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94–488 PDF 2004

S. Hrg. 108–697

LEGISLATIVE HEARING ON S. 346, A BILL TO

AMEND THE OFFICE OF FEDERAL PROCUREMENT POLICY ACT TO ESTABLISH A GOVERNMENTWIDE POLICY REQUIRING COMPETITION

IN CERTAIN PROCUREMENTS FROM FEDERAL

PRISON INDUSTRIES

HEARING

BEFORE THE

FINANCIAL MANAGEMENT, THE BUDGET, AND 

INTERNATIONAL SECURITY SUBCOMMITTEE

OF THE

COMMITTEE ON 

GOVERNMENTAL AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

APRIL 7, 2004

Printed for the use of the Committee on Governmental Affairs

(

(II)

COMMITTEE ON GOVERNMENTAL AFFAIRS 

SUSAN M. COLLINS, Maine, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

NORM COLEMAN, Minnesota 

ARLEN SPECTER, Pennsylvania 

ROBERT F. BENNETT, Utah 

PETER G. FITZGERALD, Illinois 

JOHN E. SUNUNU, New Hampshire 

RICHARD C. SHELBY, Alabama 

JOSEPH I. LIEBERMAN, Connecticut 

CARL LEVIN, Michigan 

DANIEL K. AKAKA, Hawaii 

RICHARD J. DURBIN, Illinois 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL D. BOPP, Staff Director and Chief Counsel 

JOYCE A. RECHTSCHAFFEN, Minority Staff Director and Counsel 

AMY B. NEWHOUSE, Chief Clerk

FINANCIAL MANAGEMENT, THE BUDGET, AND INTERNATIONAL 

SECURITY SUBCOMMITTEE 

PETER G. FITZGERALD, Illinois, Chairman 

TED STEVENS, Alaska 

GEORGE V. VOINOVICH, Ohio 

ARLEN SPECTER, Pennsylvania 

ROBERT F. BENNETT, Utah 

JOHN E. SUNUNU, New Hampshire 

RICHARD C. SHELBY, Alabama 

DANIEL K. AKAKA, Hawaii 

CARL LEVIN, Michigan 

THOMAS R. CARPER, Delaware 

MARK DAYTON, Minnesota 

FRANK LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas

MICHAEL J. RUSSELL, Staff Director 

RICHARD J. KESSLER, Minority Staff Director 

NANCI E. LANGLEY, Minority Deputy Staff Director 

TARA E. BAIRD, Chief Clerk 

(III)

C O N T E N T S 

Opening statements: Page 

Senator Fitzgerald ............................................................................................ 1

Senator Levin .................................................................................................... 8

Prepared statement: 

Senator Lautenberg .......................................................................................... 39

WITNESSES 

WEDNESDAY, APRIL 7, 2004

Hon. Craig Thomas, a U.S. Senator from the State of Wyoming ........................ 4

Hon. Debbie Stabenow, a U.S. Senator from the State of Michigan ................... 5

Harley G. Lappin, Director, Federal Bureau of Prisons ....................................... 11

Jack R. Williams, Jr., Assistant Regional Administrator, Federal Supply Service, Region 3, U.S. General Services Administration ........................................ 13

John M. Palatiello, President, Management Association for Private Photogrammeteric Surveyors, on behalf of the U.S. Chamber of Commerce ........... 15

Kurt Weiss, Senior Vice President and General Manager, U.S. Business Interiors, on behalf of the Office Furniture Dealers Alliance ................................. 16

Andrew S. Linder, President, Power Connector, Inc., on behalf of the Correctional Vendors Association .................................................................................. 18

Philip W. Glover, President, Council of Prison Locals, American Federation 

of Government Employees, AFL–CIO ................................................................ 19

ALPHABETICAL LIST OF WITNESSES

Glover, Philip W.: 

Testimony .......................................................................................................... 19

Prepared statement with attachments ........................................................... 94

Lappin, Harley G.: 

Testimony .......................................................................................................... 11

Prepared statement .......................................................................................... 47

Linder, Andrew S.: 

Testimony .......................................................................................................... 18

Prepared statement .......................................................................................... 87

Palatiello, John M.: 

Testimony .......................................................................................................... 15

Prepared statement .......................................................................................... 64

Stabenow, Hon. Debbie: 

Testimony .......................................................................................................... 5

Prepared statement .......................................................................................... 43

Thomas, Hon. Craig: 

Testimony .......................................................................................................... 4

Prepared statement .......................................................................................... 40

Weiss, Kurt: 

Testimony .......................................................................................................... 16

Prepared statement with attachments ........................................................... 71

Williams, Jack R., Jr.: 

Testimony .......................................................................................................... 13

Prepared statement .......................................................................................... 62

Page

IV

APPENDIX 

Copy of S. 346 .......................................................................................................... 163

Additional prepared statements for the Record from: 

Hon. Pete Hoekstra, U.S. House of Representatives, Second District of 

Michigan ........................................................................................................ 173

Hon. Mark Green, U.S. House of Representatives, Eighth District of 

Wisconsin ....................................................................................................... 183

Edwin Meese, III, former Attorney General, representing the Enterprise 

Prison Institute ............................................................................................. 187

J. Michael Quinlan, former Director of the Federal Bureau of Prisons 

(1987–1992) ................................................................................................... 189

Reginald Wilkinson, Director, Ohio Department of Rehabilitation and 

Correction ...................................................................................................... 191

Christopher P. Pearce, Director of Congressional and Regulatory Affairs, 

American Furniture Manufacturers Association ........................................ 199

The Coalition for Government Procurement .................................................. 203

National Correctional Industries Association ................................................ 207

Contract Services Association of America ...................................................... 209

Roger F. Cocivera, President and CEO, Textile Rental Services Association of America .............................................................................................. 215

Union of Needletrades, Industrial and Textile Employees (UNITE!) .......... 218

AFL–CIO ........................................................................................................... 224

Delco Remy International, Inc. ........................................................................ 225

Federal Managers Association ......................................................................... 230

Franklin Sports ................................................................................................. 235

Tennessee Rehabilitative Initiative in Correction (TRICOR) ....................... 237

Power Connector Inc. follow up letter from Andrew Linder ......................... 248

Information provided by Mr. Lappin ...................................................................... 250

Brochure entitled ‘‘UNICOR Presents Goelst,’’ provided by Mr. Palatiello ........ 304

(1)

LEGISLATIVE HEARING ON S. 346, A BILL TO 

AMEND THE OFFICE OF FEDERAL PROCUREMENT POLICY ACT TO ESTABLISH A 

GOVERNMENTWIDE POLICY REQUIRING 

COMPETITION IN CERTAIN PROCUREMENTS 

FROM FEDERAL PRISON INDUSTRIES 

WEDNESDAY, APRIL 7, 2004

U.S. SENATE,

SUBCOMMITTEE ON FINANCIAL MANAGEMENT,

THE BUDGET, AND INTERNATIONAL SECURITY,

OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 2:09 p.m., in room 

SD–342, Dirksen Senate Office Building, Hon. Peter G. Fitzgerald, 

Chairman of the Subcommittee, presiding. 

Present: Senators Fitzgerald, Levin, and Pryor. 

OPENING STATEMENT OF SENATOR FITZGERALD 

Senator FITZGERALD. The hearing will come to order. I would like 

to get underway right away, even though we have some Senators 

who are just getting back from lunch and will be joining us shortly. 

We have two roll call votes on the floor beginning at 2:15 p.m. I 

think we can safely go up to almost 2:30 p.m. before we break for 

those votes. I see Senator Thomas from Wyoming is already here 

waiting patiently, so I will begin with my opening statement and 

then we will proceed to Senator Thomas, and to any other Senators 

who will be joining us by that time. 

Today, we consider S. 346, a bill introduced by Senator Levin, 

Senator Thomas, and others to amend Federal procurement policy 

as it affects certain procurements from Federal Prison Industries, 

FPI. The bill has been referred to this Subcommittee, and today’s 

hearing will provide an opportunity to assess the implications of 

the legislation for the Federal Prison Industries program. 

I want to thank Senator Thomas for being here today. We will 

also be joined later by Senator Stabenow, and we will hear from 

the Director of the Federal Bureau of Prisons, a senior procurement official from the GSA, and other well-informed stakeholders 

who hold diverse views on the bill and on the Federal Prison Industries program. 

Federal Prison Industries, Inc., which operates under the trade 

name UNICOR, was established in 1934 to provide job training opportunities to Federal inmates by employing them to produce goods 

2

and services for Federal agencies. UNICOR has 111 factories in 

over 70 locations and employs nearly 22,000 inmate workers, which 

represents 22 percent of the prison population that is eligible for 

such employment opportunities. UNICOR has eight business 

groups: Clothing and textiles, electronics, fleet management and 

vehicular components, office furniture, graphics, industrial products, recycling activities, and services. 

One of FPI’s services, coincidentally, was highlighted in a hearing this Subcommittee held on March 1 of this year on oversight 

of the Federal Thrift Savings Plan. Namely, the materials that are 

provided to millions of TSP participants are printed by inmates 

from the Federal Prison Industries program. 

The Federal Bureau of Prisons reported that as of March 25, 

2004, there were 175,952 Federal inmates nationwide. Ninety-three 

percent of these inmates are male and 7 percent are female. Of this 

total, approximately 4,800 inmates are confined in four Federal facilities and several halfway houses in my home State of Illinois. 

Three of these four Federal correctional institutions—in Pekin, 

Greenville, and Marion—operate prison industries involving metalworking, clothing, textiles, and electronics. 

The debate over the proper role of the prison industries programs 

and the extent to which inmates should be able to perform work 

that competes with the private sector is literally as old as the Republic. As far back as the 1770’s, the Philadelphia Quakers advocated that criminal offenders be set aside from society to become 

penitent rather than being subjected to harsh corporal or capital 

punishment, as was the prevailing colonial practice. This advocacy 

gave rise to the establishment of facilities known as penitentiaries. 

It became quickly apparent, however, that prisoners fared poorly 

without some activity or labor. Therefore, during the 19th Century, 

prison work programs arose and flourished. 

Over the years, various forms of prison industry programs were 

criticized by private sector businesses, labor groups, or inmate 

rights advocates. In the early 1930’s, as the country was deep in 

the Great Depression, Congress adopted several pieces of legislation to address these controversies. One law established Federal 

Prison Industries as a government corporation, operated as an internal organization within the Bureau of Prisons. Three other laws, 

the Smoot-Hawley Act, the Sumners-Ashurst Act, and the HawesCooper Act, impose various restrictions on prison-made goods in 

interstate commerce. These laws and related executive orders first 

issued by President Theodore Roosevelt remain in effect to this 

day. 

With limited exceptions, products made by inmates are prohibited from interstate commerce. These laws are silent, however, on 

the issue of inmate performed services. Over the past 20 years, several State Attorneys General, and more recently the Department of 

Justice, have issued opinions that such services are legally permissible. Thus, State and Federal Prison Industries programs evolved 

in which inmates performed certain services, such as recycling and 

staffing call centers for private companies. 

Congress has adopted additional amendments regarding the Federal Prison Industries program over the past few years. Provisions 

in the Defense Authorization Acts of 2002 and 2003 require that 

3

DOD’s contracting officers conduct market research to determine 

whether FPI’s products are comparable to products available from 

the private sector that best meet the Department’s needs in terms 

of price, quality, and delivery. If DOD determines that FPI’s products are not comparable, then a competition is required. A provision in the Consolidated Appropriations Act of 2004 requires all 

Federal agencies that purchase a product or service offered by FPI 

to first make a determination that the specific product or service 

provides the best value to the buying agency. 

The bill we are considering today, S. 346, would repeal the ‘‘mandatory source’’ authority found in the 1934 legislation that created 

Federal Prison Industries. The bill would thus require that all Federal agencies conduct a competition for any products those agencies 

would otherwise have purchased from FPI on a sole source basis. 

The bill provides three exceptions to the competitive bidding requirement. One, the attorney general determines that the FPI cannot reasonably expect fair consideration in a competitive bidding 

scenario and the award to FPI is necessary to maintain safe and 

effective prison administration. Two, the product is only available 

from the FPI. And three, the agency head determines that the 

product would otherwise be furnished by prison labor abroad. 

Additionally, as I previously noted, other existing provisions generally bar the interstate transportation of prison-made goods. S. 

346 would also bar prison industry programs at both the Federal 

and State levels from performing services in the commercial market with inmate labor. While the sole source issue has occupied 

much of the policy debate, I am aware that the issue of prohibiting 

inmate-performed services in interstate commerce has generated a 

great deal of controversy. 

Therefore, I look forward to hearing from our witnesses with 

their views specifically regarding the issue of inmate-performed 

services. 

I know we all appreciate that our prisons are becoming more 

crowded and that most individuals sent to prison eventually return 

to our communities. As taxpayers, we all want prisons to be as cost 

effective to operate as possible and as safe as possible for prison 

guards. We also expect that inmates who are discharged will be 

better equipped to reenter society as law-abiding citizens. Extensive research indicates that one of the most critical attributes inmates will need when reentering society is the experience of how 

to work and the desire to make a gainful living in a legal manner. 

How inmates receive work in prison, how this work experience 

helps maintain discipline within correctional facilities, and the extent to which the products and services inmates produce impact the 

private sector, both positively and negatively, are some of the 

issues that today’s hearing will explore. 

At this point, we are joined by Senator Levin, who is an original 

cosponsor of S. 346. We have two votes coming up. I wonder if prior 

to your opening remarks we could permit Senators Thomas and 

Stabenow to give their opening remarks so they don’t have to return after votes, or would you like to make your statements now? 

Senator LEVIN. You are Chairman. Whatever you——

Senator FITZGERALD. Do you have the time to give them? They 

have been waiting, so in the interest of sparing you a round trip 

4

1The prepared statement of Senator Thomas appears in the Appendix on page 40. 

here, why don’t we go ahead with Senator Thomas, who was here 

first, and then we will hear from Senator Stabenow. 

Senator Thomas, thank you very much for appearing before this 

Subcommittee. 

TESTIMONY OF HON. CRAIG THOMAS,1 A U.S. SENATOR FROM 

THE STATE OF WYOMING 

Senator THOMAS. Thank you, Mr. Chairman. Senator Levin, I am 

glad you are here. I will try and be brief. You have covered it quite 

well. I want to thank you for having the hearing on S. 346. 

I have always been concerned when the government unfairly 

competes with the private sector, and I think there is evidence that 

this is the case here. That is why I have worked with my colleague 

to put together this bill. It establishes a governmentwide policy requiring competition, competition in procurement. I think that is an 

important word here. We will hear from the American business 

community that they have been injured and unfairly by monopolistic practices. We will hear from those involved in the government 

that its impacts and the sole sourcing is cause for concern, and so 

on. 

You have mentioned the background. Currently, I have different 

numbers than you. About 21,000 Federal prisoners are involved 

here. That is 12 percent of the Federal prison population of 

174,000, so a relatively small amount. 

You listed the many different items—office furniture, clothing, 

electronics, eyewear, mapping, and so on. So it is quite a broad 

thing, as a matter of fact, and it is important to have prisoners 

keep working. But this goal should not come at the cost of a government monopoly like FPI now has. 

I think this bill is a step forward. It injects competition where 

we now have a monopoly. It limits unfair government competition 

with the private sector. This important and timely legislation will 

eliminate mandatory contracting requirements that Federal agencies are subject to under the Federal Prison Industries. Under current law, all Federal agencies are required to purchase products 

made by FPI. 

Simply put, this will remove that mandatory sourcing requirement. FPI will have to compete with the private sector for Federal 

contracts. It allows contracting officers within a Federal agency to 

use competitive procedures for procurement of products as opposed 

to being forced to use FPI on a sole-source basis. It allows procurement officials to select contracts if they believe FPI can meet the 

requirements. Products must be offered at a fair and reasonable 

price as a result of open competition. It places government control 

of government procurement in the hands of contracting officers 

rather than the hands of FPI. 

Opponents will argue their bill will lead to idle prisoners, resulting in a more dangerous prison environment. Our bill, as you mentioned, allows the attorney general to grant a waiver to this process 

if a particular contract is deemed essential to the safety and the 

effective administration of a particular prison. 

5

1The prepared statement of Senator Stabenow appears in the Appendix on page 43. 

This minimizes the unfair competition with the private sector 

companies, restores the authority and the procurement decisions 

where it belongs, with the agency contracting officials. 

The Department of Defense has had some successes. Senator 

Shelby included a provision in the 2004 omnibus bill to eliminate 

FPI mandatory purchases for the Department of Defense. FPI has 

taken steps to provide some relief from FPI’s mandatory sourcing 

within the Department of Defense and just recently to all Federal 

agencies. 

In fiscal year 2002, FPI was ranked 72 on the list of top 100 

DOD contractors. In 2003, the FPI had moved up to 69th, so competition does work. Unfair advantages, of course, exist now. What 

began in the 1930’s as a program to give inmates job skills for reentry into society has become a money-making enterprise. FPI has 

expanded into a range of products and services offered in the private sector with little Congressional oversight. Congress has the 

advantage of paying lower wages, of course, between a quarter and 

a dollar-and-a-quarter, not subject to regulations such as benefits 

and retirement, health insurance costs, compliance with OSHA and 

those kinds of things. It has a guaranteed client base. 

FPI’s mandatory source requirement not only undercuts private 

employers throughout America, but often costs the American taxpayers more money. So really the bottom line, we are looking for 

the most efficient government operation we can have, the most efficient business operations, and certainly looking for a need for competition. 

So that is what it is all about, competition. Clearly, competitive 

bidding is a reasonable process that ensures the taxpayers’ dollars 

are being spent to the best and responsibly. I am confident that allowing competition for contracts will save dollars, restore management decisions where they belong, with individual agency officials. 

The elimination of the mandatory source preference will encourage 

cost savings and eliminates the monopoly. 

I think it is a fairly reasonable thing for us to do. It does not 

take away all the activities, but makes it competitive for a more 

efficient government for the taxpayers. Thank you, Mr. Chairman. 

Senator FITZGERALD. Senator Thomas, thank you. Senator 

Stabenow. 

TESTIMONY OF HON. DEBBIE STABENOW,1 A U.S. SENATOR 

FROM THE STATE OF MICHIGAN 

Senator STABENOW. Thank you, Mr. Chairman. It is wonderful to 

be back before you. A couple of weeks ago, I had the opportunity 

on a matter to testify in front of you and I want to thank you very 

much for this hearing. I thank Senator Thomas for his leadership, 

and I want to particularly thank my colleague from Michigan, Senator Levin, for his leadership on the Department of Defense provisions that are now in the law and for his ongoing leadership on 

this issue. 

I have been involved in this issue for some time. When I was in 

the Michigan legislature, I chaired the Small Business Committee 

and this was a concern I won’t tell you how many years ago as we 

6

worked through various issues with prison industries and other 

government services. 

Coming to the House of Representatives, I was pleased to be a 

cosponsor of Congressman Pete Hoekstra’s bill. I am very pleased 

to see that has now passed the House and we are looking forward 

to, I think, the ability to bring this bill before the Senate, and 

hopefully with your support and a strong bipartisan group, we can 

finally get this done, because it has been a long time in coming for 

many people who are concerned and affected by this issue. 

I am pleased to be a cosponsor of S. 346, and more importantly, 

I do come representing people in Michigan, businesses in Michigan 

who are being hurt by the current anti-competitive laws that prevent Michigan businesses from competing against the monopoly 

called the Federal Prison Industries, Incorporated. 

Right now, there is an entity with over $500 million in annual 

revenues which does not pay local, State, or Federal taxes. It is not 

required to abide by Federal or State workplace rules, as Senator 

Thomas indicated, and pays employees between 23 cents an hour 

and $1.15 an hour. This is not the Chinese government. It is not 

the Mexican government. This is not India, but a government program established by the U.S. Congress and run by the U.S. Department of Judiciary’s Bureau of Prisons. In other words, our own government is, unfortunately, undermining our Nation’s manufacturing industry at a very critical time. 

As was indicated, in 1934, Congress established Federal Prison 

Industries and placed it under the control of the Department of 

Justice’s Bureau of Prisons. Its purpose is to serve as a means for 

managing, training, and rehabilitating inmates. I support that 

fully. I believe that is a worthy goal and can be achieved in a way 

that does not have the effect that it is now having. 

Under current law, FPI is a mandatory source for the Federal 

Government, making it the sole source for more than a half-a-billion dollars in Federal contract opportunities. Unfortunately, FPI 

also has the power to determine whether its products and delivery 

schedule meet the Federal agencies’ needs rather than the buying 

agency determining whether or not it meets their needs. 

Hundreds of small businesses from Michigan and around the 

country have seen FPI take away jobs from their companies and 

give them to inmates in Federal prisons, even when these businesses could have supplied the government with a better-quality 

product on a better timeline at a lower price, and that is really the 

issue, Mr. Chairman. It is not about whether or not we ought to 

be training or providing opportunities for people within the walls 

of our prisons. But when, in fact, businesses can supply a product 

with better quality, better timeline, lower price, we believe they 

should have the right to compete and that, in fact, taxpayers would 

benefit strongly, as well as our communities, from this. 

In 2002, FPI’s business in two industries that are critical to 

Michigan’s economic health, automotive components and furniture, 

grew by 216 percent for automotive components and 24 percent in 

furniture. Furniture manufacturers in West Michigan are in the 

midst of the worst economic recession in history. Literally every 

day, Senator Levin and I open the paper and see headlines of busiVerDate 0ct 09 2002 09:10 Dec 07, 2004 Jkt 094488 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\DOCS\94488.TXT SAFFAIRS PsN: PHOGAN
7

nesses that are closing, of layoffs that are happening in West 

Michigan. 

For example, in January, Steelcase, a West Michigan furniture 

manufacturer, announced it was cutting 77 of its skilled trades 

workers, which are some of the most highly skilled and highly paid 

jobs in the factory. The company extended the layoff warning for 

60 days for another 360 employees. Over the last 3 years, the office 

furniture manufacturing industry has laid off about 30,000 people. 

The inability of Michigan businesses to fairly compete with prison industries exacerbates an already difficult economic situation. 

According to February 2004 figures from the Bureau of Labor 

Statistics, Michigan’s unemployment rate is 6.6 percent, a full percentage point above the national average. And last year, Michigan 

lost more jobs than any other State, 78,800 jobs lost in just 1 year. 

We also had the largest unemployment increase of any State last 

year. In 2003, Michigan’s unemployment went up one percent, the 

highest increase of any State, and we have lost over 175,000 manufacturing jobs since 2001, which is 19 percent of our manufacturing 

base. 

This issue, and frankly, Michigan is at the heart of America’s 

manufacturing jobs crisis, and this bill can help make a difference. 

Mr. Chairman, I want to indicate again that I certainly am not 

opposed to the 1934 law that created Federal Prison Industries. It 

is important that prisoners should have work opportunities that 

build their job skills and enable them to make a successful return 

to society once they are released. However, it is only fair that our 

small business owners and manufacturers be able to compete for 

these Federal contracts if they can offer competitive products and 

services. Our manufacturers are not asking for an advantage. They 

are not asking to exclude FPI from competing. All they want is the 

opportunity to compete fairly and on an equal footing for these contracts. 

As I indicated before, because of Senator Levin’s leadership, the 

private sector can now compete for Federal defense contracts. An 

amendment that was indicated before to the defense authorization 

bill ended the monopoly on that issue. 

At the minimum, it is time to give the private sector access to 

the playing field and let them compete for Federal contracts. To do 

so, I am very pleased to be a cosponsor of the bill in front of you, 

along with colleagues Senators Thomas, Levin, Grassley, Chambliss, and Shelby. The bill will enable Michigan businesses and the 

rest of America to have an opportunity to compete for contracts 

with their government. 

Senator Thomas also spoke to other provisions in the bill that I 

will not go into, except to indicate that by holding the hearing, Mr. 

Chairman, and by giving us an opportunity to be here today, we 

are very grateful to have the opportunity to speak about this issue 

and what has been happening. Eliminating FPI’s monopoly will 

make businesses eligible for more than a half-a-billion dollars in 

business opportunities that translates into critical jobs for our communities, and this is a much needed shot in the arm for many 

Michigan businesses as well as businesses across the country. 

Thank you. 

Senator FITZGERALD. Thank you, Senator Stabenow. 

8

I am advised that we only have a few minutes before our first 

vote closes out, so we all have to go to the floor. I am wondering 

if I could ask one real quick question, and normally you don’t ask 

Senators questions, but the first thing that comes to my mind is 

your bill would allow private companies to compete with the Federal Prison Industries, where they are now the sole source on all 

these Federal contracts. How could any private business possibly 

compete with the FPI if they are paying 25 cents or $1.25 an hour 

or whatever and they pay no taxes and they don’t have to comply 

with all the regulations that a private company does? So how could 

they effectively compete? 

Senator LEVIN. That is the question every single business owner 

asks. They say the idea that we are precluded as a business from 

competing is absurd. It is difficult enough to compete against 25 or 

50 cents an hour labor. If they can be so efficient that they can outbid prison industry, for heaven’s sake, how can we not allow them 

to bid? That is what this is all about. But they ask exactly the 

same question that you do and they throw up their hands at us 

and they say, my heavens. It is difficult enough to bid against 50 

cents an hour labor. To say that we are not even allowed to bid just 

throws sand in our face. 

Senator FITZGERALD. With that, I am advised we only have 2 

minutes, so we had all better go. We will reconvene this hearing 

after the votes. Thank you both very much. 

[Recess.] 

Senator FITZGERALD. I would like to reconvene this hearing, and 

at the outset, I would like to note that our Democratic Ranking 

Member, Senator Akaka, very much wanted to be here but due to 

an unavoidable scheduling conflict, he is not able to attend today’s 

hearing. 

Therefore, I would now like to recognize my colleague, Senator 

Levin, for his opening statement. 

OPENING STATEMENT OF SENATOR LEVIN 

Senator LEVIN. Thank you very much, Mr. Chairman, and again, 

let me thank you for scheduling this hearing. We are very much 

indebted to you for doing so. You have an awful lot on your plate 

and your willingness to take on the hearing in this matter is very 

much appreciated. 

As has been indicated, I, along with Senator Thomas, Senator 

Stabenow, and a number of other colleagues, introduced a bill 

which is really based on a straightforward premise, which is that 

private businesses ought to be allowed to bid for business with 

their government. It is that simple. 

This is not a situation where we have business people saying, 

how in heaven’s name can I compete with 50 cents or a dollar an 

hour labor? This is a situation where business is saying, we can 

compete, for whatever reasons there are, we can compete if we are 

allowed to compete. But when FPI is given the authority to unilaterally and arbitrarily set aside items that cannot be competed, then 

we have a situation which is totally unacceptable to those who are 

trying to be productive in the private sector. 

This is where businesses just simply say, let us compete. If we 

can provide something more cheaply or a better product at the 

9

same price, we surely ought to be allowed to offer our government 

our products. This is our taxpayer dollars. These are our jobs. 

There are all kinds of reasons why we want people in prison to 

work, and I know that personally from my own experience. As I indicated to our Chairman, I represented indigents full time who 

were in prison for many years as an appellate defender in Michigan, and my father was on the Prison Commission. So I understand personally, up close and personal, how important it is to 

have prisoners work. 

But there is no way in good conscience that we can tell people 

in the private sector who are in business trying to make ends meet 

that that interest comes ahead of their being allowed to compete, 

to offer their government a price and a product. We can’t look a 

business person in the eye and say that, even though there is value 

obviously in having people in prison work. We can’t deny the opportunity to the private sector to offer a product to their government. 

It is their taxes which are paying for these items. 

So we made some progress on this matter, Mr. Chairman, as has 

been indicated. We had a vote on the Senate floor in the defense 

bill. It was 74 to 24. It was a hotly debated issue. This is not one 

of the many amendments that we were able to work out and perhaps get added in a manager’s amendment or what have you. This 

was a hotly debated issue. This was an amendment on the defense 

authorization bill, which, if I remember, Senator Phil Gramm tried 

to strike and there was about a three-to-one vote in the Senate to 

eliminate the Federal Prison Industries monopoly, this unilateral 

ability to set aside items so that nobody can bid on them in the 

area of defense purchasing. 

It has been in effect now for a couple of years. FPI has gained 

some business and lost some business during this year. But at least 

people have been able to compete. The sales of the FPI to the Department of Defense have remained relatively constant. There have 

been some gains and some losses relative to Defense Department 

items. In some areas, the private sector has gained significantly 

when they have been allowed to bid, and in other areas, the prison 

industries have gained. 

So the amount of defense business has been roughly the same, 

but it sure is different from the drastic decline which was predicted 

when we introduced this amendment. I mean, we had people coming before us that said we are going to put prisons out of business 

in terms of getting jobs to inmates and that has not happened. 

So we also, in the House of Representatives, Mr. Chairman, a bill 

was passed which would make this reform applicable governmentwide, and to do that on a permanent basis. That won in the House 

of Representatives by a vote of 350 to 65. 

So the ball is now in our court to try to address the issue of 

whether or not there should be a governmentwide application of 

this very fundamental principle, which is that people in private 

business ought to have an opportunity to bid when it comes to offering services and products to their own government. It really is 

that direct and that simple an issue. 

I want to just thank you again, Mr. Chairman, for chairing these 

hearings. 

Senator FITZGERALD. Thank you, Senator. 

10

I have invited Senator Thomas to sit up here on the dais and join 

in the questioning with us. Thank you, Senator Thomas, for joining 

us. 

I would now like to introduce our second panel, and they are all 

seated. We appreciate your being here. 

Our first witness on this panel is Harley G. Lappin, who has 

served as the Director of the Federal Bureau of Prisons since April 

2003. Mr. Lappin has had a distinguished career with the Federal 

Bureau of Prisons and he is the seventh Director of the Bureau 

since its establishment in 1930. As Director, Mr. Lappin oversees 

the operations of 104 Federal institutions, six regional offices, two 

staff training centers, and 28 community corrections offices located 

throughout the United States. 

Prior to serving as Director, Mr. Lappin served as Warden at the 

Federal Correctional Institution at Butner, North Carolina; as 

Warden at the U.S. Penitentiary in Terra Haute, Indiana; and as 

Regional Director of the Mid-Atlantic Region for the Bureau of 

Prisons. 

Our second witness is Jack R. Williams, who serves as the Assistant Regional Administrator for the General Services Administration’s Mid-Atlantic and National Capital Regions, headquartered 

in Philadelphia. In this role, Mr. Williams oversees the Federal 

Supply Service in GSA’s Region 3. His management responsibilities 

include the National Furniture Center, which negotiates and purchases all furniture and furnishings for the Federal Government’s 

facilities throughout the country and around the world. 

In 2001, under Mr. Williams’ leadership, the National Furniture 

Center was selected as the most innovative GSA acquisition center 

by the Coalition for Government Procurement for making significant strides in the promotion and utilization of the GSA Multiple 

Award Schedules program. 

Our third witness is John M. Palatiello, who is representing the 

U.S. Chamber of Commerce. Mr. Palatiello is President of MAPPS, 

the Management Association for Private Photogrammetric Surveys, 

a national association of firms in the mapping, spatial data, and 

geographic information systems field. Mr. Palatiello is a member of 

the U.S. Chamber of Commerce and has been serving as the Chair 

of the Chamber’s Privatization and Procurement Council. The U.S. 

Chamber is the fourth largest federation of business organizations, 

representing more than three million businesses and professional 

organizations of every size, sector, and region of the country. 

Fourth, we have Kurt Weiss, who is here today representing the 

Independent Office Products and Furniture Dealers Association. 

His organization is the national trade association for independent 

dealers of office products and office furniture. The association is 

composed of two membership divisions: The National Office Products Alliances, representing office product dealers and their trading 

partners, and the Office Furniture Dealers Alliance, representing 

office furniture dealers and their trading partners. Mr. Weiss is 

also Senior Vice President and General Manager of U.S. Business 

Interiors, which is a dealer for Steelcase, the world’s leading designer and manufacturer of office furnishings. 

Our fifth witness is Andrew S. Linder, who is a member of the 

Correctional Vendors Association. The association represents busiVerDate 0ct 09 2002 09:10 Dec 07, 2004 Jkt 094488 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 C:\DOCS\94488.TXT SAFFAIRS PsN: PHOGAN
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1The prepared statement of Mr. Lappin appears in the Appendix on page 47. 

nesses that currently hold contracts with Federal Prison Industries 

and are concerned about the impact of S. 346 on their companies’ 

sales and jobs. Mr. Linder is the President and small business 

owner of Power Connector, Inc., an electronics business based in 

Long Island, New York, that he has operated since he started the 

company in April 1987. Mr. Linder’s company manufactures products, primarily in the area of electronic connectors and cable hardware, for Federal Prison Industries, the Department of Defense, 

and the Nation’s primary defense contractors. 

Our sixth and final witness on the panel is Philip W. Glover, the 

President of the Council of Prison Locals for the American Federation of Government Employees, AFGE. Mr. Glover has served as a 

correctional officer since 1990 at the Federal Correctional Institution in Loretto, Pennsylvania. Mr. Glover was elected President of 

Local 3951 at FCI Loretto in 1992, Northeast Regional Vice President in 1994, and President of the Council in 1997. He has extensive firsthand knowledge of how prison industries decrease recidivism and help corrections officers maintain order within the prisons. 

Again, I would like to thank our witnesses for being here today 

to testify. In the interest of time, your full statements will be 

included in the record and we ask that you limit your opening remarks to 5 minutes. Since we have such a large panel, we will adhere to the 5-minute rule to ensure there is sufficient time for 

questions, so if you could watch the light on the table, and when 

it is red, you should stop. You should begin thinking about stopping 

when you see the yellow, too. But you are ready to go when it turns 

green. 

Mr. Lappin, thank you for being here. 

TESTIMONY OF HARLEY G. LAPPIN,1 DIRECTOR, FEDERAL 

BUREAU OF PRISONS 

Mr. LAPPIN. Good afternoon, Chairman Fitzgerald and Members 

of the Subcommittee. I appreciate the opportunity to be before you 

today. As Director of the Bureau of Prisons, I also serve as the 

Chief Executive Officer of the Federal Prison Industries program. 

I have served in the Bureau for 19 years in a variety of capacities, 

including Regional Director and Warden at two institutions. Although I am not involved in the day-to-day operations of the FPI 

program, I have firsthand knowledge of the impact this program 

has in reducing crime and in making prisons safer to manage and 

less expensive to operate. 

Today, there are more than 176,000 Federal inmates. The Federal inmate population has increased more than 600 percent since 

1980, and is projected to increase another 22 percent, to more than 

215,000 inmates, in the next 6 years. 

The Bureau of Prisons is sensitive to the concerns of Members 

of Congress, as well as business and labor representatives, that any 

negative impact of the FPI program on the private sector should 

be minimized. Consistent with the administration’s position, any 

reform should simultaneously provide Federal agencies greater procurement opportunities, increase access by private sector compaVerDate 0ct 09 2002 09:10 Dec 07, 2004 Jkt 094488 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 C:\DOCS\94488.TXT SAFFAIRS PsN: PHOGAN
12

nies to government purchases, and ensure that the attorney general maintains adequate inmate work opportunities in Federal prisons. 

The Bureau has no control over the number of inmates who come 

to prison, their length of stay, or the backgrounds they bring with 

them. We do, however, have some influence over what inmates 

learn in custody and the impact they will have on public safety 

upon their release. 

The Federal Prison Industries program plays an integral role in 

reducing recidivism. Inmates who work in the program are 24 percent less likely to commit crimes and 14 percent more likely to be 

employed for as long as 12 years after release, as compared to a 

similar group of inmates who did not have the FPI program experience. 

The impact of the FPI program is particularly significant because 

FPI focuses on employing our more serious offenders. In fact, 76 

percent of FPI inmate workers have been convicted of drug trafficking, weapons, and violent offenses. These inmates are at higher 

risk of recidivism because they typically have extensive and violent 

criminal histories, poor educational accomplishments, and limited 

work experiences. 

FPI is a crime-reducing program that is financially self-sustaining and receives no direct appropriated funds for its operations. 

Although inmates who work in the FPI program produce products 

and perform services, the real output of the FPI program is inmates who are more likely to return to society as law-abiding taxpayers because of the improved job skills training and work experience. 

The FPI program earnestly strives to support the private sector. 

Last year, the FPI program spent nearly half-a-billion dollars on 

purchasing raw materials, supplies, services, and equipment from 

the private sector vendors. This amount represents 75 percent of 

the entire revenue earned by the Federal Prison Industries program, and more than 53 percent of this money went to small businesses. 

Efforts to reform the FPI program in a balanced manner are already underway. We have already reduced the FPI program’s reliance on mandatory source in our traditional product lines. The 

Congress has already enacted FPI legislation, and the FPI Board 

of Directors recently adopted several resolutions, all intended to ensure the FPI program does not place an undue burden on private 

industry. 

The collective effect of these and other factors has been a decline 

in the FPI program’s sales and earnings, particularly in office furniture. As a result, the FPI program has had to close or downsize 

13 factories and reduce inmate program participation by approximately 2,000 inmates from a year ago. 

If FPI is not able to maintain its viability as a correctional program or is not able to maintain adequate levels of inmate enrollment, there will be a negative ripple effect. Recidivism will likely 

increase. Small businesses that currently depend on the FPI program for their business success will be negatively affected. Monies 

to victims of crime will decrease. Inmate idleness will increase. And 

13

1The prepared statement of Mr. Williams appears in the Appendix on page 62. 

we will need to develop alternative programs to keep inmates productively occupied. 

Like the Federal Prison Industries program, our education and 

vocational training programs have a positive impact on recidivism 

and an inmate’s ability to find and maintain employment upon release. However, they are not a substitute for the extended real 

work experiences provided by the FPI program. Moreover, these 

programs are designed to run for a limited time—vocational training is typically 18 to 24 months in duration, and the average sentence length for inmates currently in the Bureau of Prisons is over 

9 years. 

Chairman Fitzgerald, I recognize that this is a complex public 

policy issue with no easy answers and I look forward to working 

with everyone involved to achieve a practical, balanced, cost-effective reform of the Federal Prison Industries program. 

This concludes my formal remarks and I look forward to any 

questions from the Subcommittee. 

Senator FITZGERALD. Mr. Lappin, thank you very much. Mr. Williams. 

TESTIMONY OF JACK R. WILLIAMS, JR.,1 ASSISTANT REGIONAL 

ADMINISTRATOR, FEDERAL SUPPLY SERVICE, REGION 3, 

U.S. GENERAL SERVICES ADMINISTRATION 

Mr. WILLIAMS. Chairman Fitzgerald, Members of the Subcommittee, I appreciate the opportunity to appear before you today 

on behalf of the U.S. General Services Administration, GSA, to discuss your ideas to establish a governmentwide policy requiring 

competition in certain procurements from Federal Prison Industries. 

GSA supports the Subcommittee’s interest in requiring competition to the maximum extent practicable whenever taxpayer dollars 

are being spent to ensure positive results in government acquisition. Two fundamental principles need to be satisfied in any legislative or administrative reforms. Agencies should have the flexibility through competition to purchase quality goods and services 

at fair and reasonable prices with the expectation of timely performance. At the same time, FPI is an important national program 

and the attorney general must be able to maintain adequate work 

opportunities at Federal prisons to counter the potentially dangerous effects of inmate idleness and prepare prisoners for reintegration into society. 

Finding a results-oriented approach to meeting FPI’s national objectives, providing work opportunities for inmates, while obtaining 

additional competition and transparency in the government procurement process will result in the taxpayer getting better value 

for their tax dollars and giving Federal agency customers a greater 

range of choices. 

As this Subcommittee knows, the President has called upon the 

entire Federal Government to improve performance by focusing on 

results. Among other things, we have been charged with making 

our agencies citizen-centered, market-based, and results driven. AcVerDate 0ct 09 2002 09:10 Dec 07, 2004 Jkt 094488 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 C:\DOCS\94488.TXT SAFFAIRS PsN: PHOGAN
14

countability requires that we spend the taxpayers’ dollars wisely 

and provide greater insight into how their money is being spent. 

S. 346 and other bills are being considered by the Senate with 

regard to the reform of FPI. The administration has taken a neutral position on all bills. Therefore, I will not be commenting on the 

specifics of S. 346. 

A number of previous actions by Congress and this administration are promoting competition and helping create a level playing 

field with the private sector. GSA, NASA, and the Department of 

Defense revised the Federal Acquisition Regulations four times 

over the past year to implement results-oriented reforms. 

Namely, in May 2003, agencies began evaluating FPI’s contract 

performance, just as they would the performance of any other private sector firm. This is a results-driven solution focused on actual 

contract performance. While this did not change FPI’s mandatory 

preference status, it was an important first step in helping FPI better monitor and improve its performance. Results-oriented feedback 

has proven to be a critical tool for the private sector over the last 

two decades in terms of improving both products and services and 

its bottom line, and it is now time to be employed by FPI as they 

move forward towards being competitive in the Federal marketplace. 

Second, the threshold for mandatory use of FPI was raised from 

$25 to $2,500 in May 2003. This change by the FPI Board of Directors allows agencies to go directly to the private sector or FPI for 

any purchase under $2,500. 

Third, Section 811 of the National Defense Authorization Act for 

Fiscal Year 2002 was implemented by DOD, requiring that before 

purchasing a product from FPI, DOD must determine whether the 

FPI product is comparable in price, quality, and timeliness of delivery to products available from the private sector. 

Finally, this same requirement was extended to DOD and nonDefense Department activities alike in fiscal year 2004 based on 

Section 637(f) of the Consolidated Appropriations Act of 2004. This 

statutory provision prohibits all Federal agencies from using their 

appropriated funds to purchase from FPI unless the agency making 

the purchase first determines that the FPI’s service or product provides the best value to the buying agency pursuant to FAR procedures. If FPI’s product is found to be comparable with private sector offerings that best meet the agency’s needs in terms of price, 

quality, and timeliness of delivery, agencies should buy from FPI. 

If not, agencies are free to use competitive procedures, including 

FPI, in the competition. 

GSA supports reform of FPI and looks forward to working with 

this Subcommittee in making sure our procurement system is 

based on competitive procedures that are focused on achieving results. 

This concludes my prepared remarks. I am happy to answer any 

questions you may have. 

Senator FITZGERALD. Thank you very much. Mr. Palatiello. 

15

1The prepared statement of Mr. Palatiello appears in the Appendix on page 64. 

TESTIMONY OF JOHN M. PALATIELLO,1 PRESIDENT, MANAGEMENT ASSOCIATION FOR PRIVATE PHOTOGRAMMETRIC 

SURVEYORS, ON BEHALF OF THE U.S. CHAMBER OF COMMERCE 

Mr. PALATIELLO. Thank you, Mr. Chairman. I want to commend 

you and the Subcommittee for holding this hearing and we would 

like to thank Senator Levin and Senator Thomas for their leadership on the very important issue of injecting more competition into 

Federal procurement and reforming the practices of FPI. 

The Chamber is the world’s largest business federation, representing more than three million businesses and organizations. I 

might add that more than 95 percent of the Chamber’s members 

are small businesses. 

The Senate Governmental Affairs Committee has jurisdiction 

over the entire Federal procurement process, and I would like to 

put the legislation before us today in the context of the Committee’s longstanding interest in competition in Federal procurement. 

Reform of FPI will ensure fair and full competition to ensure that 

the American taxpayer gets the best value for the goods and services that its government buys while removing barriers that prevent 

businesses, particularly small business, from competing for government contracts. FPI reform is also in line with this Committee’s 

responsibility to assure effective and efficient Federal financial 

management. 

Over the years, this Committee has had a longstanding history 

of advancing pro-competition, pro-reform procurement legislation, 

such as the Competition in Contracting Act, the Federal Acquisition Reform Act, the Federal Acquisition Streamlining Act, and the 

Federal Activities Inventory Reform Act. All of these had one fundamental principle, and that was that competition is good and competition brings better value to the taxpayer. 

We believe S. 346 is the next logical step in that series of reforms 

that this Committee has promoted. S. 346 would allow the private 

sector to compete on a fair and level playing field with FPI for Federal contracts based on price, quality, and timeliness of delivery. 

The bill also prohibits inmate access to personal or financial information, critical infrastructure information, or classified information, as well as prohibiting FPI from forcing businesses to use FPI 

as a mandatory subcontractor. In many ways, S. 346 simply codifies on a governmentwide basis the reforms that have been mentioned earlier that have been enacted in the defense authorization 

and omnibus appropriations bills. 

The system that we have today, that we have had since 1934, I 

describe as putting FPI in the place of being judge, jury, and prosecutor. It is FPI that gets to set the price they charge for their 

products. It is FPI that determines whether those products or services meet the agency’s needs. It is FPI that decides whether their 

delivery schedule meets the agency’s needs. 

FPI has also expanded its products and services without any regard to the impact on the private sector, so they have basic carte 

blanche authority to enter wherever they wish regardless of the 

consequence on small business and our employees. Even more 

16

1The prepared statement of Mr. Weiss, with attachments, appears in the Appendix on page 

71. 

alarming is their effort to, and their desire to, sell inmate-produced 

services in the commercial market. 

Mr. Chairman, you asked a very good question at the opening of 

this hearing and I would like to take some of my remaining time 

to mention—what was mentioned was 50 cents, or it is actually 23 

cents an hour to $1.15 an hour. I would like to mention some of 

the other advantages that Federal Prison Industries enjoys over 

the private sector. 

It does not have to pay Social Security, the employer’s share. It 

does not have to pay unemployment compensation or workers’ compensation insurance. It is exempt from all Federal, State, and local 

income taxes, gross receipts taxes, excise taxes, and sales taxes. It 

is not subject to Federal Trade Commission oversight, Securities 

and Exchange Commission oversight, Department of Justice antitrust oversight. 

It does not pay fair market value, or in some cases pay at all for 

utilities. It has a special statutory allowance of a line of credit from 

the U.S. Treasury for up to, I believe it is $20 million at zero percent interest. I don’t know of very many private small businesses 

that have that right. 

It is exempt from all standards, inspections, and fines of various 

State or local or Federal enforcement agencies, such as OSHA. It 

does not have to comply with local zoning. It enjoys sovereign immunity, so it has to carry no insurance. It carries no health insurance costs, and family and medical leave. And these are government contracts, so it is not just minimum wage; the private sector 

has to pay the prevailing wage rate. 

All of those are advantages that FPI has over the private sector, 

which we think would be particularly onerous if they entered the 

commercial market. 

Thank you, Mr. Chairman. 

Senator FITZGERALD. Thank you very much, Mr. Palatiello. 

Senator Pryor has joined us and I would like to welcome him, if 

he wishes, to make some opening remarks at this time before we 

proceed to the second half of this second panel. 

Senator PRYOR. No, thank you, Mr. Chairman. I appreciate your 

leadership on this issue. 

Senator FITZGERALD. Well, thank you. 

Mr. Weiss, would you like to go ahead at this time? 

TESTIMONY OF KURT WEISS,1 SENIOR VICE PRESIDENT AND 

GENERAL MANAGER, U.S. BUSINESS INTERIORS, ON BEHALF 

OF THE OFFICE FURNITURE DEALERS ALLIANCE 

Mr. WEISS. Mr. Chairman and Members of the Subcommittee, I 

appreciate the opportunity to testify before your Subcommittee 

today to discuss S. 346, a bill which amends the Office of Federal 

Procurement Policy Act to establish a governmentwide policy requiring competition in certain procurements from Federal Prison 

Industries. 

My name is Kurt Weiss and I am the Senior Vice President and 

General Manager of U.S. Business Interiors, a small business 

17

which employs 74 people. USBI was incorporated in 1990 by our 

owner, William Rice, and has always had an established culture of 

a family-owned business. 

I want to share with you my story as it relates to Federal Prison 

Industries. FPI, as you may know, has had up until recently a 

mandatory source advantage in the office furniture industry. This 

mandatory source status has had a major impact on small business, both locally and nationally. USBI has personally felt and seen 

the effects of FPI’s mandatory source status. 

U.S. Business Interiors was involved in an RFQ for the Federal 

Aviation Administration building here in Washington, DC. The 

project was a $5 million solicitation, involved every major manufacturer in the furniture industry, including Steelcase, Herman Miller, 

Knoll, Hayworth, and Techniat. FPI was not required to bid alongside the other commercial industry companies. 

USBI presented our response to the FAA meeting all requirements of all areas of the bid, forming three teaming arrangements 

to make sure we could be a turnkey provider to the FAA. In responding to the RFQ, every company had to present a corporate introduction, project team with resumes and experience, references, 

environmental impact, product literature, teaming letters, if needed, warranty information, work station typicals, work station specification, work station options, finished samples, pricing, and an 

acknowledgement of all RFQ terms, including acceptance of a 

liquidated damages clause. 

As you can imagine, this is a costly and time consuming effort 

and draws numerous resources from our day-to-day operations. 

Over 29 options were specified, including 19 work station private 

office typicals. In addition, 16 optional specifications were required 

for specialty areas. USBI spent over 120 man hours in bid preparation, including design, administration, value engineering, setting 

up vendor partners, and researching the competition. This resource 

draw cost USBI about $4,800. This is a lot of money for a small 

business like USBI. 

After evaluation of the competitors’ bids by FAA and GSA, USBI 

was assessed the best value bid. Within days of notifying FPI of the 

intent to award USBI the FAA project, it was communicated to 

USBI that the FPI waiver had not been granted. USBI was notified 

they must sign a letter to release of our best value bid to FPI. On 

May 6, 2003, FPI sent a response to GSA and FAA notifying that 

a waiver would not be granted. A copy of the FPI’s corresponding 

bid was sent to GSA and FAA. Upon review of this bid, it was determined that FPI copied USBI’s best value bid and demanded 

FAA award the FOB 10(b) project to them, and I have copies of 

both ours and UNICOR’s response here. 

The time, money, resources, confidential pricing, and discounting 

of this project was not only copied, but was given to commercial industry competitors of USBI. As a small businessman, I do not have 

a problem with the open and fair competition. What I have a problem with is the fact that FPI is not competing with anyone, but 

instead guaranteed by statute all the government business it 

wants. What FPI has been allowed to do in the FAA case is unconscionable. If USBI did this in the private market, we would have 

18

1The prepared statement of Mr. Linder appears in the Appendix on page 87. 

committed antitrust violations. When FPI does this in government, 

they consider it OK. 

The mission of FPI when it was created in 1934 was to provide 

inmates with real skills that they could use once released back into 

society. This is nice in principle, but in reality, FPI is not living 

up to its mission. The FAA project is a clear example of how FPI 

has lost its way. 

Since I am almost out of time, I would like to thank you for the 

opportunity to speak before you and answer any questions you 

might have. 

Senator FITZGERALD. Thank you. Your full statement will be entered into the record. Mr. Linder. 

TESTIMONY OF ANDREW S. LINDER,1 PRESIDENT, POWER 

CONNECTOR, INC., ON BEHALF OF THE CORRECTIONAL VENDORS ASSOCIATION 

Mr. LINDER. Mr. Chairman, Members of the Subcommittee, I am 

Andy Linder. I am President and owner of Power Connector, a 

small electronics firm based on Long Island, New York. 

Power Connector went into business on April 1, 1987, 17 years 

ago last week. When we first put the key in the door, there were 

just two of us, just two people and a lot of hope. Now we have 76 

employees and we have built what I think is a solid reputation, 

producing high-quality, reliable electronic connectors and cable 

hardware for the U.S. military. Our products are relied upon every 

day by American soldiers all over the globe, including our men and 

women in Afghanistan and Iraq. We even made some of the parts 

that the FPI built for the transmitter that saved the life of Air 

Force Captain Scott O’Grady after his plane was shot down in Bosnia in the summer of 1995. 

The story of Power Connector is very much the story of Federal 

Prison Industries working with small business. In that respect, it 

is a story that could be told by any one of thousands of other business owners, small ones in other States. 

Small businesses have contracts with FPI worth close to half-abillion dollars in gross revenues per year. At Power Connector, we 

have capitalized and hired employees on the strength of those contracts. Our employees and their families depend upon those contracts to survive. In fact, for every dollar purchased by Federal 

Prison Industries, 74 cents goes directly back into small businesses 

in the private sector just like ours. 

Senators, Power Connector would never be in business today 

without FPI and its small business initiatives. As a matter of fact, 

we may not be here tomorrow if you pass S. 346. The reason is that 

FPI recognizes the gains to be made when dealing with small businesses like ours and they make doing it a priority. They broke 

down their large comprehensive contracts into smaller segments 

and they have developed a unique partnership with small businesses. 

Unlike other Federal agencies, Federal Prison Industries gave us 

the one thing that we needed the most, and that was a chance to 

be competitive in the defense industry. They were hard taskVerDate 0ct 09 2002 09:10 Dec 07, 2004 Jkt 094488 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 C:\DOCS\94488.TXT SAFFAIRS PsN: PHOGAN
19

1The prepared statement of Mr. Glover, with attachments, appears in the Appendix on page 

94. 

masters when it came to quality, but we delivered on time and on 

budget. Our 76 employees aren’t the only ones involved. In addition 

to our own success, the subcontracts that we have outsourced over 

the past 17 years to over 45 other small businesses have created 

jobs for over 140 full-time employees outside of our own doors. 

But Federal Prison Industries is not just about creating private 

sector jobs. One day in June 2001, I received a letter from a Federal inmate from Fairton, New Jersey. He told me that he was 

about to be released about a month later in July, after having 

spent the last 18 years of his life in State and Federal custody. He 

attached his resume and he asked me for a job. 

Two days after he was released from that prison, I had him come 

to my factory, where he was interviewed by myself and three of my 

managers on a Friday. Well, he made the grade and he started 

working for us the following Monday, and he has been one of my 

most relied-upon employees and productive employees ever since 

that day. He has never missed a day. He is never late. And he has 

integrated himself seamlessly into our organization and into our 

lives. He has performed beyond all expectations. 

Today, this man who spent 18 years behind bars supervises three 

other employees in one of the most critical areas of our business. 

He will tell you what turned his life around, the day he found religion and the day he and Federal Prison Industries found each 

other. Last year, I was the best man at his wedding, and I was 

even able to help him move this past Saturday into his own home. 

When I look at him, I see why I believe in FPI. I am proud to 

call him my friend and I am even prouder to introduce him to the 

Senate. Gentlemen, please welcome my product manager, Demitrio 

Ricciardone. 

[Applause.] 

Mr. Chairman, Members of the Subcommittee, neither I nor Dino 

would be here today if it wasn’t for Federal Prison Industries. That 

is why I so strongly oppose S. 346. It would hurt small business. 

It would cost jobs. It will hurt inmates just like Dino here. And it 

will jeopardize the safety and the staff of our penal institutions. 

Thank you for your time and your consideration. 

Senator FITZGERALD. Thank you very much. Mr. Glover. 

TESTIMONY OF PHILIP W. GLOVER,1 PRESIDENT, COUNCIL OF 

PRISON LOCALS, AMERICAN FEDERATION OF GOVERNMENT 

EMPLOYEES, AFL–CIO 

Mr. GLOVER. Chairman Fitzgerald and Members of the Subcommittee, my name is Phil Glover and I am the elected President 

of the Council of Prison Locals, American Federation of Government Employees. We represent 26,000 Federal employees working 

in the Nation’s prison system. We have 100 local unions that represent correctional officers, caseworkers, food service workers, and 

Federal Prison Industries employees, and also various others. 

I would like to thank you for holding this oversight hearing today 

on S. 346, a bill that would establish a governmentwide policy reVerDate 0ct 09 2002 09:10 Dec 07, 2004 Jkt 094488 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 C:\DOCS\94488.TXT SAFFAIRS PsN: PHOGAN
20

quiring competition in Federal agency procurement from FPI. It is 

an important topic for the safety and security of Federal prisons. 

The proposed legislation would have real consequences for the 

men and women who work in Federal prisons across the country. 

In my written testimony, I have outlined some of the history of FPI 

when it was created. I also talk about the actual dollar amounts 

that FPI sells in the Federal market in furniture. 

I also want to add something that has come up several times. We 

are a unionized law enforcement workforce. Our members work in 

FPI. They do not work in non-OSHA standard factories. We would 

not allow it as a union. We wouldn’t allow them to work in there 

under any conditions that weren’t acceptable to the private sector. 

FPI receives about a half of one percent of the Federal procurement dollar. This is small compared to the Federal market and the 

larger private market. Furniture sales have dropped dramatically 

since the passage of Sections 811 and 819 in the Defense Authorization Act. We believe we know what will happen if this bill 

should pass in its present form. We have seen 2,000 inmates go 

idle and 100 staff positions eliminated so far. This should concern 

all Members of the Subcommittee. 

If you change the contracting rules permanently, then corrections 

policy must be changed, as well. It is a broader issue than just 

eliminating mandatory source and changing what products and 

services we can compete in. 

I would also like to point out three memorandums that I placed 

in our statement. One of those memorandums is from a staff member in Memphis, Tennessee. It describes a day of a riot in 1995 

when the Senate and the House didn’t change the sentencing 

standards for cocaine and powder cocaine, or crack and powder cocaine. I just want to point out one section: 

‘‘Later that afternoon, the same radical group became violent and 

began destroying government property. They also attacked us in 

front of one of the housing units. Moments after attacking us, they 

went to the rear of UNICOR and began breaking open the fire escape door. The inmates on the inside of UNICOR helped fight them 

off and yelled they did not want to participate or destroy UNICOR. 

They turned their attention to other areas of the institution and 

continued their rampage.’’

The other memos continue on the same theme, that inmates participating in FPI do not participate generally in these types of activities. I can provide more statements, and I would certainly do 

that for the Subcommittee. 

We understand the controversy surrounding FPI, but to eliminate it and replace it with nothing is unacceptable. We will need 

massive growth in correctional staffing. We are already down 11 

percent nationwide in correctional staffing, and more funding for 

additional programs that will have to come from appropriated dollars to the Federal prison system. 

The union requested information from management on FPI contracts with the private sector. I have attached the full list for the 

record, but want to highlight a few. 

In Pennsylvania, we purchased $77.9 million in goods and services in the private sector. In New Jersey, $19.5 million in goods 

and services. In Michigan, we purchased $56.1 million to the priVerDate 0ct 09 2002 09:10 Dec 07, 2004 Jkt 094488 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 C:\DOCS\94488.TXT SAFFAIRS PsN: PHOGAN
21

vate sector in Michigan. Mr. Chairman, in your State, we provide 

$33.2 million to the private sector, in Illinois. What happens to 

these people? Where do these people’s work go? Who replaces 

them? This means that UPS, Roadway, some textile companies in 

North Carolina, and many other companies will probably close 

their doors. 

Inmate wages were brought up. FPI has two workforces. We 

have security needs. It is a much different program than running 

a factory in the private sector. We have to send inmates through 

metal detectors in and out of each of those factories on a daily 

basis. I doubt any company in here has to have staff standing there 

watching that inmates don’t steal stuff from the factory so they can 

stab a staff member back up in the housing unit. 

We also have our staff that are paid out of UNICOR non-appropriated funds. They are not appropriated fund employees. All their 

benefit packages, all of their insurance, all of that comes out of FPI 

sales. So it is not appropriated dollars that are paying for staff in 

the Federal Prison Industries program. It is non-appropriated. 

Therefore, as the program decreases, those staff have to be let go. 

I want to thank you for allowing me to testify and I would answer any questions you may have. 

Senator FITZGERALD. Thank you all very much. 

I want to start with Mr. Lappin. At the outset, I asked, why 

wouldn’t FPI win any bid if private businesses could bid for government procurement contracts? Shouldn’t FPI be able to win the bids, 

because wouldn’t you have lower costs? And if you don’t have lower 

costs, why is it that you don’t have lower costs? 

Mr. LAPPIN. Thank you, sir. I would be pleased to respond to 

your question. A couple of things. One, when you look at those 

rates, one would assume, how could anyone ever compete with 

that? But I think Mr. Glover mentioned a few issues. 

First of all, let us talk about the inmates that work in Federal 

Prison Industries. They come to us with limited literacy skills, few 

vocational skills, and the majority of them have never worked in 

a normal industry or operation. Few of them have worked in a normal situation, so the majority of them lack work skills. There is 

enormous turnover. So there are limitations based on the inmates 

themselves that come to us, and certainly it is our job to improve 

on those skills. 

But I think what is more complicating is the fact that we put the 

majority of these factories in our medium- and high-security facilities, which create enormous inefficiencies, which just by the nature 

of those institutions complicate the ability to run a factory in a location like this. These inmates all have histories of violence, all 

have long, sometimes lengthy sentences, so all of those issues complicate management of tools, equipment, oversight, and control. So 

the normal work day is not a normal work day as you would compare it to a privately-run company. All of these things result in 

huge inefficiencies. 

I think you see this more when you walk in and see this operating in person. I would invite the Members of the Subcommittee 

or their staff to visit a couple of institutions so we could show you 

the challenges we face in running factories in institutions of this 

nature, not only because of the limitations of the inmates, but beVerDate 0ct 09 2002 09:10 Dec 07, 2004 Jkt 094488 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 C:\DOCS\94488.TXT SAFFAIRS PsN: PHOGAN
22

1The information provided by Mr. Lappin appears in the Appendix on page 250. 

cause of limitations just based on the type of security and oversight 

and control we must have over the equipment, the operations, and 

the programs. 

Senator FITZGERALD. So your payroll for the prison workers may 

be very low and you don’t have the Social Security, Medicare, unemployment compensation and workers’ compensation costs for the 

prison workers, but you would have to have another whole set of 

employees from Mr. Glover’s union that would actually watch over 

the workers while they are doing this. Do you also include a cost 

in your overhead for the factory itself? 

Mr. LAPPIN. Absolutely. What I would like to do for the record—

I don’t have it here in writing——

Senator FITZGERALD. Are those factories built with appropriated 

amounts or are they built out of the proceeds of the——

Mr. LAPPIN. The shell of the factory is built with appropriated 

funds. The build out of the factory and all equipment, all utilities, 

all other needs of the program, the industry, are paid for by FPI. 

The other thing I would like to mention is let me provide in writing for the Subcommittee a list of those things that are paid for by 

appropriated funds and a list of those things that are paid for by 

UNICOR so that we have the facts. 

Senator FITZGERALD. That would be helpful. Do you also have financial statements? 

Mr. LAPPIN. Absolutely. 

Senator FITZGERALD. This is a corporation. Do you have audited 

financial statements? 

Mr. LAPPIN. Yes, sir. 

Senator FITZGERALD. Balance sheet, income statement, and so 

forth? 

Mr. LAPPIN. We have to file—we comply with all commercial and 

government accounting standards. We are audited independently 

every year. This audit is conducted or overseen by the Inspector 

General’s office. This past year, this audit was conducted by 

PriceWaterhouse Coopers. It was an unqualified decision this past 

year. We post that on our website. We can provide you a copy in 

person.1

Senator FITZGERALD. Mr. Williams, you do a lot of purchasing for 

the Federal Government at the GSA. You personally—it is not an 

administration position, but you personally sound like you favor 

opening up contracts to bid and doing away with the sole source 

requirement for FPI, is that correct? 

Mr. WILLIAMS. That is correct, Mr. Chairman. 

Senator FITZGERALD. Do you think it would save the taxpayers 

money to do that? 

Mr. WILLIAMS. Absolutely, and the reason I believe that is, GSA 

used to be a mandatory source within the Federal Government. 

When we were a mandatory source, we didn’t listen to our customers in the Federal Government. We didn’t work very cooperatively with our partners in the private sector. And we pretty much 

dictated what you would get, when you would get it, and what the 

product would be. 

23

Senator FITZGERALD. So can Federal agencies now go out and 

just buy furniture at a store without going through you, or buy——

Mr. WILLIAMS. Federal agencies do not have to use GSA sources 

of supply. We have to earn the business and we have to earn the 

business with good prices and good service. 

Senator FITZGERALD. And that forced you to get better? 

Mr. WILLIAMS. We have seen much growth in our financial performance since we were mandatory. Now being non-mandatory, we 

have grown tremendously in the amount of sales to Federal agencies. 

Senator FITZGERALD. Now, what about the issue with services, 

Mr. Lappin? The FPI is now providing services. I understand that 

prison workers are manning call centers——

Mr. LAPPIN. That is correct. 

Senator FITZGERALD [continuing]. That are being used by private 

companies? 

Mr. LAPPIN. Yes. Years ago, in an effort to reduce our reliance 

on mandatory source, as indicated, we certainly are looking for 

ways to reduce the products that fall under mandatory source——

Senator FITZGERALD. In those cases, you are bidding for that 

work, I would imagine, because the private companies that need a 

call center don’t have to follow a statute that requires that they use 

you. I am sure they look around and see where they could get a 

good deal, and you must have won those contracts. 

Mr. LAPPIN. Actually, we are only pursuing work that is currently being done offshore or work that would be going offshore if 

we weren’t competing. So we are not pursuing those types of work 

ventures which would——

Senator FITZGERALD. So the billionaire in India who owns the 

call center over in India is making so much money, he might hire 

a Washington lobbyist to come over here and oppose you in the 

Senate because you are competing with him. [Laughter.] 

So you are only competing against foreign call centers? 

Mr. LAPPIN. In many of the services, we are only pursuing—a 

few months ago, the Federal Prison Industries Board asked that we 

look at opportunities outside of those products that rely on mandatory source, and that is pretty much where our new service area 

is going, and that we only look at those areas of work that is being 

conducted, and performed, offshore. So companies that come to us 

must certify that work that we are competing for, if not for us, 

would be performed offshore. 

Senator FITZGERALD. OK. Senator Levin, would you like to ask 

your questions? 

Senator LEVIN. Just following up on that, that is something 

which I have been pressing for in the area of products for a long 

time, as to why the FPI doesn’t look at products that we import 

and where there are, for instance, only imported products which 

are purchased by the government and then get into that business. 

It is the analogy to what you are doing in services. Why don’t you 

go through that list? 

Mr. LAPPIN. I certainly think that is an area that we could consider. 

24

1The information provided by Mr. Lappin appears in the Appendix on page 250. 

Senator LEVIN. Yes, but I raised that 4 years ago, and 3 years 

ago, and 2 years ago, and I was given the same answer. That is 

an area we could consider. 

Mr. LAPPIN. I think if you look at most of our product areas, you 

are seeing a decline, especially in furniture over the last few years, 

because of the recent legislation that has been passed, because of 

the recent resolutions passed by the Board. We are relying less and 

less on our primary product areas of textile, furniture, and electronics. 

I know if you look at this last year, you are going to see a bit 

of a surge, especially in textile and electronics, but that is solely 

because of the surge of the war and our commitment to support the 

troops. But certainly in furniture, you are seeing much less business in that regard and you are seeing us grow in those other 

areas, and we are looking at some refurbishment of equipment and 

supplies from overseas as well as the Department. 

It takes some time for us to transition, and again, as I have indicated before, we are in favor of reform of FPI. We are including the 

eliminating of mandatory source. We are committed to relying less 

on our traditional products lines of——

Senator LEVIN. Excuse me, what were those words? Including the 

elimination of mandatory source? Were those the words I heard? 

Mr. LAPPIN. That is correct. 

Senator LEVIN. That is what this bill is all about. 

Mr. LAPPIN. That is correct, sir. 

Senator LEVIN. We are trying to eliminate that, too, so we are 

on the same side now. 

Mr. LAPPIN. As I said, sir, we are in favor of reform. We are in 

favor of relying less on mandatory source, if not elimination, and 

less reliance on our primary product areas of furniture, textiles, 

and electronics, as long as we can pursue products and services in 

other areas that allow us to keep inmates productively occupied. 

Senator LEVIN. I am glad to hear that you favor the elimination 

of mandatory source, because that is at the heart of this bill. The 

other issue is the services issue, and there, you are saying that you 

are doing what you should have done a long time ago with products, which is to look for offshore suppliers, to compete with them 

instead of eliminating competition from the American private sector. So I would think that in a way, you are at least symbolically 

or theoretically supportive of the direction of our bill. 

But I want to go back to my question about imports on products. 

You say it is a good idea. Has FPI in the last few years done a comprehensive search of products that are purchased by the Federal 

Government that are only produced offshore? Do you know if that 

search has been made? 

Mr. LAPPIN. I am not sure, but again, I will check with the staff 

in FPI and provide for the written record a response to that question.1

Senator LEVIN. We have been pressing that issue year after year 

and have never gotten a satisfactory answer to it. 

Mr. LAPPIN. I can give you some examples of some of the service 

areas, to include data entry for information from used car ads, reVerDate 0ct 09 2002 09:10 Dec 07, 2004 Jkt 094488 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 C:\DOCS\94488.TXT SAFFAIRS PsN: PHOGAN
25

pair of automotive starters and generators, attaching advertising 

inserts in magazines, sorting and reboxing shoes. Those types of 

things have all been repatriated. 

Senator LEVIN. Mr. Williams, I think you have already commented on this, but would you expand a bit on the history of GSA? 

You had a mandatory source requirement until 1996. 

Mr. WILLIAMS. Actually, it was 1986——

Senator LEVIN. Eighty-six. 

Mr. WILLIAMS [continuing]. When we were first given permission 

to use industrial funding to fund GSA operations. With that, Congress instructed us that we would no longer have mandatory source 

and that we would be optional for use by Defense Department and 

other Federal agencies. 

Senator LEVIN. So with some products until 1996? 

Mr. WILLIAMS. In 1996, we were fully non-mandatory——

Senator LEVIN. Non-mandatory. 

Mr. WILLIAMS [continuing]. And we have seen steady growth in 

all of our program areas. I want to just insert here that the partners that we worked with in the business community, over 40 percent of them are small businesses and we worked carefully with industry to be a good partner and at the same time getting the best 

value for the government purchasing dollars. 

Senator LEVIN. Would you expect that GSA’s experience in that 

regard would be followed by FPI, that they would have the same 

experience? 

Mr. WILLIAMS. I believe if they operated in a business-like way, 

in cooperation and in spirit of cooperation with their customers, 

that they could see the same type of growth, because we had to 

change our practices. We had to change our products. We did that 

in response to agency and customer needs. I believe that they could 

enjoy the same type of growth. 

Senator LEVIN. Mr. Lappin, back to you just for a minute. What 

is the management structure of FPI? I should know the answer to 

this, but I don’t. Is it a government corporation? Are all the employees in FPI in the corporate level government employees? 

Mr. LAPPIN. Yes, they are. 

Senator LEVIN. So you are run like any other owned corporation? 

Mr. LAPPIN. We receive no appropriated funds. They are completely self-sustaining——

Senator LEVIN. And are the salaries set by you or are they set 

by statute? 

Mr. LAPPIN. They are set by OPM regulations. 

Senator LEVIN. For the management? 

Mr. LAPPIN. That is correct, for management. It goes through the 

same process that other government employees would be. Employees that work in our Federal prisons are law enforcement employees. They have primary responsibility for the care and custody of 

inmates along with their responsibilities in Federal Prison Industries. So they, too, are responsible for care and custody of inmates. 

Senator LEVIN. So your budget is a matter of public record? 

Mr. LAPPIN. Absolutely. 

Senator LEVIN. Is it part of the budget of the United States—it 

is not part of the budget documents. 

26

1The information provided by Mr. Lappin appears in the Appendix on page 250. 

Mr. LAPPIN. No, it isn’t. We do a projection yearly. For example, in 2003, we projected about a $667 million budget. Four-hundredand-ninety-seven million, or 75 percent, was to buy material supplies from private sector vendors. About 19 percent, $130 million, 

went to staff salaries and benefits. About 6 percent, $40 million, 

was inmate pay. And so we can provide that to you in writing. We 

publish a statement every year.1

Senator LEVIN. OK, thank you. Thank you, Mr. Chairman. 

Senator FITZGERALD. Senator Pryor, would you have any questions at this point? 

Senator PRYOR. I do, but Senator Thomas, you go first. 

Senator FITZGERALD. Senator Thomas. 

Senator THOMAS. Thank you, Mr. Chairman. This has been a 

good panel and I appreciate this. 

You mentioned, Mr. Lappin, in some of your criteria, I believe 

you said it will not place a burden on private business. How do you 

determine that? 

Mr. LAPPIN. We do a survey prior to going into a new product 

area and service area. We advertise. We ask for comments from 

agencies and governments who may be performing that product, or 

producing that product or service, so that we can balance that. We 

encourage folks who feel as though they have been negatively impacted to contact us so that we can weigh the consequences of some 

of our decisions and try to do whatever we can to reduce the negative impact——

Senator THOMAS. I know, but how do you determine? You have 

the U.S. Chamber that thinks you are being difficult, and you say, 

well, no, we are not hurting because we check it out. 

Mr. LAPPIN. No, for the record, say that I recognize that we have 

some negative impact on businesses. There is no doubt about that. 

We cannot completely say we don’t have some impact. 

Senator THOMAS. You also mentioned, if you didn’t do this, you 

would have to develop an alternative program. What is wrong with 

having an alternative program? You can change once in a while. 

Mr. LAPPIN. There are some alternative programs that may be 

applicable, but I know that in many of them that have been proposed, we cannot recreate a real-life work environment like we 

have in the industry programs. We value certainly our education 

programs and VT programs, as I have mentioned, and we leverage 

or nudge inmates into those programs because many of them come 

to us lacking literacy skills and vocational skills——

Senator THOMAS. What about the other 88 percent——

Mr. LAPPIN [continuing]. But they are short term. 

Senator THOMAS [continuing]. That you don’t deal with? You 

have 88 percent of your prisoners that aren’t even involved. 

Mr. LAPPIN. Well, we have work assignments far beyond Federal 

Prison Industries. 

Senator THOMAS. I understand. So why does this become such a 

priority? 

Mr. LAPPIN. Well, it is by far a much more real-life work experience and one that an inmate takes enormous commitment into the 

product, and certainly we see inmates who work in Federal Prison 

27

Industries being less disruptive in our prisons and less likely to 

come back to prison because of the work skills and abilities they 

learned as a result of that experience. 

Senator THOMAS. Mr. Williams, I don’t quite understand. You 

said agencies don’t have a choice of what they buy. This is a mandatory program, is it not? 

Mr. WILLIAMS. GSA or Federal Prison Industries? 

Senator THOMAS. No, the Federal Government agencies. 

Mr. WILLIAMS. Federal Prison Industries products for furniture 

have to be purchased by Federal agencies. There have been 

changes in two appropriations bills that have modified that temporarily——

Senator THOMAS. Right. 

Mr. WILLIAMS [continuing]. But they are required to get a waiver 

from Federal Prison Industries, and if they don’t get the waiver, 

then they have to proceed with purchase of products from 

UNICOR. In some cases, they are successful at getting a wavier. 

In others, they are not. Many times, the customer agency will work 

with GSA to get a waiver and we will work and communicate with 

the ombudsman at UNICOR to see if we can get that waiver for 

that Federal agency. 

Senator THOMAS. Let me move to Mr. Weiss. You talked some 

about waivers. Did that work well for you? 

Mr. WEISS. Not in the FAA instance. We have had one opportunity where a waiver has been successful, but they are very—usually, you go through three or four appeals of the waiver process before you can go through. It is a lot of intimidation on the contracting officer from the FPI level. You really have to have somebody on the government side or the agency side that is willing to 

invest time and effort into seeing that process through, because it 

could be a 3-month process to get a waiver. 

Senator THOMAS. Mr. Linder, you talked about getting some of 

your outsourcing at the Federal agency. Can’t you outsource in the 

private sector, as well? 

Mr. LINDER. Yes, that is a good question. I just want to say that 

I think free competition and open competition is the American way, 

free enterprise, and that is how I got into business. I just want to 

also add, I would never have even started my business if Federal 

Prison Industries didn’t exist or even have had an opportunity to 

bid into that system, because my belief and experience has been 

that to try to sell to large businesses is a very difficult process. I 

think that what we are looking at here is if this mandatory preference is removed, what will be happening is you will be providing 

opportunity to big business. I think it takes large business to manufacture the type of products that are produced by FPI and——

Senator THOMAS. There are thousands, hundreds of thousands of 

small businesses that don’t operate as you do and are still successful. 

Mr. LINDER. That may be so, but I am talking about my business. You asked me about——

Senator THOMAS. I understand. 

Mr. LINDER [continuing]. My business. 

Senator THOMAS. Why do you go there, because you can do it less 

expensively? 

28

Mr. LINDER. Why do we go to——

Senator THOMAS. Prison? 

Mr. LINDER. Let me explain it to you. Federal Prison Industries 

makes it easy for their subcontractors. They make it like paint-bythe-numbers. You don’t have to be a master painter to provide 

products to them. They take their products and break them down 

into small——

Senator THOMAS. What about the cost? 

Mr. WEISS. The costs? I compete just like everyone else. 

Senator THOMAS. Do you bid? Do you offer bids to others? 

Mr. WEISS. Ever single contract order we have ever received, and 

I believe everybody who ever receives an order from FPI does so 

in the free competitive process. 

Senator THOMAS. So you can imagine they are doing it a little 

less expensively, as the gentleman from the Chamber of Commerce 

pointed out, because of less costs, right? 

Mr. WEISS. I believe that Federal Prison is plying their product 

because they have the mandatory preference. They don’t have to 

compete against large business, who can—they don’t have to follow 

strict guidelines on pricing and formulas. Federal Prison Industries 

is bound by——

Senator THOMAS. Do they pay the costs that the private sector 

does? 

Mr. WEISS. I believe that they have plenty of expenses that the 

private sector won’t ever have. 

Senator THOMAS. Tell me what they are, would you? 

Mr. WEISS. Yes. I believe that the overhead that——

Senator THOMAS. Retirement? Do they have retirement? 

Mr. WEISS. Certainly. 

Senator THOMAS. Do they have health care? Do they have all 

those things that the employer has to pay? 

Mr. WEISS. Not to the inmates, but they certainly have heavyduty supervision. I haven’t heard anyone here state the numbers, 

but I believe that they face anywhere from 800 to 1,000 percent in 

direct supervisory costs for each inmate. So if they pay——

Senator THOMAS. How about those inmates that aren’t in this? 

Are they supervised, as well? 

Mr. WEISS. Outside of Federal prison? I believe they have——

Senator THOMAS. No, I am saying all Federal prisoners are supervised. 

Mr. WEISS. Yes, they are. 

Senator THOMAS. It is not quite right to say this group is supervised more heavily than others. 

Mr. WEISS. I believe they probably are. I don’t have the facts in 

front of me, but——

Senator THOMAS. I just think that you are a business person and 

there ought to be an opportunity for everyone to bid and get into 

the thing. It probably isn’t fair if you are getting a break from the 

taxpayers to go to this particular place less expensively to other 

businesses. So these are the kind of things I think we have to look 

at in the broad sense, don’t you? 

Mr. WEISS. I agree, and if you want to do something good for big 

business, this will do just that. You will give plenty of work to 

29

1The information provided by Mr. Lappin appears in the Appendix on page 250. 

large businesses and I think the potential for that filtering down 

to small businesses like mine will be dramatically reduced. 

Senator THOMAS. I don’t agree with you at all, because small 

businesses are the major activities in this country and they continue to prosper. 

Thank you, Mr. Chairman. 

Senator FITZGERALD. Thank you, Senator Thomas. 

I have been advised that FPI sometimes engages in so-called 

pass-throughs, or drive-by manufacturing, in which a private sector 

company essentially manufactures a product, FPI orders the product and then passes it through to the purchasing agency without 

any meaningful inmate labor involved. For any of the panelists, especially Mr. Lappin, does this happen, and if so, how frequently 

does it happen? 

Mr. LAPPIN. Yes, sir, that does not happen. It was a practice in 

the past during times when we would receive an order, and it is 

called pass-through. I guess that is the term that has been tied to 

this process, in cases where we took business and for whatever reason—the factory was closed because of a disturbance, because of a 

problem, we couldn’t meet the time line, we would go to the customer and get them to approve us purchasing the product and 

passing it to them. 

We ended that prior to my coming into the Bureau of Prisons as 

the Director. We no longer——

Senator FITZGERALD. You came in what year? 

Mr. LAPPIN. Last year, a year ago in April. A year ago this 

month. But that was solely——

Senator FITZGERALD. The end of the prior year——

Mr. LAPPIN [continuing]. For the convenience of the customer. 

Senator FITZGERALD [continuing]. Coming in, would you know exactly when they ended that? 

Mr. LAPPIN. I don’t know exactly. It was one of the resolutions 

that was approved by the FPI Board of Directors, who sets these 

standards. I can provide to you in writing the date it was passed 

and when we stopped that process. 

So now what we do is we just go back to the customer and say, 

because of the factory being closed as a result of a problem at the 

institution, we cannot meet the time line. Please go out and pursue 

that product through a private company. 

Senator FITZGERALD. When they did those pass-throughs, was 

FPI taking a mark-up on the product? You go out and buy the 

product and then sell it to the agency. Would you mark it up? 

Mr. LAPPIN. I don’t believe so, but again, when we provide you 

a written response, we will indicate that for you.1

Senator FITZGERALD. You are not doing that any more? 

Mr. LAPPIN. We are not. That is correct. 

Senator FITZGERALD. And you are not going to go back to doing 

that? 

Mr. LAPPIN. That is correct. 

Senator FITZGERALD. OK. I understand, reading the statutes that 

go back to the 1930’s covering the FPI, it appears that the work 

program can apply to non-Federal facilities, is that correct, that 

30

there may be some non-Federal prisons? There is a reference in one 

of the statutes to up to 50 non-Federal penitentiaries. I was just 

wondering what that meant. 

Mr. LAPPIN. Let me just help maybe in clarifying. A granted 

State and some private correctional facilities have industry programs. I am not sure exactly what authority they operate under. 

We only have Prison Industries programs in our own Federal facilities. In facilities that we contract out the work, that if we contract 

out the operation of the prison, we do not have factories in those 

facilities. 

Senator FITZGERALD. How many prisons do you contract out that 

are run privately in the Federal system? 

Mr. LAPPIN. Of the 176,000 inmates, we have about 18,000 in 

privately-run facilities. That is probably 12 or 13 facilities, thereabouts. I don’t have the exact number with me. 

These are primarily low-security facilities housing low-security 

criminal aliens, folks that are more than likely going to be deported. There are no factories in them. 

Senator FITZGERALD. And those are operated on a contract? Some 

private company has a contract to run that prison? 

Mr. LAPPIN. That is correct. 

Senator FITZGERALD. Does the Federal Government pay for the 

construction of the prison? 

Mr. LAPPIN. Typically, no. We only have one facility where it was 

government-built and now privately operated. The rest of those are 

built by the private contractor. 

Senator FITZGERALD. OK. If some of those prisons are privately 

owned, that means somebody owns the prison and they have Federal inmates who are working in the Federal Prison Industries program? 

Mr. LAPPIN. No. 

Senator FITZGERALD. No? 

Mr. LAPPIN. We do not have factories in those facilities. 

Senator FITZGERALD. There are no factories in any of those facilities? 

Mr. LAPPIN. That is correct. 

Senator FITZGERALD. OK. Can State prisons participate in this 

program? 

Mr. LAPPIN. States have different authorities that they work 

under. I know that States have prison industry programs. Some 

are under the PIE program. Some are run through other authorities. 

Senator FITZGERALD. They make drivers’ license plates or something like that? 

Mr. LAPPIN. Yes. 

Senator FITZGERALD. OK. By the way, I would be interested, if 

you could submit some information on the Federal prisons in Illinois. We have Marion Federal Penitentiary and then we have a few 

others. 

Mr. LAPPIN. We have FCI Pekin——

Senator FITZGERALD. In Greenville? 

Mr. LAPPIN [continuing]. Which is a 1,500-bed medium-security 

facility. We produce metal products there, chain link fence, prison 

doors, so on and so forth. We have a Federal prison or Federal corVerDate 0ct 09 2002 09:10 Dec 07, 2004 Jkt 094488 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 C:\DOCS\94488.TXT SAFFAIRS PsN: PHOGAN
31

rections institution in Greenville, Illinois, where we produce BDUs 

and other dress uniforms for the military. 

Senator FITZGERALD. Did you say BDUs? 

Mr. LAPPIN. Battle dress uniforms for the military. 

Senator FITZGERALD. OK. 

Mr. LAPPIN. And at Marion, we produce—we have a cable operation in support of military contracts. 

Senator FITZGERALD. Yes, I have visited that operation. 

Mr. LAPPIN. That is a high-security facility. 

Senator FITZGERALD. OK. Could you provide any examples of 

items that FPI produces that are used by the troops in addition to 

the BDUs, battle dress uniforms? 

Mr. LAPPIN. We have a number of contracts and products with 

the military. We produce Kevlar helmets, wiring harnesses, communication cables, battle dress uniforms, portable lighting, physical fitness uniforms, towels, sheets, items of that nature. We have 

one service group which is repairing vehicle and—it is vehicle and 

equipment repair. We repair Humvees that have been damaged. 

We refurbish engines, transmissions, items of that nature, to be 

put back in service with the military. 

Senator FITZGERALD. Are you ever competing with the arsenals, 

the domestic arsenals, do you know? 

Mr. LAPPIN. Actually, many of these customers came to us——

Senator FITZGERALD. OK. 

Mr. LAPPIN. Because they were struggling, turning around these 

products and looking for one-stop shopping. Can you do the whole 

process? And as a result, much of this business came to us, as well 

as our fleet management program, which we do with the Marshals, 

INS, outfitting their vehicles. We purchase the vehicle. We outfit 

them. Again, because they were struggling, they were putting their 

law enforcement folks out trying to get all this work done. They 

were looking for one location where we could outfit the entire vehicle, deliver it, take care of their old vehicle, survey it, and do it 

more efficiently and effectively. 

Senator FITZGERALD. OK. Now, Mr. Glover, in answer to questions by Senator Levin, it sounded like Mr. Lappin said he did not 

have a problem eliminating the sole source requirement that agencies have to go to FPI as long as the FPI could expand into a few 

other areas and remove some of the restrictions? 

Mr. GLOVER. Senator, the union doesn’t always have the same 

position as management, as you may know. 

Senator FITZGERALD. Right. That is why I was checking. [Laughter.] 

Mr. GLOVER. We are extremely concerned with the elimination of 

the mandatory source and I will tell you why, because we feel that 

peaks and valleys—we understand private business and we understand this controversy. But this program is designed to deal with 

Federal convicted felons and to get them better, to send them back 

to the street. 

When you talk about the other programs in Federal prisons, they 

are very small. You have to have appropriated money to do that. 

Our funding has been chopped, essentially. We are running prisons 

at 87 to 91 percent funding levels, every facility in the system. You 

are starting out 10 percent short every day in staffing, in correcVerDate 0ct 09 2002 09:10 Dec 07, 2004 Jkt 094488 PO 00000 Frm 00035 Fmt 6633 Sfmt 6633 C:\DOCS\94488.TXT SAFFAIRS PsN: PHOGAN
32

tional staffing, and at the same time, we are talking about cutting 

what we believe is our most important correctional program as far 

as—and it may only sound like 20 percent of the inmates who are 

eligible to work in this, but that is a large number on a day-to-day 

basis who are down in a Federal factory, in one of these factories 

doing something productive. 

Working out on the rec yard or doing something up in the education department only lasts so long. Vocational training, that is a 

great idea. We support it. Give us the Federal funding to run it 

properly and put 300 inmates a day into a Federal vocational program. We will do it. We will work hard at it. We have no problem 

doing that. 

But what we have seen over the years is less funding and then 

now, basically an attack on this Federal program, and we are going 

to have a problem trying to manage security. That is where we are 

at. I mean, that is where the union is at on this issue. 

Senator FITZGERALD. How many of your union members are involved in supervising prison workers? 

Mr. GLOVER. Prison industries? 

Senator FITZGERALD. Inmate workers, yes. 

Mr. GLOVER. Well, we have probably 2,500 employees, I would 

say, that are union members that work in the Federal Prison Industries program. 

Senator FITZGERALD. And how many union members are there in 

all of the Federal prisons? 

Mr. GLOVER. We have almost 20,000. 

Senator FITZGERALD. OK, so about 10 percent of your union 

members are involved with the program? 

Mr. GLOVER. Yes, sir. 

Senator THOMAS. Just one follow-up question, Mr. Glover. You 

talked about eliminating the program. We are talking about competition. Are you opposed to competition? Don’t you think that this 

program could continue to go and take away the mandatory aspect 

and continue to——

Mr. GLOVER. Here is what I am concerned with, Senator. The 

issue that we see is the competition is fine, but our problem is 

these peaks and valleys that are going to result in competition. We 

are not going to—our concern is to have a steady stream of work 

for the inmate population. When you have to lay in 200 inmates, 

which means send them back up to the housing units because you 

don’t have something to produce that day, we are concerned with 

that stream of work. 

The other issue with the bill, if you look at the way S. 346 is 

written, it doesn’t allow us to go out into the—it doesn’t allow us 

to repatriate work from overseas and services. It cuts services completely the way we see it. 

And the other issue is, it doesn’t allow us to do anything—you 

are cutting our market down. Basically, the Federal market is 

where we have worked forever. We are going to compete now for 

certain Federal product lines that we have gotten by mandatory 

source. So we are seeing a drop in employment, and the only reason we haven’t seen a bigger drop is because of the war effort. 

So our concern is that we need a steady stream of something for 

these inmates to do. I am going to tell you right now, the grass cutVerDate 0ct 09 2002 09:10 Dec 07, 2004 Jkt 094488 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 C:\DOCS\94488.TXT SAFFAIRS PsN: PHOGAN
33

ters of America are going to yell at us if we cut grass. Every single 

interest group that we try to come up with something to do for 

these inmates—we went down and started doing the Park Service 

stuff for a while. We did some vocational stuff. We took them out 

to the Park Service to clean national parks. Employees in the National Park Service got upset because we had inmates down there 

working in the national parks. The same thing happened in the 

VA, where we had some programs to send them down to the VA 

to operate around the VA, cleaning up the areas, painting, those 

kind of things. Right away, the painters’ union, everybody else, 

they all got upset. 

Senator THOMAS. Just like your union is right now. 

Mr. GLOVER. Exactly, sir. 

Senator THOMAS. So it goes that way, that you have to talk about 

competition makes government more efficient. Competition gives 

the private sector, the people who pay your salary, a chance to do 

some things. So really, it is pretty tough to deny the fact that there 

ought to be an opportunity for the private sector to compete, and 

I understand what you are saying. 

Mr. GLOVER. Could I just say one thing to that, Senator? 

Senator THOMAS. I suppose. 

Mr. GLOVER. I understand that issue. I understand it completely. 

My concern is that we are piecemealing this program. This is not 

a comprehensive change. This is taking a piece of the program out 

and not giving us anything to replace it with, similar to the 2,000 

inmate jobs that we have already lost. 

And so what we see happening is as this competition occurs, if 

we lose another 2,000 inmate positions and the staffing that goes 

with it, we are going to have a management problem. 

Senator THOMAS. No one is saying you are going to lose it. You 

want them to compete for business. 

Mr. GLOVER. I believe we will lose it. 

Senator THOMAS. When you are in business, you have to take a 

chance. Everyone else in this place who is in business has an opportunity to lose. 

Mr. GLOVER. I think where the Federal prisons——

Senator THOMAS. There is no way you can be competing with 

business and expect to be guaranteed to have services. 

Mr. GLOVER. Sir, all I say is this. We are not businessmen. We 

are operating Federal prisons and we have to find a way to operate 

them. 

Senator THOMAS. Thank you. 

Mr. WILLIAMS. Senator, may I add a comment on competition? 

Defense Personnel Support Center in Philadelphia, this is the 

group of people that provide uniforms, medical supplies, and food 

for our troops all around the world, they were moving from one 

part of Philadelphia to another and they wanted a waiver from 

UNICOR for 3,500 work stations. UNICOR bid $8.6 million to furnish that office space. They were moving from one old building to 

another older building, so they had certain restrictions with what 

furniture they could buy. Even though UNICOR knew that there was a bid for $4.1 million, less than half of their price, they would not give a waiver to 

the Defense Department for this move until someone in the DeVerDate 0ct 09 2002 09:10 Dec 07, 2004 Jkt 094488 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 C:\DOCS\94488.TXT SAFFAIRS PsN: PHOGAN
34

fense Department suggested, would this stand the test of public 

scrutiny? Within a day, they had a waiver and we proceeded 

through competitive bidding with a private company to furnish that 

facility. 

So I think if they would compete as we have become non-mandatory and competitive and work with the private sector, I think they 

could flourish and find business lines to succeed. 

Senator FITZGERALD. We are coming close to wrapping up, but I 

do want to ask a final question of Mr. Palatiello. You criticize in 

your opening statement the mandatory source status that was provided in the government procurement process to the FPI. Would 

you be happy if the mandatory source status were eliminated, or 

would you like to go further and eliminate FPI altogether? What 

is the Chamber’s position? 

Mr. PALATIELLO. We have never advocated doing away with FPI 

altogether. We have advocated, as Senator Thomas has so eloquently stated, we have advocated competition. We believe that is 

what the legislation before you does. 

Senator FITZGERALD. OK. Now, there seems to be pretty widespread agreement that maybe we should do away with mandatory 

source. Even Mr. Lappin could support that under certain circumstances if you were given some ability to get into some other 

areas that would compensate for losing the mandatory source. Mr. 

Glover is not so sure about that. Could you think about that? 

Mr. GLOVER. We would certainly look at whatever the Senate 

came up with, sir. 

Senator FITZGERALD. You would think about it. Do you have any 

specifics on what other areas you would like to get into, Mr. 

Lappin? 

Mr. LAPPIN. Again, I think——

Senator FITZGERALD. This bill just eliminates mandatory source, 

right? That is what it does. 

Mr. LAPPIN. I think mandatory source, if it is eliminated, needs 

to be done in such a way that as it is being eliminated, we can 

transition into some of these other product areas and be competitive. It doesn’t happen overnight. So I think there needs to be some 

consideration of that. I think we are exploring opportunities out 

there currently with the services, with some of the repatriated 

products. Granted, we take a risk just like everybody else does. We 

acknowledge that. But we believe there is potential there as long 

as the legislation was to allow us that potential. 

Senator FITZGERALD. OK. Mr. Palatiello. 

Mr. PALATIELLO. Mr. Chairman, I will leave to Senator Levin and 

Senator Thomas the reason why their bill is a little narrower than 

the House-passed bill. Part of it has to do with committee jurisdictions and the like. 

But, for example, we support the House-passed bill and particularly a provision in there that would permit Federal Prison Industries to become engaged in work for nonprofit organizations, things 

like Habitat for Humanity. We think there is room for expansion 

in areas where there would not be an adverse impact on small 

business and their workers and yet still providing work and training opportunities for prisoners. 

35

1The brochure provided by Mr. Palatiello appears in the Appendix on page 304. 

If I may, a couple of comments have been made during the 

course of the hearing that I think somewhat of just a very superficial discussion made and I would like to clarify a couple of things. 

First, if competition is injected, if there is still the demand for the 

product and services from the Federal Government, the supplier 

community is still going to survive and they are still going to 

thrive. They may become suppliers to the private bidders rather 

than to FPI, but they are still going to be suppliers. 

Second, we cannot draw a line between appropriated funds and 

some sort of virtual funding. FPI deals 100 percent with appropriated funds. They are appropriated to the Department of Defense. They are appropriated to the Department of the Interior. 

They are discretionary, appropriated funds in the 13—well, 12 appropriations bills, because I don’t believe they enjoy mandatory 

source to Congress. But they are appropriated funds. They all are. 

With regard to repatriation, Mr. Lappin very carefully chose his 

words, but they get to decide whether something, in fact, is going 

offshore and they can now claim it. There is no independent certification by the Labor Department or the Commerce Department that 

this is a lost product or service and, therefore, again, they are 

judge, jury, and prosecutor. They get to decide. They do not do impact studies on services. Mr. Lappin was slightly incorrect on that. 

They are not required to under the law. They are only required to 

do so on products. They do not do competitive impact analyses on 

services. 

I would like to enter into the record a brochure—now, this may 

be, and I will admit the Board did take action within, I believe, the 

last 2 years—Congressman Hoekstra brought to the attention of 

the FPI Board a drive-by situation and the supplier who FPI was 

turning around—whose work they were getting and turning around 

and providing to an agency was not even a U.S. company. It was 

a Canadian supplier, no value added on the part of the prisoners. 

It was when Congressman Hoekstra brought that situation to the 

attention of the Board that they finally adopted a policy for no 

more drive-by. But we have a brochure that has been jointly produced by FPI and one of its suppliers where it talks about that 

UNICOR is the exclusive agent for government customers and 

there is no value added on the part of these things.1 

One final thing. The point was made that there is a 24 percent 

reduction in recidivism for those inmates who are through the FPI 

work program. What Mr. Lappin failed to tell you is there is a 33 

percent reduction in recidivism for those inmates that go through 

vocational and remedial education programs, and that is from a 

study called the ‘‘Post-Release Employment’’——

Senator FITZGERALD. Is that true, Mr. Lappin? 

Mr. LAPPIN. Oh, it is, sir, and I would be more than happy to 

respond to that. We see great results from inmates who participate 

in vocational training. 

Senator FITZGERALD. That sounded like we would have less recidivism if we place inmates in vocational training, instead of placing them in FPI. 

36

Mr. LAPPIN. We offer a variety of vocational training, and our 

waiting lists for those programs are very small for those inmates 

who participate. We do not force inmates into vocational training 

programs. We do not force inmates into GED. We leverage them. 

We don’t force them into those programs. Congress has passed a 

number of laws that have provided some of that leverage, especially for GED, which has been very beneficial. 

But I resist, I guess, forcing inmates into programs. We all know 

what happens, when we force somebody into something that they 

don’t really want to be there, the negative impact it has on all the 

other participants in that program. So we leverage, we cajole, we 

nudge. We are providing as many vocational training programs as 

I believe we need. It does have a great impact on those who participate. We are seeing 33 percent fewer coming back. 

But again, no different than GED and vocational training, drug 

rehabilitation. We see varying rates of success, but all of them tend 

to see fewer inmates coming back to prison because of that participation. 

Mr. GLOVER. Senator, may I add one thing to that that the Director may have missed? 

Senator FITZGERALD. Sure. 

Mr. GLOVER. Those programs are much smaller. The vocational 

training program, like at Petersburg, Virginia, for instance, they 

have one there. There are maybe 32 inmates in that program, not 

250 that are working in the Federal Prison Industries factory. And 

again, this goes back to resources, I believe. If you want us to do 

more vocational training—the House bill, I would like to correct 

two things. 

Senator FITZGERALD. You said you were open to that——

Mr. GLOVER. Well, we have no problem with it if it is funded. 

What the problem is, is when the funding doesn’t come through. 

Senator FITZGERALD. And that probably costs a lot of money to 

do that. 

Mr. GLOVER. It is a lot of money. 

Senator FITZGERALD. Yes. 

Mr. GLOVER. But when the funding comes through, we are seeing 

a smaller dollar because of homeland security and because all these 

other things that are going on. We are seeing a much smaller piece 

of that pie to run Federal prisons on. We would be happy to explore 

more vocational training and rehabilitation. 

One of the comments was that they have a Habitat for Humanity 

issue in the House bill. No one is saying what they are going to 

give us in funding to buy the raw materials, to build those things, 

and then to ship that out to Habitat for Humanity. Nobody has 

talked about how they are going to fund that, and it all goes back 

to that. 

If you want us to provide more of those things, then we need 

more teachers, we need more certified recreation specialists, we 

need more people who can do vocational training, brick workers, 

masonry, roofers, all that stuff. You are going to have to increase 

staffing in the Federal prison to run it. What our bottom line is, 

is we want to make sure the prison is safe. We want to make sure 

our members go home after 8 hours with no problem in the prison. 

That is what it comes down to. 

37

Senator FITZGERALD. OK. 

Mr. LAPPIN. Mr. Chairman, I don’t disagree, we have 7 percent 

of our entire population in vocational training. Granted, could we 

do more of that? It is possible. My concern is, will we get willing 

participants? It is foolish for us to invest money in those types of 

programs if, in fact, inmates are not going to willingly participate. 

Waiting lists are small. 

What is really sad, and I have to say this, is granted we have 

20,000 inmates working currently in Federal Prison Industries. It 

is the number of inmates that leave prison—there are at least 

20,000 more inmates on those waiting lists to work at Federal Prison Industries that never, ever get into Federal Prison Industries. 

And what is sad is they are leaving prison after 10, 15, or 20 years 

with limited work skills because we failed to take advantage of this 

opportunity for willing participants to participate in this program. 

Senator FITZGERALD. I understand. 

Mr. LINDER. Senator Fitzgerald, two things I would like to say, 

that is very important. One, I think there has been a glaring omission made in all of the testimony today about one of the provisions 

of S. 346, and that is that all services for non-Federal services 

would be eliminated in this bill, meaning that there are no services 

permitted, period. 

And another thing I would like to mention is I have heard people 

talk about value, best value. For several years, that is what the Department of Defense has required now in many of their contracts, 

is best value, and value is not just the bottom-line dollars, and I 

haven’t heard one person here talk about the social conscience that 

is necessary when you talk about people in prison. In our American 

society, I thought we were trying to rehabilitate people, and if you 

think that is not important, please, just look Dino Ricciardone in 

the eye and tell him that is not part of your goal. It is a social conscience. That is what I have to say. 

Senator FITZGERALD. This has been a wonderful hearing. You 

have all been very articulate and interesting witnesses. I think we 

learned a lot. I want to thank you for your attendance. 

The hearing record will remain open until the close of business 

next Friday, April 16, for additional statements and questions. If 

those of you who are asked for additional information could provide 

that to the Subcommittee, we would appreciate it. 

If there is no further business to come before the Subcommittee, 

this hearing is adjourned. Thank you. 

[Whereupon, at 4:29 p.m., the Subcommittee was adjourned.] 

(39)

A P P E N D I X 

PREPARED STATEMENT OF SENATOR LAUTENBERG 

Mr. Chairman: Thank you for holding this important hearing on the Federal Government’s procurement policies and ‘‘FPI’’—the Federal Prison Industries—which 

does business with government agencies under the trade name of ‘‘UNICOR.’’

I approach this difficult issue as a former businessman as well as a Senator from 

New Jersey. 

American businesses large and small are hurting. This is especially true in manufacturing. It is tempting to believe that one of the problems American businesses 

face is trying to compete with prison labor. 

As someone who started a successful business with two childhood friends in 

Paterson, New Jersey, I know that an efficient marketplace requires an ‘‘even playing field’’ and all businesses should have an opportunity to compete on price, product quality, customer service, and product delivery. 

That has been the hallmark of our economic system. 

As a result, Americans enjoy one of the highest standards of living in the world. 

As a Senator from New Jersey, I also know that manufacturing jobs are disappearing from my home State at an alarming rate. 

But I don’t think we can blame this trend on prison industries. Rather, it is happening because of our increasing trade deficit, which reached a record level of 549 

billion dollars in 2003. Our trade deficit with one country—China—increased by 20 

percent to 124 billion dollars in just one year (2002 to 2003). 

Manufacturers have borne the brunt of our trade deficit. Our manufacturing trade 

deficit rose from 430 billion dollars in 2002 to 471 billion dollars in 2003. Not surprisingly, the sector lost 582,000 jobs during that period. 

I know that this hearing is not about trade policy but I mention these figures only 

to underscore an important point: Our trade deficit, along with the recent recession 

and productivity increases, account for the job losses in manufacturing. 

We need to weigh the costs and benefits of the FPI program very carefully before 

we consider making any changes to it. At a minimum, we should wait until we hear 

from the General Accounting Office (GAO) on the subject. 

There is great value to society in having Federal prisoners occupy their time constructively, develop a work ethic, and acquire job skills that will ease their transition back into civil society upon their release. 

As former Deputy Attorney General Larry D. Thompson said, ‘‘although the FPI 

program produces products and performs services, the real output is inmates who 

are more likely to return to society as law-abiding taxpayers because of the job-skills 

training and work experience they received in the FPI program.’’

I agree with Mr. Thompson. Our Federal prisons house 176,000 people—mostly 

young men, mostly minorities, mostly poorly educated—many of whom will eventually be released into our communities, so it is imperative that we provide them with 

useful skills. 

I think that restricting the FPI program will provide little relief for the private 

sector businesses that would compete with FPI for government contracts. 

I am concerned that reducing the scope of and participation in the FPI program 

will make it much harder for inmates to acquire the work and social skills necessary 

for reentering society. Without such skills, they are more likely to become recidivists 

and harm the people in the communities they are attempting to rejoin. 

This is a subject that requires careful deliberation so I look forward to hearing 

from our witnesses today since each one has expertise and an important perspective 

to share. 

Thank you, Mr. Chairman.

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