPI from dominating the 
federal market, and there are currently congressional mandates placed 
on FPI to ``avoid capturing more than a reasonable share of the 
market'' among federal agencies, departments, and institutions for any 
specific product, determining the appropriate share of the federal 
market remains contentious. Nevertheless, we must endeavor to take into 
account the concerns by working Americans across the nation so that we 
can pass a bill that simultaneously protects jobs and keeps inmates 
productive.
    The bill before us today provides for a five-year phase-out of 
mandatory source preference by granting to FPI's Federal agency 
customer's authority to first solicit on a non-competitive basis. 
However, at the end of the phase-out period there is no existing 
substitute for the services and program. Looking to the states, there 
simply is not enough program participation to accommodate the 25% that 
is currently accommodated under FPI.
    Mr. Chairman, while there other initiatives which may accomplish 
the goal of eliminating the mandatory source preference more quickly, I 
believe we can work together to reach a compromise that is both timely 
and also enhances opportunities for U.S. workers. We may not all agree 
on the specific phase-in period but let us try to find a workable 
solution on this critical issue.

    [The prepared statement of Mr. King follows:]
  Prepared Statement of the Honorable Steve King, a Representative in 
                    Congress From the State of Iowa
    Chairman Sensenbrenner, Thank you for holding a markup for this 
important piece of legislation of which I am pleased to co-sponsor.
    Federal Prison Industries (``FPI'') is a government agency in 
desperate need of reform. The special mandatory source preference in 
the government procurement process, given only to FPI, forces 
government agencies to buy from FPI--without the benefit of 
competition. I am appalled by the fact that government agencies are 
forced to buy these products and services from FPI even though the 
private sector can better meet the needs of agencies with better 
products at a cheaper price.
    I believe in the private sector. As a small business owner for over 
28 years, I know the challenges that small businesses face and their 
value to the US economy. Business owners must deal with a myriad of 
regulations and laws. However, FPI is not held to those same standards. 
FPI pays its inmate workers between 23 cents and $1.15 an hour, is 
exempt from OSHA, taxes and does not have to provide employee benefits. 
Private sector entrepreneurs cannot compete with this! There is no 
justification or excuse for undermining small business with a 
government subsidized competitor on an uneven playing field. FPI should 
have to compete for its contracts just like everyone else.
    I urge you to vote for HR 1829. Thank you Mr. Chairman.

    Chairman Sensenbrenner. Consideration now resumes of the 
bill H.R. 1829, the ``Federal Prison Industries Competition in 
Contracting Act of 2003,'' and the Chair has a manager's 
amendment at the desk which the clerk will report.
    The Clerk. Amendment to H.R. 1829 offered by Chairman 
Sensenbrenner for himself and Mr. Conyers. Page 12, line 20, 
strike sales and----
    Chairman Sensenbrenner. Without objection, the amendment 
will be considered as read.
    [The amendment follows:]
      
      

  


      
      

  


    Chairman Sensenbrenner. And the Chair recognizes himself 
for 5 minutes to strike the last word.
    I offer this amendment for myself and Mr. Conyers. The 
amendment makes a notable improvement to the bill as introduced 
and makes a number of clarifications. First, the amendment 
empowers the FPI Board of Directors to authorize an expansion 
with respect to a specific product or a specific service 
offered by FPI in excess of the maximum specified by the bill. 
Under current law the FPI Board may not authorize FPI to make 
more than a reasonable share of the market for any specific 
product. Currently neither term is defined in the FPI's 
authorizing statute or any implementing regulations.
    The bill as introduced provides a statutory definition of 
reasonable share of the markets, that of 20 percent of the 
Federal market for a specific item and 5 percent for a specific 
service. The bill requires the Board of Directors to issue a 
regulatory definition to a specific product subject to the full 
notice and comment rulemaking procedures under the 
Administrative Procedure Act.
    Critics note that the base bill would force FPI to forego 
service work that it is currently performing for Federal 
agencies. Most often cited is the fact that the FPI now 
provides the U.S. Postal Service with 90 percent of its needs 
for the service of repairing mail bags. Under the amendment the 
Board would be given the flexibility to permit FPI to provide a 
specific product or a specific service in excess of the 
reasonable share of the market under two circumstances: First, 
that the Board was requested by a Federal agency to be able to 
offer such quantities as are needed to meet the buying agency's 
requirements; and secondly, the Board could authorize higher 
sales levels for other good cause, but it requires the approval 
of 8 members of the 11-member Board rather than a simple 
majority. Such Board actions would be subject to the enhanced 
analytical and public participation requirements in the base 
bill.
    Second, the amendment clarifies that the bill as introduced 
makes no changes to the Javits-Wagner-O'Day Act, which provides 
work opportunities for the blind and other severely handicapped 
persons. This clarification has been requested by the National 
Industries for the Blind and is appropriate. I would note that 
the NIB is especially supportive of the provisions of this bill 
that protect Federal contractors from being forced to use FPI 
as a subcontractor.
    Finally, the amendment makes a series of word changes and 
other textual clarifications.
    That describes the amendment. I yield back the balance of 
my time.
    The gentleman from Virginia Mr. Scott.
    Mr. Scott. Move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Scott. Mr. Chairman, I just wanted to say a word about 
the Federal Prison Industries program, or FPI. It has been 
around since the 1930's. Under the law Federal agencies are 
required to buy needed products from FPI if FPI can meet their 
orders. The purpose of the program is to teach prisoners real 
work skills so that when they are released from prison, they 
will be able to find and hold a job to support themselves, 
their families, and they will be less likely to commit more 
crimes.
    It is clear that the program works to do just that. Follow-
up studies covering as much as 16 years of data have shown that 
inmates who participate in Prison Industries are more likely to 
be employed and less likely to commit crimes than others who 
did not participate in the program. This certainly benefits 
offenders and their families. That is beside the point from a 
public policy perspective. The real benefit is to the rest of 
us, as a result of the program, we will be less likely to be 
victims of crime.
    Now, we are prepared to spend billions of dollars in prison 
construction and prisoner upkeep in order to reduce crime. This 
is a program which reduces crime and pays for itself in the 
process. The total revenues from FPI represent a very small 
percentage, currently about one-fourth of 1 percent of Federal 
agency procurement dollars. Furniture and apparel industries 
are the two industries in which the FPI does most of its work, 
and when asked, representatives of those industries conceded 
that FPI sales represent an insignificant and negligible 
portion of their industries.
    If such industries are having problems, it is clearly not 
due to FPI. In textiles, for example, I was told that 600,000 
jobs have been lost over the last 10 years. There are 
approximately 7,000 prisoners working in textiles, in FPI. 
Certainly you can't blame a few thousand prisoners for the loss 
of 600,000 jobs.
    The program generates almost as much business as it takes 
in by pumping about three-quarters of its revenues back into 
the economy to purchase--to make purchases, to a large extent 
from small, minority and women-owned businesses by buying raw 
materials and services it needs to produce its products. FPI 
has received awards for spending in excess of 40 percent of 
expenditures in this sector of the economy.
    All able-bodied inmates in the Federal system are required 
by law to work. Few offenders in a prison have marketable work 
skills. The vast majority don't even have credible work habits, 
such as showing up for work on time, working cooperatively and 
productively with others; but such habits are required to 
maintain an FPI job. With the elimination of parole, good 
conduct credits, Pell Grants and other incentives, the prison 
system has very little to offer an inmate as an incentive for 
self-development.
    One shining exception is FPI. Non-FPI inmates get paid 
about 12 cents to 30 cents an hour, while FPI jobs pay about 
$1.25. Now, to hold down an FPI job, an inmate must have 
completed high school or be making steady progress towards 
obtaining a GED and maintain a record of good behavior. This is 
not only for those who are already on FPI jobs, but also for 
those on the waiting list, as well as those seeking to 
establish eligibility to be placed on the waiting list.
    As some suggest, the vocational education is a good 
substitute for FPI work. Now, while vocational education is 
important and ought to be available to all inmates, no amount 
of education and course work can substitute for real-world work 
experience on the job. The average sentence for prisoners in 
the Federal system is about 8 years. Vocational educational 
programs typically runs 2 years or less and is generally 
thought to be better towards the end of a sentence. In any 
case, the question comes what do you do to the other 6 years on 
average of the sentence prior to or after the completion of the 
vocational education program?
    Now, I am the first to concede there are problems with FPI 
which should be fixed, but a small business is making a single 
client product such as Army helmets, it depends on DOD 
contracts for its operations, FPI should not be able to take 
that business away. But this bill should be fixing the program, 
not gutting it by taking away all of the primary source of 
business all at once.
    While the bill suggests that the lack of competition is a 
problem, the bill seeks to stranglehold FPI as a competitor by 
not only strengthening the prohibition against activities in 
the commercial market, but also in the Government market as 
well. We are already seeing the effects of the DOD restrictions 
on FPI procurement passed last year. Information I have 
obtained from the program indicates that it has had to close 13 
factories and eliminate 1,700 inmate jobs. They expect to 
eliminate 500 additional jobs before the end of the year, and 
this is at a time when the prison population is growing, so we 
need more jobs, not fewer.
    The viability of the program at the rate we are going is 
already at risk even without this bill----
    Chairman Sensenbrenner. The gentleman's time has expired.
    Mr. Scott. Could I ask unanimous consent for 30 more 
seconds?
    Chairman Sensenbrenner. Without objection.
    Mr. Scott. We should fix the problems, and we should be 
able to do it in a way that ensures the viability of this vital 
crime-reducing program. With additional prisons scheduled to 
come online for the next few years, we can ill afford to 
diminish the successful crime reduction program. But for their 
crime and imprisonment, prisoners are indistinguishable from 
the rest of us. Treating them as if they are foreign 
competitors and viewing work of FPI as a business, a private 
business, should not be the policy of the Committee with 
oversight responsibility for the safe and efficient operation 
of our prisoners and the rehabilitation and productive return 
of the prisoners to our society.
    Mr. Chairman, we can do better than this, and I think we 
should. So I would hope that we would defeat the bill when the 
final passage comes up. I yield back.
    Mr. Conyers. Mr. Chairman, could the gentleman be given an 
additional minute?
    Chairman Sensenbrenner. Without objection.
    Mr. Conyers. And would he yield to me, please?
    I wanted to make it clear that the gentleman from Virginia 
has worked harder on this issue and longer than anyone I know 
in the Congress, and we have been working on a variety of 
approaches here. And I don't think we have reached the end of 
the road yet, and so I wanted to urge my colleague to continue 
to give us the benefit of the viewpoints that--of his that have 
already been incorporated in the bill and hope that we can 
continue to make further progress.
    I would also like to note, Mr. Chairman, that our former 
colleague from Cleveland, Ohio, Mary Rose Oakar, is in the 
Judiciary Committee room, and I know a lot of us remember her 
long and faithful service to the Congress.
    Chairman Sensenbrenner. The gentleman's time is expired.
    For what purpose does the gentleman from Wisconsin seek 
recognition?
    Mr. Green. Move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Green. Thank you, Mr. Chairman. I will be brief.
    First I would like to associate myself with the remarks of 
the gentleman from Virginia. I had to get that out on the table 
because I don't think I have actually said that before, but I 
do associate myself with his remarks, because I think on this 
subject he is right on the mark, and I think it demonstrates 
the interesting dynamics on this issue. Those who support the 
Federal Prison Industries program come from all parts of the 
political spectrum, from Mr. Scott, to myself, to Mr. Hyde, the 
distinguished former Chairman of this Committee who could not 
be here, but wanted to express his support for some of the 
amendments, the amendment I will be bringing forward, and his 
opposition to the underlying legislation.
    And outside of these halls a variety of groups and a 
variety of observers support Federal Prison Industries, and 
some of you have on your desk today a copy of a Los Angeles 
Times editorial from yesterday strongly in favor of Federal 
Prison Industries and strongly opposed to the underlying 
legislation that is before us.
    In my case the support for FPI is because of some of the 
subjects that Mr. Conyers talked about, my support for the work 
ethic as a means of rehabilitation and prison management. It 
offers a chance to reinforce the work ethic and to teach the 
work ethic to some inmates who may not have had the opportunity 
previously. It is a chance for them to learn valuable skills. 
It is also a chance to create some restitution for victims.
    It is important to remember that every dollar of FPI goes 
back to the private sector, something that is often lost in 
this debate. Seventy-four percent is spent on the purchase of 
raw materials, equipment, services and supplies from private 
sector companies. Sixty-two percent of those purchases are made 
from small and disadvantaged businesses owned by women and 
minorities. Twenty percent is paid to the staff, most of whom 
spend that money in the local community near the prison, and 
only 6 percent is paid to inmates. But that money is used to 
pay fines, child support and victim restitution. So the money 
is in that sense very well spent.
    So, Mr. Chairman, I am one of those who believes that we 
have to find ways to continue to make FPI work. It is a very 
important part of our prison system management, and it is a 
very important part of ensuring that those who will leave the 
prison system one day, as nearly every single inmate will. They 
have some of the experience, some of the skills and some of the 
values that they will need to avoid being back in prison 
someday, and with that I yield back.
    Chairman Sensenbrenner. Can we do the manager's amendment 
first?
    The question is on agreeing to the manager's amendment. 
Those in favor will say aye.
    Opposed, no.
    The ayes appear to have it. The ayes have it. The manager's 
amendment is agreed to.
    Are there further amendments to the bill?
    The gentleman from New York moves to strike the last word 
and is recognized for 5 minutes.
    Mr. Nadler. I won't speak 5 minutes.
    Mr. Chairman, I support this legislation. I support the 
Federal Prison Industries, but the fact is that we have to be 
very careful in this society about generating substandard wage 
and condition competition with American workers. Federal Prison 
Industries pays inmates between 23 cents and $1.15 an hour. It 
is exempt from OSHA regulations, from Federal, State gross 
receipts and excise taxes, and does not provide any benefits to 
its workers. FPI carries no insurance and pays no Social 
Security taxes. It goes without saying that many businesses 
cannot compete with this, but what is worse, they are not even 
allowed to try to compete since FPI gets Federal preferential 
status in Government procurement.
    Now, I work very closely with the members of UNITE in my 
district. The garment workers in New York are hurting, and they 
have suffered huge job losses in recent years, especially in 
Chinatown in the aftermath of 9/11. We should do everything we 
can to allow them to compete for Government contracts to make 
uniforms and other items purchased by the U.S. Government. We 
need to be doing much more, frankly, to support manufacturing 
in this country. In fact, we have lost about 10 percent of 
manufacturing jobs in the country in the last 3 years, in case 
anyone hadn't noticed, and I am disappointed that the trade 
deals we approved this past few days will probably do 
considerably more harm to our industrial workers than this bill 
will do to help them.
    Some people have portrayed this legislation as an attempt 
to put voiceless prisoners out of work. I don't see the issue 
in those terms. The prison population should be allowed to 
work, obviously, and to study, both to improve their own lives 
and to make it easier for prison guards to do their jobs. And 
we should appropriate, frankly, considerably more money for 
opportunities for vocational training and study and other 
training for prisoners in jail, but we should not be doing so 
in a way that enabled--that gives a preference to prison 
materials, to prison products at the expense of driving down 
wages and driving down standards in society at large.
    You know, from the days--frankly, from the days of the 
chain gangs in some of the southern States which were used to 
keep down wages and the population out of prison, this is a 
step--this is a different form of the same thing. We need ways 
for prisoners to work. We need ways for them to get educated so 
that they can better their condition and so that when they get 
out of prison, they can become more productive members of 
society, but we must not do it at the expense of driving down 
wages and working conditions for our population. And the way--I 
think this bill strikes a better balance than the current law, 
and that is why I support it, and I yield back the balance of 
my time.
    Mr. Green. Would the gentleman yield?
    Mr. Nadler. Yes, I will.
    Mr. Green. You are not meaning to suggest that those who 
participate in Prison Industries these days are similar to the 
chain gangs and forced labor of years gone by?
    Mr. Nadler. Well, in two ways they are similar.
    Mr. Green. So you are----
    Mr. Nadler. Let me just say, in two ways they are similar. 
In other ways--in all other ways, they are not. They are 
similar that they are both prisoners, and that is one way. And 
secondly, they are similar in that the labor of what they do 
makes products and makes available their work--their work in 
the one case and their products at the other--at much 
substandard wages, and therefore drives down wages and working 
conditions for everyone else. Now, in that way they are 
similar.
    In other ways certainly--I would oppose chain gangs as evil 
institutions where its present work is a good institution, but 
the economic effect outside goes in the same direction. 
Therefore, I said I would rather, frankly, have education 
programs and work programs even if we don't sell those products 
outside in competition, even if we----
    Mr. Green. I just wanted to make sure we were using the 
same terminology here.
    Mr. Nadler. I think we are, sir.
    Chairman Sensenbrenner. Are there amendments?
    Ms. Jackson Lee. Mr. Chairman.
    Chairman Sensenbrenner. The gentleman from North Carolina 
Mr. Coble.
    Mr. Coble. Mr. Chairman, move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Coble. Mr. Chairman, the gentleman from Wisconsin and 
the gentleman from Virginia make compelling arguments, as do 
you. I am in favor of this bill, however, and I think it is 
important to note that just because one may speak out in favor 
of the bill does not mean that he is an opponent to FPI. I 
worked on this bill, Mr. Chairman, in excess of a decade, and I 
will admit I come to the table subjectively, because I 
represent a significant textile and furniture workforce in my 
district, and I believe these two private sector industries are 
exposed to unfair competition as a result of mandatory 
sourcing. I think mandatory sourcing obviously gives FPI a leg 
up.
    I believe furthermore, Mr. Chairman, that your manager's 
amendment addresses a situation that may afford relief to the 
FPI through the mail bag exception that appears in your 
manager's amendment, but I do think it is important to note 
that we don't need to have another Federal entity opposing 
private sector and probably costing jobs in the private sector, 
and I am referring specifically to textiles and furniture.
    And with that, Mr. Chairman, I yield back.
    Ms. Jackson Lee. Mr. Chairman.
    Chairman Sensenbrenner. Are there amendments?
    The gentlewoman from Texas.
    Ms. Jackson Lee. Mr. Chairman, I would like to strike the 
last word.
    Chairman Sensenbrenner. The gentlewoman is recognized for 5 
minutes.
    Ms. Jackson Lee. I thank the Chairman very much.
    I think what is before us--and certainly appreciate the 
work of my colleague in the manager's amendment of Mr. 
Sensenbrenner and Mr. Conyers--is a real dilemma. A few weeks 
ago I visited one of our Federal prisons in the Beaumont area. 
It was the minimum security prison, of course, and it was a 
large complex that had three levels, medium and maximum 
security. And one of the dilemmas of those facilities is the 
budget cuts that the Federal Bureau of Prisons has experienced 
over the years and the lack of activities, educational 
activities, training activities and even work activities, for 
the persons incarcerated. These are the very same persons that, 
of course, we are punishing under the mandatory sentencing 
structure, but the very same persons that may ultimately be 
released into society.
    And I am reading an article that talks about the degree of 
recidivism in our prison inmate population and as well a 
particular note that says that 74 percent of the prison's 679 
million in sales in 2002 went back into the private sector for 
the purchase of tools, goggles and other equipment. These are 
the same individuals that we are suggesting are undermining 
small, minority and women-owned businesses, which I think is an 
issue.
    But we have another dilemma in this Committee, and that is 
that in our past legislative actions--maybe before I came to 
this Committee, we started to dumb down the prisons as it 
relates to physical exercise equipment, because that was too 
luxurious. Of course, televisions were thrown out. I think I 
saw one or two there, but I saw a huge population of 
incarcerated persons for nonviolent offenses idly sitting down 
in extreme frustration, losing a great deal of their talent.
    So I am sort of at a mixed point on this legislation, 
because I certainly have great sensitivities for small, medium 
and minority-owned businesses and women-owned businesses, to 
the extent that I have amended several pieces of legislation on 
that to provide opportunities for them, particularly in the 
science areas. But what do we do with this huge and growing 
population in our Federal system of prisoners who need 
something to do?
    Might I also say to my colleagues--and when I say that, 
again, I focused on large numbers of nonviolent criminals for a 
variety of offenses who are under the mandatory sentencing 
structure. I would hope that my colleagues in this Committee 
would entertain a proposal that I expect to offer in the coming 
weeks, coming months, a proposal that has been similarly 
presented in the Senate. Senator Sessions, I believe, has 
presented legislation, and I believe Senator Hatch has made 
comments about the burdensomeness of the mandatory sentencing 
and the fact that the Federal prison system does not have a 
good-time proposal. And I believe we should be looking at, with 
the Federal system growing to 200,000, with the financial 
burden on this Administration--excuse me, on this Government 
being excessive and growing, particularly with the population 
aging, getting older, requiring the degree of medical services 
such as kidney transplants, amputations for diabetics, 
treatment for cancer in our aging prison population, to look at 
the concept of a good-time program. A day of good time for a 
day of--a day of good time equals a day off of one's sentence.
    We are afraid of that. We are afraid of being called light 
on crime. We are afraid of the idea of releasing violent 
perpetrators out on our society in this time of homeland 
security. We are, if you will, frozen in our steps. But I 
believe that we are going to have to look at this in a lot of 
different ways; and certainly presenting a proposal that 
diminishes further the opportunity for these individuals to 
work, to feel productive, to be rehabilitated, to respond to 
our civilian population is a Catch-22, and, frankly, I don't 
know where we come down in this dilemma, because it is 
important to release individuals back into our mainstream, into 
our families and communities who have a sense of purpose and 
have a sense that they have something to live for, to do other 
than----
    Chairman Sensenbrenner. The gentlewoman's time has expired.
    Ms. Jackson Lee. I hope my colleagues will consider this 
proposal.
    Chairman Sensenbrenner. Are there amendments?
    The gentleman from California Mr. Schiff. Gentleman from 
California Mr. Schiff has an amendment.
    Mr. Schiff. Mr. Chairman, I have an amendment at the desk.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    Does the gentleman have two amendments that he wishes to 
offer en bloc?
    Mr. Schiff. Well, I think perhaps I should offer them 
singly, Mr. Chairman, unless the Chair has guidance for me on 
that.
    Chairman Sensenbrenner. The Chair suggests that the 
gentleman offer them en bloc.
    Mr. Schiff. I would be glad to offer them en bloc, Mr. 
Chairman.
    Chairman Sensenbrenner. Clerk will report the amendments.
    The Clerk. Amendments to H.R. 1829 offered by Mr. Schiff en 
bloc. Page 27, insert after line 22----
    Mr. Schiff. Mr. Chairman request that----
    Chairman Sensenbrenner. Without objection, the amendments 
will be considered en bloc. Without objection, the amendments 
are considered as read, and the gentleman from California is 
recognized for 5 minutes.
    [The amendments follow:]
      
      

  


    Mr. Schiff. Thank you, Mr. Chairman.
    As the Ranking Member indicated, this is a difficult issue. 
On the one hand we want to ensure that good law-abiding 
citizens and employees are not at a competitive disadvantage 
with those that break the law and participate in Prison Labor 
Industries. At the same time, we want to make sure that we 
satisfy the rehabilitative goals. We recognize the fact that 
two-thirds of those in prison are going to get out--or two-
thirds of them are going to recidivate after they get out, and 
we have got to attack that problem by making sure that people 
get the skills they need to be meaningfully employed once they 
are released from custody.
    There is a trade-off in the bill that addresses this issue; 
and the trade-off is in exchange for taking away the 
competitive advantage for prison labor, we strengthen the 
rehabilitative programs, the educational vocational programs 
within prison. The amendments that I am offering are designed 
both to ensure that that trade-off is a real one, that is, that 
we have meaningful timetables to ensure that these enhanced in-
prison educational, vocational assessment and training programs 
are actually implemented, and that we have an after-the-fact 
assessment to make sure they do the job they are intended to 
do.
    My amendment would ensure that all the components of the 
program, the in-prison assessments of inmate needs and 
aptitudes, the full range of educational opportunities, 
vocational training and apprenticeships, comprehensive release 
readiness preparation, are actually established in a timely 
basis in all Federal prisons. This provides a phase-in schedule 
for the establishment of these important rehabilitative 
components within a responsible period of time.
    To the effect that at least 25 percent of all Federal 
prisons not later than 2 years after the date of the act should 
have established each of the components of the program----
    Chairman Sensenbrenner. Would the gentleman yield?
    Mr. Schiff. I would be delighted to yield, Mr. Chairman.
    Chairman Sensenbrenner. I believe that both of these 
amendments are very worthwhile, and I am prepared to accept 
them. One, it establishes a schedule for implementation. The 
other establishes a report by the Director of the Bureau of 
Prisons on the results of the program. I think that both of 
these constructive additions----
    Mr. Conyers. Would the gentleman yield?
    Mr. Schiff. I would be delighted to yield.
    Mr. Conyers. I would just join with the Chairman in 
accepting these amendments. I like the part that at least 25 
percent of all Federal prisons not later than 2 years after the 
date of enactment will have this kind of an accounting 
mechanism that you have brought in, and I think this is very 
important coming from the gentleman from California, because as 
a previous U.S. attorney, you had some experience with what 
happens to people who violate the law and are sent to prison to 
be improved, and frequently that doesn't happen. And so I am 
happy that you have joined with us in this consideration.
    Mr. Watt. Would the gentleman yield?
    Mr. Schiff. Yes.
    Mr. Watt. I have some reservations, but I won't even state 
them. The question I have was on the second amendment, 055, 
line 6 and 7, where you are asking the Director to report on 
the stability of residents. I am just trying to figure out what 
the rationale for that is. Our society is so mobile, I am 
wondering whether we are asking the Director to report on 
something that is meaningless, really. What is the rationale 
for that particular part of the study?
    Mr. Schiff. The rationale is that according to the 
participants and the stakeholders in these rehabilitative 
efforts, there are several indicia of likely success in 
attacking the problem of recidivism. Stability and employment 
is certainly an obvious one, but also stability of residence, 
that people have a stake in a community, that they are not 
continually drifting from place to place, that they have a 
place of residence that they can come back to, and that also 
tends to be an indicia of likelihood of success.
    I do agree with the gentleman that probably of the three 
that we have mentioned, it is the least significant, but as the 
language points out, these are minimal requirements. We would 
expect the analysis to go much further. And the main point of 
the amendment is that I think really with every effort of this 
kind, we ought to have a rigorous assessment component to make 
sure that what we think will work is actually, in fact, 
working. But that, at least according to the experts we have 
consulted in the area, is why this is included.
    Mr. Watt. Thank the gentleman for yielding.
    Mr. Schiff. I thank the Chair and Ranking Member for their 
support and yield back whatever time I have remaining.
    Chairman Sensenbrenner. The question is on the Schiff 
amendments en bloc. Those in favor will say aye.
    Opposed, no.
    The ayes appear to have it. The ayes have it. The Schiff 
amendments en bloc are agreed to.
    Are there further amendments?
    Mr. Chabot. Mr. Chairman.
    Chairman Sensenbrenner. The gentleman from Ohio.
    Mr. Chabot. Move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Chabot. Thank you, Mr. Chairman.
    I won't use the entire 5 minutes, but I just wanted to 
respond to something that the gentlelady from Texas said in her 
statement. She mentioned some of the things that occurred in 
the Federal prisons lately. One thing that she referred to that 
she felt was a negative thing was the removal of the exercise 
or weight-lifting equipment in the Federal prisons and is one 
of the principal sponsors of that along with Congresswoman 
Deborah Pryce some years back. I wanted to again remind folks 
as to why many of us thought that that action was appropriate.
    We had many of our prisoners who spent significant amounts 
of time building themselves up and were becoming quite 
dangerous. We had the case of an Ohio woman who, after a 
Federal prisoner got out and had built himself up and was, you 
know, weight-lifting a considerable amount of time while he was 
in prison, overpowered her and repeatedly raped her, and this 
is something that she is still obviously dealing with and will 
for the rest of her life. She testified before our Committee.
    Mr. Chabot. Secondly, another case that happened in my 
State in Ohio in the Lucasville Prison riots that happened some 
years back, a number of the prisoners who were rioting used the 
barbells and the weight lifting equipment to break through 
concrete walls to get at some of the guards who were waiting 
for reinforcements to come in and they did break through the 
walls and got to one of the guards and murdered him and that 
particular--the one who instigated that is on death row and 
waiting execution for having done that. But there was, I think, 
very good reason for us to take that action in taking away the 
weight lifting equipment from some of these prisoners who 
became particularly dangerous.
    And secondly, I wanted to associate myself with the 
comments of the gentleman of Wisconsin, Mr. Green, who I think 
very articulately stated the reason that some of us have some 
real concerns with this legislation, and I think that the 
Prison Industries is a very important program and whereas I 
would agree that there are things that could be reformed and 
could be made better, I think it is important that we do allow 
these prisoners--and again I want to associate myself with the 
gentleman from Virginia as well. We do need to rehabilitate 
these folks to the degree that we are able to. Most of them 
will come out some day and they will be our fellow citizens and 
we have to make sure they do have job skills.
    Ms. Jackson Lee. Would the gentleman yield? My comment was 
in no way to suggest that there had not been some valid reasons 
for bringing forth that legislation. My point is that as we 
incarcerate these individuals, regularly we should review the 
circumstances. This legislation is an attempt to review the 
circumstances. I tend to agree with the comments made earlier 
about the difficulty of the choice because they need to be 
rehabilitated. And my point was that we also need to assess 
this growing population, if you will, and whether or not there 
can be some relief for these nonviolent minimum security 
individuals who are under mandatory sentencing and whether or 
not this Committee needs to review this question.
    Mr. Chabot. Reclaiming my time, I just conclude by saying, 
as I said, these folks are going to be out, most of them, on 
the street again, and while they are in there they ought to be 
getting skills to the extent that we are able to assist them in 
doing that, and their time ought to be productively spent. And 
if it is making furniture, whatever it might be, I think that 
is generally important.
    When I was at the local level, when I was on city council 
and I was county commissioner, I was very active in my 
community in Cincinnati and having them do all kinds of work 
out there, cleaning up parks, highways and many other things. 
And I think it is important we do this, and I yield back the 
balance of my time.
    Chairman Sensenbrenner. Are there amendments? Gentleman 
from Virginia, Mr. Scott.
    Mr. Scott. I have an amendment at the desk, number 4.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. Clerk will report the amendment.
    The Clerk. Amendment to H.R. 1829 offered by Mr. Scott of 
Virginia. On page 43, line 21, strike January 21, 2005 and 
insert June 30, 2004.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Scott. Mr. Chairman, this is in the section of 
independent study to determine the effects of eliminating 
Federal Prison Industries' mandatory source authority.
    Chairman Sensenbrenner. Gentleman yield?
    Mr. Scott. I yield.
    Chairman Sensenbrenner. I believe this is a good amendment 
and am prepared to accept it.
    Mr. Conyers. I commend the gentleman from Virginia on his 
amendment.
    Mr. Scott. Thank you, Mr. Chairman. I yield back.
    Chairman Sensenbrenner. Question is on the Scott amendment. 
Those in favor will say aye. Opposed no. The ayes appear to 
have it. The ayes have it. The amendment is agreed to.
    Are there further amendments? Gentleman from Wisconsin, Mr. 
Green.
    Mr. Green. Mr. Chairman, I have an amendment at the desk.
    Chairman Sensenbrenner. Clerk will report the amendment.
    The Clerk. Amendment to H.R. 1829 offered by Mr. Green of 
Wisconsin. Page 21----
    Mr. Green. Unanimous consent to be considered as read.
    Chairman Sensenbrenner. Without objection, so ordered. The 
gentleman is recognized for 5 minutes.
    [The amendment follows:]
      
      

  


    Mr. Green. Thank you, Mr. Chairman. Those who are pushing 
this legislation, 1829, mostly claim to support many of the 
same principles that those who are critics of this legislation 
have put forward. They argue that this legislation will not end 
the FPI program. They argue that it will not hurt materially or 
diminish the FPI program. In fact they maintain and they argue 
that this legislation will merely make FPI more competitive and 
stronger in the long run.
    Mr. Chairman, I respectfully disagree with their 
assessment. This amendment that I offer on behalf of myself and 
the former Chairman of this Committee, Congressman Hyde, offers 
us a way out of that disagreement as to whether or not this 
legislation will actually strengthen the program. The amendment 
that I offer does not block the plans of the bill's supporters. 
Instead, what it does is to provide a safety valve in case the 
bill doesn't work as its proponents promise. As the Member from 
California, Mr. Schiff, suggested just a few moments ago, it is 
a good thing for us to assess programs and to measure them and 
should try to determine whether or not they work as intended.
    Well, that is really what this amendment would do with 
respect to the mandatory source rule and FPI. My amendment 
would require the Attorney General to make a determination each 
year about whether or not phasing out FPI's procurement 
preference has led to a reduction in the number of inmates 
working. If and only if the employment numbers are 
substantially lower, the Attorney General would then be 
required to determine whether or not this drop-off poses a 
significant threat to prison operations or to general public 
safety. If the Attorney General concludes that all of this has 
occurred, he may postpone the phasing out of the mandatory 
source--the preference for at least a year and then it would 
only--the phaseout would only continue when the Attorney 
General has determined that it is safe for it to proceed.
    So my amendment says that if, in fact, this legislation 
were to strengthen FPI, fine, let us move forward. Many of us 
are afraid it will not. And if it does not work, this 
legislation as advertised, there could be serious risks for 
prison operations and for the safety of those who work in 
prisons. If, in fact, that significant risk appears, if in fact 
the Attorney General sees that it is there, then it would only 
be wise for us to allow the Attorney General to suspend that 
phaseout. And again if he or she determines that, in fact, the 
stability and safety has been restored, then it would continue.
    What I want to do here is create a safety valve to make 
sure that those negative consequences that many of us fear will 
not in fact take place.
    Mr. Chairman, I yield back.
    Chairman Sensenbrenner. The Chair recognizes himself for 5 
minutes in opposition of the amendment. I believe this to be a 
cop out amendment because what the amendment proposes to do is 
to delegate the authority that belongs to the Congress and more 
specifically this Committee to the Attorney General to make a 
determination on whether the programs contained in this 
legislation are working or not.
    Now one of the things I have prided myself in is doing 
vigorous oversight, and we will do oversight over Federal 
Prison Industries just like we have done oversight over 
practically everything else that is under the jurisdiction of 
this Committee. If the programs are not working and an 
amendment to this law is necessary, then I believe it is the 
duty of this Committee to make whatever amendments to the law 
the oversight determines to be necessary. But I don't want to 
pump the ball down the street to the Justice Department and 
have that determination be made unilaterally by the Attorney 
General.
    Now what this bill does is to level the playing field so 
that FPI would compete on the same playing field with private 
tax paying, job creating industry. And if FPI can't do that 
despite all of the preferences that it has with low wages and 
not paying taxes and not paying rent and all of that other 
stuff, then there is going to be less work for FPI to do and 
there will end up being fewer prisoners that are employed by 
FPI. And to say that if that happens because FPI can't compete, 
it ends up losing contracts and losing jobs that the Attorney 
General can say, hey, wait a minute, because they couldn't 
compete, then we are going to go back to the sole source 
procurement for the Federal Government simply blows a hole in 
this bill that is big enough to drive an 18-wheeler through. 
And I think if the bill is unworkable and it is determined in 
the future that we made a mistake of approving this bill, then 
we ought to be the ones that fix it rather than the Justice 
Department, and specifically the Attorney General saying, no, I 
didn't like that bill, so I am going to make a certification to 
make sure that the bills, reforms of the procurement practices 
don't work. In the interest of having Congress and this 
Committee do the job that the Constitution and the rules intend 
for us to do, let us keep the decision making power here rather 
than sending it down to the Justice Department.
    I urge opposition to this amendment and yield back the 
balance of my time. Gentleman from New York, Mr. Nadler. 
Gentleman strike the last word?
    Mr. Nadler. Indeed I do. Thank you, Mr. Chairman. Mr. 
Chairman, I cannot resist the opportunity rare as it is to 
speak in agreement with the Chair and there isn't much else to 
say. There is no reason to give the Attorney General the 
absolute discretion to shut down what we are doing today. The 
Committee can judge that. We had a debate on that subject in 
the last Congress. The Chairman has made the points. We will 
see how well it works. We will review it next year and we can 
reserve that judgment for this Committee.
    Chairman Sensenbrenner. Will the gentleman yield? Obviously 
this is not the Ways and Means Committee. Mr. Nadler and Mr. 
Watt are agreeing with me. Mr. Chabot and Mr. Green are 
agreeing with Mr. Scott, and that never happens in the Ways and 
Means Committee, and let us hope it never does. And I thank the 
gentleman for yielding. The gentleman from Alabama, Mr. Bachus.
    Mr. Bachus. Mr. Chairman, I don't know how many Members of 
the Committee have been around the prisons on a daily or weekly 
basis. As a State Attorney General, I spent a lot of time in 
the prisons, I spent a lot of time prosecuting people who went 
to prisons, I spent a lot of time talking to prisoners. And I 
can tell you without a doubt, I have absolutely no doubt in my 
mind it is best for those prisoners to work. They want to work. 
They have more self-esteem. They are calmer, they are easier to 
manage. If they do not work in prison, when they get out of 
prison they are not going to work. Now that is a broad 
generalization. If they work in prison, the chances of them 
working when they get out of prison are much greater.
    I am going to share a story--this is not a story of what I 
learned from working around the prisoners and in my job as a 
State's Attorney General. This is a story that my uncle told me 
about 15 years ago. I was at a little hunting camp. It was a 
shack that he owned in south Alabama and as we left one day, 
somebody asked him if he was going to lock the place up and he 
said no. He had two neighbors that watched the place. And 
somebody said, well, you know, who are they? He said they are 
the best neighbors somebody could get. He said they have been 
out of prison 2 years, and we thought he was kind of joking. He 
said they were ex-cons. What he went on to explain is they had 
been out of prison 2 years, black gentlemen, and they learned 
how to farm when they were in prison and both of them were 
farmers. And he said if there were two guys you could trust, it 
was these two gentlemen because they spent the first 25 years 
of their life in prison but they had learned to farm when they 
were in prison. And they came out and they were farming. And 
there were two guys that were not going to go back to prison. 
One reason is they learned a craft when they were in there.
    Now I am most concerned for our society and safety today. 
And as some of the Members have said, we are warehousing 
prisoners and we are putting tremendous numbers, hundreds of 
thousands of people, behind bars. Many of them before they went 
never were gainfully employed. They never knew the joy of 
actually going to work and earning money or making a product or 
accomplishing something.
    I would urge this Committee not to do anything, and I think 
Mr. Green's amendment is a safety valve. And I think the 
Attorney General, if anybody--if an Attorney General in an 
Attorney General's Office, if anybody is going to understand 
other than the Bureau of Prisons, that these prisoners need to 
be working, it is the Attorney General's office. And the 
legislation--the underlying legislation scares me because if it 
does anything to eliminate or discourage these prisoners 
working every day and building self-esteem and getting 
experience, then I hope we don't pass the underlying 
legislation. But if we do, I certainly hope that we pass Mr. 
Green's amendment. And if we don't, it may be one of our 
neighbors and one of our family members that pays the price 
when somebody that stays in prison for 10 or 15 years and sits 
there and does nothing and comes out with a lot of anger and an 
inability or not in a habit of working, takes that frustration 
out on one of our loved ones, and I yield back the balance of 
my time.
    Chairman Sensenbrenner. The question is on the Green 
amendment--the gentleman from North Carolina, Mr. Watt.
    Mr. Watt. I move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Watt. Thank you, Mr. Chairman. Let me use this 
amendment in the context in which I make some comments about 
this whole situation because I think it illustrates the points 
that I want to make more than any of the other amendments.
    First of all, I should say that Mr. Scott and I have been 
friends since before we came to Congress going all the way back 
to the mid-80's when he was in the State legislature and I was 
in the North Carolina legislature, and we have sat beside each 
other on this Committee ever since we have been in Congress. 
And when I go to the floor and debate, his phone lights up. 
When he goes to the floor and debates, my phone lights up 
because half the public thinks I am Mr. Scott and Mr. Scott is 
Mr. Watt. So there is seldom an occasion on which there is much 
light between us on a personal friendship level or on an issues 
level. And I have learned a long time ago that when Mr. Scott 
has strong opinions about something, I need to listen carefully 
to what he is saying and understand if I believe I have a 
different opinion than him. And I have listened carefully to 
what he has said, and today he has not said a thing that I 
disagree with except that he is going to vote against this bill 
and I am going to vote for it. I have analyzed our differences 
and I think they are wise in the context of this amendment more 
than anywhere else and in the context of a disagreement that 
Mr. Chabot and Ms. Jackson Lee had in the course of their 
debate.
    I think that Prison Industries and employing people in 
prison is important and valuable for rehabilitative purposes 
and for training purposes. I do not think that Prison 
Industries is an appropriate means of controlling prisoners, 
just giving them something to do to keep them busy so they 
don't disrupt the prison system. And I don't like this 
amendment for that reason because it clearly acknowledges that 
that is one aspect of what this Prison Industries stuff is all 
about. I don't think that is an appropriate purpose to be 
served by Prison Industries. If we are going to put people in 
prison, I think we ought to give them constructive things to do 
without doing detriment to private enterprise, and that is 
where Mr. Chabot and I disagree. I think, you know, if they are 
exercising, they are watching television, that is fine. If they 
are working for the purpose of training and rehabilitation, 
that is wonderful, and I would be absolutely supportive of 
that. The problem is that the Prison Industries has lost sight 
of that and it has gone off in a different direction, and a lot 
of what they are doing has to do with just keeping people 
occupied so they don't make trouble. It is not about 
rehabilitation. It is not about preparing them to go back into 
society. It is about kind of keeping them out of trouble, and 
that is where I think the dividing line is. It is a tough 
dividing line.
    And so I don't think this debate is about whether you 
support Prison Industries or not. I support Prison Industries 
for the purposes for which it was intended. I don't support 
Prison Industries for purposes other than that. And so I think 
the bill represents a good compromise. Mr. Schiff's amendment 
is going to phase it in over a period of time. Mr. Green's 
amendment would, as the Chairman said, allow a Mack truck to 
drive through it and undermine the whole purpose of the bill. I 
think we should defeat Mr. Green's amendment, support the bill, 
and I yield back.
    Mr. Bachus. Would the gentleman yield?
    Mr. Watt. One additional minute.
    Mr. Bachus. Most of us I think when we were teenagers our 
fathers got us up and they told us we were going to work and I 
don't know if you all had that experience, but my father would 
get me up at 6 o'clock and if I wasn't in school, I was 
working. And I believe there were two purposes for sending me 
to work every morning. And I think one purpose was to teach me 
work ethic and a skill. I mean I learned to do something and 
that was a part of it, but I also think part of it was to keep 
me occupied.
    Mr. Watt. Reclaiming my time, I acknowledge that that was 
probably true.
    Mr. Bachus. And I don't think they are mutually exclusive.
    Mr. Watt. I don't have a problem with keeping prisoners 
occupied. I draw the line when I start keeping them occupied at 
the expense of people in the private sector, and I am the first 
to acknowledge that that is a difficult line to draw. But I 
think that may be where--I don't know. Maybe Mr. Scott has a 
different opinion about this, but I haven't seen much 
difference between where Mr. Scott and I are except on possibly 
that one issue.
    Chairman Sensenbrenner. Gentleman's time has once again 
expired. The question is on the Green amendment. Gentleman from 
Virginia is recognized for 5 minutes.
    Mr. Scott. Thank you, Mr. Chairman. First of all, with 
regard to the comments from the gentleman from North Carolina 
about these unprecedented alliances. I point out, Mr. Chairman, 
for the last 3 days we have been in session well past midnight 
and are sleep deprived and I wonder if that has anything to do 
with these strange alliances, but in any case we want to get to 
this amendment and look at the bill and look at the amendment.
    The bill, if you look at page 4, says that you can grant 
sole source contracts if the Attorney General determines--makes 
certain determinations. But part of the determination is that 
the warden has to tell the Attorney General that he is unable 
to maintain safety or can't manage the prison. You can't expect 
a warden to publicly certify that he is unable to do his job. 
So that makes that provision somewhat unworkable. Without this 
amendment where the Attorney General can make the finding on 
his own, you have the situation in which the Attorney General 
has affirmatively concluded that there is a significant risk to 
public safety if we don't have a Federal Prison Industries 
program and there is nothing he can do about it. This amendment 
I think is well taken. It would give him something that he 
can't do to protect the public safety. I would remind the 
Members of, I guess, the last few sentences in the L.A. Times 
editorial that the gentleman, Mr. Green, mentioned. And I 
just--it is from a California Republican who apparently did 
have some experience with the prisons from the inside. He said, 
do we want them unskilled and angry after years of forced 
idleness or do we want them capable of contributing to society 
with skills they have learned during their confinement? How we 
treat them in prison will determine what kind of neighbors they 
will be.
    Finally, Mr. Chairman, I just note that we are talking 
about giving inmates constructive things to do with their time. 
That is not really the point of Federal Prison Industries. The 
fact is that Prison Industries has been shown to reduce crime. 
And to the extent that there are other ways maybe you can do 
it, but we know this works. So if we get rid of Prison 
Industries, we will be increasing crime. I would hate to read 
the paper in a couple of years and see that somebody has been 
murdered or robbed. I would have to say H.R. 1829 is working, 
the crime rate is going up.
    So this amendment allows the Attorney General to make the 
appropriate findings, and I would hope that we would adopt the 
amendment.
    I yield to my friend from North Carolina.
    Mr. Watt. I just want to focus on line 14 and 15 of Mr. 
Green's amendment and ask Mr. Green and Mr. Scott whether that 
should be the criteria, whether you have a substantial 
reduction in inmate industrial employment? Is that the 
objective or are we trying to talk about training and 
rehabilitation? I don't think the criteria ought to be--I think 
we ought to be working our way toward a situation where you are 
decreasing inmate industrial employment if Prison Industries is 
working as well as you all think it is working. Ultimately, I 
just don't think that should be the criteria, and I want you 
all to focus on that particular language. Is that the 
appropriate criteria that should stop reform of this program? 
And I will yield to Mr. Green or Mr. Scott--well, it is Mr. 
Scott's time.
    Mr. Scott. I yield back.
    Chairman Sensenbrenner. Question is on the Green amendment. 
Those in favor will say aye. Opposed no. The knows appear to 
have it.
    Mr. Green. Mr. Chairman.
    Chairman Sensenbrenner. Gentleman from Wisconsin.
    Mr. Green. On that I would like a rollcall vote.
    Chairman Sensenbrenner. A recorded vote will be ordered. 
Those in favor of the Green amendment will as your name is 
called answer aye. Those opposed no, and the Clerk will call 
the roll.
    The Clerk. Mr. Hyde.
    [no response.]
    The Clerk. Mr. Coble.
    Mr. Coble. No.
    The Clerk. Mr. Coble votes no.
    Mr. Smith.
    [no response.]
    The Clerk. Mr. Gallegly.
    [no response.]
    The Clerk. Mr. Goodlatte.
    Mr. Goodlatte. Aye.
    The Clerk. Mr. Goodlatte votes aye.
    Mr. Chabot.
    Mr. Chabot. Aye.
    The Clerk. Mr. Chabot votes aye.
    Mr. Jenkins.
    Mr. Jenkins. No.
    The Clerk. Mr. Jenkins votes no.
    Mr. Cannon.
    [no response.]
    The Clerk. Mr. Bachus.
    Mr. Bachus. Aye.
    The Clerk. Mr. Bachus votes aye.
    Mr. Hostettler.
    Mr. Hostettler. No.
    The Clerk. Mr. Hostettler votes no.
    Mr. Green.
    Mr. Green. Aye.
    The Clerk. Mr. Green votes aye.
    Mr. Keller.
    Mr. Keller. No.
    The Clerk. Mr. Keller votes no.
    Ms. Hart.
    Ms. Hart. No.
    The Clerk. Ms. Hart votes no.
    Mr. Flake.
    Mr. Flake. No.
    The Clerk. Mr. Flake votes no.
    Mr. Pence.
    Mr. Pence. No.
    The Clerk. Mr. Pence votes no.
    Mr. Forbes.
    Mr. Forbes. No.
    The Clerk. Mr. Forbes votes no.
    Mr. King.
    Mr. King. No.
    The Clerk. Mr. King votes no.
    Mr. Carter.
    Mr. Carter. No.
    The Clerk. Mr. Carter votes no.
    Mr. Feeney.
    Mr. Feeney. No.
    The Clerk. Mr. Feeney votes no.
    Mrs. Blackburn.
    Mrs. Blackburn. No.
    The Clerk. Mrs. Blackburn votes no.
    Mr. Conyers.
    Mr. Conyers. No.
    The Clerk. Mr. Conyers votes no.
    Mr. Berman.
    [no response.]
    The Clerk. Mr. Boucher.
    [no response.]
    The Clerk. Mr. Nadler.
    [no response.]
    The Clerk. Mr. Scott.
    Mr. Scott. Aye.
    The Clerk. Mr. Scott votes aye.
    Mr. Watt.
    Mr. Watt. No.
    The Clerk. Mr. Watt votes no.
    Ms. Lofgren.
    Ms. Lofgren. Aye.
    The Clerk. Ms. Lofgren votes aye.
    Ms. Jackson Lee.
    Ms. Jackson Lee. Aye.
    The Clerk. Ms. Jackson Lee votes aye.
    Ms. Waters.
    Ms. Waters. Aye.
    The Clerk. Ms. Waters votes aye.
    Mr. Meehan.
    [no response.]
    The Clerk. Mr. Delahunt.
    [no response.]
    The Clerk. Mr. Wexler.
    [no response.]
    The Clerk. Ms. Baldwin.
    [no response.]
    The Clerk. Mr. Weiner.
    [no response.]
    The Clerk. Mr. Schiff.
    Mr. Schiff. No.
    The Clerk. Mr. Schiff votes no.
    Ms. Sanchez.
    Ms. Sanchez. No.
    The Clerk. Ms. Sanchez votes no.
    Mr. Chairman.
    Chairman Sensenbrenner. No.
    The Clerk. Mr. Chairman votes no.
    Chairman Sensenbrenner. Members in the chamber wish to cast 
or change their vote. Gentleman from Utah, Mr. Cannon.
    Mr. Cannon. No.
    The Clerk. Mr. Cannon, no.
    Chairman Sensenbrenner. Gentleman from New York, Mr. 
Nadler.
    Mr. Nadler. No.
    The Clerk. Mr. Nadler, no.
    Chairman Sensenbrenner. Further Members who wish to cast or 
change their vote? If not, the Clerk will report.
    Ms. Waters. Mr. Chairman.
    Chairman Sensenbrenner. Gentlewoman, Ms. Waters, from 
California.
    Ms. Waters. I am sorry. I thought you were calling for 
additional amendments.
    Chairman Sensenbrenner. In a minute. Clerk will report.
    The Clerk. There are 8 ayes and 19 noes.
    Chairman Sensenbrenner. And the amendment is not agreed to. 
Are there further amendments?
    Chairman Sensenbrenner. Gentlewoman from Texas, Ms. Jackson 
Lee.
    Ms. Jackson Lee. I have an amendment at the desk.
    Chairman Sensenbrenner. Clerk will report the amendment.
    [The amendment follows:]
    
    
    The Clerk. Amendment to H.R. 1829 offered by Ms. Jackson 
Lee. At the end insert the following: It is the sense of 
Congress that it is important to study the concept of 
implementing a ``good time'' release program for nonviolent 
criminals in the Federal prison system.
    Chairman Sensenbrenner. The gentlewoman is recognized for 5 
minutes.
    Ms. Jackson Lee. I just want my colleagues to know, and I 
thank the distinguished Chairman.
    Chairman Sensenbrenner. Would the gentlewoman yield? I am 
happy to accept the amendment.
    Ms. Jackson Lee. I cannot thank the distinguished gentleman 
more. Let me just say a word, Mr. Distinguished Chairman. And I 
will say that word briefly. Thank you, Mr. Chairman, a 
sentence, and an end.
    My colleagues, I recognize the role of this Committee and 
the role of prisons, and on behalf of the families of 
prisoners, many of whom are incarcerated for nonviolent 
offenses and many of whom have family responsibilities but many 
of whom would be able to come under this good conduct or good 
time effort, I thank you for accepting an amendment that would 
suggest that it is important to study a good time release 
program for the Federal Bureau of Prisons. I thank my 
colleagues.
    Chairman Sensenbrenner. And the question is on the Jackson 
Lee amendment. Those in favor will say aye. Opposed no. The 
ayes appear to have it. The ayes have it and the amendment is 
agreed to.
    Are there further amendments? The gentlewoman from 
California, Ms. Waters.
    Ms. Waters. Mr. Chairman and Members, on this issue----
    Chairman Sensenbrenner. You have an amendment at the desk?
    Ms. Waters. I have an amendment at the desk.
    Chairman Sensenbrenner. Clerk will report the amendment.
    [The amendment follows:]
    
    
    The Clerk. Amendment to H.R. 1829 offered by Ms. Waters. 
Page 23, line 15, after ``institutions.'' insert ``Such hourly 
wages shall not be less than $2.50 per hour.''.
    Chairman Sensenbrenner. Gentlewoman is recognized for 5 
minutes.
    Ms. Waters. Thank you very much, Mr. Chairman. I have 
listened as some of our Members have agonized about this 
legislation. And of course we have of course Members of this 
Committee who are long time supporters of organized labor and I 
am one of them. I think you will rarely find an issue where I 
disagree with organized labor and have worked many years to try 
and increase wages and benefits and create fairness in the 
workplace. However, I find myself in a very interesting 
position with this issue and I have labored with this over the 
years.
    Today I have come to some conclusion about what I should be 
doing. I am offering this amendment to increase the amount of 
wages for any number of reasons, number one, because of 
complaints by prisoners about the amount of wages. Number two, 
I am interested in prisoners being able to save money so that 
upon release they have money to be able to find shelter and 
food and to be able to maintain themselves until they can find 
employment. I also believe it is extremely important for 
inmates to be able to work even if the jobs seem meaningless 
because it is important to have a work schedule. It is 
important to get up knowing that you have to be someplace at a 
certain time and perform certain kinds of activities. It is 
important to know that you got to follow some rules and you got 
to produce something or you got to do something to earn some 
money. So I am not really concerned about whether or not one 
prisoner is making furniture or whether they are sweeping the 
floor. I want them working, I want them active, I want them 
doing something so that they are involved and they can make 
some money.
    Now, let me tell you what is extremely important about all 
of this. Even after some of our inmates are trained, even after 
they learn a skill, I don't know how many of you understand 
what it is like to look for a job once you have been 
incarcerated. If there is one thing that just tears at my heart 
it is ex-felons, former inmates who are trying to go right, who 
are trying to do something who are begging for jobs. Can you 
help me find a job? The applications are torn up and they are 
thrown in the waste basket, and particularly in a competitive 
labor market where employers don't have to hire anybody less 
than people who are highly educated or people who have good 
work records, ex-felons and formerly incarcerated persons find 
it very, very difficult. They stand a little bit of a better 
chance if they have developed a skill, if they have learned 
something, if they are able to go and sell themselves to an 
employer that they know how to produce a product, they know how 
to operate some machinery, they understand the workplace. We 
are all at risk when we are turning out formerly incarcerated 
folks who have no money, nowhere to go and very little chances 
of being employed. What do you think is going to happen? We 
cannot control crime and recidivism if we don't think about 
this in ways that will help us to move those people from having 
been incarcerated into jobs so that they can be mainstreamed.
    So while I certainly am supportive of organized labor, we 
may disagree on this. But on this one, I have no permanent 
friends or permanent enemies. I like Mr. Watt. I like Mr. 
Scott, but it has nothing to do with any of this. This has to 
do with the unprecedented number of prisoners that are hitting 
our streets who need to find jobs, and we are doing nothing 
that would help them to get into those jobs. Don't forget, 
every application says have you served time. And once they say 
yes, the chances are they are not going to get that job. The 
only hope again that they have is that an employer may take a 
chance with them if they have a skill, they have learned 
something and they can present themselves in ways that will 
help the employers to understand.
    Chairman Sensenbrenner. The gentlewoman's time has expired.
    Ms. Waters. So I would ask that you would support the 
increase in hourly wages. And let me just say somebody said, 
well, Prison Industries won't like this because this means they 
have to pay out more money. So be it. The fact of the matter is 
they should be more competitive, we should have more jobs, we 
should have more training. And I would ask for support for this 
amendment.
    Chairman Sensenbrenner. The Chair recognizes himself in 
opposition to the amendment. The amendment of the gentlewoman 
from California, I believe, is very well-intentioned, but will 
end up being counterproductive. The purpose of this bill is to 
reduce the mandatory sourcing of FPI sales and Federal agency 
procurement. This amendment does not change that policy 
decision that is contained in H.R. 1829. What it does do is 
that it makes FPI noncompetitive in the nonmandatory sourcing 
competitive bid procurement, and thus it will end up reducing 
the amount of business FPI has and the amount of money that FPI 
can pay for its workers, the prisoners who are working in 
Federal Prison Industries.
    The bill already allows periodic adjustment wage rates by 
the Board of Directors of Federal Prison Industries. To put 
this fixed dollar amount in is going to result in fewer jobs in 
the prisons and probably end up destroying Federal Prison 
Industries. The purpose of this bill is not to destroy FPI, but 
to reform it.
    Ms. Waters. Would the gentleman yield?
    Chairman Sensenbrenner. I yield to the gentleman from 
Virginia.
    Mr. Scott. Thank you, Mr. Chairman. I think it is a good 
idea to give prisoners more money. The money they make goes to 
victims, restitution, child support and fines, and that is the 
good part of the amendment.
    Mr. Chairman, you pointed out some of the concerns because 
if you are not competitive, you won't get any contracts at all 
so there won't be any money coming in. So I am not exactly sure 
what impact it may have. One of the problems is that the 
effective labor--the labor productivity is not as effective as 
it is in the private sector. Private sectors don't have 
security guards they have to hire to look over people, the 
excess oversight. Some of the machinery may not be the best. 
And it takes, therefore, on average 4 inmates to provide the 
productivity of one private sector worker. If the rate is 
competitive, 2.50, 4, $5 an hour for each one, it may adversely 
affect the number of contracts and therefore, Mr. Chairman, 
although I agree that the inmates ought to be making more 
money, I am not able to support the amendment at this time.
    Chairman Sensenbrenner. Chair yields back. Gentlewoman from 
California, Ms. Lofgren, is recognized for 5 minutes.
    Ms. Lofgren. I understand what my colleague from Virginia 
has said and obviously we don't want to impair the viability of 
the prison industry activity. However, you know, I have long 
been troubled about inmates and there are always going to be 
nonviolent inmates because otherwise they are not going to get 
out at all, get released from prison and have actually nothing. 
And we have set up a situation where they are just bound to 
face failure in the integration back into society. So I guess I 
am searching for a way to provide some income to people who 
paid their debt to society to allow them to actually stay clean 
and become productive Americans. And I thought the gentlelady's 
amendment really addressed that.
    And I would like to yield to the gentlelady and address the 
issues.
    Ms. Waters. You are absolutely correct. Listen, Members, we 
can't have it all ways. We have a lot of Members who talk about 
law and order and how they want to make our streets safe, yet 
we really don't do anything to make our streets safe. We simply 
talk about locking people up and we wish--some of us wish we 
could throw the key away. But guess what, they are coming back 
out. We moan and groan about recidivism, but we don't prepare 
them to come back into our society, get jobs and become 
competitive. We want them to work but we have applications that 
say have you ever served time, are you a felon, and they answer 
yes, they get no job, and then we wonder why they don't work.
    We can't have it all ways. We have got to do something. Now 
you can't love organized labor so much that you aren't willing 
to provide some training and work opportunities for these 
inmates. You can't love the prison industry so much that you 
aren't willing to say to them, if you have some products, be 
competitive. They should be market rate products. Be 
competitive with your products and pay enough wages where 
people will at least have an opportunity to have some money in 
their pockets so that they can rent a place and they can get 
some food and they can try and look for a job using those 
skills that they have learned working in your industries.
    So I stand by my amendment. Those people who say it will 
drive them out of business, what you are basically saying is 
you want some special kind of relationship that does not 
require Prison Industries to charge market rate for their 
products. If they are making products for the Federal 
Government or anybody else, they should be market rate, they 
should be competitive. If they do a good job, they should be 
able to earn money, should be able to pay the prisoners more 
and I don't want to hear about their overhead costs. They are 
doing it on our property. They are doing it without having to 
pay for, you know, additional costs for electricity and air 
conditioning. Don't tell me about the guard. We already pay for 
the guard. We already pay for that guard. So their overhead is 
a lot less than it would be if they were out there having to, 
you know, rent venues and places and pay all of the costs that 
go along with it.
    There is time for us for us to shed all of our political 
alliances and think about getting rid of crime, think about 
getting rid of recidivism. And if we can't explain that to our 
friends, we aren't worth our salt and we don't deserve to be 
here, and I yield back.
    Ms. Lofgren. Actually it is my time.
    Chairman Sensenbrenner. The gentlewoman has lost it.
    Ms. Lofgren. In my experience, which again is not running a 
Federal prison but in local government where we ran a very 
large facility for 14 years and had thousands of inmates 
engaged in very productive work, what we found is if you have a 
financial incentive you also end up having the bureaucracy 
becoming more entrepreneurial. And I think that is what the 
gentlelady is suggesting, is having a wage that does not 
undercut the private sector's part of getting to an 
entrepreneurial approach within the Federal Prison Industry 
Program. And I fear that if we don't do something to support 
this whole industrial effort--we have already done terrible 
things to our educational programs within institutions, we are 
just creating a whole lot of problems for society. And 
potentially, although I am sure this is not the intent, I 
wouldn't even suggest this is the intent, but a whole lot of 
victims for when these individuals are not integrated back into 
society.
    Chairman Sensenbrenner. The gentlewoman's time has expired. 
The question is on the amendment of the gentlewoman from 
California, Ms. Waters. Those in favor will say aye. Opposed 
no. The noes appear to have it, the noes have it.
    Ms. Waters. Rollcall, please.
    Chairman Sensenbrenner. rollcall will be ordered. Those in 
favor of the Waters amendment will as your name is called 
answer aye. Those opposed no. And the Clerk will call the roll.
    The Clerk. Mr. Hyde.
    [no response.]
    The Clerk. Mr. Coble.
    [no response.]
    The Clerk. Mr. Smith.
    [no response.]
    The Clerk. Mr. Gallegly.
    [no response.]
    The Clerk. Mr. Goodlatte.
    [no response.]
    The Clerk. Mr. Chabot.
    Mr. Chabot. No.
    The Clerk. Mr. Chabot votes no.
    Mr. Jenkins.
    Mr. Jenkins. No.
    The Clerk. Mr. Jenkins votes no.
    Mr. Cannon.
    [no response.]
    The Clerk. Mr. Bachus.
    [no response.]
    The Clerk. Mr. Hostettler.
    Mr. Hostettler. No.
    The Clerk. Mr. Hostettler votes no.
    Mr. Green.
    Mr. Green. No.
    The Clerk. Mr. Green votes no.
    Mr. Keller.
    [no response.]
    The Clerk. Ms. Hart.
    [no response.]
    The Clerk. Mr. Flake.
    Mr. Flake. No.
    The Clerk. Mr. Flake votes no.
    Mr. Pence.
    Mr. Pence. No.
    The Clerk. Mr. Pence votes no.
    Mr. Forbes.
    Mr. Forbes. No.
    The Clerk. Mr. Forbes votes no.
    Mr. King.
    Mr. King. No.
    The Clerk. Mr. King votes no.
    Mr. Carter.
    Mr. Carter. No.
    The Clerk. Mr. Carter votes no.
    Mr. Feeney.
    Mr. Feeney. No.
    The Clerk. Mr. Feeney votes no.
    Mrs. Blackburn.
    Mrs. Blackburn. No.
    The Clerk. Mrs. Blackburn votes no.
    Mr. Conyers.
    [no response.]
    The Clerk. Mr. Berman.
    [no response.]
    The Clerk. Mr. Boucher.
    [no response.]
    The Clerk. Mr. Nadler.
    [no response.]
    The Clerk. Mr. Scott.
    Mr. Scott. No.
    The Clerk. Mr. Scott votes no.
    Mr. Watt.
    Mr. Watt. Undecided--aye.
    The Clerk. Mr. Watt votes aye.
    Ms. Lofgren.
    Ms. Lofgren. Aye.
    The Clerk. Ms. Lofgren votes aye.
    Ms. Jackson Lee.
    Ms. Jackson Lee. Aye.
    The Clerk. Ms. Jackson Lee votes aye.
    Ms. Waters.
    Ms. Waters. Aye.
    The Clerk. Ms. Waters votes aye.
    Mr. Meehan.
    [no response.]
    The Clerk. Mr. Delahunt.
    [no response.]
    The Clerk. Mr. Wexler.
    [no response.]
    The Clerk. Ms. Baldwin.
    [no response.]
    The Clerk. Mr. Weiner.
    [no response.]
    The Clerk. Mr. Schiff.
    Mr. Schiff. No.
    The Clerk. Mr. Schiff votes no.
    Ms. Sanchez.
    Ms. Sanchez. No.
    The Clerk. Ms. Sanchez votes no.
    Mr. Chairman.
    Chairman Sensenbrenner. No.
    The Clerk. Mr. Chairman votes no.
    Chairman Sensenbrenner. Members who wish to cast or change 
their vote. Gentleman from North Carolina, Mr. Coble.
    Mr. Coble. No.
    The Clerk. Mr. Coble, no.
    Chairman Sensenbrenner. Gentleman from Texas, Mr. Smith.
    Mr. Smith. I vote no.
    The Clerk. Mr. Smith, no.
    Chairman Sensenbrenner. Gentleman from Virginia, Mr. 
Goodlatte.
    Mr. Goodlatte. No.
    The Clerk. Mr. Goodlatte, no.
    Chairman Sensenbrenner. Gentleman from Utah, Mr. Cannon.
    Mr. Cannon. No.
    The Clerk. Mr. Cannon, no.
    Chairman Sensenbrenner. Gentleman from Alabama, Mr. Bachus.
    Mr. Bachus. No.
    The Clerk. Mr. Bachus, no.
    Chairman Sensenbrenner. Gentleman from Florida, Mr. Keller.
    Mr. Keller. No.
    The Clerk. Mr. Keller, no.
    Chairman Sensenbrenner. Gentleman from Michigan, Mr. 
Conyers.
    Mr. Conyers. Aye.
    The Clerk. Mr. Conyers, aye.
    Chairman Sensenbrenner. Gentlewoman from Pennsylvania, Ms. 
Hart.
    Ms. Hart. No.
    The Clerk. Ms. Hart, no.
    Chairman Sensenbrenner. Further Members wish to cast or 
change their vote? If not, the Clerk will report.
    The Clerk. Mr. Chairman, there are 5 ayes and 22 noes.
    Chairman Sensenbrenner. And the amendment is not agreed to.
    Are there further amendments? Gentleman from Virginia, Mr. 
Scott.
    Mr. Scott. Mr. Chairman, I have three amendments I would 
like to offer en bloc.
    Chairman Sensenbrenner. Without objection, they will be 
considered en bloc and the Clerk will report the amendments.
    The Clerk. Amendments to H.R. 1829 offered en bloc by Mr. 
Scott of Virginia. Page 16, strike line 22 and all that 
follows; page 18.
    Mr. Scott. I ask unanimous consent.
    [The amendments follow:]
      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


      
      

  


    Chairman Sensenbrenner. Without objection the amendments en 
bloc will be considered as read and the gentleman from Virginia 
is recognized for 5 minutes.
    Mr. Scott. Mr. Chairman, amendment No. 19 is what I call a 
truth in legislating amendment. It would provide for a 5-year 
phaseout of mandatory source, which is what the proponents say 
the bill does. It actually doesn't phase out anything. The fact 
of the matter is, Mr. Chairman, that it actually abruptly ends 
the program. And those that think it has a phaseout should just 
read page 4, line 5, where the bill says agencies shall solicit 
an offer, unquote, from FPI. There is nothing wrong with that 
but that is all it says, you shall solicit an offer. Doesn't 
say that they will actually be awarded an offer. Amendment No. 
19 provides for a gradual phaseout over 5 years, which gives 
the program an opportunity to find the work.
    Amendment No. 20 deals with services. The bill limits the 
ability of Federal Prison Industries and State Prison 
Industries to do services and suggest that there ought to be 
competition. The fact is there is no mandatory source on 
services, so competition is the only way they can get 
contracts. So in fact there is no need to have section 7 
limiting access to services.
    Finally, Mr. Chairman, amendment No. 23 opens up--would 
open up new opportunities trying to find work for charitable 
organizations or others. This would be a pilot project similar 
to the one in Ohio where work has been obtained. Last year with 
your support, Mr. Chairman, discussion----
    Chairman Sensenbrenner. Gentleman yield?
    Mr. Scott. I yield.
    Chairman Sensenbrenner. I believe many of these ideas are 
good ones, but I don't think they have been properly vetted and 
I would be happy to work with the gentleman from Virginia 
before this bill gets to the floor to see if we could reach a 
happy accommodation on these ideas should he decide to withdraw 
the amendment.
    Mr. Scott. Thank you, Mr. Chairman, and I appreciate your 
willingness to work, and I think there may be some common 
ground and I would be delighted to work with you and ask that 
the amendments be considered withdrawn.
    Chairman Sensenbrenner. Without objection, so ordered. The 
amendments are withdrawn.
    Are there further amendments? If not, a reporting quorum is 
present. The question is on the motion to report the bill H.R. 
1829 favorably, as amended. Those in favor will say aye. 
Opposed no. The ayes appear to have it. The ayes have it. And 
the motion to report favorably, as amended, is agreed to. 
Without objection, the bill will be reported favorably to the 
House in the form of a single amendment in the nature of a 
substitute incorporating the amendments adopted here today.
    Without objection, the Chairman is authorized to move to go 
to conference pursuant to House rules. Without objection, the 
staff is directed to make any technical and conforming changes 
and all Members will be given 2 days, as provided by the rules, 
in which to submit additional dissenting, supplemental or 
minority views.
    The Chair would like to thank everybody for their 
cooperation during this markup where five bills have been 
reported on a very sleep deprived day. Have a good recess, and 
the Committee is adjourned.
    [Whereupon, at 11:30 a.m., the Committee was adjourned.]
                            Dissenting Views

    These views dissent from the Committee Report on H.R. 1829.

                              INTRODUCTION

    The Federal Prison Industries program, or FPI, has been 
around since the 1930's. Under the law, and based on certain 
conditions, Federal agencies are required to buy needed 
products from FPI if FPI can meet their order. The purpose of 
the program is to teach prisoners real work skills so that when 
they are released from prison they will be able to find and 
hold jobs to support themselves and families, and thus, be less 
likely to commit more crimes.
    And it is clear that the program works to do just that. 
Followup studies covering as much as 16 years of data have 
shown that inmates who participate in prison industries are 14% 
more likely to be employed and 25% less likely to commit crimes 
than like cohorts who did not participate in the program. While 
the program certainly benefits offenders and their families, 
that is not the primary benefit of FPI from a public policy 
perspective. The real benefit to all of us is that, as a result 
of this program, we are less likely to be victims of crime.

                           WHAT THE BILL DOES

    H.R. 1829 would immediately eliminate the current 
``mandatory source'' procurement authority for Federal agency 
purchases from FPI. While the bill provides for an agency 
option to purchase goods from FPI on a non-competitive basis 
which is phased out over a 5-year period, there should be no 
mistake--the mandatory source rule in effect today would be 
eliminated immediately upon this bill becoming law. The 1934 
law required purchases by Federal agencies to ensure work 
opportunities for inmates. The law recognizes that prison work 
operations are necessarily less efficient, less productive and 
more costly to run when compared to private work conditions, 
given the high level of security and control that must be 
maintained, no or very low beginning work skills among the 
workforce, and the objective of labor intensive activities to 
maximize the number of inmates employed. It is estimated that 
it takes about 4 inmates to equate to the production of one 
private worker.
    Ironically, most of the adverse impact of this bill will 
fall on private sector companies and their workers. FPI would 
not exist, and certainly could not offer quality products and 
services, without the direct support of private sector 
companies that provide the raw materials and services FPI needs 
to produce its products. Each of these companies responded to 
solicitations issued by FPI (as a Federal agency, FPI follows 
all the Federal procurement regulations) and were awarded the 
contracts through competitive procedures. In order to fulfill 
their contractual obligations, these companies have hired law-
abiding citizens as staff, added equipment, and some have even 
opened entire new plants. Many of these companies have FPI 
contracts which extend 5-10 years. FPI estimates that 
approximately 5,000 U.S. jobs, of which many are unionized, are 
generated by the program.
    Last year, FPI spent 74 percent of its sales revenue on 
purchases of raw materials, equipment, supplies, and services 
from private sector companies, 62% of which were purchased from 
small businesses including women, minorities and those who are 
disadvantaged. These expenditures exceeded $500 million last 
year. The private sector companies involved have played by the 
rules, competing fair and square for the contracts. They and 
their employees do not deserve to be on the receiving end of an 
unjustified animus toward inmates or FPI.
    In addition to restrictions on FPI's ability to produce 
products for Federal agency sales, the bill severely restricts 
the ability of FPI to obtain service contracts. An alternative 
currently employed by FPI to increase Federal market share for 
products, one that also reduces reliance on mandatory source, 
is performing services for companies which are currently being 
performed in foreign countries (mandatory source has never 
applied to services). Service contracts will be prohibited 
under the bill, except for Federal Government service contracts 
competitively acquired.
    The bill, which is purportedly designed to reform Federal 
prison industries, also prohibits state service contracts. 
These restrictions will also hurt private sector businesses 
more than prisoners. The combined impact of the Federal and 
state prohibitions on service contracts with private businesses 
will have the effect of eliminating a substantial number of 
Federal and state prison industries service contracts where 
free workers will lose their jobs. One such example involves 
contracts with Delco Remy wherein prisoners perform services 
that companies are not able to get free workers to perform such 
as stripping useful materials from old parts which are then 
reused in products constructed by free workers. In Virginia 
alone, it is estimated that hundreds of free workers will lose 
their jobs. It is likely that these jobs will end up leaving 
the U.S. as the services performed by inmates are moved to 
foreign operations where the company can find workers willing 
to do work only inmates will do in this country.
    Further, the bill will have an unintended discriminatory 
effect upon small, minority and women-owned businesses. As 
noted above, roughly two-thirds of FPI purchases are made from 
small, women and minority owned and disadvantaged businesses. 
This is one of the highest rates among all Federal agencies. It 
is well established that small businesses create more jobs per 
dollar of revenue than large businesses. Accordingly, to the 
extent that FPI's sales decline, the hardest hit will be the 
socio-economically disadvantaged businesses which are 
deliberately targeted to provide them Federal procurement 
opportunities.
    Of course, the adverse effects of program reduction will 
also disproportionately affect minority inmates since racial 
and ethnic minorities are disproportionately represented among 
the inmate population. Their representation in FPI jobs, 
however, mirrors this over-representation in the prison 
population. Important, research on the value to inmates of 
working in prison industries jobs demonstrates that these 
minority inmates benefit at a higher rate than majority group 
members regarding their likelihood of remaining crime-free and 
being successfully employed upon release. Thus, job reductions 
in FPI of the magnitude certain to occur under the bill will 
fall hardest on racial and ethnic minorities.
    Some suggest that vocational education is a good substitute 
for FPI work experience. The bill provides authority for 
increased vocational training programs. A vocational education 
program typically runs for 2 years or less and is generally 
thought better to be provided toward the end of the sentence. 
The average sentence for prisoners in the Federal system is 8 
years. Whenever the vocational training is provided, the 
question becomes what to do with the other 6 years of the 
sentence prior to or after completion of what is considered a 
beneficial period of vocational education. Furthermore, unlike 
FPI, such vocational programs are in no way self-supporting.
    All able-bodied inmates in the Federal system are required, 
by law to work. Yet, few offenders enter prison with marketable 
work skills. The vast majority do not have even credible work 
habits such as showing up for work on time each day, and 
working cooperatively and productively with others. Such habits 
are required to maintain an FPI job just as they are required 
to obtain and maintain a job in the free world. While 
vocational education is important and ought to be available to 
all inmates, no amount of educational course work can 
substitute the real world workplace experience of a job.
    The bill also provides an authorization for FPI to make 
products and donate them to non-profit organizations as a way 
to maintain work opportunities for inmates. Producing products 
to give to charitable organizations simply means replacing the 
business generated from their now having to purchase the items 
from a private business, and it means transferring to the tax 
payer costs for a program that is currently wholly self-
supporting. Funding for these two initiatives--increased 
vocational education and donating inmate made products to 
charitable organizations--is authorized from FPI or 
appropriated funds. Although it is improbable that any funding 
will be made available from these two sources, even with 
funding, the programs are not likely to make up for many of the 
jobs that will be lost due to elimination of the mandatory 
source program.
    Leading up to and during markup of the bill before the full 
Judiciary Committee, compromises were offered by Rep. Bobby 
Scott and Rep. Mark Green to preserve a reasonable level of 
inmate work opportunities through a reformed, but viable, FPI 
program. Rep. Scott requested that the bill be amended to 
authorize the piloting of certain new sources of inmate work 
opportunities through FPI, including Federal ``PIE'' (Prison 
Industries Enterprise) program making products for companies 
that are now wholly made outside the US, to authorize contracts 
with charitable organizations for products and services to 
assist the charities, to eliminate the restrictions on service 
contracts and allowing a phase out of the mandatory source 
provision as these operations replaced it. Rep. Green offered 
an amendment at full committee to allow the Attorney General to 
re-institute mandatory source should he deem it necessary to 
avoid disorder or disruption in a prison. Neither offer was 
accepted. Several other compromises were put forth, as well, 
but none was accepted and no compromise was offered by 
proponents of the bill that affected the basic provisions of 
the bill. A final offer was made by the Chairman of the 
Committee to further discuss a possible compromise during the 
pendency of the bill for floor consideration in exchange for 
Rep. Scott withdrawing his amendments (which he did), but no 
compromise has emerged.

                             FPI OPERATIONS

    The total revenues of FPI represent a very small percent 
(currently about \1/4\ of one 1%) of total Federal agency 
procurement dollars and only 4.5% of the overall Federal market 
in the approximately 250 products it produces within the 
Federal supply.. The furniture and apparel industries are the 
two industries in which FPI produces the highest volume of 
work. When asked, representatives of these industries conceded 
that FPI sales represent an ``insignificant'' and 
``negligible'' portion of their industries, respectively. If 
such industries are having problems, it is clearly not due to 
the impact of FPI. In textiles, for example, it is said that 
over 600,000 jobs were lost during the past 10 years. There are 
roughly 7,000 prisoners working in textiles in FPI. Clearly, 
the blame for the loss of 600,000 jobs cannot be a few thousand 
prisoners. The same is true of revenue reductions and job loss 
due to economic downturns in the office furniture business.
    With the elimination of parole, good conduct credits, Pell 
grants, and other positive incentive programs, the Federal 
prison system has little to offer as ongoing incentives for 
self development. The one shining exception is FPI. Non-FPI 
inmate jobs pay from about $.12 an hour to about $.44 cents an 
hour. The average non-FPI inmate job pays $.23 an hour. The 
majority of non-FPI inmates work for less than $.23 per hour. 
FPI jobs pay from $.23 to $1.5 per hour with the average pay 
being $.93 per hour. To hold down an FPI job, an inmate must 
have completed high school or be making steady progress toward 
obtaining a GED, and maintain a record of good behavior. This 
is true not only for those already in an FPI job, but also for 
those on the waiting list for a job, as well as those seeking 
to establish eligibility to be placed on the waiting list. 
Contributions to inmate development and prison management are 
important, but the least important of FPI's contributions. 
Reductions in crime, restitution payments to crime victims and 
support payments to inmate dependants are far more compelling 
reasons for the program. Last year, inmate workers paid more 
than $3 million toward these obligations.
    It is readily conceded that there are problems with FPI 
which should be fixed. When a small business making a single 
product depends upon a government contract for its operations, 
FPI should not be able to take that business away. But this 
bill should be fixing the program--not gutting it by taking 
away all of its primary business sources all at once. While the 
bill suggests that the lack of competition is the problem, the 
bill seeks to strangle-hold FPI as a competitor not only by 
strengthening the prohibition against activities in the 
commercial market, but in the government market, as well. We 
are already seeing the effects of the DoD restrictions on FPI 
procurement passed last Congress. Information obtained from the 
program indicates that it has had to close 13 factories and 
eliminate over 1700 inmate jobs and expects to eliminate 500 
additional inmate jobs before the end of this year.
    We should fix the problems, but we should do so in ways 
that assure the viability of this vital crime reducing program. 
With additional prisons scheduled to come on line over the next 
few years, we can ill afford to diminish this successful crime 
reduction program. But for their crimes and imprisonment, 
prisoners are indistinguishable from the rest of us. Treating 
them as if they are foreign competitors and viewing contracts 
in FPI as contracts a private business could have, should not 
be the policy of the Committee with oversight responsibility 
for the safe and efficient operation of our prisons, or of the 
Congress, which ultimately has that responsibility. About 98% 
of prisoners serving time will eventually return to society and 
our oversight focus should be on their rehabilitation and 
productive return as a matter of public safety. We can do 
better than this bill, and we should.

                                   Robert C. Scott.
                                   Mark Green.
                                   Sheila Jackson Lee.
                                   Henry J. Hyde.

                                
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