[Federal Register Volume 61, Number 153 (Wednesday, August 7, 1996)]
[Notices]
[Pages 41248-41250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-20115]
[[Page 41247]]
_______________________________________________________________________
Part V
Department of Justice
_______________________________________________________________________
Federal Prison Industries
_______________________________________________________________________
Product Development and Production: Public Involvement Procedures;
Notice
Federal Register / Vol. 61, No. 153 / Wednesday, August 7, 1996 /
Notices
[[Page 41248]]
DEPARTMENT OF JUSTICE
Federal Prison Industries
Product Development and Production: Public Involvement Procedures
AGENCY: Federal Prison Industries, Inc., Bureau of Prisons, Department
of Justice.
ACTION: Notice.
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SUMMARY: In this document, Federal Prison Industries, Inc. (FPI)
requests comment on revised definitions of two key terms: new product
and specific product.
DATES: Comments must be submitted by October 7, 1996.
ADDRESSES: Comments should be provided to Manager, Planning, Research,
& Activation, Federal Prison Industries, Inc., 320 First Street, NW.,
Washington, D.C. 20534.
FOR FURTHER INFORMATION CONTACT: Mr. Todd Baldau, (202) 508-8440.
SUPPLEMENTARY INFORMATION: In 1988, Congress enacted legislation,
codified at 18 U.S.C. 4122(b), requiring that whenever FPI proposed to
produce a new product, or significantly expand an existing product, it
was necessary to conduct a market study, seek industry comment, and
refer the matter to the Board of Directors for a final decision. This
process has come to be known as the Industry Involvement Guidelines
process. A lengthy negotiation period ensued in which FPI, labor and
private industry met to develop definitions of ``new product'',
``specific product'' and ``significant expansion of an existing
product,'' the key terms that were necessary to implement the
legislation.1 These definitions are based primarily on the SIC
code of the Department of Commerce.
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1 The final definitions of ``Specific Product'' and ``New
Product'' were published in the Commerce Business Daily (CBD) for
December 4, 1989. The final definition of ``Significant Expansion of
Production of an Existing Product'' was published in the CBD for
January 2, 1991.
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FPI has now had six years experience with the definitions of these
key terms. On the positive side, the market studies using these
definitions have supplied the Board with more and better information on
impact of FPI's activities on the private sector than it had before the
passage of the guidelines process. At the same time, it has become
apparent that in some ways these definitions are unclear, suffer from
unavailability of data, and draw upon indicators which are hard to keep
track of and not always directly relevant. In addition, the government
is moving away from the collection of data based on the narrowly
defined SIC categories, which lie at the heart of the current
definitions of new product and specific product.
To redress these problems, we propose basing the definitions of
``new product'' and ``specific product'' on the 4-digit FSC categories,
rather than the SIC categories, and developing market studies using the
FSC approach as the basis for these studies.2 Two immediate
benefits would stem from this change in approach: first, sales
information by FSC category is readily available; and second, the
information applies directly to the federal market, which is the
primary focus of the market impact study. (SIC information pertains to
the total market, including the private sector market.)
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2 The legislative history to the guidelines process
provides that the definitions shall be reviewed periodically by the
corporation and the board to assure continued relevance.
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A preliminary discussion paper recommending the use of the FSC
system, and a new method of determining what constitutes a significant
expansion of an existing product, was circulated to the members of
FPI's Implementation Committee.3 The Committee members agreed that
revisions to the existing definitions were called for, and that the new
approach described herein looks promising. Yet one comment expressed
that 4-digit FSC categories are in certain instances too broad.
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3 This committee was established following the ``Summit
Process'' in 1992, to address any new or continuing issues.
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FPI recognizes that in certain instances the 4-digit FSC categories
may be too broad to serve as a definition for a new product, without
further refinement. At the same time, we note that a particular 4-digit
category may also be too narrow, given the fact that related items may
appear in several categories. Therefore categories may occasionally be
combined in a market study for purposes of measurement of the market.
To date we have not been able to develop a simple, single principle
that can be applied in every situation to determine when to delete
unrelated items from a 4-digit FSC categories and when to combine 4-
digit FSC categories. Therefore, we propose the following process in
lieu of an abstract definition.
FPI will adjust for the fact that in some cases the 4-digit FSC
categories contain dissimilar items in the following manner: FPI will
announce in the CBD its intent to produce any item that could
reasonably be construed to be a new product, regardless of the fact
that such an item falls in the same 4-digit category as an item that
FPI is currently making, or has made within the recent past, and is not
considered by FPI to be sufficiently different from an existing item to
be considered a new product. Moreover, FPI will commit to ``over-
report.'' That is, borderline cases will be announced in the CBD in
order to allow for the full public scrutiny.
Of course, items which are located in 4-digit FSC codes in which
FPI does not currently produce, will be treated as proposals which go
through the guidelines process, and a market study will be conducted
and made available for comment. The market impact study will measure
the market based on the 4-digit FSC categories. In measuring the size
of the federal market, we will make best efforts to delete unrelated
items from the FSC category or categories. Commenters will have input
into, and may comment on, the size of the market in the market study
exactly as they do now.
Also, for reasons explained above, we have developed a new
definition of ``significant expansion of an existing product'' which we
believe is an improvement, in that the indicators of expansion which
are clearer and directly relevant to the determination of impact on
private industry.
We now publish the following definitions of ``specific product'',
``new product'', and ``significant expansion of an existing product''
for comment.
Revised Definitions
1. Specific Product
A specific product refers to the aggregate of items which are
similar in function (e.g., bags and sacks), or which are frequently
purchased for use in groupings (e.g., dormitory and quarters furniture)
to the extent provided by the most current Federal Supply
Classification (FSC) Code. There are currently 685 federal supply
classes designated within the Federal Procurement Data System. FPI
currently produces within 74 of these classes.
Specific products will equate to the most current 4-digit FSC Code,
published by the General Services Administration, Federal Procurement
Data Center (FPDC). As a general rule, products will be deemed to be
different specific products if they are identified by a distinct 4-
digit FSC code.
The following means will be used to determine how items should be
treated:
--Items classified within the same 4-digit FSC code will be presumed to
comprise a single specific product (unless otherwise determined by FPI,
or with input from the relevant industry).
[[Page 41249]]
--The predominant material of manufacture (e.g., nylon vs. canvas) will
not ordinarily be a factor in defining an item as a separate specific
product.
In certain instances, with approval of its Board of Directors, FPI
may combine FSC codes where multiple FSC's comprise a particular
industry. In requesting the Board to combine FSC's, FPI will give
careful consideration, and be especially sensitive to, companies that
manufacture products (such as various items of apparel) in multiple FSC
codes. Moreover, situations should be avoided by FPI where it would
have to request Board approval of production and/or expansion in
several ``specific products'' (e.g., office seating, case goods, and
systems furniture), each of which often involves many of the same
companies within a single potentially affected industry (e.g., office
furniture).
The rationale for any proposed combining of FSC's will be set forth
in the market study. In all cases, FPI will seek input from the
potentially affected industry, early in the stages of industry
notification, and include all input received in its submission to the
Board of Directors.
In some instances, an item may be considered separate from another
product in the same 4-digit FSC category, if its function differs
substantially. In such cases, the 4-digit Standard Industrial
Classification (SIC) code may be used as a back-up measure to more
accurately define the product.
SIC codes will continue to be used at the 4-digit level to
determine the size of the domestic market for a particular product. For
purposes of product definition in the domestic market, FPI will combine
4-digit SIC codes when the data suggests the product under examination
may encompass several different 4-digit SIC codes, with no substantial
difference in the product (e.g., men's vs. women's apparel).
2. New Product
A new product is a `specific product' which FPI has not
manufactured or produced within the past five years. In cases where it
has been determined that more than one specific product exists within a
4-digit FSC, the 4-digit SIC code will be used as a secondary indicator
to determine whether the product is ``new''. In such cases, a new
product will be defined as a `specific product' in the four-digit SIC
which FPI has not produced within the past five years.
In cases where FPI plans to manufacture products of limited
duration or volume, e.g., with sales of less than $1 million in any
given year, and where its Federal market share will not exceed 5
percent, FPI will announce such plans in the Commerce Business Daily
(CBD), in lieu of undertaking the Industry Involvement Guidelines
process. Barring any objection, FPI will proceed with its production
plans. If an objection is raised, FPI will meet with the relevant
industry in an effort to reach an acceptable position. If an agreeable
outcome cannot be reached, FPI will proceed to initiate the Industry
Involvement Guidelines process. Moreover, should FPI's planned sales
reach or exceed $1 million, or FPI's market share exceed 5 percent, FPI
will go through the Industry Involvement Guidelines process, as it
would for any new product.
``Good Faith'' CBD Announcements--Items not deemed by FPI to be a
New Product
Under current procedures, management decisions as to whether
production of an item constitutes a new product are made by FPI staff,
based on the SIC classification system, without public involvement.
Under the proposed new procedures, there may be circumstances in which
FPI plans to produce items that FPI does not consider to be a new
product, but which an affected party may reasonably construe to be a
new product. In these circumstances, the items will be announced for
comment in the Commerce Business Daily. The purpose of this provision
is to give private industry an added level of input into such decisions
made by FPI, since it is not possible to anticipate every possible
situation or question that could arise within the proposed definition.
The parameters for publishing such internal decisions that are made
and announced subject to this provision will be as follows: items that
a reasonable person could construe to be a product separate and
distinct from another item which FPI is making or recently made would
be subject to announcement even though their function is similar. As an
example, the production of extreme cold weather trousers would be
announced, although FPI already produces bullet resistant fragmentation
vests, and both are items of protective clothing.
Items that are essentially the same product, or those that are
variations of an existing FPI product (e.g., a new style of seating)
would not be subject to announcement of any kind. However, FPI will
resolve any question as to whether to announce in favor of
announcement.
In submitting comments to FPI, the following guidelines will apply:
--Comments will be due within 10 days of the date of publication;
--Relevant comments will focus on and address why the item should be
considered a new product, separate and distinct from a similar item
currently being produced by FPI. Comments may include such factors as:
the manufacture of the item involves substantially different material
and processes; companies that produce this item specialize in
manufacturing only that item; the manufacturing processes are unique
and are not easily adaptable to produce other similar items;
--Comments related to market share and/or the impact that such a
production decision may have on the firm will not ordinarily be
considered relevant for purposes of this provision;
--All comments received in response to these announcements will be
considered by FPI. The commenter will be advised whether FPI decides to
go through the guidelines process.
As always, any interested party has a right to raise any question
at any time with the Board of Directors (see 28 CFR 301.2), and thus
may appeal to FPI's Board of Directors any issue or decision relating
to whether a product is a new product. However, pending such review,
FPI may proceed with its plans in accordance with the decision as
announced in this process described above, unless and until the
decision is reversed.
3. Significant Expansion of an Existing Product
Proposed production increases by FPI which may increase its market
share will be reviewed during the Corporation's annual planning cycle
and be deemed a significant product expansion under the following
circumstances:
(1) Planned sales (measured in constant dollars) for the specific
product will increase by more than 10 percent, or $1 million, in any
given year, whichever is greater; or
(2) In any case where FPI's market share is greater than 25%, any
increase in FPI's market share resulting from an increase in FPI
production would be deemed to be significant for purposes of triggering
the guidelines process.
Discussion: When either criterion is met, an analysis of the
federal government market for the specific product will be conducted
and an estimate of FPI's current and projected market share will be
developed. The production increase will be deemed ``significant'' when
FPI's market share position changes in accordance with the following
sliding scale. If FPI currently has a 15% or less share of the federal
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market, any increase in market share would be permissible, provided
that the particular increase does not result in FPI exceeding a 15%
market share. If FPI has a market share greater than 15%, but less than
20%, FPI could increase its market share to 20%, before the increase
would be deemed to be significant. If FPI has a market share of greater
than 20%, but less than 25%, FPI could increase its market share to
25%, before the increase would be deemed to be significant.
Situations where FPI production remains constant, but market share
increases as a result of other factors, including market changes, will
not require FPI to initiate the guidelines process. The fact that 25%
may ``trigger'' the guidelines does not necessarily mean the Board of
Directors cannot approve an FPI production level resulting in a federal
market share above 25%.
The prior three years' data will be used to determine the share of
the federal government market, to ensure that annual fluctuations are
taken into account and normalized.
FPI may produce at the rate of past year sales levels, adjusted for
inflation, without initiating the guidelines process.
In cases where FPI sales inadvertently or insubstantially exceed
authorized levels, FPI will take steps to adjust its production by a
corresponding amount the following year. If FPI plans call for
continued growth, it will invoke the guidelines process without delay
and seek Board approval of future production levels. Should the Board
decide on a production level lower than that which FPI already
achieved, FPI will adjust its future plans and, if necessary scale
back, to comply with the Board's decision.
In cases of extreme public exigency, such as national disaster or
national defense emergency, such as during Operation Desert Storm, FPI
may exceed guidelines thresholds, provided FPI receives specific orders
or requests from senior Department of Defense and/or Executive Branch
officials. Increased sales resulting from national exigencies will not
be considered a violation of guidelines ceilings in the year which they
occurred. Such exceptional events will be subject to approval by FPI's
Chief Operating Officer, with concurrence of FPI's Board of Directors.
Once these definitions are finalized and proposed revisions
implemented, FPI's sales for the current fiscal year will be utilized
as the base year for future application.
Prior decisions of FPI's Board of Directors will remain unaffected
by these changes to the definitions.
These proposed procedures have been reviewed by FPI's Growth
Strategies Implementation Committee. The following officials are
represented on the Committee:
Executive Vice President, Envelope Manufacturers Association of America
Vice President--Government Affairs, Screen Printing and Graphic Imaging
Association International
Manager, Break-Out Procurement Center Representative Program, Small
Business Administration
Former Senior Staff Member, Brookings Institution Head of Office of
Wages and Industrial Relations, AFL-CIO President, State/Federal
Correctional Vendors Association
Their comments and suggestions have been incorporated into this
request for comment.4
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4 Of course, these officials and these organizations are not
precluded from making further comment at this time.
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We now seek comments to these proposed changes. All comments
received in response to this request for comment before expiration of
the comment period will be provided to the FPI Board of Directors for
consideration prior to the final publication and implementation of the
procedures.
Robert Grieser,
Manager, Planning, Research and Activation Branch.
[FR Doc. 96-20115 Filed 8-6-96; 8:45 am]
BILLING CODE 4410-05-P