[Federal Register Volume 64, Number 66 (Wednesday, April 7, 1999)]
[Notices]
[Pages 17000-17014]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-8575]



[[Page 17000]]

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DEPARTMENT OF JUSTICE

Office of Justice Programs
[OJP(BJA)-1213]
RIN 1121-AA36


Prison Industry Enhancement Certification Program Guideline

AGENCY: Office of Justice Programs, Bureau of Justice Assistance (BJA), 
Justice.

ACTION: Issuance of final guideline.

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SUMMARY: The Office of Justice Programs, Bureau of Justice Assistance 
(BJA), is issuing this final revision to its Prison Industry 
Enhancement Certification Program (PIECP) Guideline proposed for public 
comment on July 7, 1998, 63 FR 36710-36719. Under Title 18 U.S.C. 
1761(c), BJA PIECP certification excepts participating agencies from 
certain Federal restraints placed on the marketability of prison-made 
goods by permitting the transport of such goods in interstate commerce 
and the sale of such goods to the Federal government. This Guideline 
addresses statutory amendments and reflects administrative experience 
gained by BJA since the last final PIECP Guideline published on March 
29,1985 (50 FR 12661-64).
    The publication of this Final Guideline is considered to be a 
Federal action that will not significantly affect the quality of the 
human environment. Therefore, preparation of an environmental impact 
statement is not necessary.

EFFECTIVE DATE: This Guideline is effective April 7, 1999; existing 
participants will have until April 7, 2000 to achieve compliance with 
all of the new requirements set forth in this Guideline except for 
those relating to the National Environmental Policy Act (NEPA). The new 
requirements implementing NEPA are effective immediately.

FOR FURTHER INFORMATION CONTACT: Jeffrey R. Hall, Law Enforcement 
Program Manager, Bureau of Justice Assistance, 810 Seventh Street, NW, 
Washington, DC 20531. Telephone: (202) 616-3255.

SUPPLEMENTARY INFORMATION:

Scope of Program Announcement

I. Introduction: Program Purposes and Objectives
II. Background of the Prison Industry Enhancement Certification 
Program (PIECP)
    a. The Legislative History
    1. Unregulated Prison Labor
    2. Prisoner Idleness and Prisoners' Need for Job Skills Training
    b. The PIECP Program
    1. Current State of the Program
    2. Future Challenges
    c. Discussion of Comments
    c. 1-11 (see Nos. pp 821-847)
III. Program Guidance
    a. PIECP Purposes
    b. Definitions
    c. BJA's Initial Considerations for Determining Propriety of 
Work Pilot Project Certification
    1. BJA's Exercise of Discretionary Authority To Define and 
Certify 50 Work Pilot Projects
    2. Threshold Inquiry for Determining Applicability of PIECP 
Exception Status
    d. Mandatory Program Criteria for PIECP Participation
    1. Eligibility
    2. Inmate Wages
    3. Non-Inmate Worker Displacement
    4. Benefits
    5. Deductions
    6. Voluntary PIECP Inmate Worker Participation
    7. Consultation With Organized Labor
    8. Consultation With Local Private Industry
    9. Compliance With the National Environmental Policy Act (NEPA)
IV. PIECP Administration
    a. Certificate Holders
    1. Project Structure
    2. Application Content
    3. BJA Review
    4. Standard or Provisional Certification
    5. Certificate Holder Designation Authority
    6. Certificate Holder Monitoring Responsibilities
    b. Cost Accounting Centers' PIECP Exception Status
    c. Compliance Reviews
    1. Performance Reports
    2. On-Site Monitoring Reviews
    d. BJA's PIECP Administration
    e. Exception Status Suspension/Termination
    1. Notice of Possible Compliance Violation
    2. Voluntary Compliance Agreements
    3. Failure To Achieve Compliance and Effect of Non-Compliance
    4. PIECP Exception Status Suspension and Termination

I. Introduction: Program Purposes and Objectives

    The Prison Industry Enhancement Certification Program (PIECP), 
codified at 18 U.S.C. 1761(c), was first authorized by the Justice 
System Improvement Act of 1979, Pub. L. No. 96-157, 93 Stat. 1215. The 
PIECP was expanded from 7 to 20 pilot projects under the Justice 
Assistance Act of 1984, Pub. L. 98-473 Sec. 609k(a)(1), 98 Stat. 2077, 
2102. In 1990, The Crime Control Act of 1990, Public Law 101-647 
Sec. 2906, 104 Stat. 4789,4914, raised to 50 the number of PIECP 
projects that may be excepted by the Bureau of Justice Assistance (BJA) 
from certain Federal restrictions on the marketability of prisoner-made 
goods, including the Ashurst-Sumners Act (18 U.S.C. 1761(a)) and the 
Walsh-Healey Act (41 U.S.C. 35).
    Since its inception in 1979, the PIECP program has certified 38 
work pilot projects throughout the country. Prison administrators find 
PIECP participation an effective way to address idleness among ever-
increasing prison populations and as a cost-efficient method for 
providing inmates with marketable job skills. Taxpayers benefit because 
PIECP wage deductions result in reductions in incarceration costs. 
Inmate wages benefit society, generally, in that deducted amounts are 
authorized to address victim compensation, inmate family support needs 
and taxes. Lastly, PIECP industries obtain broad market access for 
their products because they are excepted from the Ashurst-Sumners Act 
prohibition against the interstate transport of prisoner-made goods and 
from the Walsh-Healey Act prohibition against certain contract sales of 
prisoner-made goods to the Federal government.
    BJA first issued a Final Guideline to implement this program on 
March 29, 1985, 50 FR 12661-64. After providing an opportunity for 
public comment on the revised Guideline on July 7, 1998 (63 FR 36710-
19), the agency now publishes this Final Guideline to offer updated 
program clarification. In so doing, the legislative underpinnings of 
relevant laws are examined and the scope of their applicability is 
defined. Compliance expectations are explained as program guidance. 
Refined administrative practices reflect experience gained by BJA over 
the past 14 years. The background history, guidance definitions and 
administrative requirements described in this Guideline are specific 
only to the PIECP and have no bearing on or relationship to the 
development, goals or administrative practices of any other prison 
industry program.

II. Background of the Prison Industry Enhancement Certification 
Program (PIECP)

a. Legislative History

1. Unregulated Prison Labor
    The 19th Century evolution of industrial capitalism and private 
sector use of prisoner labor spawned a number of conditions that 
adversely affected several major segments of society. By the turn of 
the 20th Century, these segments joined in an organized appeal to 
Congress and state legislatures nationwide. They collectively asserted 
that the production and distribution of unregulated prisoner-made goods 
in interstate commerce needed to be

[[Page 17001]]

eliminated or, at a minimum, controlled.
    Human rights activists turned the public's attention to poor prison 
work conditions and inmate exploitation. Organized labor argued that 
the demand for prisoner-made products, anywhere, necessarily displaced 
a possible demand for the product of free labor. Free enterprise 
manufacturers at the time were disturbed because manufacturers of 
prisoner-made goods did not bear the burden of overhead costs borne by 
private industry competitors. Prisoner-made goods were sold at below 
market prices. The viability of private industry competition was 
thereby undercut. In December 1924, Secretary of Commerce Herbert 
Hoover held a conference on the subject of the ``ruinous and unfair 
competition between prison-made products and free industry and labor.'' 
70 Cong. Rec. S656 (1928).
    Then-Secretary Hoover authorized an advisory committee to study the 
problem. This committee issued a report to Congress in 1928 wherein 
Chairman of the Advisory Committee on Prison Industries, Arthur 
Davenport, submitted the following conclusions:

(1) Certain major factors in the normal cost of production which must 
be met by all manufacturers are entirely absent in the case of prison 
industries. If anything approaching normal efficiencies of operation 
can be attained with the use of prison facilities and labor, the total 
costs of production are . . . below those of the manufacturer who must 
meet large overhead expenses as well as employ free labor.
(2) It is the universal belief that prisoners should be usefully 
occupied whether as a part of their punishment or as a means of 
rehabilitation by teaching them the habits of industry. To this end 
nearly every State . . . provid[es] productive work for their prisoners 
. . .
    (3) The volume of goods produced by prison labor is already very 
large in some lines, but as more prisoners are put to work, and the 
industries become more efficient, the output of our prisons will be 
greatly increased.
    (4) The effect of placing on the open market a volume of goods 
which have been produced below normal costs, is to lower prices and 
disorganize the market * * * The increase in prison production which is 
predicted will exaggerate this evil and make it difficult if not 
impossible for manufacturers employing free labor to exist in trade 
where the prison output becomes heavy.
    (5) The solution of this problem, if prison production is to 
continue * * * would seem to be the elimination, in one way or another, 
of the direct price competition of the prison products with so called 
``free products''* * *. 70 Cong. Rec. S656 (1928).
    In closing, Chairman Davenport urged that solutions be found, 
``[o]therwise either prison industries must cease and prisoners kept in 
idleness or the manufacture of products competing with prison output 
will become impossible. Either of these developments would be 
disastrous * * *.'' See S. Rep. No. 344, 70th Cong., 1st Sess., re-
printed, Cong. Rec. S656 (Dec. 15, 1928), ``Statement of Prison Labor 
Problems as Shown by Report of Senate Committee.''
    Even if a state prohibited its own correctional institutions from 
producing and marketing prisoner-made goods, that same state had no 
jurisdiction to control such goods produced in other states, 
transported in interstate commerce and sold within its boundaries. As 
an initial solution to this problem, Congress enacted the Hawes-Cooper 
Act in 1929, Pub. L. 70-669, 45 Stat. 1084, recodified by Pub. L. 95-
473, 92 Stat. 1449 (1978) [formerly codified at 49 U.S.C. 11507, 
omitted in the revision of Title 49 by Pub. L. 104-88, Title I 
Sec. 102(a), 109 Stat. 804 (effective January 1, 1996); See S. Rep. No. 
104-176]. This law divested prisoner-made products of their interstate 
character upon their arrival in the state of their destination and 
permitted the laws of that state to become operative with respect to 
the sale and distribution of such products. It was described, at the 
time of enactment, as an enabling act because it did not prohibit the 
transportation of prisoner-made goods or force the enactment of state 
legislation.
    In 1935, Congress enacted the Ashurst-Sumners Act, Pub. L. 74-215, 
49 Stat. 494 (1935), which authorized Federal criminal prosecutions of 
violations of state laws enacted pursuant to the Hawes-Cooper Act. 
Subsequent amendments to this law, including Pub. L. 76-851, 54 Stat. 
1134 (1940), strengthened Federal enforcement authority by making any 
transport of prisoner-made goods in interstate commerce a Federal 
criminal offense. As amended, 18 U.S.C. 1761(a) now provides:

    Whoever knowingly transports in interstate commerce or from any 
foreign country into the United States any goods, wares, or 
merchandise manufactured, produced, or 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 [herein referred to as the Ashurst-Sumners 
Act].

    Certain prisoner-made products were excepted, by statute, from the 
Ashurst-Sumners Act prohibition, including ``agricultural commodities 
or parts for the repair of farm machinery'' as well as ``commodities 
manufactured in a Federal, District of Columbia or State institution 
for use by the Federal Government, or by the District of Columbia, or 
by any State or Political subdivision of a State or not-for-profit 
organizations.'' Title 18 U.S.C. 1761(b).
    The Walsh-Healey Act, 49 Stat. 2036 (1936), as amended in 1979 by 
Pub. L. No. 90-351, Sec. 827(b) and codified at 41 U.S.C. 35, also 
controls the production of prisoner-made goods. This statute prohibits 
the use of prisoner labor to fulfill general government contracts which 
exceed $10,000. BJA certification pursuant to Sec. 1761(c) excepts 
prisoner-made goods produced at PIECP work pilot projects from the 
Walsh-Healey Act contracting restrictions, as well as the Ashurst-
Sumners Act interstate transportation restrictions.
2. Prisoner Idleness and Prisoners' Need for Job Skills Training
    The PIECP exception to the Ashurst-Sumners and the Walsh-Healey Act 
restrictions was introduced into the Senate in 1979 after the 1978 
Pontiac, Illinois prison riot. In the wake of that uprising, Senator 
Charles Percy (R-Ill.) stated:

    [L]ast summer in Pontiac, Illinois, our worst fears about the 
conditions in the Nation's prisons erupted into a nightmarish 
reality. The Pontiac prison riot of 1978 ended with three guards 
dead, three others seriously wounded, and $4 million in property 
damage * * *.
    The shopping list of problems and deficiencies in our prison 
system is long and well known. Overcrowding, old and obsolete 
facilities, lack of training or educational programs, crime within 
prison walls, frustration on the part of guards and inmates are all 
a part of the dreary picture * * *. Recidivism is now a substantial 
element in our overall crime rate, and prisons are often accurately 
characterized as a ``school for crime,'' rather than a deterrent to 
crime * * *. 125 Cong. Rec. S11834 (1979).

    These concerns caused Congress to take measures to encourage prison 
industries, provided that they not engage in unfair competition with 
private sector business and labor. Senator Percy's bill, now referred 
to as the Prison Industries Enhancement Act, Section 827 of the Justice 
System Improvement Act of 1979, Pub. L. 96-157, Sec. 827(a), 93 Stat. 
1215, was enacted on December 27, 1979. As amended, it now offers 50 
certified projects an opportunity to participate in the

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interstate market, provided certain safeguards to free-world labor and 
industry, and to prisoner-workers themselves, are met. See The Crime 
Control Act of 1990, Pub. L. 101-647, Sec. 2906, 104 Stat. at 4914.
    In describing the purpose of his introduced legislation, Senator 
Percy explained (125 Cong. Rec. S11834 (1979)):

    My amendment would do two basic things: First, it would 
authorize the [BJA] to encourage development of pilot demonstration 
projects for prison industry at the State level, involving private 
sector industry * * *. Under this approach, prison programs benefit 
from the private business, develop access to new markets, and 
attract needed capital. The goal of these pilot projects would be to 
create as realistic a working environment as possible within the 
prison walls, while enabling an inmate to become more self-
sufficient to the benefit of himself, the prison system, and the 
taxpayer.
    Secondly, my amendment creates a partial exemption to two 
Federal laws which severely restrict the ability of State prison 
industries to market their goods * * *. When these laws were enacted 
decades ago, they represented significant reforms against 
exploitation of prison labor. Over the years, however, they have 
developed into heavy-handed roadblocks to growth among * * * prison 
industry programs * * *.
    My amendment would provide limited exemptions to these 
restrictions where inmates have been paid a wage comparable to that 
paid for similar work in the private sector in the locality * * *.
    The statutory exception that was enacted to establish PIECP is 
codified at 18 U.S.C. 1761(c):

    * * * [the Federal marketability prohibitions] shall also not 
apply to goods, wares, or merchandise manufactured, produced, or 
mined by convicts or prisoners who--
    (1) Are participating in one of not more than 50 non-Federal 
prison work pilot projects designated by the Director of the Bureau 
of Justice Assistance; * * *

    To become eligible for Bureau of Justice Assistance (BJA) 
certification, an applicant department of corrections must comply with 
specified statutory requirements. It must pay participating prisoners 
``wages not less than that paid for work of a similar nature in the 
locality in which the work was performed'' and cannot take more than 80 
percent in deductions from gross wages for specified purposes including 
taxes, reasonable charges for room and board, family support and 
victims' compensation. 18 U.S.C. 1761(c)(2).
    Certain other conditions of employment must also be met. An 
eligible applicant cannot deprive participating offenders, solely 
because of their status as offenders, of the right to participate in 
benefits made available by the Federal or state government to other 
individuals on the basis of their employment, such as workmen's 
compensation. Title 18 U.S.C. 1761(c)(3). PIECP inmates must also 
participate on a voluntary basis and must have agreed to the specific 
deductions made from gross wages pursuant to 18 U.S.C. 1761(c)(2), and 
all other financial arrangements resulting from participation in such 
employment. Title 18 U.S.C. 1761(c)(4).
    The note following 18 U.S.C. 1761, although not codified, is public 
law and adds two additional PIECP requirements on certified prison 
industries. The note requires participating prison industries to 
consult with local union organizations prior to initiating any project 
qualifying for a 1761(c) exemption. Also, the qualifying applicant must 
ensure that paid PIECP inmate employment will not result in the 
``displacement of employed workers, or be applied in skills, crafts, or 
trades in which there is a surplus of available gainful labor in the 
locality, or impair existing contracts for services.'' The Justice 
System Improvement Act of 1979 added these provisions which became 
Sec. 827(c) of the Omnibus Crime Control and Safe Streets Act of 1968. 
See Pub. L. 96-157, 93 Stat. 1215, reprinted in 1979 U.S.C.C.A.N. 2471. 
In 1984, Sec. 827(c) was redesignated Sec. 819 of the Omnibus Crime 
Control and Safe Streets Act of 1968, as amended. See Pub. L. 98-473, 
98 Stat. 2093.
    If all eligibility requirements are met and an applicant acquires 
BJA certification, the agency is thereafter authorized to operate 
irrespective of Federal prohibitions on the marketing of state 
prisoner-made goods. Conversely, non-compliance with these statutory 
eligibility requirements could expose an industry to criminal 
prosecution under the Ashurst-Sumners Act. Title 18 U.S.C. 1761(a).

b. The PIECP Program

1. Current State of the Program
    Currently, 38 departments of correction or umbrella authorities are 
PIECP Certificate Holders. Under the Justice System Improvement Act of 
1979, Arizona, California, Idaho, Kansas, Minnesota, Nevada and Utah 
were certified. In 1984, under the Justice Assistance Act of 1984, 13 
prisons work pilot projects were certified in: Alaska, Belnap County 
(NH), Connecticut, Iowa, Maine, Missouri, Nebraska, New Mexico, 
Oklahoma, Oregon, South Carolina, Strafford County (NH) and Washington 
State. Under the Crime Control Act of 1990, the following additional 
departments of correction were certified: Colorado, Delaware, Florida, 
Hawaii, Indiana, Louisiana, Maryland, Montana, North Carolina, Ohio, 
Red River County (TX), South Dakota, Tennessee, Texas, the Texas Youth 
Commission, Vermont, Virginia, Washington State Jail Industries Board 
and Wisconsin.
    About 145 private sector businesses now work in partnership with 
PIECP certified projects to employ about 2,800 inmates. Either the 
department of corrections or the private sector enterprise retains 
project authority to direct and control inmate labor, depending on the 
management model used. Project implementation has resulted in the 
production of myriad products including such items as furniture, sheet 
metal, video equipment, clothing, food products, office products, 
mattresses, draperies, crutches and road signs. In addition, although 
service industries were not a threat to the private sector in 1935 and 
thus, were not included within the scope of the Ashurst-Sumners 
prohibition, a number of service industries have elected to comply with 
the PIECP requirements.
    Between January 1979 and September 1998, PIECP projects generated 
approximately $113.7 million in gross inmate wages. Nearly half of this 
amount was diverted to non-inmate recipients: $8.9 million was deducted 
for victims of crime, $25.7 million was deducted for room and board 
payments, $5.8 million was deducted for family support and about $13.7 
million was withheld in local, State and Federal taxes.
    BJA monitors the performance of PIECP work pilot projects to ensure 
that they operate in full compliance with all legislative and 
administrative program requirements. Under a grant to the Correctional 
Industries Association (CIA), prison industry and other professionals 
conduct regular, on-site reviews of all PIECP projects. BJA responds to 
matters involving possible non-compliance by taking appropriate 
remedial action such as providing technical assistance or proposing a 
corrective action plan.
2. Future Challenges
    PIECP is used nationwide as a cost-efficient way to provide inmates 
with work experience and training in marketable job skills, as well as 
to reduce idleness among growing prison populations.
    Over time, the limit on the authorized number of pilot projects has 
been raised to meet the demands of interested applicants. When Congress 
last increased the project ceiling to 50, the House took into 
consideration a waiting

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list of states and counties that had wanted to participate and noted 
that ``the demand for certification by state and local governments 
indicates a need for this amendment which will enable the program to 
expand and other jurisdictions to apply.'' H.R. (I), 101st Cong. 202 
(1990).
    BJA administers PIECP with the objective of making participation 
available to as many qualified applicants as possible, within limits 
imposed by the statutory ceiling. This Guideline provides projects with 
clarity as to Federal participation requirements, as well as 
programmatic flexibility to allow for PIECP Project growth in ways that 
respond to local needs. The Federal requirements are intended to ensure 
that the interests of local business and organized labor are protected. 
In this way, BJA's administrative practices address concerns reflected 
in the legislative history pre-dating the onset of Federal regulation 
of prisoner-made goods.
    Finally, this revised Guideline addresses novel issues presented by 
new PIECP participants, the private sector prisons. These entities are 
unique in that they render an essential service traditionally 
undertaken by public agencies and they do so for profit. Thus, BJA has 
altered some PIECP program requirements to insure program 
implementation remains consistent with Congressional intent. Congress 
enacted PIECP to introduce public departments of correction to private 
sector profit-making enterprises. Therefore, private prisons are 
invited to participate in PIECP only as Cost Accounting Centers (CACs) 
designated under the authority of departments of correction.

c. Discussion of Comments

    BJA published a proposed Guideline in the Federal Register on July 
7, 1998 for public comment. Written comments from public and private 
organizations were received. All comments have been considered by the 
BJA in this publication. This Guideline is final. The following is a 
summary of substantive comments and BJA's response.
1. Background on PIECP
    Comment: BJA should retain the legislative history and background 
section. It is informative and useful.
    BJA should explain that the background section does not accurately 
describe present day political, social or economic concerns regarding 
the implementation of prison industry programs.
    Response: BJA provides the background and legislative history 
section to illustrate social, political and economic concerns that were 
predominant prior to 1940, before the Federal government first began 
regulating, as a criminal matter, the interstate transport of prisoner-
made goods, as well as such concerns as they existed prior to the 1979 
enactment of the PIECP exception to 18 U.S.C. 1761(a). BJA provides 
this background to inform PIECP Cost Accounting Centers about Congress' 
intent when developing the program's statutory requirements and 
exception authority.
    Accordingly, no substantive change was made in the background 
section of the Guideline.
2. Program Purposes
    Comment: BJA should modify its program purposes to add, as a 
purpose, introducing government to private sector profit-making 
enterprises. More specifically, BJA should endorse private sector 
prison options as a specific way to introduce state and local 
government agencies to private sector profit-making enterprises.
    Response: Consistent with the legislative history of the PIECP, BJA 
exercises its administrative authority only to endorse PIECP as a cost-
efficient means to address inmate idleness and to provide inmates with 
work experience and training in marketable job skills. Whether private 
sector partnerships or private prison contracts are suitable prison 
industry options for any given jurisdiction, is a state and or local 
matter for determination. State and local interests are uniquely poised 
to identify appropriate private sector profit-making enterprises, if 
any, to partner with prison industries. Thus, as a Federal agency, BJA 
is not prepared to adopt such a program purpose.
    Accordingly, no change was made in the program purposes provision 
of the Guideline.
3. Definitions
    Comment: BJA should modify the definitions so that references to 
departments of corrections include public or not-for-profit agencies 
sanctioned under state law to administer the Prison Industry 
Enhancement Certification Program.
    BJA should add a definition of ``chief state correctional 
officer,'' as the term is used in reference to the room and board 
deduction, so that it encompasses umbrella authorities where such 
models have been certified by BJA as prison work pilot projects.
    With respect to the minimum wage definition, BJA should state that 
this PIECP program wage threshold is in no way intended, in and of 
itself, to ascribe to inmate workers ``employee'' status for purposes 
of other state and Federal laws.
    BJA should re-define the locality definition. The proposed 
definition, which defers to state agencies for the making of such 
determinations, is too vague and subjective.
    Response: BJA concurs with a number of recommendations to enhance 
the clarity of terms used in the Guideline. A definition for the term 
``departments of correction'' is incorporated to clarify that state and 
local government agencies, and the instrumentalities thereof, including 
not-for-profit entities sanctioned under state law to administer PIECP, 
are eligible as potential PIECP Certificate Holders. A definition of 
the term ``chief state correctional officer'' is added to enhance 
guidance with respect to model specific implementation of the room and 
board deduction. Also, the scope of the minimum wage definition is more 
specifically defined in relation to PIECP purposes and the operation of 
other laws.
    The locality definition has implications both with respect to the 
inmate wage requirement and the prohibition against private sector 
employee displacement. BJA directs all Cost Accounting Centers to 
obtain non-displacement projections and prevailing wage determinations 
from their appropriate state agencies and, in so doing, extends to the 
states an opportunity to locally influence implementation of the 
Federally authorized PIECP Project. BJA expects that by extending this 
opportunity, the states will exercise their authority so as to protect 
the interests of local labor groups and private sector competition. 
This approach was adopted to vest state agencies with authority and 
flexibility to respond to uniquely local economic trends and 
conditions. Accordingly, no change to the locality definition was made.
4. Eligibility
    Comment: BJA should allow private prisons to independently qualify 
as Certificate Holders. Alternatively, restrictions affecting the 
designation of private prison industries, as Cost Accounting Centers 
(CAC), should be eased.
    Umbrella authorities should not be allowed to qualify as eligible 
Certificate Holders. The certification of umbrella authorities 
circumvents the 50 project limit imposed on the program by Congress.
    Response: Title 18 U.S.C. 1761(c)(1) authorizes BJA to exercise 
broad discretion in certifying PIECP prison work pilot projects. Two 
significant

[[Page 17004]]

considerations, however, weigh in favor of limiting Certificate Holder 
eligibility only to departments of correction and not private prisons. 
First, the legislative history of the PIECP reflects Congress' desire 
to craft an inmate work vehicle to advance state and local government 
interests, and specifically their need to gainfully occupy growing 
prison populations in marketable job skills. Second, as PIECP 
implementation could impact state and local private sector interests, 
BJA believes that the protection of those interests would be best 
served by reserving certification for those agencies which, by their 
very nature, are accountable to the public.
    BJA will not authorize any PIECP certified project to designate 
CACs outside of its jurisdictional boundaries because the Bureau defers 
to individual state legislatures for determinations as to whether PIECP 
should be authorized within their jurisdictions. If a state legislature 
decides not to authorize PIECP implementation in public facilities, 
private facilities ought not be authorized to implement PIECP, in that 
same state, through a designation authorized by a Certificate Holder 
located in another state. BJA, however, incorporates amendments to the 
Final Guideline to allow any given state Certificate Holder to 
designate CACs within private prisons operating within that same state, 
even in the absence of a contract for incarceration services between 
that state and the private prison seeking to participate in PIECP. The 
BJA form used to accomplish the designation of a CAC within a private 
prison must reflect express approval of the designation by the Chief 
State Correctional Officer for the state in which the private prison 
CAC is located. See Section IV.(a)(5), infra.
    CACs designated within private prisons must also retain on-file 
documentation reflecting approval of PIECP inmate worker participation 
by the state and local jurisdictions in which the PIECP inmate workers 
were convicted. In order to issue such approvals, the remanding state 
and local jurisdictions must also hold PIECP certificates. This 
requirement insures continuity of the necessary PIECP project 
authorization vis-a-vis the PIECP inmate workers, and is responsive to 
the statutory project ceiling number.
    If inmate workers could not participate in PIECP within the 
boundaries of the state and local jurisdictions in which they were 
convicted, they should not be allowed to participate in PIECP in 
another state or local jurisdiction through an agreement for private 
prison incarceration services. Alternatively stated, state and local 
jurisdictions cannot be allowed to participate in PIECP indirectly 
through a contract with a private prison that has a PIECP-designated 
CAC, if they choose not to participate in PIECP directly, i.e., had 
they incarcerated their inmates within their own state and local 
jurisdictional boundaries.
    Title 18 U.S.C. 1761(c) offers BJA broad discretion with respect to 
defining a prison work pilot project for PIECP eligibility purposes. 
Umbrella authorities may represent a mix of agency members such as 
state and local departments of correction, and youth authorities. Any 
of these agency members may, through their respective umbrella 
authorities, designate CACs within themselves or private prisons 
located in their jurisdictional areas. In order to qualify for PIECP 
certification, umbrella authorities must be able to assure BJA that a 
central administration of the CACs can be accomplished to insure 
project-wide compliance with the guideline and the statute as well as 
responsible exercises of designation/undesignation authority. Since the 
inception of PIECP in 1980, BJA has certified several umbrella 
authorities. During that same period of time, Congress was advised of 
such projects and consistently increased the project ceiling. BJA 
interprets such action as tacit approval of BJA's certification of 
umbrella authority models.
    Accordingly, changes are made in the eligibility provisions to ease 
restrictions on Certificate Holder designation of CACs within private 
prisons located within the Certificate Holder's jurisdiction. Private 
prisons are ineligible as independent PIECP Certificate Holders.
5. Inmate Wages
    Comment: Authors of two comments claim that PIECP wage rates do not 
equal labor costs: BJA should allow Cost Accounting Centers (CACs) to 
make adjustments in prevailing wage rates to address the hidden, 
unusual costs of doing business in a prison environment such as the 
cost of transportation to rural areas, reduced production levels due to 
rapid turnover, and added expenses of worker training and start-up. 
Because these cost variables are significant and inherent in doing 
business within prisons, the PIECP wage requirement is not necessary to 
``level the playing field'' with private sector competition.
    From the perspective of one organized labor group, the proposed 
Guideline is an improvement over the 1985 PIECP guideline. BJA, 
however, is urged not only to encourage, but to require CACs to 
implement salary wage plans based on worker competency and seniority.
    Regarding the wage self-determination option, in the proposed 
guideline, the following diverse comments were received: this option is 
an improvement in that it allows for CAC implementation in instances 
where state agencies are non-responsive to requests for prevailing wage 
determinations; this option imposes too great of an administrative 
burden on CACs; this option provides participants with an opportunity 
to avoid obtaining state agency wage determinations.
    In instances where a private sector partner has both a non-inmate 
operation and a PIECP CAC in the same locality, the partner should be 
permitted to bypass a state agency's wage determination and use 
relevant non-inmate wage scales with respect to PIECP inmate workers 
performing the same job function.
    BJA should clarify the meaning of the term of ``notable tasks,'' as 
it is used in the Guideline with respect to identifying which inmate 
workers should be paid a PIECP wage.
    Response: Title 18 U.S.C. 1761(c)(1) expressly states that PIECP 
wages must be paid at a rate which ``is not less than that paid for 
work of a similar nature in the locality in which the work is 
performed.'' PIECP wage determinations must be based only on comparable 
non-inmate worker wages for performing work of a similar nature. Gross 
wages earned by PIECP inmate workers may be reduced only through an 
application of the four authorized wage deductions specified in 18 
U.S.C. 1761(c)(2). Thus, the plain language of the PIECP exception 
statute provides BJA with no authority to allow wage deductions in 
addition to those set forth in 18 U.S.C. 1761(c)(2) and for the purpose 
of addressing the unusual costs of doing business in a prison 
environment, however meritorious such proposed adjustments might be.
    The language of 18 U.S.C. 1761(c)(3) requires PIECP projects to pay 
wages based only on private sector wage amounts for performing similar 
work and it does not, as a matter of law, require the implementation of 
salary plans. BJA added this policy-based encouragement to advance 
program objectives.
    The self-determination option, as reflected in the proposed 
guideline, was presented to address a recurring challenge confronting 
many PIECP Cost Accounting Centers (CACs). On occasion and through no 
fault of their own, CACs are unable to obtain timely, state agency 
responses to requests for wage determinations. The self-

[[Page 17005]]

determination option, which is available only when state non-
responsiveness occurs, assists CACs to achieve compliance without 
relying on a determination by a third party. The method presented 
requires only the minimum amount of data collection and analysis 
necessary to yield a defensible, rationally-based wage determination. 
Availability of the self-determination option prevents CACs from paying 
a Federal minimum wage--the lowest possible PIECP wage, indefinitely, 
when payment of such a wage rate is unwarranted and the state remains 
non-responsive to wage determinations requests.
    To ease the impact of PIECP implementation on any given locality's 
ecomony and labor force, BJA reserves two opportunities for states to 
affect the implementation of the Federal PIECP program within state 
boundaries. The requirement that proposed CACs must obtain wage rates 
from the relevant state agencies, is one of those opportunities. BJA 
reserves this opportunity for state participation in the program, 
without exception, to insure CACs respond to relevant, locally-based 
input from an objective source.
    BJA introduces the Guideline concept of ``notable tasks'' as a way 
to assist CACs in identifying inmate workers to whom a PIECP prevailing 
wage should be paid. Questions arise as to whether inmates performing 
support functions, such as janitorial and maintenance services, 
necessary to CAC operations must be paid a PIECP wage. A more specific 
definition, in this regard, is not possible without compromising 
flexibility in the application. The Guideline offers specific 
administrative direction by identifying relevant considerations for 
determining whether a given task is ``notable.''
    Accordingly, no change was made in the wage payment provisions of 
the Guideline.
6. Non-Inmate Worker Displacement
    Comment: One representative from organized labor claimed that 
prisoner labor should never be allowed to compete with free-world labor 
because it undermines the private sector labor force and inmate 
rehabilitation. Another representative of organized labor generally 
endorsed the Guideline and the revised non-inmate worker displacement 
requirement, stating that it is an improvement over that which was 
issued in 1985.
    The presumption of non-compliance, applicable when a private sector 
partner employs non-inmate and inmate workers in the same locality, is 
too vague and too restrictive on private sector partners.
    The general language of this requirement makes it difficult to 
measure displacement in instances where other non-employee, non-inmate 
workers perform similar jobs or skills in the same locality. Any PIECP 
operation is likely to affect the private sector marketplace and, 
consequently, private sector jobs. The requirement ought not be 
construed in such a way so as to prohibit PIECP companies from engaging 
in normal business operations such as bidding for contracts on the open 
market after they have been designated as participating in a PIECP 
project. Also, BJA should not impede or discourage successful PIECP 
operations, already designated, from continuing operations even when 
there is a subsequent general downturn in the economy and, arguably, de 
facto displacement of non-inmate workers performing similar work in the 
locality.
    This requirement is too restrictive in that it prohibits PIECP 
partners from outsourcing entry level jobs and redirecting their 
current private sector workforce toward higher skill level jobs.
    The Guideline encourages potential Cost Accounting Centers to 
develop new jobs in a locality; this should not be implemented so as to 
adversely affect a CAC which decides not to follow the encouragement.
    Response: Congress directs BJA to implement the PIECP program, a 
prison industry program that places prison made goods in competition 
with the private sector. BJA has no discretion to exercise in 
determining whether or not to implement this program.
    One BJA purpose in revising the Guideline is to improve the 
program's responsiveness to organized labor's concerns. The agency is 
pleased that a segment of the labor community views its interests as 
better served through the re-issuance of the PIECP Guideline.
    BJA acknowledges that implementing the non-inmate worker 
displacement prohibition may appear to work at cross purposes with 
encouraging the commercial success of PIECP Cost Accounting Centers 
(CACs). The agency must respond to a broad statutory mandate to insure 
that PIECP does not impair or displace private sector workers and is 
not applied in skills in which there is a surplus of available gainful 
labor. However, BJA cannot accomplish PIECP implementation if CAC's are 
prevented from attaining commercial success by engaging in typical 
competitive market practices. To address this concern, the guidance 
language is modified to reflect BJA's expectation that PIECP CACs will 
engage in typical business operations, such as bidding for contracts on 
the open market after project initiation.
    While compliance is a continuing CAC responsibility, a violation of 
the non-displacement requirement is more likely to occur and is more 
discernable just prior to and immediately following CAC implementation 
than thereafter. For this reason, BJA will scrutinize CAC compliance 
with this provision just prior to and within one year following CAC 
implementation.
    The agency devised a presumption of displacement which may be 
applicable in instances where a private sector partner retains non-
inmate workers in the same locality. This presumption is modified in 
this Final Guideline to provide partners with a degree of flexibility 
to reallocate resources to their optimum use. Specifically, the 
presumption may be overcome if the private sector partner can 
demonstrate that non-inmate workers have been retained by the private 
sector partner in jobs at pay rates equal to or greater than that 
received in the previous position, that non-inmate employees have been 
provided an adequate opportunity for effective training in any new job 
skills and that the subject non-inmate employees are being retained by 
the private sector partner under reasonably similar or improved 
employment conditions.
    BJA policy encouragement regarding the creation of new PIECP jobs 
is not a mandate. CACs which do not bring new jobs to their localities 
will not be penalized. For obvious reasons, however, CACs generating 
new jobs are easier for BJA to evaluate and are less likely to be the 
subject of local criticism.
    Accordingly, changes are made in the non-inmate worker displacement 
provision to clarify the scope of the prohibition and to not unduly 
impede business decisions that lend themselves to effective commercial 
management and success of PIECP Cost Accounting Centers.
7. Benefits Requirement
    Comment: A resolution of inconsistent Social Security requirements 
imposed on PIECP models should be accomplished at the Federal level 
between BJA, the Social Security Administration and the Internal 
Revenue Service. The disparate treatment of customer and employer 
models is arbitrary. Both models should be treated the same way for 
purposes of requiring projects to provide inmates with Social Security 
coverage.
    BJA should clarify its position with respect to imposing the 
Federal

[[Page 17006]]

Unemployment Tax Act on PIECP models as a benefits requirement.
    Response: The benefits requirement, as outlined in the proposed 
Guideline, elicited the greatest number of comments. Several Federal 
laws apply to wages earned by inmates in penal institutions. BJA, 
therefore, sought a Guideline review from both the Social Security 
Administration (SSA) and the Internal Revenue Service (IRS) to 
ascertain whether the PIECP benefits requirement, as proposed, was 
consistent with comparable laws administered by those Federal agencies.
    Both the IRS and the SSA concluded that BJA's benefits requirement 
is consistent with comparable laws set forth in the Social Security 
Act, 42 U.S.C. 410(a)(7) and 418(c)(6)(B), and the Internal Revenue 
Code. Services performed in an institution by an inmate in the employ 
of a State, a political subdivision, or a wholly-owned instrumentality 
are excepted from Social Security employment by 26 U.S.C. 3121(b)(7). 
Section 3121(u)(2)(B)(ii)(II) also provides that such services are not 
subject to the Medicare tax.
    In contrast to those inmate services performed in the employ of a 
state or governmental entity, there is no IRS or SSA exception for 
services of inmates performing services in the employ of a non-
governmental entity (for example, a private corporation operating a 
prison or a private corporation operating under the PIECP employer 
model). PIECP Employer models must generally provide inmates with 
Social Security coverage.
    BJA retains the customer and employer models to implement the PIECP 
benefits provision, 18 U.S.C. 1761(c)(3), in a manner consistent with 
other Federal laws addressing inmate wages. Specifically, the models 
are necessary in order to accord states and other governmental entities 
the Social Security employment or coverage exception status, as 
recognized by the IRS and the SSA. BJA will monitor and evaluate Cost 
Accounting Centers (CACs) in accordance with the guidance set forth in 
this Guideline, but will defer to the expertise of both the IRS and SSA 
should either of those agencies reach another conclusion with respect 
to the appropriate benefits treatment of inmate wages earned at any 
given CAC.
    In the case of services performed by PIECP inmates, regardless of 
whether services are being performed under the customer or employer 
model, Federal Unemployment Tax Act taxes do not apply to such 
services. See Section 26 U.S.C. 3306(c)(21) which excepts from 
employment ``service performed by a person committed to a penal 
institution.''
    Accordingly, no changes are made in the benefits requirement of the 
Guideline.
8. Deductions
    Comment: BJA ought to expressly authorize the use of room and board 
deduction funds for the purpose of lowering costs otherwise incurred to 
maintain and operate a PIECP program.
    The term ``Chief State Correction Officer'' should be amended to 
also include ``responsible umbrella authorities.''
    Private prisons managing PIECP Cost Accounting Centers (CACs) 
should be required to demonstrate that any benefit derived through the 
taking of room and board deductions is passed on to states which 
provide public funds to cover such costs.
    The authorized deduction for victims compensation ought to be made 
available to address a PIECP inmate's legal obligations to pay victim 
restitution.
    Response: Consistent with the statutory mandate addressing the room 
and board deduction, BJA defers to state determinations--as reflected 
in regulations issued by Chief State Correctional Officers--with 
respect to determining the amounts of such deductions as well as 
identifying the specific needs to which such deducted amounts may be 
directed. BJA has authority to review room and board deductions to 
insure the amounts deducted are reasonable and are used to defray the 
costs of inmate incarceration. Specific amount determinations and 
budget line item uses are issues more appropriately determined at the 
state and local level.
    In instances where the Certificate Holder is an umbrella authority, 
possibly composed of diverse state as well as local agencies, the 
umbrella authority may itself issue policy on this matter to guide its 
multijurisdictional membership. A definition of ``Chief State 
Correctional Officer'' is added to accommodate the administration of 
this deduction by such models.
    The room and board deduction was authorized by Congress to lower 
incarceration costs otherwise borne by the public. Since private prison 
PIECP inmates' room and board expenses might otherwise be addressed in 
contracts for incarceration services between private prisons and public 
agencies, BJA requires private prison CACs to obtain written approval 
from their respective public agency clients before taking the room and 
board deduction. In devising this requirement, BJA insures notice of 
this possible revenue source is received by appropriate public agencies 
without unduly burdening contractual relations to which it is not a 
party.
    BJA broadens its interpretation of the victims compensation 
authorized deduction to also include deductions deposited in funds 
established by law to facilitate victim restitution. Compensation and 
restitution serve substantially the same purpose in providing victims 
with financial redress for expenses incurred as a result of crime.
    Although the statutory PIECP authorization, 18 U.S.C. 1761(c), does 
not require CACs to make tax deductions, the Internal Revenue Code 
requires federal income tax withholding if payments of wages are made 
to employees. BJA encourages all CACs to take whatever deductions, 
which may be necessary to comply with all Federal laws, including the 
Internal Revenue Code. As with the PIECP benefits provision, BJA defers 
to the IRS as the final authority with respect to making CAC tax 
withholding determinations.
    Accordingly, changes are made in the deductions provision to 
clarify that the victims deduction may, in some instances, be used to 
address a PIECP worker's restitution obligations. Guidance regarding 
room and board deduction is simplified because of the inclusion of a 
definition for the term ``Chief State Correctional Officer.'' 
Clarification is also provided with respect to tax deductions which may 
be necessary to facilitate CAC compliance with the Internal Revenue 
Code.
9. Voluntary Inmate Participation
    Comment: BJA should accept inmate signatures on deduction notices 
as evidence of voluntary inmate participation. BJA should not require 
the execution of new inmate voluntary participation agreements each 
time the deductions affecting inmate wages are changed.
    Response: The 18 U.S.C. 1761(c) expressly requires not only 
voluntary inmate employment, but also inmate agreement, in advance, of 
all deductions and financial arrangements affecting gross wages. While 
an inmate's signature on a notice form may signify receipt of notice, 
it does not necessarily reflect inmate agreement. Thus, the proposal is 
inadequate to insure compliance with the statutory requirement.
    Accordingly, no change is made to the voluntary participation 
provision.

[[Page 17007]]

10. Consultation With Local Labor and Business
    Comment: The consulation requirements reflected in the guideline 
exceed BJA's statutory authority. The requirements are overly 
burdensome and should not be implemented so as to compromise the 
competitive capablity of the Cost Accounting Centers (CACs).
    BJA should accept as compliance with the labor consultation 
requirement, the presence of an organized labor representative on the 
board of an umbrella authority PIECP project.
    With respect to consulation with organized labor, BJA should 
routinely require CAC consultation with both state and local union 
representatives. CACs should also be required to maintain documentation 
of such consultation, on file.
    Response: BJA's labor consultation requirement is consistent with 
the mandate reflected in the statutory note to 18 U.S.C. 1761(c). The 
provision requiring notice to local business, is consistent with a 
provision reflected in the 1985 guideline as well as the legislative 
history of the program exception. In this revised Guideline, BJA 
provides specific guidance on the minimum amount of information 
necessary to insure provision of adequate consultation; it includes 
general information on the scope and nature of the proposed Cost 
Accounting Center, the proposed initiation date as well as notice of 
the requirement and an invitation to comment. Implementation of the 
consultation requirements is not intended to compromise the market 
competitiveness of a CAC, but to advise local economic interests which 
may be impacted by the project.
    Labor consultation cannot automatically be achieved through labor 
participation on the board of a PIECP project. Such representation does 
not necessarily insure notice of the proposed CAC activities to the 
relevant local union representative in the locality to be affected.
    While BJA issues this guidance to insure provision of consultation 
to a labor organization (i.e., notice to a state labor organization, in 
the event a local organization cannot be identified or does not exist), 
BJA has no statutory authority to require notice to both state and 
local labor organizations on a routine basis.
    Accordingly, no change is made to the consultation provisions.
11. Compliance With the National Environmental Policy Act (NEPA)
    BJA should allow PIECP projects to defer to state environmental 
requirements and not impose a new national requirement.
    BJA should provide Cost Accounting Centers (CACs) with technical 
assistance to facilitate compliance with this program requirement.
    Response: BJA has no authority to allow CAC applicants to defer to 
state environmental requirements as a substitute for implementing the 
provisions of the National Environmental Policy Act (NEPA), 42 U.S.C. 
4321-4347 (NEPA). BJA decisions on proposed PIECP certifications and 
designations consitute ``Federal actions'' as defined by 40 C.F.R. 
1508.18 of the Council on Environmental Quality's (CEQ) regulations for 
implementing NEPA. As such, BJA has a federal obligation to insure that 
prior to decisions being made on requested certifications and 
designations, BJA implements the appropriate provisions of the CEQ 
regulations. These Federal implementation responsibilities, which can 
be shared with but cannot be delegated to Federal program applicants, 
have existed since the enactment of NEPA.
    The technical assistance needs of CACs will be addressed through 
BJA, itself, as well as its contractor, the Correctional Industries 
Association.
    Accordingly, no change was made to the proposed PIECP provision 
implementing the NEPA.
    As a result of public review and comment, the final ``Prison 
Industry Enhancement Certification Program'' Guideline is revised to 
read as follows:

III. Program Guidance

a. PIECP Purposes

     To provide a cost-efficient means to address inmate 
idleness and to provide inmates with work experience and training in 
marketable job skills. BJA encourages private sector PIECP partners to 
consider post-incarceration employment to PIECP inmate workers.
     Through inmate wage deductions, to increase advantages to 
the public by providing departments of correction with a means for 
collecting taxes and partially recovering inmate room and board costs, 
by providing crime victims with a greater opportunity to obtain 
compensation, as well as by promoting inmate family support.
     Through PIECP participation conditions, to prevent unfair 
competition between prisoner-made goods and private sector goods.
     To prevent the exploitation of prisoner labor.

b. Definitions

    Benefits refers to inmate benefit coverage required by 18 U.S.C. 
1761(c)(3). PIECP projects must provide inmate workers appropriate 
benefits comparable to those made available by the Federal or state 
government to private sector employees. The scope of appropriate 
benefits coverage is impacted by whether the Cost Accounting Center is 
structured as an employer or customer model and whether the inmate 
labor work force is controlled by a public agency or the private 
sector.
    BJA refers to the Bureau of Justice Assistance within the Office of 
Justice Programs, U.S. Department of Justice.
    Certificate Holder refers to a department of corrections, or an 
alternate umbrella authority, which is approved by BJA for PIECP 
Project certification. Certificate Holders assume monitoring and 
designation responsibilities with respect to their designated Cost 
Accounting Centers. All PIECP prisoner-made goods are produced within 
Cost Accounting Centers that a Certificate Holder designates within 
itself, private prisons located in the same state or jurisdiction or, 
in the case or an umbrella authority, within its membership agencies.
    Certification refers to an exercise of BJA's discretionary 
authority to designate a Prison Work Pilot Project pursuant to Title 18 
U.S.C. 1761(c). BJA may issue either standard or provisional 
certifications to applicant projects. BJA certified projects are 
excepted from certain Federal marketability restraints on the transport 
of prisoner-made goods in interstate commerce, as provided in 18 U.S.C. 
1761(a), and sales to the Federal government in excess of $10,000, 41 
U.S.C. 35.
    Chief State Correctional Officer refers either to the highest 
correctional officer for the jurisdiction in which the certified work 
pilot project is located or, with respect to umbrella authorities that 
control PIECP CACs within a mix of state and local jurisdictions, the 
authorities themselves.
    Cost Accounting Center (CAC) refers to a distinct PIECP goods 
production unit of the industries system that is managed as a separate 
accounting entity under the authority of a Certificate Holder. All 
PIECP production activities are conducted within the context of a 
designated CAC which, generally, is structured either as a customer or 
employer model for purposes of determining PIECP inmate benefits. All 
CACs must operate in compliance with the provisions set forth in 18 
U.S.C. Sec. 1761(c) and this Guideline.

[[Page 17008]]

    Customer Model is a form of a PIECP Cost Accounting Center 
management structure. In this model, the private sector is engaged in a 
CAC enterprise only to the extent that it purchases all or a 
significant portion of the output of a prison-based business owned and 
operated by a governmental entity, political subdivision or an 
instrumentality thereof. A customer model private sector partner 
assumes no major role in industry operations, does not direct 
production and has no control over inmate labor. These functions are 
performed, rather, by a department of corrections.
    Deductions. CACs may elect to take deductions from a PIECP inmate 
worker's wages for certain authorized items. Deductions from PIECP 
inmate gross wages, if taken, may be made only for those items 
specified in 18 U.S.C. 1761(c)(2), including: payment of taxes, 
reasonable charges for room and board, allocations for family support 
and contributions to any funds established by law to compensate victims 
of crime (no less than 5 percent and no more than 20 percent). In no 
event may a PIECP inmate worker's total deductions exceed 80 percent of 
gross wages and each and every PIECP inmate worker must agree, in 
advance, to all deductions from gross wages.
    Department of Corrections refers to state or local governmental 
entity or a political subdivision or instrumentality thereof, including 
not-for-profit entities, that are legally sanctioned by state 
legislatures to administer prison industries.
    Designation is an exercise of a Certificate Holder's discretionary 
authority to bring a CAC within its certified PIECP Project. This 
exercise of authority results in an extension of PIECP exception status 
and an imposition of compliance requirements on an identified CAC 
operating within the certified PIECP Project.
    Employer Model is a form of a PIECP management structure. In this 
model, the private sector owns and operates the CAC by controlling the 
hiring, firing, training, supervision, and payment of the inmate work 
force. The department of corrections assumes no major role in industry 
operations, does not direct production, and exercises minimum control 
over inmate labor performance. These functions are performed, rather, 
by the private sector.
    Goods include tangible items, wares, and merchandise.
    Locality means the geographic area impacted by the presence of a 
PIECP CAC operation. For PIECP CACs, it is relevant with regard to: 
determining inmate wages, providing consultation to appropriate labor 
and private sector organizations, and determining whether a PIECP CAC 
operation will displace the private sector labor force. All locality 
determinations must be documented as part of a Notice of Designation. 
As used in the calculation of CAC wage rates, locality is usually a 
matter for definition by the appropriate state agency which normally 
determines wage rates (i.e., the State Department of Economic 
Security).
    Minimum wage refers to the Federal minimum wage which is the lowest 
possible wage that can be paid to private sector employees under the 
Fair Labor Standards Act, 29 U.S.C. 206. Any special wage program, 
excepted by law from the minimum wage requirement in the private 
sector, may be used by a PIECP CAC as long as the CAC meets the same 
program participation conditions as private sector participants. The 
requisite payment of at least a minimum wage, by a CAC, is in no way 
intended by BJA to imply that PIECP inmate workers are employees for 
purposes of the PIECP statute or any other Federal law.
    Monitoring refers to the process of examining Prison Work Pilot 
Project activities to ensure continuing compliance with 18 U.S.C. 
1761(c) and this Guideline. It includes, at a minimum, BJA's receipt 
and analysis of performance reports and on-site CAC monitoring visits 
by BJA, BJA contractors and Certificate Holders.
    NEPA means the National Environmental Policy Act, Pub. L. 91-190, 
83 Stat. 852 (1970) (codified as amended at 42 U.S.C. 4321-4347; 
implemented under 40 C.F.R. pt. 1500).
    Participation means engaging in the activities and operations of an 
18 U.S.C. 1761(c) excepted PIECP Project.
    PIECP means the Prison Industry Enhancement Certification Program 
as authorized by 18 U.S.C. 1761(c).
    PIECP Exception Status. Any PIECP Project which produces prisoner-
made goods pursuant to 18 U.S.C. 1761(c) is excepted from certain 
Federal restraints imposed on the marketability of prisoner-made goods, 
including 18 U.S.C. 1761(a) and 41 U.S.C. 35.
    PIECP Inmate Worker is a convict or prisoner who performs notable 
tasks necessary to produce or transport goods in interstate commerce 
and for a Prison Work Pilot Project certified under 18 U.S.C. 1761(c). 
The PIECP Inmate Worker benefits from PIECP by receiving training and 
work experience.
    Prevailing wage is a wage rate which is not less than that paid for 
work of a similar nature in the locality in which the work is to be 
performed, 18 U.S.C. 1761(c)(2).
    Prison Industry means an organized utilization of inmate labor to 
produce goods or render services.
    Prison Work Pilot Project (PIECP Project) refers to one of 50 non-
Federal prison work pilot projects which may be designated by the 
Director of BJA under 18 U.S.C. 1761(c). This term encompasses the 
operations of the Certificate Holder's designated Cost Accounting 
Centers (CACs). Any Prison Work Pilot Project may consist of one or 
more CACs.
    Prisoner includes prison and jail inmates, convicts and 
incarcerated juvenile offenders, and does not include prisoners on 
parole, probation, or supervised release. Title 18 U.S.C. 1761(a) does 
not regulate the transport of goods produced by prisoners on parole, 
supervised release, or probation.
    Prisoner-made goods include all goods, wares, and merchandise 
manufactured, produced, or mined, wholly or in part, by convicts or 
prisoners (except convicts or prisoners on parole or probation).
    Production is the forming anew or transforming of marketable goods. 
The term includes mining and manufacture and excludes services.
    Provisional Certification is issued by BJA in instances where an 
applicant has not yet come into full compliance with all PIECP 
requirements, but such compliance appears imminent. It entitles the 
holder to PIECP exception status for an identified period of time, may 
be made contingent upon the occurrence of identified conditions, and 
may or may not be renewed by BJA.
    Statutory Exception Status refers to a prison industry which meets 
the statutory requirements set forth in 18 U.S.C. 1761(b), and is 
thereby entitled to an exception from the prohibition set forth in 18 
U.S.C. 1761(a).
    Supervised Release. 18 U.S.C. 1761(a) states that the Ashurst-
Sumners Act prohibition does not apply to ``convicts on parole, 
supervised release, or probation.'' The reference to ``supervised 
release'' was added to 1761(a) in 1984, Pub. L. 98-473, 223, and is 
responsive to changes made at that same time in state and Federal 
Sentencing Guidelines. Policy statements issued by the U.S. Sentencing 
Commission explain that supervised release is a ``new form of post-
imprisonment supervision created by the Sentencing Reform Act.'' See 
Federal Sentencing Guidelines, 18 U.S.C.A. ch. 7, pt. A (1997).
    Umbrella Authority refers to a type of Certificate Holder which is 
authorized by law to administer a PIECP Project and which consists of 
state and/or local departments of correction located

[[Page 17009]]

within the same state. A certified umbrella authority may designate 
CACs within its membership agencies, as well as within members' private 
prisons, and assumes responsibility for monitoring CAC compliance.

c. BJA's Initial Considerations for Determining Propriety of Work Pilot 
Project Certification

1. BJA's Exercise of Discretionary Authority To Define and Certify 50 
Work Pilot Projects
(A) BJA may exercise discretionary authority to designate up to 50 non-
Federal work pilot projects, 18 U.S.C. 1761(c).
(B) BJA may define PIECP eligibility qualifications and, in accordance 
with its own definitions, may exercise agency discretion to extend or 
withdraw certification privileges, as it deems appropriate.
2. Threshold Inquiry for Determining Applicability of PIECP Exception 
Status
    Appropriate PIECP participants include prison industries whose 
activities would likely violate the 18 U.S.C. 1761(a) prohibition and 
would likely not fit within an 18 U.S.C. 1761(b) exception. BJA has 
devised an administrative approach for identifying such industries. 
This approach incorporates relevant sections 1761 (a) and (b) 
considerations, including whether a given prisoner-made item qualifies 
as an excepted agricultural product, whether a given prison industry 
activity qualifies as an unregulated service, and whether a product 
distribution activity qualifies as an intrastate distribution of goods. 
These considerations are reflected in the following threshold inquiry, 
which BJA will use to determine whether a prison industry should be 
encouraged to apply for PIECP exception status:

(A) Is a statutory exception applicable under 18 U.S.C. 1761(b)? The 
following prisoner-made items are excepted from the prohibition set 
forth in section 1761(a):

     Parts for the repair of farm machinery; or
     Commodities manufactured in a Federal, District of 
Columbia, or state institution for use by the Federal Government, or by 
the District of Columbia or by any state or political subdivision of a 
state or not-for-profit organizations. This exception is intended to 
inure to the benefit of the public; or
     Agricultural commodities grown or cultivated on a farm 
which retain continuing substantial identity through processing stages, 
if any. In making the determination as to whether a processing stage 
changes a product from an agricultural commodity to a manufactured 
commodity, a relevant consideration is whether the processing is 
incidental or ancillary to agricultural commodity growth and or 
cultivation. If the processing is incidental or ancillary in nature and 
is commonly undertaken by agricultural enterprises, then it would 
likely fall within the scope of the statutory exception.

(B) Could the contemplated activity trigger 18 U.S.C. 1761(a) by 
resulting in a production of goods by inmates in any penal or 
reformatory institution? The production of goods, which is regulated by 
18 U.S.C. 1761(a), must be distinguished from inmate services which are 
not regulated by the criminal prohibition. The following factors are 
relevant in determining whether a given activity results in the 
production of prison-made goods:

     Has a tangible item been produced, manufactured or mined?
     Has a tangible item been formed or transformed?
     Has the activity resulted in the creation of property or 
in a new, marketable item?

(C) Could the contemplated activity trigger 18 U.S.C. 1761(a) by 
resulting in a post-production, interstate transportation of prisoner-
made goods?

     Will there be transportation of prisoner-made goods into 
the flow of interstate commerce, i.e., across state lines or from a 
foreign country into the United States?
     Is there a commercial economic enterprise present?
    BJA will use this preliminary threshold inquiry to instill greater 
consistency in PIECP eligibility decision-making. If a prison industry 
activity falls within the scope of the Sec. 1761(b) statutory 
exception, the involved industry need not seek Sec. 1761(c) exception 
status to avoid Sec. 1761(a) criminal sanctions. Additionally, if a 
prison industry activity would not result in the production of goods, 
interstate transport of prisoner-made goods, or does not in any other 
way trigger Sec. 1761(a), the involved industry need not seek 
compliance with the requirements set forth in Sec. 1761(c) or this 
Guideline.
    This threshold inquiry was devised only for 18 U.S.C. 1761(c) 
programmatic purposes and does not reflect the Department of Justice's 
18 U.S.C. 1761(a) prosecution guidelines. Thus, reliance on this 
Guideline, or any BJA determination based thereon, is not a complete 
defense to any civil or criminal action, but would depend on other 
factors as well.

d. Mandatory Program Criteria for PIECP Participation

1. Eligibility
    All departments of correction and juvenile justice agencies 
authorized by law to administer prison industry programs are eligible 
to apply for PIECP certification; such governmental agencies are also 
eligible members of umbrella authorities, authorized by law to 
administer prison industry programs, that are seeking certification. 
PIECP Certificate Holders may designate CACs within themselves, as well 
as within private prisons located in the same state. A private prison 
industry may participate in PIECP only as designated CAC of the 
certified PIECP Project in its respective state and upon the approval 
of the Chief State Correctional Officer of that same state. CACs 
designated within private prisons must also retain on-file 
documentation reflecting approval of PIECP inmate worker participation 
by the state and local jurisdictions in which the PIECP inmate workers 
were convicted. In order to issue such approvals, the remanding state 
and local jurisdictions must also hold PIECP certificates. Non-
compliance by any one designated CAC may result in PIECP exception 
status suspension and/or termination as to that CAC, and if warranted, 
its respective Certificate Holder. Also, within a reasonable period of 
time after certification, each Certificate Holder must have at least 
one CAC producing goods and operating under its authority or risk 
losing certification.
2. Inmate Wages
    PIECP inmate workers must receive wages at a rate which is not less 
than that paid for work of a similar nature in the locality in which 
the work is to be performed. This requirement benefits society by 
allowing for the development of prison industries while protecting the 
private sector labor force and business from unfair competition that 
could otherwise stem from the flow of low-cost, prisoner-made goods 
into the marketplace. PIECP participants must, therefore, implement the 
prevailing wage requirements under like conditions experienced by 
private sector competition. Toward this end, the following requirements 
are applicable:

(A) Section 1761(c) requires that the PIECP wage amount be set 
exclusively in relation to the amount of pay received by similarly

[[Page 17010]]

situated non-inmate workers. In deriving the appropriate PIECP wage, 18 
U.S.C. 1761(c)(2) does not allow other cost variables to be taken into 
consideration, such as unique expenses incurred as a result of 
undertaking production within the prison environment.
(B) Prevailing wage verification must be obtained by the appropriate 
state agency which determines wage rates (usually the Department of 
Economic Security).
(C) When making PIECP prevailing wage verifications and annual re-
verifications, the responsible state agency should recommend the 
utilization of a non-inmate wage scale which will not result in the 
displacement of non-inmate workers performing similar work in the 
relevant locality.
(D) The PIECP prevailing wage must be received by those inmate workers 
performing notable tasks necessary to produce and/or transport goods in 
interstate commerce. If a similarly situated, private sector company is 
paying wages to obtain services that are necessary to production, e.g. 
refuse pickup, then the PIECP CAC must also pay such wages to the 
inmate provider of like services. In determining which tasks are 
covered, the following considerations are relevant: the amount of 
inmate time involved, effort and skill necessary to accomplish the 
task, the regularity of task performance, and whether the task would 
have been performed by the inmate absent PIECP production.
(E) The prevailing wage must be verified prior to the initiation of 
PIECP participation. Annually, thereafter, the PIECP participant must 
re-verify the adopted wage to ensure that it continues to be comparable 
to wages paid for work of a similar nature in the locality in which the 
project is located.
(F) If no such verification can be obtained from the State Department 
of Economic Security, or other similar department, the PIECP 
participant is responsible for establishing a reasonable prevailing 
wage. In such instances, the participant should retain on file, for 
BJA's review:
    (1) relevant wage data from a sufficient number of competitors in 
the locality;
    (2) data analyses for determining a reasonable prevailing wage 
result; and
    (3) if possible, a written assessment of the reasonableness of the 
resulting prevailing wage determination by an appropriate state agency 
which normally determines wage rates.
(G) The PIECP prevailing wage can not be set below the Federal minimum 
wage, as defined in the Fair Labor Standards Act (FLSA), 29 U.S.C. 201 
et seq. Payment of the Federal minimum wage, however, does not 
automatically achieve compliance with the prevailing wage requirement 
unless the prevailing wage for the comparable private sector industries 
is, in fact, the Federal minimum wage.
(H) Overtime, at one and a half times the rate of regular or prevailing 
wage, must be paid for prisoner hours worked in excess of 40 hours per 
week. See 29 U.S.C. 207(a) (a payment standard imposed on private 
sector competition).
(I) If a CAC pays a wage based on piece work, the project must apply a 
calculation to convert regular wages paid into a comparable hourly 
wage. The calculation should be used as a routine check to ensure that 
inmate workers, paid according to piece rate work, do not receive less 
than the Federal minimum wage. In instances where the CAC is paying 
Federal minimum wage and such a wage is less than the industry standard 
for the prevailing wage, the CAC must be able to identify inmate worker 
performance variances as justification for the wage rate.
(J) BJA strongly encourages the use of wage plans that take into 
consideration a PIECP worker's experience, seniority, and performance.
3. Non-Inmate Worker Displacement.
    PIECP CAC operations must not result in displacement of employed 
workers; be applied in skills, crafts, or trades in which there is a 
surplus of available gainful labor in the locality; or significantly 
impair existing contracts. The term ``displacement,'' as used in this 
provision, includes all such prohibited activities, as well as the 
inappropriate transfer of private sector job functions to PIECP 
inmates. This prohibition is intended to protect the private sector 
partner's non-inmate employees, as well as all other non-inmate workers 
who perform work of a similar nature in the same locality in which the 
CAC is located. This prohibition is not, however, intended to prohibit 
PIECP CACs from engaging in typical business operations, such as 
competing for business or bidding on contracts on the open market after 
their designation as Cost Accounting Centers.

(A) Regarding the possibility of displacement among non-inmate 
employees of private sector partners in the same locality as the CAC:
    (1) BJA will presume non-compliance where there is a non-inmate 
worker's job function replacement by a PIECP inmate worker or where a 
non-inmate worker's job function is eliminated or adversely impacted, 
to a significant degree, and there is a concomitant assumption of a 
similar job function by a PIECP inmate worker. This presumption may be 
overcome if it can be demonstrated that the non-inmate workers have 
been retained by the private sector partner in jobs at pay rates equal 
to or greater than that received in previous positions, that non-inmate 
employees have been provided an adequate opportunity for effective 
training in any new job skills and that the subject non-inmate 
employees are being retained by the private sector partner under 
reasonably similar or improved employment conditions. When making this 
compliance evaluation, BJA will not consider the private sector 
partner's intent or economic viability.
    (2) Prior to CAC initiation, the CAC applicant must provide BJA 
with written documentation reflecting the private sector partner's 
agreement not to displace its non-inmate employees with PIECP inmate 
labor in violation of the 18 U.S.C. 1761(c) statutory note.
    (B) Prior to project initiation, all CAC applicants must show 
through written verification by the State Department of Economic 
Security (or other appropriate state agency) that the PIECP project 
will not result in displacement of non-inmate workers performing the 
same work, regardless of wage rate. In cases where an appropriate state 
agency cannot provide this service, the applicant CAC should propose to 
and confer with BJA as to alternative measures to address this 
requirement.
(C) While compliance is a continuing CAC obligation, BJA will 
scrutinize CAC compliance with the non-displacement requirement just 
prior to and within one year after the initiation date of CAC 
operations.
(D) In instances where BJA finds that CAC implementation results in 
private sector worker displacement, the CAC must either cease its 
operations or comply with a BJA-approved corrective action plan, if BJA 
proposes such a plan under Section IV. f. of this Guideline, infra.

[[Page 17011]]

(E) BJA strongly recommends that CAC job development be oriented toward 
the creation of new jobs within the locality.
4. Benefits.
    PIECP projects must provide inmate workers appropriate benefits 
comparable to those made available by the Federal or State Government 
to private sector employees, including workers' compensation and, under 
certain circumstances, Social Security.

(A) By statute, in some states, inmates are not eligible to participate 
in workers' compensation programs. Provision of comparable workers' 
compensation benefits is acceptable as long as the CAC can demonstrate 
comparability of such benefits with those secured by the Federal or 
state Government for private sector employees.
(B) The PIECP CAC management model impacts whether the CAC must provide 
Social Security benefits to PIECP inmate workers. Where the employer 
model is utilized and the private sector directs and controls the PIECP 
inmate worker, the PIECP participant must provide PIECP inmate workers 
with Social Security benefits. Where a customer model is utilized and a 
governmental, or instrumentality thereof, directs or controls the PIECP 
inmate worker, BJA recognizes the applicability of other provisions of 
Federal law which may operate to preclude the provision of PIECP 
inmates with certain benefits, including Social Security.
5. Deductions.
    Participating CACs are not required under 18 U.S.C. 1761(c) to take 
deductions from PIECP inmate wages. Deductions, however, may be 
required under other Federal statutes, such as the Internal Revenue 
Code. If a CAC elects to take deductions from a PIECP inmates' gross 
wages, such deductions can be taken only under the following 
conditions:

(A) Deductions from gross wages, if made, may be withheld only for the 
following authorized purposes:
    (1) taxes (Federal, state, local);
    (2) in the case of a state prisoner, reasonable charges for room 
and board as determined by regulations issued by the Chief State 
Correctional Officer;
    (3) allocations for support of family pursuant to state statute, 
court order, or agreement by the offender; and
    (4) contributions of not more than 20 percent, but not less than 5 
percent of gross wages to any fund established by law to compensate the 
victims of crime.

    Such deductions, in aggregate, cannot exceed 80 percent of gross 
wages.

(B) PIECP inmate workers must be paid, credited with, or otherwise 
benefit legally from, the 20 percent gross remainder. In this regard, 
the CAC may direct the 20 percent gross remainder to a PIECP inmate 
worker's expense accounts, savings accounts, or toward the settling of 
the worker's legal obligations, including the payment of fines and 
restitution.
(C) Each Certificate Holder, through its respective Chief State 
Correctional Officer, retains flexibility in determining appropriate 
room and board charges that may be deducted from PIECP inmate workers' 
gross wages. Except as to CACs within private prisons, the applicable 
regulations for determining this deduction are those issued by the 
Chief State Correctional Officer of the state in which the PIECP inmate 
is incarcerated.
(D) The legislative history of 18 U.S.C. 1761(c) reflects a 
Congressional intent to permit the use of the room and board deduction 
to lower costs otherwise incurred by the public for inmate 
incarceration. Thus, prior to making room and board deductions, private 
prison CACs must obtain written approval of any such proposed 
deductions from the Chief State Correctional Officers for those states 
from which the PIECP inmate workers were remanded.
(E) A PIECP inmate's gross wages may be subjected to a deduction for 
the purpose compensating crime victims if the deducted amount is 
deposited into a fund established by law for the purpose of providing 
crime victim compensation. State crime victim compensation funds 
typically qualify as authorized recipients of such deducted amounts.
    The victims compensation deduction may also be used to address 
victim restitution as long as the deducted amounts are deposited into a 
fund established by law to address such victim interests. Amounts 
deducted by private prison CACs should be deposited in those crime 
victim compensation or restitution funds in states from which the PIECP 
inmates were remanded.
6. Voluntary PIECP Inmate Worker Participation
    The Inmate Worker must indicate, in writing, that he or she:
(A) agrees voluntarily to participate in the PIECP project, and
(B) agrees voluntarily, and in advance, to specific deductions made 
from gross wages, as well as all other financial arrangements made as 
to earned PIECP wages.
7. Consultation With Organized Labor
    PIECP CACs must:

(A) consult with representatives of local union central bodies or 
similar labor union organizations prior to the initiation of any 
certified or designated CAC project. CACs should consult with as many 
of such organizations as may have an interest in the trade or skill to 
be performed by the PIECP inmates. If there are no local union bodies 
or labor organizations, consultation must be made with the state union 
bodies or similar state-wide labor organizations.
(B) provide adequate information about the contemplated PIECP 
participation such as, at a minimum, an identification of the scope of 
the intended CAC and projected initiation date, as well as an 
explanation of the fact that statutory consultation is required and 
comments are invited. CACs should retain documentation reflecting 
provision of adequate consultation.
8. Consultation With Local Private Industry
    PIECP CACs must:

(A) consult with representatives of local business that may be 
economically impacted by CAC production prior to beginning operations, 
and
(B) provide adequate information about the contemplated PIECP 
participation such as, at a minimum, an identification of the scope of 
the intended CAC and projected initiation date as well as an 
explanation of the fact that consultation is required and comments are 
invited. CACs should retain documentation reflecting provision of 
adequate consultation.
9. Compliance With the National Environmental Policy Act (NEPA)
    The review and approval of PIECP certification applications as well 
as the designation of PIECP CACs must comply with NEPA and other 
related Federal environmental review requirements. See NEPA, 42 U.S.C.

[[Page 17012]]

4321-4347 and 40 CFR pt. 1500. See also 28 CFR pt. 61 (Department of 
Justice procedures for implementing NEPA); 28 CFR pt. 61 App. D 
(procedures specific to Federal actions undertaken by the Office of 
Justice Programs).

(A) A BJA PIECP certification, or a CAC designation under an issued 
certification, constitutes a ``Federal action,'' as defined by 40 CFR 
1508.18 of the Council on Environmental Quality's (CEQ) regulations for 
implementing NEPA. Consistent with CEQ regulations, PIECP applicants 
and CACs are required to submit for BJA review environmental data and 
information regarding their proposed activities and, if necessary, 
environmental assessments. Applicants and CACs must also assist BJA in 
the preparation of any required environmental impact statements.
(B) Title 28 CFR Part 61 App. D provides NEPA compliance guidance to 
PIECP applicants and CACs, including the following:
    (1) Actions entailing minor renovation projects or remodeling do 
not normally require an environment impact statement or an 
environmental assessment, unless, for example the actions would be 
located in or potentially affect a floodplain; a wetland; a listed 
species or critical habitat for an endangered species; or a property 
that is listed on or may be eligible for listing on the National 
Register of Historic Places.
    (2) Actions that normally require an environmental assessment, but 
not necessarily an environmental impact statement, include: renovations 
and expansions that change the basic prior use of a facility or 
substantially change its size; change in use of an existing facility 
that results in the increased production of liquid, gaseous, or solid 
wastes; new construction; research and technology whose anticipated and 
future application could be expected to have an effect on the 
environment; and new operations involving the use of hazardous, toxic, 
radioactive, or odorous materials. Assessments of such activities which 
result in BJA ``findings of significant impact'' will necessitate the 
preparation of environmental impact statements in compliance with NEPA 
and its implementing regulations.
    (3) Additionally, no certification will be approved nor can any 
designation be provided or maintained if the application or designation 
includes a facility in non-compliance with any Federal, state, or local 
environmental law or regulation.

IV. PIECP Administration

a. Certificate Holders

    BJA may exercise its discretionary authority to certify up to 50 
Non-Federal PIECP Projects. Eligible applicants may seek certification 
by submitting an application to BJA in accordance with the requirements 
set forth in BJA's PIECP Certification Application, which will be 
provided upon request, and subpart IV.a.2, infra. BJA's review of 
submitted applications will be conducted as outlined in subparts IV.a.3 
and a.4, infra. Once a certificate is issued, the holder assumes the 
authority and responsibilities set forth in subparts IV.a.5 and a.6, 
infra.
1. Project Structure
    All departments of correction, authorized by law to administer 
prison industry programs, are eligible to apply for BJA certification. 
Certified applicants may designate one or a number of Cost Accounting 
Centers (CACs) under their authority. Certificate Holders may also 
under certain conditions designate CACs within private prisons located 
in their respective states or jurisdictions. BJA will consider 
alternative program structures suggested by certification applicants, 
including, but not limited to, applicant umbrella authorities, as 
described in subpart III. d.1, supra.
2. Application Content
    All applications for PIECP Project Certification shall include the 
following:

(A) Assurances of Authority. The Certificate Holder must provide 
written assurance to BJA that it has in place appropriate statutory and 
administrative authority to meet all mandatory program criteria and, in 
particular, to monitor CAC compliance throughout the proposed PIECP 
Project.
(B) Documentation to Show Compliance With Mandatory Program Criteria. 
The applicant must submit all documentation necessary to show CAC 
compliance with the nine mandatory program criteria outlined in Section 
III. d., supra.
(C) Project Description. The applicant must describe key project 
elements, including the process to be used to designate and monitor 
compliance of CACs with 18 U.S.C. 1761(c) and this Guideline.
3. BJA Review
    PIECP applications will be reviewed by BJA on a first-come, first-
served basis. Awards of certification are discretionary exercises of 
authority by BJA under 18 U.S.C. 1761(c). No certification will be 
awarded, however, unless there is a determination that the applicant 
has met the mandatory participation criteria outlined in this 
Guideline. Applicants will be notified in writing of BJA's award or 
denial of certification. The hearing and appeal procedures set forth in 
28 C.F.R. Part 18 do not apply to denied PIECP applicants. Certified 
applicants will be informed of the effective date of BJA's 
certification.
4. Standard or Provisional Certification
    A standard certification may be issued by BJA to an approved 
Certificate Holder applicant when all mandatory program criteria have 
been met. When one or more mandatory program criteria have not been 
met, but when steps have been taken to ensure that those criteria will 
be met within a reasonable period of time, then a provisional 
certification may be issued by BJA in instances where the withholding 
of certification would significantly impair the applicant's ability to 
further develop its project. The terms of the provisional certification 
will be made specific to the nature of the unmet mandatory criteria and 
may be made contingent upon the occurrence of identified conditions. 
Provisional certifications may be issued for no longer than one year 
from the date of issuance and may be subject to renewal, at BJA's 
discretion.
5. Certificate Holder Designation Authority
(A) The Certificate Holder may exercise CAC designation authority with 
respect to department of correction prison industries operating under 
its jurisdiction, including in private prisons which are located in its 
respective state or jurisdiction. CACs designated within private 
prisons must also retain on-file documentation reflecting approval of 
PIECP inmate worker participation by the state and local jurisdictions 
in which PIECP inmate workers were convicted. In order to issue such 
approvals, the remanding state and local jurisdictions must also hold 
PIECP certificates.
To exercise this authority, a Certificate Holder must first determine 
that a proposed CAC has complied with the requirements set forth in 
this Guideline and in 18 U.S.C. 1761(c).

[[Page 17013]]

Whenever the Certificate Holder elects to exercise this authority after 
certification application approval, it must submit a Notice of 
Designation Form to BJA that provides the following information and 
documentation:
    (1) Cost Accounting Center Name and Location;
    (2) Proposed number of workers;
    (3) Item(s) to be produced;
    (4) Proposed consumer market (including anticipated geographic 
distribution);
    (5) Description of private sector involvement, including models 
that will be used in working with private enterprise;
    (6) Locality determination, and supporting justification;
    (7) Description of inmate compensation plans;
    (8) Documentation of prevailing wage verification;
    (9) Identification of deductions and percentage of each to be taken 
from PIECP inmates' gross wages;
    (10) Documentation of private sector partner's agreement not to 
displace its non-inmate employees in the same locality with PIECP 
inmate labor, if applicable;
    (11) Documentation of non-displacement verification; and
    (12) As to any CACs within private prisons, written approval from 
remanding jurisdiction of any proposed room and board deduction, in 
compliance with Section III.d.5.(E)of this Guideline, supra;
    (13) As to any CACs within private prisons, written approval of the 
designation by the Chief State Correctional Officer for the 
jurisdiction in which the CAC is located; and
    (14) Documentation of the environmental impacts of the CAC's 
existing and proposed activities.
(B) The Certificate Holder may, in its own discretion, undesignate any 
previously designated CAC. In such instances, the Certificate Holder 
must submit to BJA an Undesignation Form providing the following 
information:
    (1) Cost Accounting Center Name and Location;
    (2) Reasons for Undesignation; and
    (3) Effective Date of Undesignation.
(C) BJA may, at any time deemed necessary to resolve compliance 
concerns and upon the issuance of written notice, suspend a Certificate 
Holder's authority to designate additional Cost Accounting Centers.
6. Certificate Holder Monitoring Responsibilities
    As to all designated CACs, the Certificate Holder must assume the 
following monitoring responsibilities:

(A) Undertake all reporting and evaluation activities deemed necessary 
to ensure continuing designated CAC compliance; and
(B) Respond to all BJA requests for information and cooperation aimed 
at ensuring Project compliance.

b. Cost Accounting Centers' PIECP Exception Status

    A CAC is entitled to operate under PIECP exception status.

1. To retain this status, the CAC must comply with all PIECP 
participation obligations to its Certificate Holder and to BJA, 
including:
    (A) Maintaining continuous compliance with the requirements set 
forth in 18 U.S.C. 1761(c) and in III.d), supra, of this Guideline; and
    (B) Responding to all monitoring requests for information and 
cooperation aimed at maintaining continued compliance with this 
Guideline.
2. The CAC must promptly report to the Certificate Holder any 
contemplated change in operations which may affect its ability to 
maintain statutory and Guideline compliance.

c. Compliance Reviews

1. Performance Reports
    Within 30 days following the close of each calendar quarter, each 
CAC must submit a quarterly performance report to its Certificate 
Holder in a form prescribed by BJA. The performance report describes 
activities undertaken during the prescribed period. A consolidated 
report of all CAC activity must be submitted to BJA by the Certificate 
Holder within 45 days following the close of each calendar quarter.
2. On-Site Monitoring Reviews
    BJA and BJA technical assistance contractors are authorized to 
perform desk and on-site reviews of all PIECP participants, including 
all CACs, as deemed necessary. On-site reviewers may request access to 
any and all documentation necessary to assist in determining compliance 
with the requirements of this Guideline and 18 U.S.C. 1761. Monitored 
participants will be advised in writing of the results of any such 
reviews. Immediate corrective action must be taken to address 
determinations of non-compliance and/or to respond to issues that raise 
compliance related-concerns for BJA.

d. BJA's PIECP Administration

    BJA's PIECP responsibilities include the following:

1. Review and approval of Certificate Holder PIECP applications;
2. Monitoring to determine compliance status of operations within all 
CACs;
3. PIECP exception status termination or suspension for cause related 
to substantial non-compliance;
4. Liaison with other Federal agencies that may affect PIECP 
operations;
5. Provision of compliance-related technical assistance; and
6. Any and all other functions necessary to administer the program in 
compliance with 18 U.S.C. 1761(c).

e. PIECP Exception Status Suspension/Termination

1. Notice of Possible Compliance Violation
    Alleged facts indicative of non-compliance shall be communicated in 
writing by BJA to the involved Certificate Holder and the involved 
designated CAC. These parties must respond to the allegations, in 
writing, within 15 days after receipt of the notice of non-compliance 
determination. Immediate corrective action must be taken to address 
determinations of non-compliance.
2. Voluntary Compliance Agreements
    If BJA determines that noncompliant practices persist, BJA may, in 
its discretion, propose a voluntary compliance agreement to the 
involved Certificate Holder.
3. Failure To Achieve Compliance and Effect of Non-Compliance
    If a voluntary compliance agreement is not presented by BJA or is 
not accepted or adequately implemented by the Certificate Holder within 
30 days after receipt of such an agreement, BJA may suspend the 
Certificate Holder's certification and/or CAC exception status.
4. PIECP Exception Status Suspension and Termination
    A certification may be terminated by BJA if it has been inactive 
(no production within a designated CAC) or suspended for six 
consecutive months. A certification and/or designation may be 
suspended, and six months thereafter, terminated upon: (1) issuance of 
a notice of a determination that the Certificate Holder and/or 
designated CAC is not acting in compliance with

[[Page 17014]]

the requirements of 18 U.S.C. 1761, this Guideline or the conditions 
set forth in its certificate; or (2) in the discretion of the Director 
of BJA and upon a re-definition of a PIECP Project authorized under 18 
U.S.C. 1761(c). Termination or suspension of the exception status of 
one designated CAC will not automatically impact the PIECP exception 
status of other CACs under the same certification unless the PIECP 
Project certification is suspended or terminated. The hearing and 
appeal procedures set forth in 28 C.F.R. Part 18 do not apply to PIECP 
applicants or participants who have had PIECP exception status 
suspended or terminated under this provision.

    Dated: March 31, 1999.
Nancy Gist,
Director, Bureau of Justice Assistance.
[FR Doc. 99-8575 Filed 4-6-99; 8:45 am]
BILLING CODE 4410-18-P