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Bill Pits Prisons Against Small Businesses

A measure passed by the House would allow businesses to compete for contracts once reserved for prison labor.
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For the second time in three years, the House has approved a bill forcing prisons to compete with small businesses for federal contracts.

The Federal Prison Industries Competition in Contracting Act, which passed the House by 362-57 on Wednesday, allows small private-sector manufacturers to vie for formerly non-competitive government contracts for office furniture, electronics, and other products and services.

In 2003, a similar House bill failed to pass the Senate.

Under current law, federal agencies are required to get certain office supplies and services from Federal Prison Industries under a special "mandatory source" status.

Created in 1934, FPI, which also goes by the trade name UNICOR, is a government-owned agency that employs inmates at federal prisons -- paying them as low as 25 cents an hour -- to supply goods and services for federal agencies.

Last year, FPI made $765 million in total sales, including $138 million in furniture sales alone, according to the agency's annual report.
  
Private-sector businesses, trade groups, and labor unions have long complained that the agency's preferred procurement status is unfair and bad for business.

The FPI says its own purchases of services and materials, primarily from small businesses, are good for the private sector. It has also says that without the program, inmates would have no way of learning work habits and job skills, which could lead to higher recidivism rates among inmates. 

"The unintended and indirect message from FPI to working Americans is that if you want a job, commit a crime," Rep. Don Manzullo (R-Ill.), chairman of the House Small Business Committee, said in a statement following Wednesday's vote. "That's not the American way,"

"This legislation simply requires FPI to compete like every other business for contracts with the federal government," he added.

Rep. Pete Hoekstra (R-Mich.), who sponsored the bill, said it includes provisions for alternative work and rehabilitation programs for inmates that "are just as valuable in combating idleness and contributing to institution safety as prison labor."

Still, those programs could cost the government up to $357 million between 2007 and 2011, according to Congressional Budget Office estimates.

At the same time, federal agencies will likely be able to "acquire some products or services less expensively through a competitive procurement process," the CBO said.

According to the U.S. Chamber of Commerce, which strongly supports the measure, taxpayers are already footing the bill for "above market prices for lower quality goods" under the current program.

In a congressional statement issued last year, it said the bill removed costly barriers that "prevent business, particularly small businesses, from obtaining government contracts."

A similar bill introduced in the Senate in April 2005 is currently in the committee stage.

Last updated: Sep 15, 2006




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