In The News

Over Labor Day weekend, NBC News pulled back the curtain on Federal Prison Industries (FPI) revealing several disturbing facts about this government-owned entity that included costly recalls which endangered the lives of our men and women in uniform as well as fuzzy math that raised further questions about FPI's budget and funding mechanisms.

NBC also brought to light FPI's ability to poach small business contracts despite having a labor force of more than 12,000 inmates, FPI’s unique mandatory source provision that allows them to claim any government contract they want, and FPI's desire to expand their operations into the private sector.

Below are excerpts of NBC's eye-opening report. The entire story is available on NBCNews.com.


Federal Prison-Owned 'Factories With Fences' Facing Increased Scrutiny
NBC News
Safia Samee Ali
SEP 4 2016, 2:22 PM ET

For years, Federal Prison Industries, a government-owned manufacturing corporation which uses inmate labor and has faced several Justice Department investigations, has bypassed the competitive bid process and netted multi-million dollar government contracts, NBC News has found. The practice, some lawmakers and small businesses say, gives the prison-based company an unfair advantage. The company has also, for at least five years operated at a net loss of $89.8 million, according to the Justice Department, requiring the corporation to draw on its cash reserves.

At times, the company also had problems with its product line — it once made defective military helmets which had to be recalled. The company also previously exposed some of its workers at electronic recycling centers to toxic chemicals — incidents which led to a scathing rebuke from the DOJ. FPI, which is also known by the trade name UNICOR, operates 83 prison factories across the country and pays the more than 12,000 inmates between 23 cents to $1.15 per hour to crank out everything from body armor to running call centers. 

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Between 2006 and 2009, the company, as a subcontractor to ArmorSource — a private company which won $30.3 million deal with the federal government — produced thousands of defective combat helmets for the U.S. military, according to a Justice Department Inspector General report. In May 2010, after several lots failed ballistic safety tests, the Army was forced to recall the combat helmets. The Justice Department investigation found that Kevlar dust was used to patch up parts of the helmets; serial numbers had been switched or changed altogether; and expired paint was used as a coating. "The investigation also found that manufacturing documents were altered by inmates at the direction of FPI staff that falsely indicated helmets passed inspection and met contract specifications," according to the Justice Department report.  Federal Prison Industries also had a separate $23 million contract to make the Marine Corps Lightweight Helmet. Many of those were also defective and they, too, were recalled.

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"More often than not FPI is given a contract, not because other companies do not produce the product or service requested, but because it receives preferential treatment when it provides services to the federal government," Huizenga, who introduced legislation in 2013 and 2015 to regulate the government behemoth, said on his website. And the federal government guarantees the company steady revenue. In order to assure a constant stream of revenue, Federal Prison Industries sells its products to government entities that are required, by law, to buy and only buy from Federal Prison Industries. A legal provision many lawmakers find troubling. "Under the current system, if FPI want a contract from the federal government, it gets it," Huizenga told NBC News.

Procuring government contracts in the free market usually requires several companies to compete and bid on hugely prosperous contracts, said Charles Tiefer, a professor at the University of Baltimore College of Law.However, Federal Prison Industries bypasses this process completely by way of guaranteed contracts that allows the corporation to net multi-million dollar orders. During the current fiscal year, the Department of Defense alone provided the company with more than half of its revenue, purchasing almost $264 million in military products. In addition to having several hundred no-bid contracts securely in hand, the company also participates in the free market bidding arena.

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"It seems like FPI management got greedy," said Tiefer, who specializes in government contracts and contract law at the University of Baltimore School of Law. "They have a dangerous amount of power for them to be getting greedy. They have both incredibly cheap labor and favored status. It's a formula for disaster if management lets itself get greedy."