Federal Prison Industries has unfair advantage

Stephen Ryan

Most Americans would instinctively recoil from the notion that our citizens should
compete with prison labor from China. What few people seem to know is that the U.S.
government also uses prison labor to compete with private industry, a practice that has
cost the jobs of thousands of law-abiding American workers.

On the list of anachronistic procurement preferences that should be dispensed with,
none looms larger than the preference provided Federal Prison Industries. FPI is a $600
million-per-year corporation that uses prison labor in providing goods and services to the
federal government. FPI is one of the government's 50 largest suppliers.

FPI is sustained by a mandatory preference system that lets it claim a share of the
federal marketplace for goods and services. Once FPI has decided to take its share of a
market and its board of directors has approved such action, no federal agency can buy
those goods commercially without first getting a waiver from FPI.

If FPI wants to make the sale to the agency, it simply refuses to grant the waiver and
takes that sale. Most of FPI's goods and services are sold to the Defense Department. But
representatives of DOD purchasing organizations have testified recently that FPI's prices,
quality and delivery schedules are inferior to those available on the open market.

I have a stake in this situation because I am representing an association of
manufacturers in a suit challenging FPI's privileged status. However, I believe there is a
broader issue that the public should take note of: the unfunded mandate that transfers
money to the federal prison bureaucracy from other agencies.

FPI's expansion in its long-standing markets, such as furniture and military clothing,
has been so extensive that FPI is circling the federal computer and services market
looking for openings. Recently, for example, FPI's board approved the taking of 26 percent
of the federal market for recycled toner cartridges.

FPI's involvement can grotesquely distort a marketplace. FPI workers are paid 23 cents
an hour to start, with rates capping out at $1.16 per hour. Try competing with those labor
rates. Given that advantage, FPI should not need any preference system to get sales.

In the early 1990s, in a single sector of the furniture industry, prison output jumped
from about $10 million to $24 million, a 138 percent increase, over two years. In that
case, FPI never bothered to obtain from its own board the required authorization for

Asked to explain why FPI had not complied with its statute or its regulations, FPI and
its parent agency, the Justice Department, have stonewalled. But the bottom line cannot be
changed: From fiscal 1988 through fiscal 1995, FPI made almost no effort to implement
procedures to collect, process and report the data needed to comply with federal law and
its own self-serving regulations.

It has thumbed its nose at Congress's direction that its board must authorize such
expansions. Indeed, FPI has made it clear it is prepared to manipulate its own rules to
keep Congress from knowing what is going on. For example, FPI delayed its most recent
significant expansion hearing, apparently in hopes Congress would be out of town during
the hearing.

Federal prison populations are expanding rapidly. The policies that have led to this
expansion should be examined carefully.

There is a legitimate need to rehabilitate and keep prisoners busy. FPI claims its
workers are much less likely to become recidivists when released.

This may be true. But what FPI doesn't disclose is that they pick the best of the
prisoners for jobs. (FPI often chooses lifers or prisoners with long sentences, which cuts
down on turnover.)

Vice President Gore's National Performance Review has recommended elimination of FPI's
mandatory preference. Recently, more than 180 members of the House voted to end the
mandatory preference. They lost the vote on procedural and jurisdictional grounds when the
Judiciary Committee said it needed time to consider the issue.

Congress should act promptly on legislation to take away FPI's big club, the mandatory
preference that the company has used to deprive the private sector and its workers of
their livelihoods. FPI will never have to compete on the price of labor. Let it compete on
the basis of price and quality.

This is an issue the resurgent AFL-CIO, Pat Buchanan, the small-business community and
other unlikely allies can agree upon. When you can form that type of coalition, it tells
you something is wrong with the government's position.

Stephen M. Ryan is a partner in the Washington law firm of Brand, Lowell &
Ryan. He has long experience in federal information technology issues.

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