In The News

Critics Target Federal Prison Industries’ Contracting Preferences 
The Federal Times
Sarah Chacko
June 29, 2012

Some small businesses and lawmakers are pushing to curtail contracting preferences given to Federal Prison Industries.

Agencies must procure products and services from Federal Prison Industries (FPI), which uses the brand name commonly known as UNICOR, in cases where it holds a small share of the federal market. A bill introduced by Rep. Bill Huizenga, R-Mich., would eliminate UNICOR’s mandatory source preference and require UNICOR to compete for all federal contracts except in limited circumstances. UNICOR has taken business away from small businesses all over the country, Huizenga told the House Small Business contracting and workforce subcommittee Thursday.

“UNICOR has been argued as not really being a significant operation,” he said. “That is not the case.”

UNICOR earned $745 million in sales last year and employs more than 14,000 inmates, Huizenga said.

However, an FPI official said sales are down since Congress restricted UNICOR’s mandatory source provisions in 2008. That year, Congress limited FPI’s mandatory source privilege so that the Defense Department no longer has to buy from UNICOR if UNICOR has more than 5 percent market share in an industry. And non-defense agencies no longer are required to buy from UNICOR unless UNICOR has more than a 20 percent market share in an industry. For decades before that, agencies were obligated to buy from FPI anything it produced.

Between 2009 and 2011, UNICOR’s sales dropped $140 million, according to the agency’s annual reports. UNICOR’s operating costs exceeded its sales between 2009 and 2011, totaling $95 million in losses during those three years.

After UNICOR reaches the market share threshold in an industry, it can still compete for contracts, including set-aside contracts for small businesses. Since UNICOR does not have to pay minimum wage, does not incur the cost of employee benefits, federal workplace regulations or state taxes, it often can outbid most businesses, small-business representatives said.

Huzienga’s bill would also require FPI to pay inmates more in wages and would impose federal health and safety standards on FPI’s operations.

Subcommittee chairman Mick Mulvaney, R-S.C., said he is concerned about UNICOR’s impact on small businesses but did not say whether he supports Huzienga’s bill. Two subcommittee members are co-sponsors of the bill.
Mulvaney suggested that UNICOR focus its work in areas where there are labor shortages, such as agriculture.

“They’re losing entire industries in my state because they can’t find the people,” he said.

Officials should also consider expanding vocational training programs, which have a better record of keeping inmates from returning to prison after release than FPI, small-business owners said. Vocational training programs could teach inmates more useful trades and skills that can be used in more industries, such as how to use Microsoft Office programs, said Rebecca Boenigk, owner of Neutral Posture furniture company.

“They are not getting real skills by inserting casters and screws into a chair,” she said.