Unicor uses law to handcuff the competition

The arm of the Bureau of Prisons that employs inmates wants to keep 25 percent of all
federal inmates employed at labor rates of 25 cents to $1.25 an hour. Unicor—the
trade name of Federal Prison Industries Inc.—sustains itself by exercising its legal
right to make federal agencies buy products it chooses to manufacture. This mandatory
preference is at once Unicor’s lifeline of customers and its political Achilles’

To sustain its factories, Unicor refuses to grant waivers permitting private-sector
vendors to compete with it. To date, Unicor has not been a player in the information
technology field, except in certain narrow niches. For example, Unicor workers recycle
printer toner cartridges and resell them. The company performs data entry, digitizing and
imaging services. It also salvages parts and gold from obsolete computers.

Recent developments indicate Unicor is trying to break out of its niche. First, Unicor
has proposed a rule claiming the right to provide services to any company, not just to
federal agencies or contractors. The expansion is justified by an opinion helpfully
provided Unicor by the Office of Legal Counsel of the Justice Department—the same
department that benefits from the Unicor revolving fund that is fed by payments from
federal customers for prisoners’ work.

Second, Unicor has also claimed it is exempt from the Federal Acquisition Regulation
and is permitted certain privileges, such as knowing the prices of its privatesector

Third, Unicor asserts it has the right to manufacture new product lines without its
board’s approval, provided it does not rely on its mandatory authority to sell them.

This proposed expansion of Unicor is patently unlawful. I will be among many attorneys
filing comments on behalf of trade associations and companies asserting this concern. If
the proposals go through, however, federal IT contractors may find odd pieces of their
business being sucked up by the Unicor operation, and agencies will be required to
transfer portions of their budgets to sustain federal prisons.

Some developments regarding Unicor are positive and deserve recognition. Recently
Unicor agreed, under a pilot program, to give up its reliance on mandatory use as a way of
obtaining business for military barracks furniture. This experiment begins Jan. 1 and will
run for five years. (After years of litigation against Unicor, I negotiated this agreement
on behalf of an affected trade group.) It remains to be seen if Unicor will be willing to
negotiate similar agreements industry by industry, or whether Congress will force the

Two House coalitions are sparring over Unicor’s powers. Reps. Peter Hoekstra
(R-Mich.) and Barney Frank (D-Mass.) have assembled a bipartisan business and labor
coalition pushing for an end to Unicor’s mandatory source authority. They’ll
reintroduce HR 2758 to curb the company’s practices. On the opposite side is
Judiciary Subcommittee on Crime chairman Bill McCollum (R-Fla.). He’s sympathetic to
expansion of Unicor’s authorities. But even McCollum has a provision in his bill, HR
4100, that might someday result in Unicor’s having to give up mandatory source

The Clinton administration has failed to demonstrate it has a policy on these difficult
issues. While Unicor and BOP personnel aggressively testify against Hoekstra’s bill
and in favor of McCollum’s, the Office of Federal Procurement Policy appears passive
and is not actively coordinating a policy that recognizes the disparate interests of
agencies such as the Defense Department, which is statutorily required to buy
Unicor’s products, even when they’re not best values.

Unicor is a force that distorts the cost and quality of goods delivered in the federal
market. Employing prisoners is a laudable goal but one that is morally troubling when
felons put law-abiding citizens out of work. As the IT sector grows, the pressure to use
prisoners, as many states do, for data entry and other IT services will grow as well.

Stephen M. Ryan is a partner in the Washington law firm of Brand, Lowell &
Ryan. He has long experience in federal information technology issues. E-mail him at smr@blrlaw.com.

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