```

[House Report 109-591]
[From the U.S. Government Publishing Office]

109th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     109-591

======================================================================

 
    FEDERAL PRISON INDUSTRIES COMPETITION IN CONTRACTING ACT OF 2006

                                _______
                                

 July 21, 2006.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 2965]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 2965) to amend title 18, United States Code, to require 
Federal Prison Industries to compete for its contracts 
minimizing its unfair competition with private sector firms and 
their non-inmate workers and empowering Federal agencies to get 
the best value for taxpayers' dollars, to provide a five-year 
period during which Federal Prison Industries adjusts to 
obtaining inmate work opportunities through other than its 
mandatory source status, to enhance inmate access to remedial 
and vocational opportunities and other rehabilitative 
opportunities to better prepare inmates for a successful return 
to society, to authorize alternative inmate work opportunities 
in support of non-profit organizations and other public service 
programs, and for other purposes, having considered the same, 
report favorably thereon with an amendment and recommend that 
the bill as amended do pass.
  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Federal Prison 
Industries Competition in Contracting Act of 2006''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1 Short title; table of contents.
Sec. 2. Governmentwide procurement policy relating to purchases from 
Federal Prison Industries.
Sec. 3. Public participation regarding expansion proposals by Federal 
Prison Industries.
Sec. 4. Transitional mandatory source authority.
Sec. 5. Authority to perform as a Federal subcontractor.
Sec. 6. Inmate wages and deductions.
Sec. 7. Clarifying amendment relating to services.
Sec. 8. Conforming amendment.
Sec. 9. Rules of construction relating to chapter 307.
Sec. 10. Providing additional rehabilitative opportunities for inmates.
Sec. 11. Re-entry employment preparation through work-based training 
and apprenticeship.
Sec. 12. Restructuring the Board of Directors.
Sec. 13. Providing additional management flexibility to Federal Prison 
Industries operations.
Sec. 14. Transitional personnel management authority.
Sec. 15. Federal Prison Industries report to Congress.
Sec. 16. Definitions.
Sec. 17. Implementing regulations and procedures.
Sec. 18. Rules of construction.
Sec. 19. Effective date and applicability.
Sec. 20. Clerical amendments.

SEC. 2. GOVERNMENTWIDE PROCUREMENT POLICY RELATING TO PURCHASES FROM 
                    FEDERAL PRISON INDUSTRIES.

  Section 4124 of title 18, United States Code, is amended to read as 
follows:

``Sec. 4124. Governmentwide procurement policy relating to purchases 
                    from Federal Prison Industries

  ``(a) In General.--Purchases from Federal Prison Industries, 
Incorporated, a wholly owned Government corporation, as referred to in 
section 9101(3)(E) of title 31, may be made by a Federal department or 
agency only in accordance with this section.
  ``(b) Solicitation and Evaluation of Offers and Contract Awards.--
(1)(A) If a procurement activity of a Federal department or agency has 
a requirement for a specific product or service that is authorized to 
be offered for sale by Federal Prison Industries, in accordance with 
section 4122 of this title, and is listed in the catalog referred to in 
subsection (g), the procurement activity shall solicit an offer from 
Federal Prison Industries, if the purchase is expected to be in excess 
of the micro-purchase threshold (as defined by section 32(f) of the 
Office of Federal Procurement Policy Act (41 U.S.C. 428(f))).
  ``(B) The requirements of subparagraph (A) shall also apply to a 
procurement that a Federal department or agency intends to meet by 
placing an order against a contract maintained by the General Services 
Administration under the Multiple Award Schedule Contracts Program.
  ``(C) Federal Prison Industries, upon its request, shall be listed on 
any Schedule, referred to in subparagraph (B), as offering products or 
services which Federal Prison Industries believes to be comparable to 
those products and services being offered by commercial contractors 
through the Multiple Award Schedule Contracts Program.
  ``(2) A contract award for such product or service shall be made 
using competitive procedures in accordance with the applicable 
evaluation factors, unless a determination is made by the Attorney 
General pursuant to paragraph (3) or an award using other than 
competitive procedures is authorized pursuant to paragraph (7).
  ``(3) The procurement activity shall negotiate with Federal Prison 
Industries on a noncompetitive basis for the award of a contract if the 
Attorney General determines that--
          ``(A) Federal Prison Industries cannot reasonably expect fair 
        consideration to receive the contract award on a competitive 
        basis; and
          ``(B) the contract award is necessary to maintain work 
        opportunities otherwise unavailable at the penal or 
        correctional facility at which the contract is to be performed 
        to prevent circumstances that could reasonably be expected to 
        significantly endanger the safe and effective administration of 
        such facility.
  ``(4) Except in the case of an award to be made pursuant to paragraph 
(3), a contract award shall be made with Federal Prison Industries only 
if the contracting officer for the procurement activity determines 
that--
          ``(A) the specific product or service to be furnished will 
        meet the requirements of the procurement activity (including 
        any applicable prequalification requirements and all specified 
        commercial or governmental standards pertaining to quality, 
        testing, safety, serviceability, and warranties);
          ``(B) timely performance of the contract can be reasonably 
        expected; and
          ``(C) the contract price does not exceed a current market 
        price.
  ``(5) A determination by the Attorney General pursuant to paragraph 
(3) shall be--
          ``(A) supported by specific findings by the warden of the 
        penal or correctional institution at which a Federal Prison 
        Industries workshop is scheduled to perform the contract;
          ``(B) supported by specific findings by Federal Prison 
        Industries regarding why it does not expect to win the contract 
        on a competitive basis; and
          ``(C) made and reported in the same manner as a determination 
        made pursuant to section 303(c)(7) of the Federal Property and 
        Administrative Services Act of 1949 (41 U.S.C. 253(c)(7)).
  ``(6) If the Attorney General has not made the determination 
described in paragraph (3) within 30 days after Federal Prison 
Industries has been informed of a contracting opportunity by a 
procurement activity, the procurement activity may proceed to conduct a 
procurement for the product or service in accordance with the 
procedures generally applicable to such procurements by the procurement 
activity.
  ``(7) A contract award may be made to Federal Prison Industries using 
other than competitive procedures if such product or service is only 
available from Federal Prison Industries and the contract may be 
awarded under the authority of section 2304(c)(1) of title 10 or 
section 303(c) of the Federal Property and Administrative Services Act 
of 1949 (41 U.S.C. 253(c)(1)), as may be applicable, and pursuant to 
the justification and approval requirements relating to such 
noncompetitive procurements specified by law and the Governmentwide 
Federal Acquisition Regulation.
  ``(8) A contract award may be made to Federal Prison Industries using 
other than competitive procedures by the Federal Bureau of Prisons.
  ``(9) A solicitation for a contract shall first be made to Federal 
Prison Industries using other than competitive procedures if the 
product or service to be acquired would otherwise be furnished by a 
contractor performing the work outside of the United States.
  ``(c) Offers From Federal Prison Industries.--(1) A timely offer 
received from Federal Prison Industries to furnish a product or service 
to a Federal department or agency shall be considered for award without 
limitation as to the dollar value of the proposed purchase, unless the 
contract opportunity has been reserved for competition exclusively 
among small business concerns pursuant to section 15(a) of the Small 
Business Act (15 U.S.C. 644(a)) and its implementing regulations.
  ``(2) Any offer made by Federal Prison Industries to furnish a 
product or service may exclude from the offer the price of the 
following:
          ``(A) The costs related to security of the facilities at 
        which the contract will be performed.
          ``(B) The costs of educating and training the prison work 
        force performing the contract.
          ``(C) Excess capital costs of machinery and excess 
        inventories used within a prison environment that are the 
        result of the unique environment of prison life.
          ``(D) Other costs of performing the contract resulting from 
        the unique environment of prison facilities.
  ``(d) Performance by Federal Prison Industries.--Federal Prison 
Industries shall perform its contractual obligations under a contract 
awarded by a Federal department or agency to the same extent as any 
other contractor.
  ``(e) Finality of Contracting Officer's Decision.--(1) A decision by 
a contracting officer regarding the award of a contract to Federal 
Prison Industries or relating to the performance of such contract shall 
be final, unless reversed on appeal pursuant to paragraph (2) or (3).
  ``(2)(A) The Chief Operating Officer of Federal Prison Industries may 
protest a decision by a contracting officer not to award a contract to 
Federal Prison Industries pursuant to subsection (b)(4), in accordance 
with section 33.103, (Protests to the agency) of the Federal 
Acquisition Regulation (48 C.F.R. part 33.103).
  ``(B) In the event of an adverse decision of a protest filed pursuant 
to subparagraph (A), the Assistant Attorney General for Administration 
may request a reconsideration of such adverse decision by the head of 
the Federal agency or department, which shall be considered de novo and 
the decision issued by such agency head on a non-delegable basis. Such 
decision upon reconsideration by the agency head shall be final.
  ``(3) A dispute between Federal Prison Industries and a procurement 
activity regarding performance of a contract shall be subject to--
          ``(A) alternative means of dispute resolution pursuant to 
        subchapter IV of chapter 5 of title 5; or
          ``(B) final resolution by the board of contract appeals 
        having jurisdiction over the procurement activity's contract 
        performance disputes pursuant to the Contract Disputes Act of 
        1978 (41 U.S.C. 601 et seq.).
  ``(f) Reporting of Purchases.--Each Federal department or agency 
shall report purchases from Federal Prison Industries to the Federal 
Procurement Data System (as referred to in section 6(d)(4) of the 
Office of Federal Procurement Policy Act (41 U.S.C. 405(d)(4))) in the 
same manner as it reports to such System any acquisition in an amount 
in excess of the simplified acquisition threshold (as defined by 
section 4(11) of the Office of Federal Procurement Policy Act (41 
U.S.C. 403(11))).
  ``(g) Catalog of Products.--Federal Prison Industries shall publish 
and maintain a catalog of all specific products and services that it is 
authorized to offer for sale. Such catalog shall be periodically 
revised as products and services are added or deleted by its board of 
directors (in accordance with section 4122(b) of this title).
  ``(h) Compliance With Standards.--Federal Prison Industries shall be 
subject to Federal occupational, health, and safety standards with 
respect to the operation of its industrial operations.''.

SEC. 3. PUBLIC PARTICIPATION REGARDING EXPANSION PROPOSALS BY FEDERAL 
                    PRISON INDUSTRIES.

  Section 4122(b) of title 18, United States Code, is amended--
          (1) by redesignating paragraph (6) as paragraph (13); and
          (2) by striking paragraphs (4) and (5) and inserting the 
        following new paragraphs:
  ``(4)(A) Federal Prison Industries is authorized to offer a new 
specific product or furnish a new specific service in response to a 
competitive solicitation or other purchase request issued by a Federal 
department or agency. No subsequent offering of such product or service 
may be made by Federal Prison Industries until the board of directors 
has approved the offering for sale of such new specific product or new 
specific service, in conformance with the requirements of paragraphs 
(5) through (9).
  ``(B) Federal Prison Industries may produce a product or furnish a 
service in excess of the authorized level of production for such 
product or service, in response to an order placed pursuant to an 
existing contract with a Federal department or agency, if the agency's 
need for the product or service is of such an urgency that it would 
justify the use of procedures other than competitive procedures 
pursuant to section 2304(c)(2) of title 10 or section 303(c)(2) of the 
Federal Property and Administrative Services Act of 1949 (41 U.S.C. 
253(c)(2)), as may be applicable.
  ``(5) A decision to authorize Federal Prison Industries to offer a 
new specific product or specific service or to expand the production of 
an existing product or service for sale to the Federal Government shall 
be made by its board of directors in conformance with the requirements 
of subsections (b), (c), (d), and (e) of section 553 of title 5, and 
this chapter.
  ``(6)(A) Whenever Federal Prison Industries proposes to offer for 
sale a new specific product or specific service or to expand production 
of a currently authorized product or service, the Chief Operating 
Officer of Federal Prison Industries shall submit an appropriate 
proposal to the board of directors and obtain the board's approval 
before initiating any such expansion. The proposal submitted to the 
board shall include a detailed analysis of the probable impact of the 
proposed expansion of sales within the Federal market by Federal Prison 
Industries on private sector firms and their non-inmate workers.
  ``(B)(i) The analysis required by subparagraph (A) shall be performed 
by an interagency team on a reimbursable basis or by a private 
contractor paid by Federal Prison Industries.
  ``(ii) If the analysis is to be performed by an interagency team, 
such team shall be led by the Administrator of the Small Business 
Administration or the designee of such officer with representatives of 
the Department of Labor, the Department of Commerce, and the Federal 
Procurement Data Center.
  ``(iii) If the analysis is to be performed by a private contractor, 
the selection of the contractor and the administration of the contract 
shall be conducted by one of the entities referenced in clause (ii) as 
an independent executive agent for the board of directors. Maximum 
consideration shall be given to any proposed statement of work 
furnished by the Chief Operating Officer of Federal Prison Industries.
  ``(C) The analysis required by subparagraph (A) shall identify and 
consider--
          ``(i) the number of vendors that currently meet the 
        requirements of the Federal Government for the specific product 
        or specific service;
          ``(ii) the proportion of the Federal Government market for 
        the specific product or specific service currently furnished by 
        small businesses during the previous 3 fiscal years;
          ``(iii) the share of the Federal market for the specific 
        product or specific service projected for Federal Prison 
        Industries for the fiscal year in which production or 
        performance will commence or expand and the subsequent 4 fiscal 
        years;
          ``(iv) whether the industry producing the specific product or 
        specific service in the private sector--
                  ``(I) has an unemployment rate higher than the 
                national average; or
                  ``(II) has a rate of unemployment for workers that 
                has consistently shown an increase during the previous 
                5 years;
          ``(v) whether the specific product is an import-sensitive 
        product;
          ``(vi) the requirements of the Federal Government and the 
        demands of entities other than the Federal Government for the 
        specific product or service during the previous 3 fiscal years;
          ``(vii) the projected growth or decline in the demand of the 
        Federal Government for the specific product or specific 
        service;
          ``(viii) the capability of the projected demand of the 
        Federal Government for the specific product or service to 
        sustain both Federal Prison Industries and private vendors; and
          ``(ix) whether authorizing the production of the new product 
        or performance of a new service will provide inmates with the 
        maximum opportunity to acquire knowledge and skill in trades 
        and occupations that will provide them with a means of earning 
        a livelihood upon release.
  ``(D)(i) The board of directors may not approve a proposal to 
authorize the production and sale of a new specific product or 
continued sale of a previously authorized product unless--
          ``(I) the product to be furnished is a prison-made product; 
        or
          ``(II) the service to be furnished is to be performed by 
        inmate workers.
  ``(ii) The board of directors may not approve a proposal to authorize 
the production and sale of a new prison-made product or to expand 
production of a currently authorized product if the product is--
          ``(I) produced in the private sector by an industry which has 
        reflected during the previous year an unemployment rate above 
        the national average; or
          ``(II) an import-sensitive product.
  ``(iii) The board of directors may not approve a proposal for inmates 
to provide a service in which an inmate worker has access to--
          ``(I) personal or financial information about individual 
        private citizens, including information relating to such 
        person's real property, however described, without giving prior 
        notice to such persons or class of persons to the greatest 
        extent practicable;
          ``(II) geographic data regarding the location of surface and 
        subsurface infrastructure providing communications, water and 
        electrical power distribution, pipelines for the distribution 
        of natural gas, bulk petroleum products and other commodities, 
        and other utilities; or
          ``(III) data that is classified.
  ``(iv)(I) Federal Prison Industries is prohibited from furnishing 
through inmate labor construction services, unless to be performed 
within a Federal correctional institution pursuant to the participation 
of an inmate in an apprenticeship or other vocational education program 
teaching the skills of the various building trades.
  ``(II) For purposes of this clause, the term `construction' has the 
meaning given such term by section 2.101 of the Federal Acquisition 
Regulation (48 C.F.R. part 2.101), as in effect on June 1, 2004, 
including the repair, alteration, or maintenance of real property in 
being.
  ``(7) To provide further opportunities for participation by 
interested parties, the board of directors shall--
          ``(A) give additional notice of a proposal to authorize the 
        production and sale of a new product or service, or expand the 
        production of a currently authorized product or service, in a 
        publication designed to most effectively provide notice to 
        private vendors and labor unions representing private sector 
        workers who could reasonably be expected to be affected by 
        approval of the proposal, which notice shall offer to furnish 
        copies of the analysis required by paragraph (6) and shall 
        solicit comment on the analysis;
          ``(B) solicit comments on the analysis required by paragraph 
        (6) from trade associations representing vendors and labor 
        unions representing private sector workers who could reasonably 
        be expected to be affected by approval of the proposal to 
        authorize the production and sale of a new product or service 
        (or expand the production of a currently authorized product or 
        service); and
          ``(C) afford an opportunity, on request, for a representative 
        of an established trade association, labor union, or other 
        private sector representatives to present comments on the 
        proposal directly to the board of directors.
  ``(8) The board of directors shall be provided copies of all comments 
received on the expansion proposal.
  ``(9) Based on the comments received on the initial expansion 
proposal, the Chief Operating Officer of Federal Prison Industries may 
provide the board of directors a revised expansion proposal. If such 
revised proposal provides for expansion of inmate work opportunities in 
an industry different from that initially proposed, such revised 
proposal shall reflect the analysis required by paragraph (6)(C) and be 
subject to the public comment requirements of paragraph (7).
  ``(10) The board of directors shall consider a proposal to authorize 
the sale of a new specific product or specific service (or to expand 
the volume of sales for a currently authorized product or service) and 
take any action with respect to such proposal, during a meeting that is 
open to the public, unless closed pursuant to section 552(b) of title 
5.
  ``(11) In conformance with the requirements of paragraph (10) of this 
subsection, the board of directors may--
          ``(A) authorize the donation of products produced or services 
        furnished by Federal industries and available for sale;
          ``(B) authorize the production of a new specific product or 
        the furnishing of a new specific service for donation; or
          ``(C) authorize a proposal to expand production of a 
        currently authorized specific product or specific service in an 
        amount in excess of a reasonable share of the market for such 
        product or service, if--
                  ``(i) a Federal agency or department, purchasing such 
                product or service, has requested that Federal Prison 
                Industries be authorized to furnish such product or 
                service in amounts that are needed by such agency or 
                department; or
                  ``(ii) the proposal is justified for other good cause 
                and supported by at least two-thirds of the appointed 
                members of the board.''.

SEC. 4. TRANSITIONAL MANDATORY SOURCE AUTHORITY.

  (a) In General.--Notwithstanding the requirements of section 4124 of 
title 18, United States Code (as amended by section 2 of this Act), a 
Federal department or agency having a requirement for a product that is 
authorized for sale by Federal Prison Industries and is listed in its 
catalog (referred to in section 4124(g) of title 18, United States 
Code) shall first solicit an offer from Federal Prison Industries and 
make purchases on a noncompetitive basis in accordance with this 
section or in accordance with section 2410n of title 10, United States 
Code, or section 318 of title III of the Federal Property and 
Administrative Services Act of 1949 (as added by subsection (i)).
  (b) Preferential Source Status.--Subject to the limitations of 
subsection (d), a contract award shall be made on a noncompetitive 
basis to Federal Prison Industries if the contracting officer for the 
procurement activity determines that--
          (1) the product offered by Federal Prison Industries will 
        meet the requirements of the procurement activity (including 
        commercial or governmental standards or specifications 
        pertaining to design, performance, testing, safety, 
        serviceability, and warranties as may be imposed upon a private 
        sector supplier of the type being offered by Federal Prison 
        Industries);
          (2) timely performance of the contract by Federal Prison 
        Industries can be reasonably expected; and
          (3) the negotiated price does not exceed a fair and 
        reasonable price.
  (c) Contractual Terms.--The terms and conditions of the contract and 
the price to be paid to Federal Prison Industries shall be determined 
by negotiation between Federal Prison Industries and the Federal agency 
making the purchase. The negotiated price shall not exceed a fair and 
reasonable price determined in accordance with the procedures of the 
Federal Acquisition Regulation.
  (d) Performance of Contractual Obligations.--
          (1) In general.--Federal Prison Industries shall perform the 
        obligations of the contract negotiated pursuant to subsection 
        (c).
          (2) Performance disputes.--If the head of the contracting 
        activity and the Chief Operating Officer of Federal Prison 
        Industries are unable to resolve a contract performance dispute 
        to their mutual satisfaction, such dispute shall be resolved 
        pursuant to section 4124(e)(3) of title 18, United States Code 
        (as added by section 2 of this Act).
  (e) Limitations on Use of Authority.--
          (1) In general.--As a percentage of the sales made by Federal 
        Prison Industries during the base period, the total dollar 
        value of sales to the Government made pursuant to subsection 
        (b) and subsection (c) of this section shall not exceed--
                  (A) 90 percent in fiscal year 2007;
                  (B) 85 percent in fiscal year 2008;
                  (C) 70 percent in fiscal year 2009;
                  (D) 55 percent in fiscal year 2010; and
                  (E) 40 percent in fiscal year 2011.
          (2) Sales within various business sectors.--Use of the 
        authority provided by subsections (b) and (c) shall not result 
        in sales by Federal Prison Industries to the Government that 
        are in excess of its total sales during the base year for each 
        business sector.
          (3) Limitations relating to specific products.--Use of the 
        authorities provided by subsections (b) and (c) shall not 
        result in contract awards to Federal Prison Industries that are 
        in excess of its total sales during the base period for such 
        product.
          (4) Changes in design specifications.--If a buying agency 
        directs a change to the design specification for a specific 
        product, the costs associated with the implementation of such 
        specification change by Federal Prison Industries shall not be 
        considered for the purposes of computing sales by Federal 
        Prison Industries for the purposes of paragraphs (2) and (3).
  (f) Additional Authority to Sustain Inmate Employment.--During the 
period specified in subsection (g), the authority of section 
4122(b)(11)(C)(ii) of title 18, United States Code (as added by section 
3), may be used by the Board to sustain inmate employment.
  (g) Duration of Authority.--The preferential contracting authorities 
authorized by subsection (b) may not be used on or after October 1, 
2011, and become effective on the effective date of the final 
regulations issued pursuant to section 17.
  (h) Definitions.--For the purposes of this section--
          (1) the term ``base period'' means the total sales of Federal 
        Prison Industries during the period October 1, 2003, and 
        September 30, 2004 (Fiscal Year 2004);
          (2) the term ``business sectors'' means the seven product/
        service business groups identified in the 2004 Federal Prison 
        Industries annual report as the Clothing and Textiles Business 
        Group, the Electronics Business Group, the Fleet Management and 
        Vehicular Components Business Group, the Industrial Products 
        Business Group, the Office Furniture Business Group, the 
        Recycling Activities Business Group, and the Services Business 
        Group; and
          (3) the term ``fair and reasonable price'' shall be given the 
        same meaning as, and be determined pursuant to, part 15.8 of 
        the Federal Acquisition Regulation (48 C.F.R. 15.8).
  (i) Finding by Attorney General With Respect to Public Safety.--(1) 
Not later than 60 days prior to the end of each fiscal year specified 
in subsection (e)(1), the Attorney General shall make a finding 
regarding the effects of the percentage limitation imposed by such 
subsection for such fiscal year and the likely effects of the 
limitation imposed by such subsection for the following fiscal year.
  (2) The Attorney General's finding shall include a determination 
whether such limitation has resulted or is likely to result in a 
substantial reduction in inmate industrial employment and whether such 
reductions, if any, present a significant risk of adverse effects on 
safe prison operation or public safety.
  (3) If the Attorney General finds a significant risk of adverse 
effects on either safe prison management or public safety, he shall so 
advise the Congress.
  (4) In advising the Congress pursuant to paragraph (3), the Attorney 
General shall make recommendations for additional authorizations of 
appropriations to provide additional alternative inmate rehabilitative 
opportunities and additional correctional staffing, as may be 
appropriate.
  (j) Procedural Requirements for Civilian Agencies Relating to 
Products of Federal Prison Industries.--Title III of the Federal 
Property and Administrative Services Act of 1949 (41 U.S.C. 251 et 
seq.) is amended by adding at the end the following new section:

``SEC. 318. PRODUCTS OF FEDERAL PRISON INDUSTRIES: PROCEDURAL 
                    REQUIREMENTS.

  ``(a) Market Research.--Before purchasing a product listed in the 
latest edition of the Federal Prison Industries catalog under section 
4124(g) of title 18, United States Code, the head of an executive 
agency shall conduct market research to determine whether the Federal 
Prison Industries product is comparable to products available from the 
private sector that best meet the executive agency's needs in terms of 
price, quality, and time of delivery.
  ``(b) Competition Requirement.--If the head of the executive agency 
determines that a Federal Prison Industries product is not comparable 
in price, quality, or time of delivery to products available from the 
private sector that best meet the executive agency's needs in terms of 
price, quality, and time of delivery, the agency head shall use 
competitive procedures for the procurement of the product or shall make 
an individual purchase under a multiple award contract. In conducting 
such a competition or making such a purchase, the agency head shall 
consider a timely offer from Federal Prison Industries.
  ``(c) Implementation by Head of Executive Agency.--The head of an 
executive agency shall ensure that--
          ``(1) the executive agency does not purchase a Federal Prison 
        Industries product or service unless a contracting officer of 
        the agency determines that the product or service is comparable 
        to products or services available from the private sector that 
        best meet the agency's needs in terms of price, quality, and 
        time of delivery; and
          ``(2) Federal Prison Industries performs its contractual 
        obligations to the same extent as any other contractor for the 
        executive agency.
  ``(d) Market Research Determination Not Subject to Review.--A 
determination by a contracting officer regarding whether a product or 
service offered by Federal Prison Industries is comparable to products 
or services available from the private sector that best meet an 
executive agency's needs in terms of price, quality, and time of 
delivery shall not be subject to review pursuant to section 4124(b) of 
title 18.
  ``(e) Performance as a Subcontractor.--(1) A contractor or potential 
contractor of an executive agency may not be required to use Federal 
Prison Industries as a subcontractor or supplier of products or 
provider of services for the performance of a contract of the executive 
agency by any means, including means such as--
          ``(A) a contract solicitation provision requiring a 
        contractor to offer to make use of products or services of 
        Federal Prison Industries in the performance of the contract;
          ``(B) a contract specification requiring the contractor to 
        use specific products or services (or classes of products or 
        services) offered by Federal Prison Industries in the 
        performance of the contract; or
          ``(C) any contract modification directing the use of products 
        or services of Federal Prison Industries in the performance of 
        the contract.
  ``(2) In this subsection, the term `contractor', with respect to a 
contract, includes a subcontractor at any tier under the contract.
  ``(f) Protection of Classified and Sensitive Information.--The head 
of an executive agency may not enter into any contract with Federal 
Prison Industries under which an inmate worker would have access to--
          ``(1) any data that is classified;
          ``(2) any geographic data regarding the location of--
                  ``(A) surface and subsurface infrastructure providing 
                communications or water or electrical power 
                distribution;
                  ``(B) pipelines for the distribution of natural gas, 
                bulk petroleum products, or other commodities; or
                  ``(C) other utilities; or
          ``(3) any personal or financial information about any 
        individual private citizen, including information relating to 
        such person's real property however described, without the 
        prior consent of the individual.
  ``(g) Definitions.--In this section:
          ``(1) The term `competitive procedures' has the meaning given 
        such term in section 4(5) of the Office of Federal Procurement 
        Policy Act (41 U.S.C. 403(5)).
          ``(2) The term `market research' means obtaining specific 
        information about the price, quality, and time of delivery of 
        products available in the private sector through a variety of 
        means, which may include--
                  ``(A) contacting knowledgeable individuals in 
                government and industry;
                  ``(B) interactive communication among industry, 
                acquisition personnel, and customers; and
                  ``(C) interchange meetings or pre-solicitation 
                conferences with potential offerors.''.

SEC. 5. AUTHORITY TO PERFORM AS A FEDERAL SUBCONTRACTOR.

  (a) In General.--Federal Prison Industries is authorized to enter 
into a contract with a Federal contractor (or a subcontractor of such 
contractor at any tier) to produce products as a subcontractor or 
supplier in the performance of a Federal procurement contract. The use 
of Federal Prison Industries as a subcontractor or supplier shall be a 
wholly voluntary business decision by the Federal prime contractor or 
subcontractor, subject to any prior approval of subcontractors or 
suppliers by the contracting officer which may be imposed by the 
Federal Acquisition Regulation or by the contract.
  (b) Limitations on Use.--Federal Prison Industries is prohibited from 
being a subcontractor or supplier at any tier if--
          (1) the product or service is to be acquired by a Federal 
        department or agency pursuant to section 3 of the Javits-
        Wagner-O'Day Act (41 U.S.C. 48); or
          (2) the product to be acquired by the Federal department or 
        agency is subject to section 2533a of title 10, United States 
        Code.
  (c) Commercial Sales Prohibited.--The authority provided by 
subsection (a) shall not result, either directly or indirectly, in the 
sale in the commercial market of a product or service resulting from 
the labor of Federal inmate workers in violation of section 1761(a) of 
title 18, United States Code. A Federal contractor (or subcontractor at 
any tier) using Federal Prison Industries as a subcontractor or 
supplier in furnishing a commercial product pursuant to a Federal 
contract shall implement appropriate management procedures to prevent 
introducing an inmate-produced product into the commercial market.
  (d) Prohibitions on Mandating Subcontracting With Federal Prison 
Industries.--Except as authorized under the Federal Acquisition 
Regulation, the use of Federal Prison Industries as a subcontractor or 
supplier of products or provider of services shall not be imposed upon 
prospective or actual Federal prime contractors or a subcontractors at 
any tier by means of--
          (1) a contract solicitation provision requiring a contractor 
        to offer to make use of Federal Prison Industries, its products 
        or services;
          (2) specifications requiring the contractor to use specific 
        products or services (or classes of products or services) 
        offered by Federal Prison Industries in the performance of the 
        contract;
          (3) any contract modification directing the use of Federal 
        Prison Industries, its products or services; or
          (4) any other means.

SEC. 6. INMATE WAGES AND DEDUCTIONS.

  Section 4122(b) of title 18, United States Code (as amended by 
section 3 of this Act), is further amended by adding after paragraph 
(11) a new paragraph (12) as follows:
  ``(12)(A) The Board of Directors of Federal Prison Industries shall 
prescribe the rates of hourly wages to be paid inmates performing work 
for or through Federal Prison Industries. The Director of the Federal 
Bureau of Prisons shall prescribe the rates of hourly wages for other 
work assignments within the various Federal correctional institutions. 
In the case of an inmate whose term of imprisonment is to expire in not 
more than 2 years, wages shall be earned at an hourly rate of not less 
than $2.50, but paid at the same rate and in the same manner as to any 
other inmate, and any amount earned but not paid shall be held in trust 
and paid only upon the actual expiration of the term of imprisonment.
  ``(B) The various inmate wage rates shall be reviewed and considered 
for increase on not less than a biannual basis.
  ``(C) The Board of Directors of Federal Prison Industries shall--
          ``(i) not later than September 30, 2008, increase the maximum 
        wage rate for inmates performing work for or through Federal 
        Prison Industries to an amount equal to 50 percent of the 
        minimum wage prescribed by section 6(a)(1) of the Fair Labor 
        Standards Act of 1938 (29 U.S.C. 206(a)(1)); and
          ``(ii) not later than September 30, 2013, increase such 
        maximum wage rate to an amount equal to such minimum wage.
  ``(D) Wages earned by an inmate worker shall be paid in the name of 
the inmate. Deductions, aggregating to not more than 80 percent of 
gross wages, shall be taken from the wages due for--
          ``(i) applicable taxes (Federal, State, and local);
          ``(ii) payment of fines and restitution pursuant to court 
        order;
          ``(iii) payment of additional restitution for victims of the 
        inmate's crimes (at a rate not less than 10 percent of gross 
        wages);
          ``(iv) allocations for support of the inmate's family 
        pursuant to statute, court order, or agreement with the inmate;
          ``(v) allocations to a fund in the inmate's name to 
        facilitate such inmate's assimilation back into society, 
        payable at the conclusion of incarceration; and
          ``(vi) such other deductions as may be specified by the 
        Director of the Bureau of Prisons.
  ``(E) Each inmate worker working for Federal Prison Industries shall 
indicate in writing that such person--
          ``(i) is participating voluntarily; and
          ``(ii) understands and agrees to the wages to be paid and 
        deductions to be taken from such wages.''.

SEC. 7. CLARIFYING AMENDMENT RELATING TO SERVICES.

  (a) In General.--Section 1761 of title 18, United States Code, is 
amended in subsection (a) and (c) by striking ``goods, wares, or 
merchandise manufactured, produced, or mined'' each place it appears 
and inserting ``products manufactured, services furnished, or minerals 
mined''.
  (b) Completion of Existing Agreements.--Any prisoner work program 
operated by a prison or jail of a State or local jurisdiction of a 
State which is providing services for the commercial market through 
inmate labor on October 1, 2004, may continue to provide such 
commercial services until--
          (1) the expiration date specified in the contract or other 
        agreement with a commercial partner on October 1, 2004, or
          (2) until September 30, 2010, if the prison work program is 
        directly furnishing the services to the commercial market.
  (c) Approval Required for Long-Term Operation.--A prison work program 
operated by a correctional institution operated by a State or local 
jurisdiction of a State may continue to provide inmate labor to furnish 
services for sale in the commercial market after the dates specified in 
subsection (b) if such program has been certified pursuant to section 
1761(c)(1) of title 18, United States Code, and is in compliance with 
the requirements of such subsection and its implementing regulations.
  (d) Existing Work Opportunities for Federal Inmates.--Any private 
for-profit business entity having an agreement with Federal Prison 
Industries in effect on the date of enactment of this Act, under which 
Federal inmates are furnishing services that are being introduced into 
the commercial market, may continue to furnish such services for the 
duration of the term of such agreement.
  (e) Additional Amendment.--Section 1761 of title 18, United States 
Code, is further amended--
          (1) by redesignating subsection (d) as subsection (e); and
          (2) by inserting after subsection (c) the following new 
        subsection:
  ``(d) This section shall not apply to services performed as part of 
an inmate work program conducted by a State or local government to 
disassemble, scrap, and recycle products, other than electronic 
products, that would otherwise be disposed of in a landfill. Recovered 
scrap from such program may be sold.''.

SEC. 8. CONFORMING AMENDMENT.

  Section 4122(a) of title 18, United States Code, is amended by 
striking ``production of commodities'' and inserting ``production of 
products or furnishing of services''.

SEC. 9. RULES OF CONSTRUCTION RELATING TO CHAPTER 307.

  Chapter 307 of title 18, United States Code, is further amended by 
adding at the end the following:

``Sec. 4130. Construction of provisions

  ``Nothing in this chapter shall be construed--
          ``(1) to establish an entitlement of any inmate to--
                  ``(A) employment in a Federal Prison Industries 
                facility; or
                  ``(B) any particular wage, compensation, or benefit 
                on demand, except as otherwise specifically provided by 
                law or regulation;
          ``(2) to establish that inmates are employees for the 
        purposes of any law or program; or
          ``(3) to establish any cause of action by or on behalf of any 
        inmate against the United States or any officer, employee, or 
        contractor thereof.''.

SEC. 10. PROVIDING ADDITIONAL REHABILITATIVE OPPORTUNITIES FOR INMATES.

  (a) Additional Educational, Training, and Release-Preparation 
Opportunities.--
          (1) Program established.--There is hereby established the 
        Enhanced In-Prison Educational and Vocational Assessment and 
        Training Program within the Federal Bureau of Prisons.
          (2) Comprehensive program.--In addition to such other 
        components as the Director of the Bureau of Prisons deems 
        appropriate to reduce inmate idleness and better prepare 
        inmates for a successful reentry into the community upon 
        release, the program shall provide--
                  (A) in-prison assessments of inmates' needs and 
                aptitudes;
                  (B) a full range of educational opportunities;
                  (C) vocational training and apprenticeships; and
                  (D) comprehensive release-readiness preparation.
          (3) Authorization of appropriations.--For the purposes of 
        carrying out the program established by paragraph (1), 
        $75,000,000 is authorized for each fiscal year after fiscal 
        year 2008, to remain available until expended. It is the sense 
        of Congress that Federal Prison Industries should use some of 
        its net earnings to accomplish the purposes of the program.
          (4) Schedule for implementation.--All components of the 
        program shall be established--
                  (A) in at least 25 percent of all Federal prisons not 
                later than 2 years after the date of the enactment of 
                this Act;
                  (B) in at least 50 percent of all Federal prisons not 
                later than 4 years after such date of enactment;
                  (C) in at least 75 percent of all Federal prisons not 
                later than 6 years after such date of enactment; and
                  (D) in all Federal prisons not later than 8 years 
                after such date of enactment.
  (b) Additional Inmate Work Opportunities Through Public Service 
Activities.--
          (1) In general.--Chapter 307 of title 18, United States Code, 
        is further amended by inserting after section 4124 the 
        following new section:

``Sec. 4124a. Additional inmate work opportunities through public 
                    service activities

  ``(a) In General.--Inmates with work assignments within Federal 
Prison Industries may perform work for an eligible entity pursuant to 
an agreement between such entity and the Inmate Work Training 
Administrator in accordance with the requirements of this section.
  ``(b) Definition of Eligible Entities.--For the purposes of this 
section, the term `eligible entity' means an entity--
          ``(1) that is an organization described in section 501(c)(3) 
        of the Internal Revenue Code of 1986 and exempt from taxation 
        under section 501(a) of such Code and that has been such an 
        organization for a period of not less than 36 months prior to 
        inclusion in an agreement under this section;
          ``(2) that is a religious organization described in section 
        501(d) of such Code and exempt from taxation under section 
        501(a) of such Code; or
          ``(3) that is a unit of local government, a school district, 
        or another special purpose district.
  ``(c) Inmate Work Training Administrator.--There is hereby 
established the position of Inmate Work Training Administrator, who 
shall be responsible for fostering the creation of alternative inmate 
work opportunities authorized by this section. The Administrator shall 
be designated by the Chief Executive Officer of Federal Prison 
Industries, with the approval of the Board of Directors, and be under 
the supervision of the Chief Operating Officer, but may directly report 
to the Board.
  ``(d) Proposed Agreements.--An eligible entity seeking to enter into 
an agreement pursuant to subsection (a) shall submit a detailed 
proposal to the Inmate Work Training Administrator. Each such agreement 
shall specify--
          ``(1) types of work to be performed;
          ``(2) the proposed duration of the agreement, specified in 
        terms of a base year and number of option years;
          ``(3) the number of inmate workers expected to be employed in 
        the specified types of work during the various phases of the 
        agreement;
          ``(4) the wage rates proposed to be paid to various classes 
        of inmate workers; and
          ``(5) the facilities, services and personnel (other than 
        correctional personnel dedicated to the security of the inmate 
        workers) to be furnished by Federal Prison Industries or the 
        Bureau of Prisons and the rates of reimbursement, if any, for 
        such facilities, services, and personnel.
  ``(e) Representations.--
          ``(1) Eleemosynary work activities.--Each proposed agreement 
        shall be accompanied by a written certification by the chief 
        executive officer of the eligible entity that--
                  ``(A) the work to be performed by the inmate workers 
                will be limited to the eleemosynary work of such entity 
                in the case of an entity described in paragraph (1) or 
                (2) of subsection (b);
                  ``(B) the work would not be performed in the United 
                States but for the availability of the inmate workers; 
                and
                  ``(C) the work performed by the inmate workers will 
                not result, either directly or indirectly, in the 
                production of a new product or the furnishing of a 
                service that is to be offered for other than resale or 
                donation by the eligible entity or any affiliate of the 
                such entity.
          ``(2) Protections for non-inmate workers.--Each proposed 
        agreement shall also be accompanied by a written certification 
        by the chief executive officer of the eligible entity that--
                  ``(A) no non-inmate employee (including any person 
                performing work activities for such governmental entity 
                pursuant to section 607 of subchapter IV of the Social 
                Security Act (42 U.S.C. 607)) of the eligible entity 
                (or any affiliate of the entity) working in the United 
                States will have his or her job abolished or work hours 
                reduced as a result of the entity being authorized to 
                utilize inmate workers; and
                  ``(B) the work to be performed by the inmate workers 
                will not supplant work currently being performed in the 
                United States by a contractor of the eligible entity.
  ``(f) Approval by Board of Directors.--
          ``(1) In general.--Each such proposed agreement shall be 
        presented to the Board of Directors, be subject to the same 
        opportunities for public comment, and be publicly considered 
        and acted upon by the Board in a manner comparable to that 
        required by paragraphs (7) and (8) of section 4122(b).
          ``(2) Matters to be considered.--In determining whether to 
        approve a proposed agreement, the Board shall--
                  ``(A) give priority to an agreement that provides 
                inmate work opportunities that will provide 
                participating inmates with the best prospects of 
                obtaining employment paying a livable wage upon 
                release;
                  ``(B) give priority to an agreement that provides for 
                maximum reimbursement for inmate wages and for the 
                costs of supplies and equipment needed to perform the 
                types of work to be performed;
                  ``(C) not approve an agreement that will result in 
                the displacement of non-inmate workers contrary to the 
                representations required by subsection (e)(2) as 
                determined by the Board or by the Secretary of Labor 
                (pursuant to subsection (i)); and
                  ``(D) not approve an agreement that will result, 
                either directly or indirectly, in the production of a 
                new product or the furnishing of a service for other 
                than resale by an eligible entity described in 
                paragraph (1) or (2) of subsection (b) or donation.
  ``(g) Wage Rates and Deductions From Inmate Wages.--
          ``(1) In general.--Inmate workers shall be paid wages for 
        work under the agreement at a basic hourly rate to be 
        negotiated between the eligible entity and Federal Prison 
        Industries and specified in the agreement. The wage rates set 
        by the Director of the Federal Bureau of Prisons to be paid 
        inmates for various institutional work assignments are 
        specifically authorized.
          ``(2) Payment to inmate worker and authorized deductions.--
        Wages shall be paid and deductions taken pursuant to section 
        4122(b)(12)(D).
          ``(3) Voluntary participation by inmate.--Each inmate worker 
        to be utilized by an eligible entity shall indicate in writing 
        that such person--
                  ``(A) is participating voluntarily; and
                  ``(B) understands and agrees to the wages to be paid 
                and deductions to be taken from such wages.
  ``(h) Assignment to Work Opportunities.--Assignment of inmates to 
work under an approved agreement with an eligible entity shall be 
subject to the Bureau of Prisons Program Statement Number 1040.10 (Non-
Discrimination Toward Inmates), as contained in section 551.90 of title 
28 of the Code of Federal Regulations (or any successor document).
  ``(i) Enforcement of Protections for Non-Inmate Workers.--
          ``(1) Prior to board consideration.--Upon request of any 
        interested person, the Secretary of Labor may promptly verify a 
        certification made pursuant subsection (e)(2) with respect to 
        the displacement of non-inmate workers so as to make the 
        results of such inquiry available to the Board of Directors 
        prior to the Board's consideration of the proposed agreement. 
        The Secretary and the person requesting the inquiry may make 
        recommendations to the Board regarding modifications to the 
        proposed agreement.
          ``(2) During performance.--
                  ``(A) In general.--Whenever the Secretary deems 
                appropriate, upon request or otherwise, the Secretary 
                may verify whether the actual performance of the 
                agreement is resulting in the displacement of non-
                inmate workers or the use of inmate workers in a work 
                activity not authorized under the approved agreement.
                  ``(B) Sanctions.--Whenever the Secretary determines 
                that performance of the agreement has resulted in the 
                displacement of non-inmate workers or employment of an 
                inmate worker in an unauthorized work activity, the 
                Secretary may--
                          ``(i) direct the Inmate Work Training 
                        Administrator to terminate the agreement for 
                        default, subject to the processes and appeals 
                        available to a Federal contractor whose 
                        procurement contract has been terminated for 
                        default; and
                          ``(ii) initiate proceedings to impose upon 
                        the person furnishing the certification 
                        regarding non-displacement of non-inmate 
                        workers required by subsection (d)(2)(B) any 
                        administrative, civil, and criminal sanctions 
                        as may be available.''.
          (2) Authorization of appropriation.--There is authorized to 
        be appropriated $5,000,000 for each of the fiscal years 2008 
        through 2012 for the purposes of paying the wages of inmates 
        and otherwise undertaking the maximum number of agreements with 
        eligible entities pursuant to section 4124a of title 18, United 
        States Code, as added by paragraph (1).
          (3) Sense of congress.--For purposes of sections 4124a and 
        4124b of title 18, United States Code, as added by sections 
        10(b) and 11, respectively, it is the sense of Congress that an 
        inmate training wage that is at least 50 percent of the minimum 
        wage prescribed pursuant to section 6(a)(1) of the Fair Labor 
        Standards Act of 1938 (29 U.S.C. 206(a)(1)) will facilitate 
        successful achievement of the goals of the work-based training 
        and apprenticeship program authorized under such section 4124a.
  (c) Inmate Work Opportunities in Support of Not-for-Profit 
Entities.--
          (1) Proposals for donation programs.--The Chief Operating 
        Officer of Federal Prison Industries shall develop and present 
        to the Board of Directors of Federal Prison Industries 
        proposals to have Federal Prison Industries donate products and 
        services to eligible entities that provide goods or services to 
        low-income individuals who would likely otherwise have 
        difficulty purchasing such products or services in the 
        commercial market.
          (2) Schedule for submission and consideration of donation 
        programs.--
                  (A) Initial proposals.--The Chief Operating Officer 
                shall submit the initial group of proposals for 
                programs of the type described in paragraph (1) within 
                180 days after the date of the enactment of this Act. 
                The Board of Directors of Federal Prison Industries 
                shall consider such proposals from the Chief Operating 
                Officer not later than the date that is 270 days after 
                the date of the enactment of this Act.
                  (B) Annual operating plan.--The Board of Directors of 
                Federal Prison Industries shall consider proposals by 
                the Chief Operating Officer for programs of the type 
                described in paragraph (1) as part of the annual 
                operating plan for Federal Prison Industries.
                  (C) Other proposals.--In addition to proposals 
                submitted by the Chief Operating Officer, the Board of 
                Directors may, from time to time, consider proposals 
                presented by prospective eligible entities.
          (3) Definition of eligible entities.--For the purposes of 
        this subsection, the term ``eligible entity'' means an entity--
                  (A) that is an organization described in section 
                501(c)(3) of the Internal Revenue Code of 1986 and 
                exempt from taxation under section 501(a) of such Code 
                and that has been such an organization for a period of 
                not less than 36 months prior to inclusion in a 
                proposal of the type described in paragraph (1), or
                  (B) that is a religious organization described in 
                section 501(d) of such Code and exempt from taxation 
                under section 501(a) of such Code.
          (4) Authorization of appropriations.--There are authorized to 
        be appropriated $7,000,000 for each of the fiscal years 2008 
        through 2012 for the purposes of paying the wages of inmates 
        and otherwise carrying out programs of the type described in 
        paragraph (1).
  (d) Maximizing Inmate Rehabilitative Opportunities Through Cognitive 
Abilities Assessments.--
          (1) Demonstration program authorized.--
                  (A) In general.--There is hereby established within 
                the Federal Bureau of Prisons a program to be known as 
                the ``Cognitive Abilities Assessment Demonstration 
                Program''. The purpose of the demonstration program is 
                to determine the effectiveness of a program that 
                assesses the cognitive abilities and perceptual skills 
                of Federal inmates to maximize the benefits of various 
                rehabilitative opportunities designed to prepare each 
                inmate for a successful return to society and reduce 
                recidivism. The demonstration program shall be 
                undertaken by a contractor with a demonstrated record 
                of enabling the behavioral and academic improvement of 
                adults through the use of research-based systems that 
                maximize the development of both the cognitive and 
                perceptual capabilities of a participating individual, 
                including adults in a correctional setting.
                  (B) Scope of demonstration program.--The 
                demonstration program shall to the maximum extent 
                practicable, be--
                          (i) conducted during a period of three 
                        consecutive fiscal years, commencing during 
                        fiscal year 2008;
                          (ii) conducted at 12 Federal correctional 
                        institutions; and
                          (iii) offered to 6,000 inmates, who are 
                        categorized as minimum security or less, and 
                        are within five years of release.
                  (C) Report on results of program.--Not later than 60 
                days after completion of the demonstration program, the 
                Director shall submit to Congress a report on the 
                results of the program. At a minimum, the report shall 
                include an analysis of employment stability, stability 
                of residence, and rates of recidivism among inmates who 
                participated in the program after 18 months of release.
          (2) Authorization of appropriations.--There is authorized to 
        be appropriated $3,000,000 in each of the three fiscal years 
        after fiscal year 2007, to remain available until expended, for 
        the purposes of conducting the demonstration program authorized 
        by subsection (a).
  (e) Prerelease Employment Assistance.--
          (1) In general.--The Director of the Federal Bureau of 
        Prisons shall, to the maximum extent practicable, afford to 
        inmates opportunities to participate in programs and activities 
        designed to help prepare such inmates to obtain employment upon 
        release.
          (2) Prerelease employment placement assistance.--Such 
        prerelease employment placement assistance required by 
        subsection (a) shall include--
                  (A) training in the preparation of resumes and job 
                applications;
                  (B) training in interviewing skills;
                  (C) training and assistance in job search techniques;
                  (D) conduct of job fairs; and
                  (E) such other methods deemed appropriate by the 
                Director.
          (3) Priority participation.--Priority in program 
        participation shall be accorded to inmates who are 
        participating in work opportunities afforded by Federal Prison 
        Industries and are within 24 months of release from 
        incarceration.

SEC. 11. RE-ENTRY EMPLOYMENT PREPARATION THROUGH WORK-BASED TRAINING 
                    AND APPRENTICESHIP.

  (a) In General.--Chapter 307 of title 18, United States Code, is 
further amended by inserting after section 4124a, as added by section 
10(b), the following new section:

``Sec. 4124b. Re-entry employment preparation through work-based 
                    training and apprenticeship.

  ``(a) Participation Authorized.--A private for-profit business entity 
shall be an eligible entity for participation in the program authorized 
by section 4124a of this title, if such participation conforms with the 
requirements and limitations of this section.
  ``(b) Requirements Relating to Products and Services.--A private for-
profit business entity is eligible for such participation if such 
business entity proposes to train participating inmates, pursuant to 
subsection (c), by producing a product or performing a service, if such 
product or service is of a type for which there is no production or 
performance within the United States by noninmate workers.
  ``(c) Requirements Relating to Training.--
          ``(1) In general.--For purposes of this section, the training 
        of participating inmates shall be work-based training that 
        provides to a participating inmate apprenticeship training or a 
        functionally equivalent structured program that combines hands-
        on work experience with conceptual understanding of the work 
        being performed. Other inmates with regular work assignments 
        within Federal Prison Industries may be assigned to support the 
        program.
          ``(2) Documentation of program participation.--
                  ``(A) Each inmate who successfully completes 
                participation in training undertaken pursuant to this 
                section shall be provided a certificate or other 
                written document memorializing such successful 
                completion, providing a marketable summary of the 
                skills learned and an overall assessment of 
                performance.
                  ``(B) Copies of such documents shall be furnished to 
                perspective employers upon the request of the 
                participant for a period of not less than 24 months 
                from the date of such participant's release from 
                incarceration.
          ``(3) Documents required for employment.--The Federal Bureau 
        of Prisons, in cooperation with a business entity providing an 
        inmate work-based training at the time of his or her scheduled 
        release, shall make every reasonable effort to help the inmate 
        timely obtain such documentation (including a State government-
        issued photo identification card) as a person may be required 
        to provide to a prospective employer, after such person 
        completes an Employment Eligibility Verification (ICE Form I-
        9).
  ``(d) Wage Rates.--
          ``(1) In general.--Business entities participating in the 
        program authorized by subsection (a) shall propose wages for 
        inmates participating in the program at rates not less than the 
        inmate training wage promulgated pursuant to section 17(c) of 
        the Federal Prison Industries Competition in Contracting Act of 
        2006.
          ``(2) Inmate training wage.--Not more than 30 days after the 
        date of enactment of this section, the Board of Directors of 
        Federal Prison Industries shall request the Secretary of Labor 
        to promulgate an inmate training wage pursuant to section 14(a) 
        of the Fair Labor Standards Act of 1938 (29 U.S.C. 214(a)).
  ``(e) Support for Other Release Preparation Programs.--In addition to 
the matters listed in section 4124a(d) of this title, a proposal for an 
agreement referred to in such section submitted by an eligible business 
entity shall specify an amount of any supplemental funding, specified 
as a per-capita amount for each inmate participating pursuant to the 
agreement, that the business entity will provide for the purpose of 
supporting remedial, vocational, and other release preparation programs 
for other nonparticipating inmates.
  ``(f) Additional Standards Applicable.--In considering a proposed 
agreement pursuant to section 4124a(f)(1) of this title, the Board of 
Directors shall--
          ``(1) give preference to an agreement that proposes--
                  ``(A) work-based training opportunities that provide 
                the participating inmate the best prospects for 
                obtaining employment paying a livable wage upon 
                release;
                  ``(B) the highest per-capita amount pursuant to 
                subsection (e) relating to providing financial support 
                for release preparation for other inmates; and
                  ``(C) the highest inmate wage rates;
          ``(2) not approve any agreement with respect to furnishing 
        services of the type described in section 4122(b)(6)(D)(iii) of 
        this title;
          ``(3) not approve any agreement with respect to furnishing 
        construction services described in section 4122(b)(6)(D)(iv) of 
        this title, unless to be performed within a Federal 
        correctional institution;
          ``(4) not approve an agreement that does not meet the 
        standards of subsection (b); and
          ``(5) request a determination from the International Trade 
        Commission (and such other executive branch entities as may be 
        appropriate), regarding whether a product or service is of the 
        type being produced or performed in the United States by 
        noninmate workers, whenever the Board determines that such an 
        additional assessment is warranted, including upon a request 
        from an interested party presenting information that the Board 
        deems to warrant such additional assessment prior to the 
        Board's consideration of the proposed agreement.
  ``(g) Limitations on the Use of the Authority.--
          ``(1) No sales by federal prison industries.--Federal Prison 
        Industries is prohibited from directly offering for commercial 
        sale products produced or services furnished by Federal 
        inmates, including through any form of electronic commerce.
          ``(2) Duration.--
                  ``(A) No proposed agreement pursuant to this 
                subsection may be approved by the Board of Directors 
                after September 30, 2016.
                  ``(B) Performance of all such agreements shall be 
                concluded prior to October 1, 2021.''.
   (b) Review and Reporting by the Attorney General.--Not less than 
biannually, beginning in fiscal year 2008, the Attorney General shall 
meet in person jointly with the Chairman of the Board of Directors and 
the Chief Executive Officer of Federal Prison Industries to review the 
progress that Federal Prison Industries is making in maximizing the use 
of the authority provided by sections 4124a and 4124b of title 18, 
United States Code. The Attorney General shall provide annually a 
written report to the Committees on the Judiciary and Appropriations of 
the House of Representatives and the Senate addressing such progress by 
Federal Prison Industries.
  (c) GAO Assessment of Work-Based Training Program.--
          (1) In general.--The Comptroller General of the United States 
        shall undertake an on-going assessment of the authority granted 
        by section 4124b of title 18, United States Code, as added by 
        subsection (a).
          (2) Matters to be assessed.--In addition to such other 
        matters as the Comptroller General deems appropriate, the 
        assessment shall include--
                  (A) efforts to recruit private for-profit business 
                entities to participate;
                  (B) the quality of training provided to inmates;
                  (C) the amounts and types of products and services 
                that have been produced incident to the work-based 
                training programs;
                  (D) the types of worksite arrangement that encourage 
                business concerns to voluntarily enter into such 
                partnerships;
                  (E) the extent and manner of the participation of 
                supervisory, quality assurance, and other management 
                employees of the participating business entity in 
                worksites within correctional facilities of various 
                levels of security;
                  (F) the extent of the facilities, utilities, 
                equipment, and personnel (other than security 
                personnel) provided by the host correctional agency, 
                and extent to which such resources are provided on a 
                nonreimbursable basis;
                  (G) the rates of wages paid to inmate workers and the 
                effect that such wage rates have on willingness of 
                business entities to participate;
                  (H) any complaints filed regarding the displacement 
                of noninmate workers or of inmate workers being paid 
                less than required wages and the disposition of those 
                complaints;
                  (I) any sanctions recommended relating to 
                displacement of noninmate workers or payment of less 
                than the required wages, and the disposition of such 
                proposed sanctions;
                  (J) the extent to which the new authority provided 
                additional inmate work opportunities assisting the 
                Bureau of Prisons in attaining its objective of 
                providing 25 percent of the work-eligible inmates with 
                work opportunities within Federal Prison Industries;
                  (K) measures of any adverse impacts of implementation 
                of the new authority on business concerns using 
                noninmate workers that are engaged in providing similar 
                types of products and services in direct competition; 
                and
                  (L) a compilation of data relating work opportunities 
                for Federal inmates with work assignments with Federal 
                Prison Industries provided by--
                          (i) sales to Federal agencies pursuant to the 
                        status of Federal Prison Industries as a 
                        mandatory source of supply during the period 
                        fiscal year 1990 through fiscal year 2007;
                          (ii) sales to Federal agencies of services, 
                        both through non-competitive interagency 
                        transfers and as a result of direct competition 
                        from private-sector offerors during the period 
                        fiscal year 1990 though fiscal year 2007;
                          (iii) performance as a subcontrator to a 
                        Federal prime contractor or Federal 
                        subcontractor at a higher tier beginning in 
                        fiscal year 1990;
                          (iv) introduction of inmate-furnished 
                        services into the commercial market, beginning 
                        in the second quarter of fiscal year 1998;
                          (v) alternative inmate work opportunities, 
                        beginning in fiscal year 2007, provided by 
                        agreements with--
                                  (I) non-profit organizations, 
                                pursuant to section 4124a(b)(1) of 
                                title 18, United States Code, as added 
                                by section 10(b), and section 10(c);
                                  (II) religious organizations, 
                                pursuant to section 4124a(b)(2) of 
                                title 18, United States Code;
                                  (III) units of local governments, 
                                school districts, or other special 
                                purpose districts, pursuant to section 
                                4124a(b)(3) of title 18, United States 
                                Code;
                                  (IV) work-based Employment 
                                Preparation Programs for Federal 
                                inmates, pursuant to section 4124b of 
                                title 18, United States Code, as added 
                                by section 11; or
                                  (V) other means.
          (3) Opportunity for public comment.--The Comptroller General 
        shall provide an opportunity for public comment on the proposed 
        scope and methodology for the assessment required by paragraph 
        (1), making such modifications in response to such comments as 
        he deems appropriate.
          (4) Reports and recommendations.--
                  (A) In general.--The Comptroller General shall submit 
                to the Congress in accordance with this subsection two 
                interim reports and a final report of the assessment of 
                implementation of the new authority, including such 
                recommendations as the Comptroller General may deem 
                appropriate.
                  (B) Interim reports.--The two interim reports shall 
                encompass the assessment of the implementation of the 
                new authority--
                          (i) from the effective date of the authority 
                        through the end of fiscal year 2007; and
                          (ii) from the effective date of the authority 
                        through the end of fiscal year 2010.
                  (C) Final report.--The final report shall assess the 
                implementation of the new authority from the effective 
                date of the authority through the end of fiscal year 
                2013.
                  (D) Submission to congress.--The Comptroller General 
                shall submit the reports required by this paragraph 
                within 6 months after the end of the fiscal years 
                referred to in subparagraphs (B) and (C).
  (d) Conforming Amendment.--Section 1761 of title 18, United States 
Code, as amended by section 7, is further amended--
          (1) by redesignating subsection (e) as subsection (f); and
          (2) inserting after subsection (d) the following new 
        subsection:
  ``(e) This section shall not apply to products produced or services 
furnished with inmate labor incidental to the work-based training 
program authorized pursuant to section 4124b of this title.''.

SEC. 12. RESTRUCTURING THE BOARD OF DIRECTORS.

  (a) In General.--Section 4121 of title 18, United States Code, is 
amended to read as follows:

``Sec. 4121. Federal Prison Industries; Board of Directors: executive 
                    management

  ``(a) Federal Prison Industries is a government corporation of the 
District of Columbia organized to carry on such industrial operations 
in Federal correctional institutions as authorized by its Board of 
Directors. The manner and extent to which such industrial operations 
are carried on in the various Federal correctional institutions shall 
be determined by the Attorney General.
  ``(b)(1) The corporation shall be governed by a board of 11 directors 
appointed by the President.
  ``(2) In making appointments to the Board, the President shall assure 
that 3 members represent the business community, 3 members represent 
organized labor, 1 member shall have special expertise in inmate 
rehabilitation techniques, 1 member represents victims of crime, 1 
member represents the interests of Federal inmate workers, and 2 
additional members whose background and expertise the President deems 
appropriate. The members of the Board representing the business 
community shall include, to the maximum extent practicable, 
representation of firms furnishing services as well as firms producing 
products, especially from those industry categories from which Federal 
Prison Industries derives substantial sales. The members of the Board 
representing organized labor shall, to the maximum practicable, include 
representation from labor unions whose members are likely to be most 
affected by the sales of Federal Prison Industries.
  ``(3) Each member shall be appointed for a term of 5 years, except 
that of members first appointed--
          ``(A) 2 members representing the business community shall be 
        appointed for a term of 3 years;
          ``(B) 2 members representing labor shall be appointed for a 
        term of 3 years;
          ``(C) 2 members whose background and expertise the President 
        deems appropriate for a term of 3 years;
          ``(D) 1 member representing victims of crime shall be 
        appointed for a term of 3 years;
          ``(E) 1 member representing the interests of Federal inmate 
        workers shall be appointed for a term of 3 years;
          ``(F) 1 member representing the business community shall be 
        appointed for a term of 4 years;
          ``(G) 1 member representing the business community shall be 
        appointed for a term of 4 years; and
          ``(H) the members having special expertise in inmate 
        rehabilitation techniques shall be appointed for a term of 5 
        years.
  ``(4) The President shall designate 1 member of the Board as 
Chairperson. The Chairperson may designate a Vice Chairperson.
  ``(5) Members of the Board may be reappointed.
  ``(6) Any vacancy on the Board shall be filled in the same manner as 
the original appointment. Any member appointed to fill a vacancy 
occurring before the expiration of the term for which the member's 
predecessor was appointed shall be appointed for the remainder of that 
term.
  ``(7) The members of the Board shall serve without compensation. The 
members of the Board shall be allowed travel expenses, including per 
diem in lieu of subsistence, at rates authorized for employees of 
agencies under subchapter I of chapter 57 of title 5, United States 
Code, to attend meetings of the Board and, with the advance approval of 
the Chairperson of the Board, while otherwise away from their homes or 
regular places of business for purposes of duties as a member of the 
Board.
  ``(8)(A) The Chairperson of the Board may appoint and terminate any 
personnel that may be necessary to enable the Board to perform its 
duties.
  ``(B) Upon request of the Chairperson of the Board, a Federal agency 
may detail a Federal Government employee to the Board without 
reimbursement. Such detail shall be without interruption or loss of 
civil service status or privilege.
  ``(9) The Chairperson of the Board may procure temporary and 
intermittent services under section 3109(b) of title 5, United States 
Code.
  ``(c) The Director of the Bureau of Prisons shall serve as Chief 
Executive Officer of the Corporation. The Director shall designate a 
person to serve as Chief Operating Officer of the Corporation.''.
  (b) Continued Governance.--The members of the Board of Directors 
serving on the date of enactment of this Act, and the person selected 
by them as Chairman, shall continue to exercise the duties and 
responsibilities of the Board until the earlier of--
          (1) the date on which the President has appointed at least 6 
        members of the Board and designated a new Chairman, pursuant to 
        section 4121 of title 18, United States Code (as added by 
        section 12(a) of this Act); or
          (2) the date that is 365 days after the date of enactment of 
        this Act.

SEC. 13. PROVIDING ADDITIONAL MANAGEMENT FLEXIBILITY TO FEDERAL PRISON 
                    INDUSTRIES OPERATIONS.

  Section 4122(b)(3) of title 18, United States Code, is amended--
          (1) by striking ``(3)'' and inserting ``(3)(A)''; and
          (2) by adding at the end the following new paragraphs:
  ``(B) Federal Prison Industries may locate more than one workshop at 
a Federal correctional facility.
  ``(C) Federal Prison Industries may operate a workshop outside of a 
correctional facility if all of the inmates working in such workshop 
are classified as minimum security inmates.''.

SEC. 14. TRANSITIONAL PERSONNEL MANAGEMENT AUTHORITY.

  Any correctional officer or other employee of Federal Prison 
Industries being paid with nonappropriated funds who would be separated 
from service because of a reduction in the net income of Federal Prison 
Industries during any fiscal year specified in section 4(e)(1) shall 
be--
          (1) eligible for appointment (or reappointment) in the 
        competitive service pursuant to title 5, United States Code;
          (2) registered on a Bureau of Prisons reemployment priority 
        list; and
          (3) given priority for any other position within the Bureau 
        of Prisons for which such employee is qualified.

SEC. 15. FEDERAL PRISON INDUSTRIES REPORT TO CONGRESS.

  Section 4127 of title 18, United States Code, is amended to read as 
follows:

``Sec. 4127. Federal Prison Industries report to Congress

  ``(a) In General.--Pursuant to chapter 91 of title 31, the board of 
directors of Federal Prison Industries shall submit an annual report to 
Congress on the conduct of the business of the corporation during each 
fiscal year and the condition of its funds during the fiscal year.
  ``(b) Contents of Report.--In addition to the matters required by 
section 9106 of title 31, and such other matters as the board considers 
appropriate, a report under subsection (a) shall include--
          ``(1) a statement of the amount of obligations issued under 
        section 4129(a)(1) of this title during the fiscal year;
          ``(2) an estimate of the amount of obligations that will be 
        issued in the following fiscal year;
          ``(3) an analysis of--
                  ``(A) the corporation's total sales for each specific 
                product and type of service sold to the Federal 
                agencies and the commercial market;
                  ``(B) the total purchases by each Federal agency of 
                each specific product and type of service;
                  ``(C) the corporation's share of such total Federal 
                Government purchases by specific product and type of 
                service; and
                  ``(D) the number and disposition of disputes 
                submitted to the heads of the Federal departments and 
                agencies pursuant to section 4124(e) of this title;
          ``(4) an allocation of the profits of the corporation, both 
        gross and net, to--
                  ``(A) educational, training, release-preparation 
                opportunities for inmates;
                  ``(B) opening new factories; and
                  ``(C) improving the productivity and competitiveness 
                of existing factories;
          ``(5) an analysis of the inmate workforce that includes--
                  ``(A) the number of inmates employed;
                  ``(B) the number of inmates utilized to produce 
                products or furnish services sold in the commercial 
                market;
                  ``(C) the number and percentage of employed inmates 
                by the term of their incarceration; and
                  ``(D) the various hourly wages paid to inmates 
                employed with respect to the production of the various 
                specific products and types of services authorized for 
                production and sale to Federal agencies and in the 
                commercial market; and
          ``(6) data concerning employment obtained by former inmates 
        upon release to determine whether the employment provided by 
        Federal Prison Industries during incarceration provided such 
        inmates with knowledge and skill in a trade or occupation that 
        enabled such former inmate to earn a livelihood upon release.
  ``(c) Public Availability.--Copies of an annual report under 
subsection (a) shall be made available to the public at a price not 
exceeding the cost of printing the report.''.

SEC. 16. DEFINITIONS.

  Chapter 307 of title 18, United States Code, is amended by adding at 
the end the following new section:

``Sec. 4131. Definitions

  ``As used in this chapter--
          ``(1) the term `assembly' means the process of uniting or 
        combining articles or components (including ancillary finished 
        components or assemblies) so as to produce a significant change 
        in form or utility, without necessarily changing or altering 
        the component parts;
          ``(2) the term `current market price' means, with respect to 
        a specific product, the fair market price of the product within 
        the meaning of section 15(a) of the Small Business Act (15 
        U.S.C. 644(a)), at the time that the contract is to be awarded, 
        verified through appropriate price analysis or cost analysis, 
        including any costs relating to transportation or the 
        furnishing of any ancillary services;
          ``(3) the term `import-sensitive product' means a product 
        which, according to Department of Commerce data, has 
        experienced competition from imports at an import to domestic 
        production ratio of 25 percent or greater;
          ``(4) the term `labor-intensive manufacture' means a 
        manufacturing activity in which the value of inmate labor 
        constitutes at least 10 percent of the estimate unit cost to 
        produce the item by Federal Prison Industries;
          ``(5) the term `manufacture' means the process of fabricating 
        from raw or prepared materials, so as to impart to those 
        materials new forms, qualities, properties, and combinations;
          ``(6) the term `reasonable share of the market' means a share 
        of the total purchases by the Federal departments and agencies, 
        as reported to the Federal Procurement Data System for--
                  ``(A) any specific product during the 3 preceding 
                fiscal years, that does not exceed 20 percent of the 
                Federal market for the specific product; and
                  ``(B) any specific service during the 3 preceding 
                fiscal years, that does not exceed 5 percent of the 
                Federal market for the specific service; and
          ``(7) the term `services' has the meaning given the term 
        `service contract' by section 37.101 of the Federal Acquisition 
        Regulation (48 C.F.R. 36.102), as in effect on July 1, 2004.''.

SEC. 17. IMPLEMENTING REGULATIONS AND PROCEDURES.

  (a) Federal Acquisition Regulation.--
          (1) Proposed revisions.--Proposed revisions to the 
        Governmentwide Federal Acquisition Regulation to implement the 
        amendments made by this Act shall be published not later than 
        60 days after the date of the enactment of this Act and provide 
        not less than 60 days for public comment.
          (2) Final regulations.--Final regulations shall be published 
        not later than 180 days after the date of the enactment of this 
        Act and shall be effective on the date that is 30 days after 
        the date of publication.
          (3) Public participation.--The proposed regulations required 
        by subsection (a) and the final regulations required by 
        subsection (b) shall afford an opportunity for public 
        participation in accordance with section 22 of the Office of 
        Federal Procurement Policy Act (41 U.S.C. 418b).
  (b) Board of Directors.--
          (1) In general.--The Board of Directors of Federal Prison 
        Industries shall issue regulations defining the terms specified 
        in paragraph (2).
          (2) Terms to be defined.--The Board of Directors shall issue 
        regulations for the following terms:
                  (A) Prison-made product.
                  (B) Prison-furnished service.
                  (C) Specific product.
                  (D) Specific service.
          (3) Schedule for regulatory definitions.--
                  (A) Proposed regulations relating to the matter 
                described in subsection (b)(2) shall be published not 
                later than 60 days after the date of enactment of this 
                Act and provide not less than 60 days for public 
                comment.
                  (B) Final regulations relating to the matters 
                described in subsection (b)(2) shall be published not 
                less than 180 days after the date of enactment of this 
                Act and shall be effective on the date that is 30 days 
                after the date of publication.
          (4) Enhanced opportunities for public participation and 
        scrutiny.--
                  (A) Administrative procedure act.--Regulations issued 
                by the Board of Directors shall be subject to notice 
                and comment rulemaking pursuant to section 553 of title 
                5, United States Code. Unless determined wholly 
                impracticable or unnecessary by the Board of Directors, 
                the public shall be afforded 60 days for comment on 
                proposed regulations.
                  (B) Enhanced outreach.--The Board of Directors shall 
                use means designed to most effectively solicit public 
                comment on proposed regulations, procedures, and 
                policies and to inform the affected public of final 
                regulations, procedures, and policies.
                  (C) Open meeting processes.--The Board of Directors 
                shall take all actions relating to the adoption of 
                regulations, operating procedures, guidelines, and any 
                other matter relating to the governance and operation 
                of Federal Prison Industries based on deliberations and 
                a recorded vote conducted during a meeting open to the 
                public, unless closed pursuant to section 552(b) of 
                title 5, United States Code.
  (c) Secretary of Labor.--
          (1) Schedule for regulatory action.--Upon receipt of a 
        request from the Federal Prison Industries Board of Directors, 
        pursuant to section 11(d)(2), to establish an inmate training 
        wage pursuant to section 14(a) of the Fair Labor Standards Act 
        of 1938 (29 U.S.C. 214(a)), the Secretary of Labor, in 
        consultation with the Attorney General, shall issue--
                  (A) an advanced notice of proposed rulemaking within 
                60 days;
                  (B) an interim regulation with concurrent request for 
                public comments within 180 days; and
                  (C) a final regulation within 365 days.
          (2) Alternative to timely issuance.--In the event that the 
        Secretary of Labor fails to issue an interim inmate training 
        wage by the date required by paragraph (1)(B), the Federal 
        Prison Industries Board of Directors may prescribe an interim 
        inmate training wage, which shall be in an amount not less than 
        50 percent of the amount of the minimum wage prescribed 
        pursuant to section 6(a)(1) of such Act (29 U.S.C. 206(a)(1)).
          (3) Continued use of interim inmate training wage.--
                  (A) The interim inmate training wage issued pursuant 
                to paragraph (1)(B) or prescribed under paragraph (2) 
                shall remain in effect until the effective date of a 
                final regulation, issued pursuant to paragraph (1)(C).
                  (B) An eligible entity having an approved agreement 
                with Federal Prison Industries pursuant to section 
                4124b of title 18, United States Code, may continue to 
                pay participating inmates at the wages prescribed in 
                the agreement for the duration of the agreement, if 
                those wages comply with the standards of the interim 
                inmate training wage issued pursuant to paragraph 
                (1)(B) or prescribed under paragraph (2).
          (4) Existing agreements with nonconforming wages.--Any for-
        profit business concern having an agreement with Federal Prison 
        Industries in effect on the date of enactment of this Act, 
        under which Federal inmates are furnishing services that are 
        being introduced into the commercial market, may continue to 
        pay wages at rates specified in the agreement for the duration 
        of the term of such agreement.

SEC. 18. RULES OF CONSTRUCTION.

  (a) Agency Bid Protests.--Subsection (e) of section 4124 of title 18, 
United States Code, as amended by section 2, is not intended to alter 
any rights of any offeror other than Federal Prison Industries to file 
a bid protest in accordance with other law or regulation in effect on 
the date of the enactment of this Act.
  (b) Javits-Wagner-O'Day Act.--Nothing in this Act is intended to 
modify the Javits-Wagner-O'Day Act (41 U.S.C. 46 et seq.).

SEC. 19. EFFECTIVE DATE AND APPLICABILITY.

  (a) Effective Date.--Except as provided in subsection (b), this Act 
and the amendments made by this Act shall take effect on the date of 
enactment of this Act.
  (b) Applicability.--Section 4124 of title 18, United States Code, as 
amended by section 2, shall apply to any requirement for a product or 
service offered by Federal Prison Industries needed by a Federal 
department or agency after the effective date of the final regulations 
issued pursuant to section 17(a)(2), or after September 30, 2007, 
whichever is earlier.

SEC. 20. CLERICAL AMENDMENTS.

  The table of sections for chapter 307 of title 18, United States 
Code, is amended--
          (1) by amending the item relating to section 4121 to read as 
        follows:

``4121. Federal Prison Industries; Board of Directors: executive 
management.'';

          (2) by amending the item relating to section 4124 to read as 
        follows:

``4124. Governmentwide procurement policy relating to purchases from 
Federal Prison Industries.'';

          (3) by inserting after the item relating to section 4124 the 
        following new items:

``4124a. Additional inmate work opportunities through public service 
activities.
``4124b. Re-entry employment preparation through work-based training 
and apprenticeship.''.

          (4) by amending the item relating to section 4127 to read as 
        follows:

``4127. Federal Prison Industries report to Congress.'';

        and
          (5) by adding at the end the following new items:

``4130. Construction of provisions.
``4131. Definitions.''.

                          Purpose and Summary

    H.R. 2965, the ``Federal Prison Industries Competition in 
Contracting Act of 2006,'' amends title 18 to require Federal 
Prison Industries Inc. (FPI) to compete for its contracts with 
private sector firms and provides a five-year transition period 
during which FPI adjusts to obtaining inmate work opportunities 
through other than its mandatory source status. Additionally, 
the legislation provides for inmate access to remedial and 
other rehabilitative opportunities to better prepare inmates 
for a successful return to society, including authorizing 
alternative inmate work opportunities in support of non-profit 
organizations and other public service programs.
    H.R. 2965 incorporates H.R. 1829, the ``Federal Prison 
Industries Competition in Contracting Act of 2003,'' which was 
reported by the Committee by voice vote on July 25, 2003 and 
passed the House on November 6, 2003 by a vote of 350-65. H.R. 
1829 was similar to H.R. 1577, the ``Federal Prison Industries 
Competition in Contracting Act of 2002,'' which was reported by 
the Committee by voice vote on April 24, 2002.
    As reported by the Committee, H.R. 2965, contains 
additional provisions to ensure successful transition by FPI by 
authorizing a new Work-Based Employment Preparation Program for 
Federal inmates. Under this program, private-sector firms can 
enter into agreements with FPI for the production of products 
or the furnishing of services to be sold in the commercial 
market, for which there is no domestic production. H.R. 2965 is 
designed to facilitate a successful transition by FPI from 
simply taking contracts pursuant to its status as a mandatory 
source and winning contracts competitively. The bill includes a 
provision that would allow FPI to be listed as providing goods 
and services comparable to private-sector firms holding 
contracts under the Multiple Award Schedules (MAS) Program 
administered by the General Services Administration, although 
Government corporations are ineligble to be MAS Program 
contract holders.
    During the five-year period of transition to competition, 
H.R. 2965, permits the FPI Board of Directors to allow FPI to 
take more than a reasonable share of the market for an 
authorized product or service, if needed to maintain inmate 
employment. To avoid a displacement of current inmate workers, 
H.R. 2965 ``grandfathers'' all of FPI's current agreements with 
private-sector firms that result in the introduction of inmate-
furnished services in the commercial market. H.R. 2965 also 
grandfathers State or local prison industry programs to 
complete their existing agreements.
    H.R. 2965 reflects improvements adopted by the Committee 
and by the House during the 107th and 108th Congresses. It 
retains the extensive provisions of the Conyers-Frank Amendment 
to H.R. 1577, which increases access to educational 
opportunities, including remedial and modern ``hands-on'' 
vocational programs, which have been shown to be more effective 
in reducing recidivism (33 percent) than traditional prison 
inmate work programs (24 percent). The bill provides statutory 
authorization for an inmate's ``gate fund'' to facilitate a 
successful reentry into society. H.R. 2965 also reflects a 
House Floor amendment to H.R. 1829 approved during the 108th 
Congress, offered by Representative Waters and Representative 
Millender-McDonald, that would increase the wages paid to FPI 
workers, especially those within 24 months of release.
    H.R. 2965 provides alternative inmate work opportunities, 
and authorizes the production of products or the furnishing of 
services for donation to community service organizations. It 
authorizes FPI workers to perform work in support of non-profit 
entities. In several States, State inmates construct components 
for Habitat for Humanity using donated materials and 
components, while learning the building trades. The opportunity 
for alternative rehabilitative inmate work opportunities was 
further expanded through a Floor amendment to H.R. 1829, during 
the 108th Congress, which provided a structured program through 
which Federal inmate workers may also perform public service 
work for units of local government or special purpose districts 
such as school districts. The Ohio Department of Corrections 
has been able to use such public service work opportunities to 
create more inmate jobs than is provided by its traditional 
prison industries program. The new authorities contain 
enforceable protections to avoid unfair competition with the 
private sector or public employees.
    During a legislative hearing on S. 346, the Senate 
companion to H.R. 1829,\1\ Harley G. Lappin, Director of the 
Federal Bureau of Prisons and FPI's Chief Executive Officer, in 
response to a question from Senator Carl Levin, the sponsor of 
S. 346, stated: ``We are in favor of relying less on mandatory 
source, if not elimination * * * as long as we can pursue 
products and services in other areas that allow us to keep 
inmates productively occupied.'' H.R. 2965 provides those 
alternative rehabilitative inmate work opportunities.
---------------------------------------------------------------------------
    \1\ Hearing held on April 7, 2004 before the Subcommittee on 
Financial Management, the Budget, and International Security of the 
Senate Committee on Governmental Affairs.
---------------------------------------------------------------------------

                Background and Need for the Legislation

                               A. HISTORY

    The Federal Bureau of Prisons (BOP) is responsible for the 
custody and care of more than 181,000 Federal offenders. 
Approximately 85 percent of these inmates are confined in BOP 
correctional facilities or detention centers. Prisoners who are 
physically able to work must labor in some capacity five days a 
week. The Federal Prison Industries (FPI), a government 
corporation that operates the BOP's correctional program, 
employs inmates in the Federal prison population to manufacture 
goods for and provide services to Federal agencies. About 20 
percent of inmates work in FPI factories. They generally work 
in factory operations, such as metals, furniture, electronics, 
textiles, and graphic arts. FPI work assignments pay from 
23 cents to $1.15 per hour.
    Although FPI is precluded from selling its goods in the 
commercial market under 18 U.S.C. section 1761, the BOP has 
taken the position that the language prohibiting interstate 
transport of goods does not prohibit it from selling services 
in the commercial market. Many private companies and small 
businesses have trouble competing with the advantages the 
prison industry enjoys such as a guaranteed market for its 
products and reduced costs for labor and capital.
    In fiscal year (FY) 2004, FPI operated 102 factories in 71 
correctional facilities producing products and services in 
approximately 150 broad classes under the trade name UNICOR. In 
FY 1998, FPI had total sales of $534.2 million and employed 
20,200 inmates (18.3 percent). In FY 2004, FPI employed 19,337 
inmates, with a total sales of $802.7 million and a profit of 
$120.4 million. Federal agencies are required by law, under 18 
U.S.C. section 4124, to purchase FPI products if a product is 
available that meets the agencies' requirements and does not 
exceed current market prices. This provision in the law, deemed 
``mandatory source preference,'' does not specify how the 
current market price should be determined. The General 
Accounting Office (GAO) concluded in a 1998 report to Congress 
that ``the only limitation on FPI's price is that it may not 
exceed the upper end of the current market price range.''
    The ``mandatory source preference'' given FPI is viewed as 
an exception to the Federal Acquisition Regulation standards 
established for a ``fair and reasonable price.'' Thus, agencies 
are required to purchase products from FPI regardless of 
whether FPI provides the agency with a price it considers 
reasonable or factually supports the price it offered. Recent 
amendments to Federal law allow agency contracting officers to 
determine if a product offered by FPI is ``comparable to 
products available from the private sector that best meet the 
Department's needs in terms of price, quality, and time of 
delivery.'' \2\ If a contracting officer finds that FPI's 
offered product is not comparable, then the purchase is to be 
made using competitive procedures. There is no need to obtain a 
so-called ``waiver'' from FPI prior to making the purchase. 
Section 2410n only requires that FPI be accorded the same right 
to compete as any other eligible offeror, but does not grant to 
FPI any preferential status in the competitive process.
---------------------------------------------------------------------------
    \2\ 10 U.S.C. Sec. 2410(n).
---------------------------------------------------------------------------
    FPI's 2004 Annual Report states that ``the number of 
inmates participating in the FPI program has decreased by more 
than 3,000 in the last three years.'' It has been asserted that 
this is the result of the enactment and implementation of 10 
U.S.C. Sec. 2410(n) and the extension of the effect of section 
2410n to the Civilian Agencies of the Government.\3\ Under the 
provision, Civilian Agency contracting officers can exercise 
the same authorities in dealing with FPI and its mandatory 
source status that DOD contracting officers have had available 
since Section 2410(n) was added to the Title X of the United 
States Code by Section 811 of Public Law 107-107, the National 
Defense Authorization Act for Fiscal Year 2002.
---------------------------------------------------------------------------
    \3\ Section 637 of Title VI (General Provisions--Departments, 
Agencies, and Corporations) of Division F (Transportation, Treasury, 
and Independent Agencies Appropriations, 2004) of P.L. 108-7, the 
Consolidated Appropriations Act, 2004.
---------------------------------------------------------------------------
    However, the question remains how FPI could have lost 
inmate work opportunities when FPI's total sales and its 
operating profits have increased substantially over the same 
three fiscal years. FPI's sales were $678.7 million for Fiscal 
Year 2002 and increased to $802.7 million in FY 2004. 
Similarly, FPI profits increased from $71.4 million in FY 2002 
to $120.4 million in FY 2004. Only one of the eight Business 
Groups showed a decrease in revenues during the three years 
cited. Due to purchases made by the Department of Defense, on a 
non-competitive basis, in support of ongoing military 
operations, two of FPI's Business Groups showed very 
substantial increases. The sales of the Electronics Business 
Group increased from $152.4 million in FY 2003 to $255.2 
million in FY 2004. The sales of FPI Clothing and Textile 
Business Group increased from $158.4 million in FY 2003 to 
$184.5 million in FY 2004. Such expansions should have 
generated substantial inmate jobs sufficient to offset any loss 
of inmate work assignments associated with decrease in sales of 
FPI's Office Furniture Business Group from $151.9 million in FY 
2003 to $140.9 million in FY 2004. Historical data regarding 
FPI sales, profits, and inmate employment suggest an 
inconsistent correlation. For example, in FY 1998, FPI had 
total sales of $534.2 million, with a loss of $2.4 million, and 
yet was able to employ 20,200 inmates (18.3%), while it could 
only employ 19,337 inmates in FY 2004 with total sales of 
$802.7 million and a profit of $120.4 million.
    Opponents of this legislation maintain that FPI is 
completely self-sufficient and serves a vital purpose. FPI 
provides inmates with employment skills and the opportunity to 
learn a trade that will help them obtain a job upon release. 
Some studies have shown that inmates who participate in work 
programs are less likely to commit new offenses. Additionally, 
allowing prisoners to work helps productivity and minimizes 
opportunities for conflict within the prison. Some wages paid 
to the prisoners are directed toward restitution owed to their 
victims.

                          B. DETAILED SUMMARY

    H.R. 2965 would fundamentally alter the 1934 authorizing 
statute of Federal Prison Industries (``FPI''), requiring that 
FPI compete for its business opportunities and no longer be 
able to take them on a sole-source basis. Currently, all 
Federal agencies must purchase products offered by FPI, which 
is commonly referred to as FPI's ``mandatory source'' status. 
FPI, rather than the buying agency, determines if FPI's offered 
product, price, and delivery schedule meets the mission needs 
of the buying agency.
    This bill gradually phases out the exclusive right of FPI, 
deemed ``mandatory source,'' to sell goods on an exclusively 
non-competitive basis to federal agencies by October 1, 2011. 
The bill also changes the manner in which FPI sells its 
products and services to the various Federal departments and 
agencies. During the phase-out period, FPI would be required to 
provide the agencies with a product that meets its needs at a 
``fair and reasonable price'' in a timely manner.
    Today, FPI's offered price meets the ``current market'' 
price standard if it does not exceed the highest price offered 
to the Government for a comparable item, even if no actual 
sales have been made at that price. Under the Federal 
Acquisition Regulations (FAR), a federal manager must obtain 
FPI's unilateral permission to even solicit competitive offers 
from the private sector in an effort to obtain ``best value'' 
for the taxpayer dollars entrusted to such manager's care.
    To enable FPI to adjust to the requirement that it obtain 
contracts on a competitive basis, H.R. 2965 provides FPI with a 
five-year transitional period to adjust from its sole-source 
dealings with its currently captive Federal agency customers. 
Under this phase-out authority, Federal agencies could continue 
to contract with FPI on a noncompetitive basis through October 
1, 2011, subject to annually declining caps on the use of the 
preferential contracting authority. During the first 
transitional year, FY 2007, Federal agencies could make 
noncompetitive awards to FPI in an amount not to exceed 90 
percent of FPI's sales in FY 2002. The percentage decreases to 
85 percent in FY 2008, 70 percent in FY 2009, 55 percent in FY 
2010, and 40 percent in the final transitional year FY 2011. 
During the phase-out period, FPI would be required to provide a 
buying agency with a product that meets the buying agency's 
needs, when needed, at a ``fair and reasonable price.''
    To assure that the loss of a contract by FPI does not 
endanger the safety of a Federal Correctional Institution 
(FCI), H.R. 2965 contains a provision that permits the Attorney 
General to authorize a sole source contract award to prevent 
idleness ``that could reasonably be expected to significantly 
endanger the safe and effective administration'' of the FPI at 
which the work required by the contract is scheduled to be 
performed. To prevent abuse of this sole-source authority by 
FPI, the provision requires that the Attorney General's 
decision to authorize the sole source contract award be 
supported by findings by the FCI's warden.
    H.R. 2965 does not alter a broad array of competitive 
advantages that FPI enjoys with respect to private sector 
firms. The great majority of inmates working for FPI will 
continue to be paid at rates below the minimum wage. FPI 
factory space is provided by the host FCI and is constructed at 
taxpayer expense. Similarly, FPI receives its utilities from 
the host FCI. As a Government corporation, FPI may receive 
industrial equipment excess without cost from other Departments 
and agencies, including the substantial quantities of 
industrial equipment returned to the Department of Defense by 
its contractors. FPI has had a $20 million line-of-credit from 
the U.S. Treasury on an interest-free basis since 1988.
    In addition to requiring that FPI compete for its Federal 
agency sales, H.R. 2965 improves the process by which FPI's 
Board of Directors considers proposals from FPI's career 
management staff to authorize production expansion. The bill 
provides clearer standards to guide the Board's deliberations 
regarding expansion proposals. It improves, and makes 
independent the process by which the impact on private sector 
suppliers is evaluated. It increases the opportunities for 
public comment on the proposed expansions and assures that the 
Board has direct access to those comments. For the first time, 
it extends the public participation and Board approval 
procedures to expansion proposals relating to services as well 
as expansion proposals relating to products.
    The legislation also substantially modifies the structure 
of FPI's Board of Directors. Currently, the FPI Board of 
Directors is composed of six members, appointed by the 
President. Two are public members, one representing the 
Attorney General and another representing the Secretary of 
Defense. Of the four private sector members, one represents 
``industry,'' one represents ``labor,'' one represents 
``agriculture'' (although FPI does not sell agricultural 
products), and one represents ``retailers and consumers'' 
(although FPI is not authorized to sell products or services in 
the commercial market).
    H.R. 2965 replaces the current Board with an eleven member 
Board: three members representing business, three members 
representing labor, one member with special expertise in inmate 
rehabilitation techniques, one member representing victims of 
crime, one member representing inmate workers, and two 
additional members ``whose background and expertise the 
President deems appropriate.'' The restructuring of the Board 
was modeled after the Internal Revenue Service Oversight Board, 
enacted as part of the Internal Revenue Service Restructuring 
and Reform Act of 1998. Most importantly, H.R. 2965 requires 
that the Board deliberate and make decisions in public rather 
than in closed session as they do today.
    The legislation includes provisions, added through the 
Conyers-Frank Amendment adopted during the Committee's 
consideration of H.R. 1577 during the 107th Congress, that 
substantially expands alternative rehabilitative opportunities 
for more Federal inmates to better prepare them for a 
successful return to society. These provisions were included in 
the bill that passed the House of Representatives in the 108th 
Congress as well.
    The legislation also seeks to provide increased 
opportunities to participate in programs providing fundamental 
remedial education as well as modern hands-on vocational and 
apprenticeship training. Additionally, the legislation 
authorizes alternative inmate work opportunities in support of 
non-profit, community service organizations. For example, FPI 
workers can provide services to build or recondition for 
donation to nonprofit organizations to assist low income 
individuals who would have difficulty purchasing these products 
on their own. H.R. 2965 also includes a demonstration project 
to test the cognitive abilities and perceptual skills of 
Federal inmates to maximize rehabilitation efforts and reduce 
recidivism. Additionally, the bill clarifies that no more than 
$75 million will be authorized for additional educational, 
training and release preparation opportunities. Finally, H.R. 
2965 adds a new Section 13 ``Transitional Personnel Management 
Authority'' to provide some relief to correctional officers, 
whose staff positions are no longer funded from appropriations 
to the Federal Bureau of Prisons, but through non-appropriated 
funds, completely dependent upon revenue from FPI ``sales.''
    This legislation includes provisions, which were developed 
over a six-month period with representatives of the Attorney 
General. These provisions are broadly supported by an array of 
business organizations and labor unions participating in the 
Federal Prison Industries Competition in Contracting Coalition.
    H.R. 2965 creates a new Work-Based Employment Preparation 
Program under which private-sector firms can enter into 
agreements with FPI to prepare inmates for re-entry through 
real-world work coupled with structured apprenticeship-like 
training. The byproducts of this work-based training program, 
including the production of products and the furnishing of 
services, may then be sold in the commercial market. To avoid 
unfair competition with non-inmate workers, and the firms that 
employ them, the legislation restricts products of the Work-
Based Employment Training Program to products or services for 
which there is no domestic production. To make the re-entry 
preparation program more viable, the Secretary of Labor, in 
consultation with the Attorney General, is directed to issue an 
inmate training wage under the authority of the Fair Labor 
Standards Act, which along with other similar special wage 
rates would be less than the Federal Minimum Wage. H.R. 2965 
includes a sense of Congress that the wage set by the Secretary 
should be no less than 50 percent of the Federal minimum wage 
under the Federal Labor Standards Act.
    In addition to the re-entry preparation provided by the 
Program, the Work-Based Employment Preparation Program would 
benefit inmates in a number of ways. A participating firm would 
be required to issue a reference for inmate successfully 
completing the Program for a period of 24 months after release. 
In addition, a participating inmate would be assured to be 
provided with the documents, include a state-issued 
identification card, needed to complete an Employment 
Eligibility Verification (ICE Form I-9) required to get 
private-sector employment. Inmates not participating in the 
Program would benefit because funds from private-sector firms 
participating in the Work-Based Employment Preparaton Program 
would be allocated to other release preparation programs 
authorized by H.R. 2965.
    H.R. 2965, is designed to further facilitate a successful 
transition by FPI from simply taking contracts pursuant to its 
status as a mandatory source and winning contracts 
competitively. The legislation includes a provision that would 
allow FPI to be listed as providing goods and services 
comparable to private-sector firms holding contracts under 
Multiple Award Schedules (MAS) Program administered by the 
General Services Administration, although Government 
corporations are ineligible to be MAS Program contract holders. 
This will enable FPI to keep its offering clearly in the view 
of the Federal buyer.
    H.R. 2965 requires Federal buyers to solicit offers from 
FPI, an advantage not enjoyed by private-sector firms who must 
find their Federal contract opportunities. The legislation also 
requires that a solicitation shall be made to FPI first if the 
product or service to be acquired would otherwise be furnished 
by a contractor outside the United States. This provision was 
added to the legislation at the request of Representative 
Debbie Wasserman-Schultz (FL-20th).
    The legislation, as amended, also gives FPI authority to 
file agency bid protests, if FPI feels the Federal buyer has 
not evaluated fairly FPI's offer. No other Government 
corporation has this authority. FPI is authorized to perform a 
Government contract won competitively although the FPI Board of 
Directors has not authorized FPI to produce such a new product 
or service. In addition the legislation provides for the 
consideration of the unique costs of dealing with an inmate 
population in offers for cost-reimbursement contracts by FPI.

                                Hearings

    H.R. 2965 was introduced on June 17, 2005, and referred to 
the Committee on the Judiciary Subcommittee on Crime, 
Terrorism, and Homeland Security. A hearing on the legislation 
was held by the Subcommittee on July 1, 2005. Testimony was 
received from the following witnesses: The Honorable Peter 
Hoekstra, Member of Congress, 2nd District, Michigan; Paul A. 
Miller, Director of Governmental Affairs, Independent Office 
Products and Furniture Dealers; Dr. Reginald A. Wilkinson, Ohio 
Department of Rehabilitation and Corrections; and Phillip 
Glover, President of Council of Prison Locals, American 
Federation of Government Employees.

                        Committee Consideration

    On July 12, 2006, the Committee met in open session and 
ordered favorably reported the bill H.R. 2965, with an 
amendment, by voice vote, a quorum being present.

                         Votes of the Committee

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee notes that the 
following rollcall votes occurred during the committee's 
consideration of H.R. 2965.
    Representative Chabot offered an amendment in the nature of 
a substitute, which would have replaced the text of the bill 
with the establishment of a Commission to study the issue of 
mandatory source and make recommendations with regard to 
mandatory source and inmate work opportunities and 
rehabilitative opportunities. This amendment was defeated by a 
rollcall vote of 9-28.

                     Rollcall No. 1, Date: 7-12-06

                       Committee on the Judiciary

                     U.S. House of Representatives

                      109th Congress, 2nd Session

    Subject: Chabot Amendment in the Nature of a Substitute to 
H.R. 2965, which was not agreed to by a rollcall vote of 9 ayes 
to 28 nays.

------------------------------------------------------------------------
                                                  Ayes          Nays
------------------------------------------------------------------------
MR. HYDE....................................            X   ............
MR. COBLE...................................  ............            X
MR. SMITH...................................  ............            X
MR. GALLEGLY................................            X   ............
MR. GOODLATTE...............................            X   ............
MR. CHABOT..................................            X   ............
MR. LUNGREN.................................            X   ............
MR. JENKINS.................................  ............            X
MR. CANNON..................................  ............            X
MR. BACHUS..................................            X   ............
MR. INGLIS..................................  ............            X
MR. HOSTETTLER..............................  ............            X
MR. GREEN...................................            X   ............
MR. KELLER..................................  ............            X
MR. ISSA....................................  ............            X
MR. FLAKE...................................  ............  ............
MR. PENCE...................................  ............            X
MR. FORBES..................................  ............            X
MR. KING....................................  ............            X
MR. FEENEY..................................  ............            X
MR. FRANKS..................................  ............            X
MR. GOHMERT.................................  ............            X
MR. CONYERS.................................  ............            X
MR. BERMAN..................................  ............            X
MR. BOUCHER.................................  ............  ............
MR. NADLER..................................  ............            X
MR. SCOTT...................................            X   ............
MR. WATT....................................  ............            X
MS. LOFGREN.................................            X   ............
MS. JACKSON LEE.............................  ............            X
MS. WATERS..................................  ............            X
MR. MEEHAN..................................  ............            X
MR. DELAHUNT................................  ............  ............
MR. WEXLER..................................  ............            X
MR. WEINER..................................  ............            X
MR. SCHIFF..................................  ............            X
MS. SANCHEZ.................................  ............            X
MR. VAN HOLLEN..............................  ............            X
MRS. WASSERMAN SCHULTZ......................  ............            X
MR. SENSENBRENNER, CHAIRMAN.................  ............            X
                                             ---------------------------
      TOTAL.................................            9            28
------------------------------------------------------------------------

    Representative Scott offered an amendment which sought to 
strike the section of the bill that prohibits Federal Prison 
Industries and state prison industries from contracting for 
work to provide services. This amendment was not agreed to by a 
rollcall vote of 9-28.

                             Rollcall No. 2

                       Committee on the Judiciary

                     U.S. House of Representatives

                      109th Congress, 2nd Session

    Subject: Scott Amendment (#2) to the Sensenbrenner 
Amendment in the Nature of a Substitute to H.R. 2965, which was 
not agreed to by a rollcall vote of 9 ayes to 28 nays.

------------------------------------------------------------------------
                                                  Ayes          Nays
------------------------------------------------------------------------
MR. HYDE....................................            X   ............
MR. COBLE...................................  ............            X
MR. SMITH...................................  ............            X
MR. GALLEGLY................................            X   ............
MR. GOODLATTE...............................            X   ............
MR. CHABOT..................................            X   ............
MR. LUNGREN.................................            X   ............
MR. JENKINS.................................  ............            X
MR. CANNON..................................            X   ............
MR. BACHUS..................................  ............  ............
MR. INGLIS..................................  ............            X
MR. HOSTETTLER..............................  ............            X
MR. GREEN...................................            X   ............
MR. KELLER..................................  ............            X
MR. ISSA....................................  ............            X
MR. FLAKE...................................  ............            X
MR. PENCE...................................  ............            X
MR. FORBES..................................            X   ............
MR. KING....................................  ............            X
MR. FEENEY..................................  ............            X
MR. FRANKS..................................  ............            X
MR. GOHMERT.................................  ............            X
MR. CONYERS.................................  ............            X
MR. BERMAN..................................  ............            X
MR. BOUCHER.................................  ............  ............
MR. NADLER..................................  ............            X
MR. SCOTT...................................            X   ............
MR. WATT....................................  ............            X
MS. LOFGREN.................................  ............            X
MS. JACKSON LEE.............................  ............            X
MS. WATERS..................................  ............            X
MR. MEEHAN..................................  ............            X
MR. DELAHUNT................................  ............  ............
MR. WEXLER..................................  ............            X
MR. WEINER..................................  ............            X
MR. SCHIFF..................................  ............            X
MS. SANCHEZ.................................  ............            X
MR. VAN HOLLEN..............................  ............            X
MRS. WASSERMAN SCHULTZ......................  ............            X
MR. SENSENBRENNER, CHAIRMAN.................  ............            X
                                             ---------------------------
      TOTAL.................................            9            28
------------------------------------------------------------------------

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

                        Committee Cost Estimate

    In compliance with clause 3(d)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee believes that 
the bill will have no cost for fiscal year (FY) 2007, and that 
the cost incurred in carrying out H.R. 2965 would be $444 
million for FY 2008 to FY 2012. The Committee estimate of these 
costs is as follows:
    H.R. 2965 will require that Federal agencies make their 
purchases from FPI on a competitive basis, when fully 
implemented. It provides FPI a five-year transition period to 
adjust to obtaining its contracts on a competitive basis rather 
than simply taking them on a sole-source basis pursuant to its 
current status as a mandatory source of supply. Most 
importantly, the legislation provides alternative 
rehabilitative and work opportunities for Federal inmates, as 
fully described in the Committee's report.
    H.R. 2965 contains the same levels of authorizations of 
appropriations for the alternative rehabilitative programs and 
alternative inmate work opportunities as those specified in 
H.R. 1829, the bill in the 108th Congress. The Committee's cost 
estimate is derived from the cost estimate by CBO relating to 
those new programs and their associated authorizations of 
appropriations.
    The Committee estimates that implementing H.R. 2965 would 
cost $444 million over the 2008-2012 period, subject to 
appropriation of the necessary amounts. The bill does not 
affect direct spending by FPI.
    The legislation establishes a program that would authorize 
inmates with FPI work assignments to produce products or 
furnish services in support of the public service activities of 
non-profit organizations and units of local government and 
special purpose districts of such units of local government. 
Further, it would authorize such inmate workers to produce 
products or furnish services for donation by non-profit 
organizations. It would authorize the appropriation of $5 
million per fiscal year for fiscal years 2008 through 2012 for 
implementing the new public service program and $7 million a 
year for fiscal years 2008 through 2012 to carry out the new 
donation program. Assuming the appropriation of the authorized 
amounts, the Committee estimates that implementing these 
programs would cost about $25 million and $35 million 
respectively over the 2008-2012 period. All costs of the 
donation program would be subject to appropriation action. 
Section 10 would authorize the Attorney General to establish a 
Federal Enhanced In-Prison Vocational Assessment and Training 
Program in Federal institutions and would authorize the 
appropriation of $75 million each year beginning in 2008 for 
such program. Assuming the appropriation of the specified 
amounts, the Committee estimates that implementing this new 
program would cost $375 million over the 2008-2012 period. 
Finally, the legislation provides $3 million per fiscal year 
for fiscal year 2008 through 2010 to conduct a demonstration 
program to assess cognitive abilities of Federal inmates to 
maximize the effectiveness of remedial and vocational programs 
made available to such inmates.
    Due to the many safeguards that have been included in this 
bill to help FPI make the five-year transition to competition, 
FPI's many on-going multi-year requirments-type contracts with 
Department of Defense contracts, and the ability of FPI to 
partner with not-for-profits and private sector companies to 
sell products and services not being domestically provided, the 
Committee does not believe that the elimination of mandatory 
source will result in a decline in inmate work opportunities 
available through FPI. The Committee believes that the 
additional vocational programs and the other opportunities 
provided to train inmates and prevent ``inmate idleness'' will 
prevent the asserted need to hire additional correctional 
officers.
    The Committee does not believe that H.R. 2965 contains an 
intergovernmental mandate as defined in the Unfunded Mandates 
Reform Act (UMRA). Section 7 of the legislation does have an 
effect on State and local government operations of prison 
industry programs. However, the Committee believes for the 
reasons described below that this section does not create an 
unfunded mandate.
    Section 1761(a) of Title 18, United States Code, prohibits 
the results of inmate labor from being sold in interstate or 
foreign commerce. This prohibition applies equally to inmates 
incarcerated by State and local governments and the Federal 
Bureau of Prisons. Section 1761(c) of Title 18, first enacted 
in 1979, provides the principal exception to the general 
prohibition on the commercial sale of the results of inmate 
labor contained in 18 U.S.C. 1761(a). It authorizes the Prison 
Industry Enhancement (PIE) Program under which a State-
sponsored prison industry program may be authorized to sell in 
the commercial market, either directly or through a private-
sector partner, products produced, or services furnished, by 
inmates incarcerated by the State or one of its units of local 
government. Each proposed PIE project must apply for PIE 
certification from the Bureau of Justice Assistance (BJA) at 
the Department of Justice.
    Section 7 (Clarifying Amendment Relating to Services) of 
H.R. 2965 makes explicit that the statutory prohibition on the 
sale of the results of inmate labor in interstate commerce or 
foreign commerce contained in 18 U.S.C. 1761(a) applies equally 
to services as well as products. For 65 years, this statute was 
consistently interpreted to prohibit the commercial sale of 
inmate-furnished services as well as inmate-produced products-
only recently was it reinterpreted by the Office of Enforcement 
Operations in DOJ's Criminal Division, which provides legal 
services to FPI and the Bureau of Prisons. This ``new'' 
interpretation provided FPI and the prison industries of the 
States and their local governments, authority to sell inmate 
furnished services, either directly or in partnerships with 
private sector firms, without meeting the standards for PIE 
certification.
    Section 7 merely clarifies that the statute's prohibition 
against displacement of non-inmate workers to provide jobs for 
inmate workers and the requirement to pay inmate workers 
providing products or services to the commercial market creates 
comparable to wages being paid non-inmate workers of private 
firms providing the same types of products or services shall 
apply and not the unilateral decision of the attorneys for the 
Bureau of Prisons. Section 7 contains a ``grandfathering'' 
provision, which permits the completion of any existing 
agreement with a private sector partner or gives a state 
program making direct sales a 2-year grace period. The 
provision makes explicit that after the expiration of the 
specified ``grace periods,'' a State-sponsored prison industry 
must comply with the requirements of the Prison Industry 
Enhancement Act.
    This bill contains no new private-sector mandates as 
defined in the Unfunded Mandates Reform Act.
    The Committee would finally note with substantial emphasis 
that the use of competitive procurement techniques to obtain 
goods and services, rather than relying on non-competitive 
contract awards to a sole-source supplier, have consistently 
been shown to result in procurement savings, through 
expenditure avoidance, in the range between 10 and 30 percent. 
This standard was first established through the substantial 
work done by the U.S. General Accounting Office (GAO) during 
the mid-1980s in response to the case of egregious spare-parts 
overpricing confronted by the Department of Defense. The 
benefits of competitive acquisition techniques have been 
consistently validated through subsequent work by GAO and the 
various Inspectors General (IG), most notably the Department of 
Defense Inspector General. Some of this subsequent work 
suggests that savings at the higher end of the range.
    In FY 2004, FPI had sales of $802.7 million, up from $666.8 
million in FY 2003. Such sales make FPI the 49th largest 
contractor to the Federal Government. All of FPI sales to the 
Federal agencies are on a basis other than full and open 
competition.
    The use of competitive procurement procedures by FPI's 
currently captive Federal agency customers, required by the 
bill, rather than sole-source contracting procedures Federal 
agencies are now compelled to use when purchasing from FPI 
pursuant to its mandatory source authority, should result in 
savings. Based on FPI's sales in FY 2004 that means that 
potential savings in acquisition costs in the range of $80 
million to $240 million are possible.
    Further, competitive procurement techniques have been 
consistently shown to improve the quality of the products being 
offered. H.R. 2965 provides agency acquisition managers with 
the tools currently available to them in their dealings with 
private-sector suppliers of products and services.
    Competitive procurement techniques also improve the 
timeliness of deliveries by vendors who know that their past 
performance records will have a significant impact on the 
likelihood of winning future business. Timely deliveries can 
result in savings through cost avoidance. If a Federal agency 
does not have to extend on a month-to-month basis the lease on 
its current space because late deliveries preclude the 
occupancy of its new leased space, the agency avoids wasting 
taxpayer money for space that cannot be occupied.
    Under the competitive contracting procedures required by 
H.R. 2965, FPI cannot avoid the standard that must met by all 
others to the Federal Government: the unambiguous obligation to 
offer a product or service that the buying agency finds to 
represent the ``best value'' for the taxpayer dollars being 
spent and then to fully and timely perform its contractual 
obligations.
    The amount of FPI's sales to the various Federal agencies, 
like the sales volume of any private sector contractor, will be 
determined by the extent that FPI is able to provide a high 
quality product, when needed, at the best price, all tested in 
the crucible of competition.
    If FPI's sales fall, it confirms that FPI's captive Federal 
agency customers have been forced by FPI's mandatory source 
status to accept products and contract performance at prices 
that are not even an approximation of ``best value''. In 
essence, these currently captive Federal agencies have been 
involuntarily subsidizing FPI's operations with the taxpayer 
dollars appropriated for the conduct of their missions on 
behalf of the public.
    Lastly, the Committee observes that some suggest that the 
enactment of H.R. 2965 will result in reduced opportunities for 
inmate employment, raising the specter of mass idleness within 
Federal correctional institutions. In fact, the vast majority 
of inmates have work assignments helping to maintain the 
institutions in which they are incarcerated. They help prepare 
meals, run laundries, maintain grounds, and help do electrical, 
plumbing, carpentry repairs and other similar institutional 
support work. Only the balance of inmate workers have work 
assignments with FPI. Based upon FPI employment figures for FY 
2004, approximately 85 percent of Federal inmates had 
institutional work assignments. Approximately 15 percent of 
Federal inmates had FPI work assignments. Only these inmates 
could be affected by the enactment of H.R. 2965. Rather than 
reducing the potential for inmate work assignments, H.R. 2965 
authorizes additional types of alternative inmate work 
opportunities, seeking to change the future direction of FPI's 
attainment of its self-specified goal of trying to provide 
employment for 25 percent of the inmate population. The 
alternative inmate work opportunities authorized by H.R. 2965 
will not subject non-inmate workers, and the firms that employ 
them, to the unfair competition in the Federal procurement 
market that now flows from each annual FPI expansion.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, H.R. 
2965 is intended to reform the Federal Prison Industries to 
require FPI to compete for its contracts with private sector 
firms and provide a five-year period during which FPI adjusts 
to obtaining inmate work opportunities through other than its 
mandatory source status. Additionally, the legislation is 
intended to provide for inmate access to remedial and 
vocational opportunities and other rehabilitative opportunities 
to better prepare inmates for a successful return to society.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in article I, section 8, clause 18 of the 
Constitution.

               Section-by-Section Analysis and Discussion

Sec. 1. Short Title; Table of Contents

    Subsection (a) of this section establishes the bill's 
citation as the ``Federal Prison Industries Competition in 
Contracting Act of 2006''.
    Subsection (b) sets forth a table of contents of headings 
of the various sections of the bill.

Sec. 2. Government-wide procurement policy relating to purchases from 
        Federal Prison Industries

    Subsection (a) of revised section 4124 of title 18, United 
States Code, makes explicit that a purchase of a product or 
service from Federal Prison Industries, Inc. (FPI) by a Federal 
agency shall be purchased through a procurement transaction 
awarded pursuant to section 4124, as amended. Such procurements 
shall be made on a competitive basis, except to the extent that 
an other than competitive award is expressly authorized by 
revised section 4124.
    Under current section 4124(a), FPI has been accorded the 
status of a mandatory source of supply under the Government-
wide Federal Acquisition Regulation (FAR) in FAR Subpart 8.6 
(Acquisition from Federal Prison Industries, Inc.) (48 CFR 
8.6). A Federal agency is required to acquire from FPI, on a 
sole-source basis, any product of the type listed in FPI's 
Schedule of Products published by FPI, which has adopted and 
uses the trade name ``UNICOR.''
    On March 26, 2004, FAR Subpart 8.6 was modified to reflect 
the enactment of Section 637 of division F of the Consolidated 
Appropriations Act of 2004 (Public Law 108-199), which required 
that, for Fiscal Year 2004, the procedures of section 2410n of 
title, United States Code, be given government-wide application 
through the FAR. Section 637 of division H of the Consolidated 
Appropriations Act of 2005 (Public Law 108-447) extended to all 
government agencies procedures of Section 2410n for Fiscal Year 
2005, and each subsequent fiscal year. In response, FAR Part 
8.6 was again modified by an Interim Rule on April 5, 2005, 
which extended the earlier modifications for Fiscal Year 2005, 
and subsequent fiscal years. On January 3, 2006, a Final Rule 
was issued, which left substantively unchanged the prior 
Interim Rules.
    FAR Part 8.6, as modified, requires a Federal agency buyer, 
before making a purchase a product from FPI, which is listed in 
FPI's Schedule of Products, to conduct appropriate market 
research to determine if the product offered by FPI is 
comparable in quality, timeliness of delivery, and price with 
products available from private sector firms. If the agency 
buyer determines that FPI's offered product is comparable, then 
a purchase must be made from FPI or, pursuant to FAR 8.605 
(Clearances), FPI's authorization, referred to by FPI as a 
``waiver,'' must be obtained pursuant to FPI's procedures. 
Under FPI' s current waiver procedures, the decision to grant a 
waiver is made unilaterally by FPI.
    If the agency buyer determines that FPI's product is not 
comparable then the purchase must be made on a competitive 
basis. An offer must be solicited from FPI. The requirement to 
solicit an offer from FPI applies only to products which FPI 
has been authorized to offer for sale by its Board of Directors 
and which are listed in FPI's Schedule of Products. The 
requirement to solicit an offer from FPI does not apply to any 
service offered by FPI. FPI's authorizing statute does not 
provide any explicit statutory authority to offer services to 
any Federal agency. FPI, however, has for many years done so. 
It follows that there is procurement preference accorded to 
services offered by FPI. FPI, however, has asserted a 
preferential status for the services it offers and agencies 
have acquired them through interagency transfers, foreclosing 
any opportunity for private sector firms to make an offer on 
such agency needs for such services.
    FAR Part 8.603 (Purchase priorities) states in paragraph 
8.603(b)(2) that Federal buying agencies are to give FPI a 
priority with respect to services needed by the buying. Such 
direction to the Federal agency buyer is, in the Committee's 
opinion, without basis under current law, and would be 
expressly contrary to Section 4124, as amended. The 
determination by the agency buyer regarding the comparability 
of a product offered by FPI is a unilateral determination by 
the contracting officer, not subject to appeal by FPI. Section 
2410n specifically forecloses FPI from invoking the disputes 
mechanism of current section 4124(c) of title 18, United States 
Code. Prior to the modification of FAR 8.6, in response to the 
previously cited statutory provisions, FPI, rather than the 
buying agency, determined whether the FPI-offered product met 
the mission needs of the buying agency. Similarly, FPI, rather 
than the buying agency, determined if FPI's proposed delivery 
schedule met the mission needs of the buying agency. Finally, 
FPI, rather than the buying agency, determined the 
reasonableness of FPI's price.
    Revised section 4124 is intended to fundamentally change 
the business relationship between a Federal agency and FPI and 
realign that relationship to mirror the business relationship 
that exists between a Federal agency and a private sector 
supplier. The revised section 4124 eliminates any statutory 
basis for either the ``clearance'' process of current FAR Part 
8.6 or FPI's so-called ``waiver' process. As previously 
mentioned, FPI's authorizing statute currently does not provide 
explicit authority for FPI to sell services to the various 
Federal agencies. The statute has been interpreted to authorize 
FPI to offer services to Federal agencies. FPI's mandatory 
source status does not apply, but it is clear that Federal 
agencies typically obtain services from FPI after a non-
competitive negotiation on the basis that a purchase from FPI 
is an interagency transfer rather than a procurement, and thus, 
is not subject to the statutory and regulatory procedures for 
the solicitation, award, and administration of procurement 
contracts. The revised section 4124 makes explicit that 
services as well as products obtained from FPI by a Federal 
agency should be obtained through procurement contracts.
    Subsection (b) of revised section 4124 addresses the 
solicitation of offers from FPI by the various Federal agencies 
and the subsequent award of a contract to FPI on either a 
competitive or sole-source basis. Paragraph (1)(A) of 
subsection (b) places a general affirmative responsibility on 
the various Federal agencies to solicit an offer from FPI when 
making a purchase, above the Micro-purchase Threshold, for any 
product or service authorized by FPI's Board of Directors to be 
offered for sale by FPI and listed in the UNICOR (FPI's trade 
name) Schedule of Products. Subsection (c) contains a 
limitation relating to solicitations that have been reserved 
for competition among small business concerns. The Micro-
purchase Threshold is established in Section 32(g) of the 
Office of Federal Procurement Policy Act (41 U.S.C. 428(g)) by 
Section 4001 of Public Law 104-355, the ``Federal Acquisition 
Streamlining Act of 1994''. It is currently set at $2,500.
    Prospective contractors, whether the smallest of small 
businesses, or a multinational corporation, are responsible for 
identifying Federal contracting opportunities. New paragraph 
(1)(A) is one of several reflected in revised section 4124, and 
elsewhere in the bill, that accord FPI a limited preference 
status in the procurement designed to facilitate FPI's ability 
to compete for Federal Contracts. Paragraph (1)(B) of 
subsection (b) makes explicit that the requirements of 
subparagraph (A) apply when the Federal agency is intending to 
acquire a product or service to meet the agency's need by 
placing an order against one or more of the contracts 
maintained by the General Services Administration (GSA) under 
its Multiple Award Schedule (MAS) Program. Under the MAS 
Program, GSA negotiates the terms and conditions of an array of 
contracts to provide the Federal agencies with existing 
contractual vehicles through with such agencies may obtain 
easier access to commercial products and services offered by 
commercial firms. As with any procurement, the buying agency 
determines which offeror represents the ``best value'' for the 
taxpayer dollars being expended.
    Paragraph (1)(C) authorizes FPI, upon its request, to have 
notices placed in the lists maintained by GSA of firms holding 
MAS contracts, stating that FPI offers products or services 
which FPI believes are comparable to the products or services 
being offered by Schedule contract holders. The provision is 
not intended to affect FPI's ineligibility to be evaluated for 
award of a MAS Schedule contract, given its status as a wholly-
owned Government corporation, specifically prohibited from 
making sales of products or services in the commercial market. 
Although not a Schedule contract holder, the provision grants 
FPI the preference of having its offerings listed in the same 
manner and with the same frequency as a holder of a Schedule 
contract. For example, if FPI is authorized to offer 
institutional seating, FPI's notice would appear along with the 
listing of the firms actually holding Schedule contracts. If 
the category of institutional seating is further subdivided 
within the listing, FPI should also be listed with the firms 
holding a Schedule contract. GSA would be responsible for 
monitoring the text of FPI's proposed notice to make certain 
that FPI's notice does not, in any way, convey to Federal 
agency buyers that FPI enjoys any preference for award over 
commercial firms holding MAS contracts. FPI' s placement within 
the list of Schedule contract holders would similarly be 
determined by GSA. Such listings must be requested by FPI. The 
provision places no affirmative responsibility on GSA to place 
a listing in any Schedule without a request from FPI.
    The authority to be listed, granted by paragraph (2)(C), 
like the underlying solicitation requirement of Subparagraph 
(A), only applies to a product or a service which FPI has been 
authorized to offer for sale by its Board of Directors, 
pursuant to 4122 of title 18, United States Code, as amended by 
Section 3 (Public Participation Regarding Expansion Proposals 
by Federal Prison Industries) of the bill. Paragraph (2) of 
subsection (b) requires the use of competitive procedures for 
the solicitation and award of a contract to FPI, unless the use 
of other than competitive procedures is authorized pursuant to 
Paragraph (3), Paragraph (7) of revised section 4124(b), or is 
authorized pursuant to section 303(c)(7) of the Federal 
Property and Administrative Services Act of 1949 (41 U.S.C. 
253(c)(7)). The contract shall be awarded to FPI, only if the 
contracting officer determines that FPI's offer represents the 
``best value.'' Paragraph (3) of subsection (b) requires the 
non-competitive negotiation of a contract award to FPI, if the 
Attorney General makes a determination that: (i) there is no 
reasonable expectation that FPI will win the contract award 
competitively, and (ii) the inmate work opportunities provided 
by the contract are necessary ``to prevent circumstances that 
could reasonably be expected to significantly endanger the safe 
and effective administration'' of the correctional facility at 
which the contract is to be performed. Paragraph (4) of 
subsection (b) makes explicit the authority of the contracting 
officer to evaluate FPI's offer with respect to whether: (i) 
FPI's offered product or service will meet the agency's 
requirements; (ii) timely performance by FPI can reasonably be 
expected; and (iii) the price offered by FPI represents a 
current market price. These authorities of the contracting 
officer apply equally whether the contract is for a product or 
a service, or is to be awarded after a competition or on a 
sole-source basis, unless the award is made pursuant to new 
paragraph (3) of subsection (b).
    Subsection (b)(4) is intended to make explicit that any 
product or service offered by FPI must comply with the full 
range of performance and design specifications that would be 
demanded of a product or service furnished by a private sector 
offeror. For example, FPI or its product or service would have 
to comply with any pre-qualification requirements, such as a 
QML (Qualified Manufacturers List) or QPL (Qualified Products 
List). Similarly, design specifications (relating to quality of 
materials used or manner of manufacture) or performance 
specifications (relating to durability, serviceability, or 
interoperability) would have to be met. Further, products 
furnished by FPI should be required to conform to the same 
commercial or governmental standards and pass the same tests 
required of products furnished by private sector vendors. FPI's 
status as a government corporation operating within the Federal 
correctional system should not diminish, in any degree, its 
responsibility to furnish to a Federal agency a quality product 
or service that meets the agency's mission or program needs to 
the same extent as a product or service furnished by a private 
sector supplier.
    Subsection (b)(4) is also intended to make explicit the 
contracting officer's authority regarding the time of 
performance being offered by FPI. Timely performance is 
frequently as important as the quality of the product or 
service being furnished. Under the new provision the 
contracting officer may independently evaluate promises of 
timely performance being made by FPI. Pursuant to Section 1091 
of Public Law 103-355, the ``Federal Acquisition Streamlining 
Act of 1994'', and implementing FAR coverage, a contracting 
officer is now required to accord substantial weight to each 
offeror's history of timely performance with respect to prior 
contracts, especially for the product or service being offered, 
when making the decision to award a new contract. Such an 
evaluation on the basis of ``past performance'' will now fully 
apply to FPI.
    Subsection (b)(4) is further intended to make explicit the 
contracting officer's authority to make an independent 
determination as to whether the price being offered by FPI 
represents a current market price. This applies equally with 
regard to whether FPI is offering a product or service. 
Currently, the term ``current market price'' is not defined in 
FPI's authorizing statute or in the government-wide Federal 
Acquisition Regulation (FAR) provisions pertaining to purchases 
from FPI. Section 16(2) of the bill adds such a definition. The 
proposed definition includes explicit recognition of the 
contracting officer's authority to employ generally available 
price analysis or cost analysis techniques to determine whether 
FPI's offered price meets the standard.
    The provisions of new section 4124, making explicit a 
contracting officer's authority in dealing with FPI, are 
intended to overturn a sweeping legal opinion by the Assistant 
Attorney General for the Office of Legal Counsel, issued on 
September 13, 1993. The opinion, Application of the Federal 
Acquisition Regulations to Procurement from Federal Prison 
Industries, unequivocally holds that FPI is not subject to the 
Federal Acquisition Regulation (FAR), except the FAR provisions 
relating to FPI as a mandatory source of supply. A federal 
agency cannot compel FPI, like a private contractor, to meet 
the agency's contractual terms and conditions regarding: (i) 
quality of product delivered or services furnished; (ii) the 
reasonableness of offered prices (or require the justification 
of any price increases); or the delivery schedule for products 
(or a schedule of performance relating to a service).
    The legal opinion was issued at FPI's request to respond to 
a 1991 report by the Inspector General of the Department of 
Defense (DOD). In DOD Procurements from Federal Prison 
Industries, (Audit Report No. 92-005; October 11, 1991), 
overpricing, averaging 15 percent, was identified in 48 of 54 
contracts (89 percent) awarded to FPI by various DOD buying 
centers for electronic components and electrical cables during 
a seven-year period, FY 1984 through FY 1990. Although the 
contracts were awarded on a non-competitive basis, FPI did not 
provide the current, accurate, and complete cost data or 
pricing data needed by the contracting officer to determine 
whether the Government is being charged a fair and reasonable 
price. Further, FPI was found to lack the accounting systems to 
generate reliable cost or pricing data. The DOD Inspector 
General recommended that FPI refund the amounts found to be 
over-pricing.
    The legal opinion specifically held that ``DOD lacks the 
necessary contracting freedom to make FPI accept the FAR's 
constraints.'' ``* * * as a matter of law, it [FPI] retains 
ultimate statutory authority to set its own prices, subject to 
arbitration'' by a statutorily-specified board composed of the 
President (delegated to the Director of the Office of 
Management and Budget), the Attorney General, and the 
Administrator of General Services, which according to the GAO 
last met in the 1930s to arbitrate a performance dispute.
    This subsection is also necessary because of FPI's current 
unique pricing standard. Under current 4124(a) of FPI's 
authorizing statute the price FPI charges its Federal agency 
customers cannot exceed a ``current market price,'' however, 
the statute does not define current market price. Rather FPI 
operates on the basis of a 1931 Arbitration Board decision that 
says that FPI's price meets the statutory ``current market 
price'' standard, if the price FPI intends to charge its 
Federal agency customer does not exceed the highest price at 
which a comparable product was offered to the Government (not 
actually purchased).
    Those opposing modification to the FPI program frequently 
assert that FPI is self-sustaining. It is true that FPI 
receives little direct appropriations. It is not true, however, 
that FPI is self-sustaining. Its status as a mandatory source 
of supply, permit it to take the appropriations of its captive 
Federal agency customers to the extent that FPI' s products do 
not represent the best value for the taxpayer dollars being 
spent with FPI by a Federal busying agency.
    With regard to over-pricing, corroboration is provided by a 
1991 report by the DOD Inspector General (IG) and GAO reports 
in 1993 and 1998. On October 11, 1991, the DOD IG issued Audit 
Report No. 92-005, DOD Procurements from Federal Prison 
Industries, in response to a DOD IG HOTLINE allegation. The DOD 
IG reviewed a sample of FPI contracts, over a seven-year period 
(FY1984 to FY1990), to supply electronic and electrical cables 
to DOD. The audit report found overpricing in 89 percent of the 
contracts that averaged 15 percent. On October 5, 1998, the DOD 
IG issued Audit Report No. 99-001, Defense Logistics Agency 
Procurements from Federal Prison Industries, Inc. The DOD IG 
reviewed 1,786 contracts awarded during FY96 and FY97 for 
items, 87 percent of the textiles, for which DLA made purchases 
from FPI and commercial sources. Even for textiles, items for 
which FPI is especially competitive due to its lower labor 
costs, FPI's prices were higher than commercial vendors in 42 
percent of the contracts reviewed.
    On July 7, 1993, GAO issued Report No. GGD 93-51R, entitled 
FPI Systems Furniture. In accessing FPI pricing for systems 
furniture, the GAO compared FPI's pricing with the prices 
available from commercial vendors through the GSA's Multiple 
Award Schedule (MAS) Program. FPI's prices were higher than the 
offered prices of 9 of the 11 commercial systems furniture 
vendors under the MAS Program. FPI's prices averaged 15 percent 
higher than the prices of the three commercial vendors whose 
sales in 1992 aggregated to 60 percent of the systems furniture 
sales under the GSA MAS Program. Further, the three most 
successful commercial suppliers were not simply ``low-end 
product'' vendors. Similar findings regarding furniture 
products as well as other products are reported in Federal 
Prison Industries: Information on Product Pricing: (GAO/GGD-98-
151; August 24, 1998).
    Paragraph (5) of Subsection (b) requires that the Attorney 
General's determination made pursuant to subsection (b)(3) of 
revised section 4124 must be supported by two specific 
findings. First, the warden of the correctional institution 
containing the factory scheduled to perform the work required 
by the contract must determine that without the work the ``safe 
and effective administration of such facility'' would be 
``significantly endangered''. Second, FPI's chief operating 
officer must provide substantiated findings regarding why FPI 
``does not expect to win the contract on a competitive basis''.
    The standard for the determination by the warden does not 
even suggest, must less require, that the warden find that loss 
of the contract at issue will result in loss of control of the 
institution, as some have asserted. The enunciated standard is, 
on its face, substantially lower. The warden's determination is 
fully recognized as concurrently judgmental and prospective in 
nature. The specific supporting findings contemplated by the 
provision relate to the number of inmates with FPI work 
assignments that would be affected by the loss of the contract 
as a percentage of the total number of inmates with FPI work 
assignments, and other factors affecting the good order of the 
institution, such as the degree to which the institution is 
overcrowded.
    The requirements proposed in new Section 4124(b)(5) mirrors 
the current requirements applicable to the Department of 
Justice in order to make a sole-source purchase under the 
authority of Section 303(c)(7) of the Federal Property and 
Administrative Services Act of 1947 (41 U.S.C. 253(c)(7)), 
which requires the Attorney General to make a personal 
determination that a contract award cannot be made 
competitively, but is ``necessary in the public interest''. A 
sole-source purchase, pursuant to Section 303(c)(7), can only 
be made by the Attorney General, on a non-delegable basis and 
require a 30-day wait period after making the report to 
Congress. The new authority is unencumbered by any delay 
requirement and the responsibility may be delegated. The 
Committee expects that, if the Attorney General's 
responsibilities are delegated, they not be delegated to anyone 
with FPI or the Federal Bureau of Prisons, or below the level 
of an Assistant Deputy Attorney General.
    Paragraph (6) of subsection (b) provides that the buying 
activity may resume its generally applicable contract 
solicitation and award procedures, if the Attorney General has 
not authorized a sole source negotiation pursuant to new 
Section 4124(b)(3) within 30 days. It is anticipated that any 
notice of a contracting opportunity published prior to the 
release of a solicitation for competitive offers will specify 
that an offer is required to be solicited from FPI and that the 
Attorney General is empowered to determine that the contracting 
opportunity will be negotiated with FPI on a sole-source basis. 
Paragraph (7) of subsection (b) recognizes a Federal agency is 
authorized to make a purchase from FPI on a sole-source basis 
if the buying agency determines that the needed product or 
service is currently only available from FPI. Paragraph (8) of 
subsection (b) authorizes the Federal Bureau of Prisons (BOP) 
to make purchases from FPI on a non-competitive basis. This 
recognizes a long-standing tradition of having inmates produce 
as many of the products that they use daily. For example, FPI 
produces uniforms worn by the inmates, eyeglasses, industrial 
safety as well as prescription, plastic service with which the 
inmates eat their meals, and the mattresses and bed linens upon 
which they sleep.
    The Committee considered, and soundly rejected, a proposal 
to grant the Attorney General new blanket authority to make 
sole-source purchases from FPI to meet any need of any element 
of the Department of Justice. The various operating elements of 
the Department of Justice represent a very substantial amount 
of Federal business opportunities, which should not be randomly 
foreclosed from bidding by private-sector firms, and their non-
inmate workers, whose tax dollars the Attorney General is 
spending. According the most recent data available from the 
Federal Procurement Data Center, the Department of Justice made 
purchases of $ 4.047 billion in Fiscal Year 2004, making DOJ 
the 6th largest purchaser among the Federal departments and 
agencies.
    Paragraph (9) of subsection (b) requires the various buying 
agencies to first solicit an offer from FPI on a non-
competitive basis with respect to a product or service that 
would otherwise likely be furnished by a contractor performing 
work outside of the United States. There is no requirement that 
the product or service has already been authorized for sale by 
the FPI Board of Director and be listed in FPI's Schedule of 
Products.
    Subsection (c) of revised Section 4124 makes explicit that 
a competitive offer timely received from FPI will always be 
considered, unless the competition is restricted to small 
businesses, a so-called ``small business set-aside'', conducted 
pursuant to Section 15(a) of the Small Business Act (15 U.S.C. 
644(a)). Subsection (c) of revised Section 4124 of title 18, 
United States Code, was further amended by an amendment offered 
by Rep. Darrel Issa (CA-49), which added a new paragraph (2) to 
Subsection (c). New subsection (c)(2) would authorize FPI to 
exclude from its offered price the costs specifically related 
to producing the product or furnishing the service in a 
correctional setting. This provision contemplates that FPI will 
have developed and implemented, prior the utilization of this 
authority, a cost accounting system that enable FPI to reliably 
and accurately capture such costs and to allocate them to FPI' 
s offered price in a consistent manner. This provision would 
seem to be intended to make allowable the costs of contract 
performance in a correctional setting. If such new cost 
accounting system meets the standards of the Federal 
Acquisition Regulation and the associated Cost Accounting 
Standards, such system should also permit FPI to be able to 
compete for Federal contracting opportunities that provide for 
the reimbursement of the successful offeror's costs of 
performance, rather than only those awarded on a unit price 
basis.
    Subsection (d) of revised Section 4124 codifies the 
fundamental principal that FPI is required to perform its 
contractual obligations to the same extent as any private 
sector contractor. Attainment of FPI's prison management and 
inmate-rehabilitation objectives do not authorize FPI to 
furnish non-conforming products or services, perform late, or 
unilaterally increase prices to the detriment of a Federal 
agency customer who requires timely performance of the services 
or delivery of products to perform its functions on behalf of 
the public and to be good stewards of the taxpayers' money.
    It is intended that the implementation of this provision 
through the government-wide Federal Acquisition Regulation 
(FAR) will afford to an agency contracting officer 
administering a contract with FPI the same array of contract 
administration techniques, authorities, and remedies available 
when administering a contract with a private contractor. 
Disputes between the administrative contracting officer and FPI 
regarding whether FPI's performance conforms to the terms of 
the contract would be subject only to appeal rights granted to 
FPI pursuant to new subsection (e) of revised Section 4124.
    FPI's Federal agency customers have had to bear the 
additional costs of late deliveries by FPI as well as problems 
with FPI furnishing to them products that failed to meet the 
buying agency's stated requirements and FPI's promised 
performance. Various studies have led credence to those 
complaints. For example, on July 31, 1998, GAO issued Federal 
Prison Industries: Delivery Performance Improving but Problems 
Remain (GAO/GGD-98-118; June 30, 1998).
    Further support for the need to empower the contracting 
officer to require full contractual performance was included in 
a particularly thorough 1992 report by the DOD Inspector 
General, Quality Assurance Actions Resulting from Electronic 
Component Screening, Report No. 92-099. During a review of DOD 
quality assurance programs for accessing the quality of 
electronic components and cables furnished to DOD during 
FY1988-90, the DOD Inspector General found that among the top-
20 suppliers of electronic components, FPI ranked 8th in terms 
of sales, but first in number of Product Quality Deficiency 
Reports (PQDRs) identified, 106 out of 170. Among all the 
contractors furnishing electronic components and cables to DOD 
during the review period, the DOD IG identified the contractors 
with most PQDRs. Three FPI factories were among the top-15 poor 
performers, with 100 PQDRs out of 245, or 40.1% of the total. 
The seriousness of these quality deficiencies found by the DOD 
Inspector General is amplified when it is recognized that many 
contracting officers don't even bother to cite FPI for quality 
deficiencies, since, in practical terms, FPI determines the 
validity of any quality delinquency report made against any FPI 
product.
    Subsection (e) of revised Section 4124 is intended to 
eliminate the existing bias in favor of FPI in the resolution 
of disputes arising during the negotiation of a sole-source 
contract award to FPI pursuant to its mandatory source status 
or during FPI's subsequent performance of the contract. Under 
current 18 U.S.C Section 4124(b), and the FAR provisions 
implementing the statute, any dispute relating to the ``price, 
quality, character, or suitability of such [FPI] products'' 
shall be arbitrated by a board consisting of the President 
(delegated to the Director of the Office of Management and 
Budget), the Attorney General, and the Administrator of General 
Services. ``Their decision shall be final and binding upon all 
parties.'' This statutory disputes resolution provision 
currently gives FPI total dominance over its Federal agency 
customers, in practical business terms.
    Prior to the statutorily-mandated modifications to FAR Part 
8.6, previously described, a contracting officer had to obtain 
FPI's permission through its ``waiver'' process, if the 
contracting officer wanted to purchase an FPI-offered product 
from an alternative source. To obtain a waiver from FPI, the 
contracting officer had to prove to FPI's satisfaction that: 
(i) the FPI-offered product does not meet the agency's 
requirements; (ii) FPI's delivery schedule will not meet the 
agency's mission requirements, or (iii) FPI's price does not 
represent a ``current market price''. FPI's ``waiver process'' 
has no statutory basis. However, it discouraged contracting 
officers from scrutinizing FPI's offers, since disagreements 
were settled by FPI.
    FPI is still accorded the similar superior position with 
respect to disputes arising during the performance of the 
contract. FPI's decision regarding the adequacy of its own 
performance prevails, unless overturned by a decision of the 
statutorily-specified arbitration board. Like the ``waiver 
process'' during the contract-award phase, FPI's statutorily-
sanctioned dominance makes a contracting officer's demand for 
timely performance or fully conforming products or services 
futile. Except with respect to FPI, a contracting officer's 
final decision regarding contract performance is otherwise 
binding with respect to a private sector contractor.
    Paragraph (1) of subsection (e) specifies that the decision 
of a contracting officer regarding the award of a contract to 
FPI or relating to the performance of a contract awarded to FPI 
shall be final, unless the decision is overturned pursuant to 
the procedures specified regarding the disposition of an appeal 
made by FPI. The provision requires that any appeal by FPI 
shall be through the appeal processes specified in Paragraphs 
(2) and (3) of revised Section 4124(e). Paragraph (2) of 
subsection (e) authorizes the FPI's Chief Operating Officer to 
file an agency protest relating to the award of a contract to 
FPI pursuant FAR Part 33.103 (Protests to the agency). In the 
event of an adverse decision regard an agency bid protest, the 
Assistant Attorney General for Administration may request a 
reconsideration, de novo, by the head of the buying agency. The 
decision on reconsideration shall be personally made by the 
agency head. The decision on reconsideration by the agency head 
is final.
    As a Government-owned corporation, FPI does not have a 
right to file a protest with the buying agency, with the bid 
protest forum operated by the Government Accountability Office 
(GAO), or with the Court of Federal Claims. To facilitate FPI's 
ability to compete for its Federal contracts, a major 
concession was made to FPI by granting it access to agency bid 
protest forums established pursuant to FAR Part 33.103. 
Requests that FPI be granted access to either the GAO or the 
court were considered and rejected. Paragraph (3) of subsection 
(e) gives FPI the right to an independent review of an adverse 
decision by the agency contracting officer regarding the 
adequacy of FPI's contract performance. FPI can have an adverse 
decision decided through one of the various forms of 
alternative disputes resolution provided in Subchapter IV of 
Title V, United States Code, such as mediation or binding 
arbitration by an independent neutral party. To assure the 
impartiality, both parties must agree to the use of an 
alternative disputes resolution technique.
    Despite FPI's status as a Government-owned corporation, FPI 
is also granted the right to appeal an adverse contracting 
officer's decision relating to FPI's performance of a contract. 
The Contract Disputes Act of 1978 (41 U.S.C. 601, et seq.) was 
enacted to provide private-sector contractors with access to 
impartial forums to resolve disputes relating to the 
performance of a Federal contract. The Act authorizes the 
creation of Boards of Contract Appeals. Certain departments and 
agencies with very substantial procurement activities, such as 
the Department of Defense and the General Services 
Administration, maintain their own boards. Other agencies, with 
very limited procurement activities, have entered into 
agreements to have their contract performance disputes handled 
by another agency's board. Given the intra-governmental 
character of the dispute between FPI and one of its agency 
customers, an appeal to the Court of Federal Claims is 
expressly not made available to FPI. The decision of the 
independent board of contract appeals is final, without further 
right of appeal.
    New subsection (f) of revised Section 4124 requires each 
Federal agency and department reporting to the government-wide 
Federal Procurement Data System (FPDS) to report all 
acquisitions from FPI in the same manner it reports purchases 
from private sector vendors in excess of the Simplified 
Acquisition Threshold as defined in Section 4(11) of the Office 
of Federal Procurement Policy Act (41 U.S.C. 403(11), currently 
$100,000. Section 2901 of the ``Crime Control Act of 1990'', 
Public Law 101-647, amended 18 U.S.C. 4124 to provide for the 
reporting of all purchases from FPI. This provision is intended 
to make explicit the reporting format and level of detail. 
Until the 1990 amendment, there was no requirement that 
purchases from FPI be reported to the FPDS by the various 
Executive agencies because the purchases are considered to be 
non-reportable ``interagency transfers'' rather than contracts. 
The absence of full FPDS data on federal agency purchases from 
FPI has made it virtually unworkable to make market-share 
determinations relating to the FPI Board of Directors' 
consideration of proposals to approve new products to be 
offered for sale by FPI or to expand production of currently 
approved products, pursuant to current Section 4122(b). The 
validity of the market share analyses prepared by FPI staff are 
generally questioned by the private vendor community because of 
the inability to make reliable comparisons of agency purchases 
from private-sector sources and those made from FPI.
    Subsection (g) of revised Section 4124 requires FPI to 
publish and keep current its UNICOR Schedule of Products, which 
lists both the products and services it has been authorized by 
its Board of Directors to offer for sale. FPI maintains an 
extensive electronic bulletin board accessible through the 
Internet which provides interactive information about its full 
line of products and services. The bulletin board, like its 
Schedule of Products and other paper-based promotional 
materials, makes it explicit that the statutes require FPI be a 
mandatory source for federal agencies needing any product which 
FPI offers. It also explains the new procedures required by the 
statutorily-mandated modifications to FAR Part 8.6.
    Subsection (h) makes explicit that FPI's industrial 
operations are subject to the same Federal occupational, 
health, and safety standards as private-sector suppliers to the 
Federal Government. It is the expectation of the Committee that 
Federal Prison Industries will provide an appropriately safe 
and environmentally compliant workplace for both its staff and 
its inmate workers. To do less would be a major disservice to 
both. The Committee is aware of recent reports concluding that 
employees as well as inmate workers in one or more of the 
recycling factories operated by Federal Prison Industries were 
exposed to toxic or hazardous substances. The Committee is 
advised that, due to a dispute in the findings of the initial 
investigation, the Office of the Inspector General in the 
Department of Justice is undertaking a separate, independent 
investigation into FPI's electronics recycling program. Since 
this facility in question was, according to FPI management, 
adhering to standard FPI procedures relating to electronics 
recycling, it is not unreasonable to be concerned that similar 
problems might exist at FPI electronic recycling factories at 
other correctional institutions. The Committee requests that 
the Attorney General provide the Committee a briefing on the 
scope and methodology of the planned inquiry by the Inspector 
General, and periodic briefings on the status of the 
investigation while it is being undertaken.

Sec. 3. Public Participation Regarding Expansion Proposals by Federal 
        Prison Industries

    This section amends Section 4122(b) of title 18, United 
States Code, relating to the procedures for approving the 
addition of a new product or service offered for sale by 
Federal Prison Industries (FPI) or expanded production or 
performance of a currently approved product or service. The 
amendments will: (i) conform the public participation processes 
used by FPI's Board of Directors with those currently used by a 
very similar federal preference program for purchases from 
rehabilitative work centers employing the blind and severely 
handicapped; (ii) clarify the analytical process to determine 
if an adverse private-sector impact will result from the 
approval of a proposal to add a new product or service to FPI's 
product line or expand production or performance of a currently 
authorized product or service; and (iii) distinguish more 
clearly between the analytical and advisory responsibilities of 
FPI's career staff and the decision-making authorities of the 
Presidentially-appointed FPI Board of Directors.
    Paragraph (4) of amended Section 4122(b) authorizes two 
exceptions under which FPI may sell a new product or sell 
quantities in excess of its authorized level without obtaining 
prior approval from the FPI Board of Directors. They are two 
further examples of modifications to H.R. 2965, as introduced, 
designed to help FPI make a successful adjustment to obtaining 
Federal contracts on a competitive basis.
    Paragraph (4)(A) authorizes FPI to offer an new specific 
product or a new specific service in order to respond to a 
Federal agency's contract solicitation. If FPI is successful in 
winning the contract, it must seek Board approval before being 
able to respond to a subsequent solicitation. During the 
pendency of the public and Board review process pursuant to 
subparagraphs (5) through (9), FPI may perform any delivery 
orders, work assignments, or any option affecting the contract 
term, under, and within the scope, of the competitively awarded 
contract. If the Board does not authorize the new specific 
service or new specific item, FPI may only perform further 
delivery orders work assignments, or option quantities during 
the contract term in effect at the time the Board made its 
decision.
    Paragraph (4)(B) authorizes FPI to produce a specific 
product or furnish a specific service in excess of the Board 
authorized level of production for such product or service to 
respond to an order under an existing contract, if the buying 
agency has an exigent need for the products or service. In 
determining whether exigent circumstances exist, the buying 
agency must determine whether the circumstances would be 
sufficient to justify the initial award of the contract 
pursuant to law and Federal Acquisition Regulations, using 
other than competitive procedures due to urgent and compelling 
circumstances. Paragraph (5) of amended Section 4122(b) would 
apply the public notice and comment requirements of the 
Administrative Procedure Act (APA) (5 U.S.C. 533) to the 
procedures used by FPI's Board of Directors when considering a 
proposal to authorize FPI to produce a new specific product or 
specific service or significantly expand the production or 
performance of a currently approved product or service. These 
APA requirements, the ``standard'' for public participation, 
currently apply to an almost identical decision made by the 
Committee for Purchase from the Blind and Other Severely 
Handicapped, under a very similar procurement preference 
program authorized by the Javits-Wagner-O'Day Act (41 U.S.C. 
46-48c).
    Paragraph (6) of amended Section 4122(b) specifies the 
analytical requirements that must accompany an expansion 
proposal from FPI's career management staff. Rather than being 
conducted by FPI as is presently done, new section (b)(6) would 
require that the impact analysis be conducted by an independent 
entity, either an interagency team or a private contractor. The 
interagency team would consist of representatives of the 
Department of Labor, the Department of Commerce, and the 
Federal Procurement Data Center, led by a representative of the 
Small Business Administration. If the impact analysis is to be 
conducted by a private contractor, the selection of the 
contractor and the administration of the contract is to be 
handled by one of the statutorily designated Federal agencies, 
operating as an independent executive agent of the FPI Board of 
Directors. To maintain independence, the participation of FPI 
staff would be limited to submitting to the buying agency's 
contracting officer a proposed statement of work for the 
contractor.
    Subparagraph (C) of revised Section 4122(b)(5) specifies 
the matters to be considered in conducting the impact analysis 
relating to the expansion proposed by FPI staff. Subparagraph 
(D) of revised Section 4122(b)(5) sets forth limitations on the 
authority of the FPI Board of Directors to authorize the 
production of a new specific product or specific service (or 
expand production of a currently approved product or service).
    First, the provision would preclude the Board from 
approving a proposal for a new specific product (or the 
continued sale of a previously authorized product) unless the 
product is a ``prison-made product''. Prison industry programs 
are justified, in part, on the basis that they keep inmates 
occupied through labor-intensive work and provide skills 
training for inmates.
    Second, the provision would preclude the Board from 
approving a proposal for a new specific product (or to expand 
production of a currently authorized product) with respect to 
products that are ``import-sensitive products'' or which are 
produced by an industry with chronic high unemployment. 
``Import-sensitive products'' are designated by the Department 
of Commerce for other statutory purposes. The Department of 
Labor currently identifies such industries with chronic high 
unemployment for other statutory purposes.
    Third, the provision would preclude the Board from 
approving a proposal to authorize inmates to perform a service 
if such work would provide inmate workers with access to 
personal or financial information about individual private 
citizens. It would also preclude inmates from performing a 
service that would give them access to geographic data 
regarding the location of surface and subsurface infrastructure 
providing communications, water and electrical power 
distribution, pipelines for the distribution of natural gas, 
bulk petroleum products, and other commodities, as well as 
other utilities.
    Fourth, the provision would preclude the Board from 
authorizing FPI from furnishing construction services to 
Federal agencies. The provision adopts the definition of 
``construction'' that has been a part of the Government-wide 
Federal Acquisition Regulation for more than two decades. 
Construction services, almost always provided on the owner's 
property, are manifestly unsuitable for performance by prison 
labor. The provision would not preclude Federal prisoners from 
continuing to provide maintenance, repair, or even minor 
alteration of the prison facilities in which they are 
incarcerated. Such work opportunities, when coupled with access 
to apprenticeship-type training programs, can provide inmates 
with greatly increased prospects for finding good-paying jobs 
in the building trades, which is currently suffering from a 
severe shortage of skilled workers.
    Paragraph (7) of amended Section 4122(b) places in a 
separate paragraph the ``outreach'' mechanisms specified in 
Section 4122(b)(4) of current law, to emphasize that they are 
``supplemental'' techniques to broaden participation by known 
interested parties. Paragraph (8) of amended Section 4122(b) 
requires the Board of Directors be furnished actual copies of 
all of the comments received regarding a proposed expansion, in 
addition to any summaries prepared by FPI's career management 
staff. Paragraph (9) of amended Section 4122(b) specifies in a 
separate paragraph the requirement in Section 4122(b)(4) of 
current law that the FPI staff's final recommendation to FPI's 
Board of Directors specify how the staff's initial production 
proposal was modified in response to public comments received 
and the supporting analysis for those modifications.
    Paragraph (10) of amended Section 4122(b) requires the FPI 
Board of Directors to consider and act upon a recommendation to 
authorize new specific product or specific service, or increase 
production of currently authorized products or services, or 
take other actions relating to the governance of the 
corporation at a meeting open to the public. Such meeting may 
be closed if specified statutory standards can be met. 
Paragraph (11) of amended Section 4122(b) empowers the FPI 
Board of Directors to authorize the donation of products or 
services. Given that such donation does not potentially subject 
private sector firms to unfair competition. The Board need only 
make a such a decision during an open meeting. A schedule 
relating to the implementation of this authority is specified 
in Section 10(b) of the bill. Paragraph (11)(C) empowers the 
Board to authorize an expansion that could be expected to 
result in FPI's share of the Federal market exceeding a 
``reasonable share of the market,'' as that term is defined in 
Section 17(6) of the bill. Such authority could be used if such 
an expansion was specifically requested by the Federal agency 
having a need for the product or service or is justified for 
``other good cause.'' Two-thirds of the appointed members of 
FPI's new eleven-member Board would have to support an 
expansion above a reasonable share of the market justified on 
the basis of ``other good cause.''

Sec. 4. Transitional mandatory source authority

    Subsection (a) provides authority to the various Executive 
agencies to make purchases from FPI on a non-competitive basis 
during a five-year transition period. This transitional period 
is intended to provide a period during which FPI adjusts to the 
requirement that it obtain its business opportunities on a 
competitive basis rather than a non-competitive basis through 
its status as a mandatory source. Subsequent subsections 
provide direction to the buying agencies regarding the use of 
this special authority.
    Subsection (b) makes clear that the buying agency, rather 
than FPI, is empowered to determine that the product offered by 
FPI meets the needs of the buying agency. The FPI-offered 
product is expected to meet the same standards and 
specifications as the buying agency would apply to a product 
being offered by a private sector supplier. Similarly, the 
buying agency is empowered to determine if timely performance 
by FPI can be reasonably expected before entering into a sole-
source negotiation with FPI. Finally, the buying agency need 
not make a sole-source award to FPI if the buying agency 
determines that the award price will exceed a ``fair and 
reasonable price.''
    Subsection (c) makes it explicit that Subpart 15.4 
(Contract Pricing) of the Government-wide Federal Acquisition 
Regulation (FAR) shall guide the buying agency's determination 
of ``fair and reasonable price.''
    Subsection (d) makes it explicit that, despite the award of 
the contract pursuant to the special sole-source authority, FPI 
remains responsible for fully performing its contractual 
obligations. Performance disputes between the buying agency and 
FPI are to be resolved pursuant to 18 U.S.C. 4124(e)(3), as 
added by section 2 of the bill.
    Subsection (e) imposes a number of limitations on the 
buying agencies' use of the transitional sole-source authority 
during the five-year ``phase-out'' of FPI's mandatory source 
status. In general, these limitations are intended to assure 
that FPI's sales expand on the basis of competitive awards and 
by taking only necessary advantage of the transitional sole-
source authority.
    First, contract awards to FPI through use of the 
transitional sole-source authority cannot exceed a specified 
percentage of FPI's total sales during the base year of fiscal 
year 2004. During the first year of the five-year transitional 
period, fiscal year 2007, use of the special sole source 
contracting authority cannot aggregate to more than 90 percent 
of FPI's total sales during the base year. The percentage 
decreases to 85 percent in fiscal year 2008, to 70 percent in 
fiscal year 2009, to 55 percent in fiscal year 2010, and to 40 
percent during the final transition year, fiscal year 2011.
    Second, use of the special transitional sole-source 
contract authority cannot result in sales by any of FPI's seven 
business groups that are in excess of the total sales for each 
such business group during the base year. Similarly, the use of 
the transitional authority is prohibited from increasing FPI's 
sales for a specific product over its total sales of such 
product during the base year. Since FPI, rather than the buying 
agency, will have access to information regarding the dollar 
value of various awards made to FPI pursuant to the 
transitional authority, the implementing FAR provision relating 
to this provision should empower the buying agency's 
contracting officer to obtain an appropriate compliance 
certification from FPI prior to contract award.
    In the event of change in the design specification for a 
specific product, the costs associated with the implementation 
of such specification change by FPI shall not be considered for 
the purposes of computing FPI sales with respect to the 
specific product or for the business group selling such 
product. FPI's compliance certification, specified in the 
implementing FAR provisions, should require FPI to identify the 
source of the design specification change and its calculation 
of the associated costs.
    Subsection (g) specifies this special five-year transition 
sole-source authority may not be used by a buying agency on or 
after October 1, 2011. The provision also makes clear that its 
use is contingent upon issuance of the essential implementing 
FAR provisions, pursuant to section 18 of the bill.
    Subsection (h) defines terms relating to this section.
    Subsection (i) requires the Attorney General to monitor 
FPI's transition from obtaining work through sole-source awards 
pursuant to its mandatory source status to obtaining them on a 
competitive basis. Specifically, the subsection requires the 
Attorney General to make a determination regarding whether the 
limitations on the use of the special transitional sole-source 
authority has resulted, or is likely to result, in a 
substantial reduction in inmate work opportunities with FPI and 
``whether such reductions, if any, present a significant risk 
of adverse effects on safe prison operations or public 
safety.'' Such determination and finding is to be made 
annually, 60 days prior to the end of each of the five fiscal 
years of the transition period. For the purposes of this 
section, the term ``public safety'' means the anticipated 
impact that any identified inmate idleness may be reasonably 
expected to have on the safety of the immediate community in 
which the affected federal correctional institution is located.
    If the Attorney General finds a significant risk of adverse 
effects on either safe prison management or public safety, the 
Attorney General is required to advise Congress. In advising 
Congress, the Attorney General is required to make 
recommendations for additional funding to provide additional 
alternative inmate rehabilitative opportunities and additional 
correctional staffing, as may be appropriate.
    Subsection (j) adds a new section, Products of Federal 
Prison Industries: Procedural Requirements, to the Title III of 
the Federal Property and Administrative Services Act of 1949 
that mirrors the provision of the same name appearing at 
Section 2410n of title 10, United States Code. The objective is 
to provide conformity in both primary sources of statutory 
direction relating to contracting.

Sec. 5. Authority to perform as a Federal subcontractor

    Subsection (a) of this section provides, for the first 
time, explicit statutory authority for FPI to perform as a 
subcontractor or a supplier to a private-sector firm performing 
a Federal contract as a prime contractor or a subcontractor at 
any tier. This provision was included to provide FPI a clear 
path to the inmate work opportunities that are available from 
producing products for the Federal subcontract market.
    FPI's authorizing statute is silent with respect to its 
authority to act as a subcontractor or supplier. At various 
times during the 1990s, proposals were advanced to grant FPI 
specific statutory authority to operate as a subcontractor. 
Section 4122(a) only authorizes FPI ``to produce commodities 
for consumption in such institutions or for sale to the 
departments of agencies of the United States, but not for sale 
to the public in competition with private enterprise.''
    FPI currently acts as a subcontractor to a number of major 
prime contractors (or major subsystem subcontractors) 
furnishing major systems and other equipment to the Department 
of Defense. FPI also provides inmate-furnished services to 
these firms.
    At various times, FPI has claimed an inherent authority to 
operate as a subcontractor derived from 18 U.S.C. 4124(a). When 
challenged by the Department of Justice Inspector General, FPI 
cited the authority granted by a World War II-era Attorney 
General's opinion (40 Op. Atty Gen. 207 (1942)). Entitled 
``Procurement of War Materials from Federal and State 
Prisons.'' The opinion was issued on May 6, 1942 by Attorney 
General Francis Biddle in response to an inquiry from President 
Franklin D. Roosevelt regarding ``whether industrial facilities 
at the prisons of the United States can be utilized in the 
production of essential war materials.'' The opinion was issued 
despite the prohibition of the Hawes-Cooper Act of 1920, 
relating to selling convict-made goods in interstate or foreign 
commerce. The Hawes-Cooper Act is now codified at Sections 1761 
and 1762 of Title 18, United States Code. Given the critical 
need to maximize the Nation's total productive capacity for the 
War effort, Attorney General Biddle found that FPI, and the 
various States prison industry programs, could operate as a 
subcontractor. Subsequently, on June 20, 1942, Assistant 
Solicitor General Oscar Cox wrote to the Chairman of the War 
Production Board further clarifying the authority granted by 
the opinion of the Attorney General. In pertinent part, Mr. Cox 
found that a prison industry program could function as a 
subcontractor or supplier only if ``there is no other source of 
supply readily available to him [the Government prime 
contractor] on the open [commercial] market.
    Given long-prevailing competitive market conditions among 
subcontractors on Federal contracts, it is highly unlikely that 
this explicit limitation on the World War II authority could be 
met today. Further, the authority cited by FPI was based on the 
Nation's exigent productions needs during World War II and 
conditions have changed since.
    Subsection (b) imposes two limitations on FPI's authority 
to perform as a subcontractor. Under the first limitation, FPI 
may not perform as a subcontractor or supplier at any tier if 
the product or service is to be acquired by a Federal agency 
from a workshop for the blind or other severely handicapped 
pursuant to the Javits-Wagner-O'Day (JWOD) Act. Under section 3 
of the JWOD Act, non-profit organizations operating workshops 
employing the blind or other severely handicapped are accorded 
a preferential status in selling products and furnishing 
services to the various Federal agencies. The Committee is 
concerned that FPI could use subcontracting with these non-
profit organizations to expand its sales, while transferring 
work opportunities from the blind and handicapped workshops to 
FPI's factories.
    This concern is substantially compounded by the fact that 
the Chairman of the Committee for the Purchase from the Blind 
and Severely Handicapped, which administers the program 
authorized by the JWOD Act, is currently the Chief Operating 
Officer of Federal Prison Industries. An amendment to make such 
an arrangement unlawful was contemplated, but jurisdiction over 
the JWOD Act is with the Committee on Government Reform.
    Under the second limitation, FPI may not perform as a 
subcontractor or supplier at any tier if the product to be 
acquired by the Federal agency is subject to Section 2533a of 
title 10, United States Code. Section 2533a is the codification 
of the so-called ``Berry Amendment,'' a provision annually 
appearing in the appropriations bill for the Department of 
Defense. The Berry Amendment requires that certain items of 
procured by the Department of Defense (DOD) must be made in 
America. This provision of H.R. 2965, as amended, affects 
military clothing and textiles.
    The requirements of the Berry Amendment preserve the 
remaining American companies, the majority of which are small 
businesses, that comprise the industrial base available to meet 
DOD requirements for a broad array of military clothing and 
textile-based equipment. Military clothing and textiles remains 
among the one of the largest ``business groups'' within FPI. In 
FY 2004, it was the second largest business group. FPI is among 
the major suppliers to DOD, with sales larger than the next 
five largest suppliers, combined.
    The concern is that subcontracting by FPI in the military 
clothing and textile market will further erode the domestic 
industrial base outside of Federal prisons. A recent incident 
confirmed these concerns regarding FPI acting as a 
subcontractor within the military clothing and textiles supply 
base. FPI urged an American company with no production 
facilities within the United States to bid on a DOD requirement 
and then subcontract 100 percent of the work to FPI. 
Technically, this arrangement met the requirements of the Berry 
Amendment. The arrangement, however, resulting in the closing 
of a Pennsylvania production facility of an Ohio firm who had 
been supplying uniforms to the Government since the Civil War. 
To expand work opportunities for Federal inmates, FPI's scheme 
diminished further the industrial base for military clothing 
and textiles and caused 120 experienced military clothing 
workers to lose their jobs, in a region in Pennsylvania where 
few other available job existed.
    Subsection (c) makes explicit that the exercise of the 
authority to perform as a subcontractor or supplier on a 
Federal contract shall not result, either directly or 
indirectly, in the sale in the commercial market of a product 
or service resulting from the labor of federal inmate workers 
in violation of 18 U.S.C. 1761(a). A Federal contractor or 
subcontractor using FPI in performance of a Federal contract to 
furnish a commercial product is required to have in place 
management procedures to prevent introducing an inmate-produced 
product into the commercial market.
    Subsection (d) makes explicit that the use of FPI as a 
subcontractor or supplier is to be a voluntary business 
decision of the Federal prime contractor or subcontractor. It 
explicitly prohibits imposing on a Federal prime contractor or 
subcontractor, directly or indirectly, by solicitation 
requirements, contract modifications, or other means, a 
requirement to make use of FPI, or its products or services in 
the performance of the Government contract.

Sec. 6. Inmate Wages and Deductions

    This section adds a new paragraph (12) to Section 4122(b) 
of Title 18, United States Code. New Section 4122(b)(12)(A) 
provides explicit statutory authority for the FPI Board of 
Directors to prescribe the rates of hourly wages to be paid 
inmates with FPI work assignments. Similarly, it makes explicit 
the authority of the Director of the Federal Bureau of Prisons 
to specify the hourly wages for inmates with institutional and 
other work assignments other than with FPI.
    New Section 4122(b)(12)(A) also requires that inmates with 
work assignments in FPI be paid at the rate of $2.50 per hour 
during the inmate's final 24 months of incarceration. This 
provision was added to the bill during the House consideration 
of H.R 1829 (108th Cong.) by an amendment offered by Rep. 
Maxine Waters (CA-35), which was combined with a related 
amendment offered by Rep. Juanita Millender-McDonald (CA-37).
    New Section 4122(b)(12)(B) requires that the wage rates for 
inmates with work assignments in FPI be reviewed and considered 
for increase on not less than a biannual basis.
    New Section 4122(b)(12)(C) requires the FPI Board of 
Directors to increase, by September 30, 2008, the maximum wage 
payable to an inmate with a work assignment in FPI to 50 
percent of the Federal Minimum Wage, and to increase that 
maximum wage to 100 percent of the Federal Minimum Wage by 
September 30, 2013. The purpose in increasing the maximum FPI 
inmate wage is to motivate the inmate work to be a quality 
performer, just as higher wages are designed to motivate 
workers in non-correctional work environments.
    New Section 4122(b)(12)(D) requires that inmate wages be 
paid in the name of the inmate and establishes a statutory 
priority for deductions that are to be taken from wages earned. 
Enhanced priority is given to deductions taken for the payment 
of restitution to the victims of the inmate's crime. An 
increased allocation rate for this purpose is specified in 
furtherance of the concepts of restorative justice.
    The provision also grants explicit statutory authority to 
establish a savings account, often referred to as a ``gate 
fund'', payable to the inmate upon release. Finally, the 
provision also contemplates that the inmate may have deductions 
from wages taken for the purpose of maintaining contact with 
the inmate's family during the term of incarceration. Travel 
and even telephone costs can be substantial, especially if the 
inmate is incarcerated a long distance from where the inmate's 
family resides.

Sec. 7. Clarifying Amendment Relating to Services

    Subsection (a) of this section makes it explicit that the 
statutory prohibition on the sale of the results of inmate 
labor in interstate commerce or foreign commerce, codified at 
18 U.S.C. 1761(a), applies equally to services as well as 
products. For 65 years, this statute was consistently 
interpreted to prohibit the commercial sale of the results of 
inmate labor, including both products and services. Section 
1761(a) does not include the word ``service'', which is not 
surprising given that a broad service economy did not exist at 
the time of enactment in the 1930s. However, it seems 
implausible that a provision, enacted during the Great 
Depression, to protect workers against unfair competition from 
low-cost prison labor would have been consciously intended to 
afford no protection to workers providing services in the 
commercial market.
    A statutory exception to the broad statutory prohibition 
was provided in 1979 when Congress established the Prison 
Industry Enhancement (PIE) Program, codified at 18 U.S.C. 
1761(c). Under the PIE Program, a state and local prison 
industry program may be authorized to sell prison-made products 
and inmate-furnished services, after receiving approval, 
commonly referred to as ``certification,'' from the Bureau of 
Justice Assistance within the Department of Justice (DOJ), for 
each individual PIE project.
    FPI sought and obtained a new interpretation of 18 U.S.C. 
1761(a) in February 1998. Reversing more than 65 years of 
practice, it found no statutory prohibition on the commercial 
sale of inmate-furnished services. It is important to note that 
the new interpretation did not come in the usual form of a 
legal opinion from DOJ's Office of Legal Counsel. Rather, it 
was made in the form of a legal memorandum from a special 
counsel in the Office of Enforcement Operations in DOJ's 
Criminal Division, which provides legal services to FPI and its 
parent, the Federal Bureau of Prisons.
    This interpretation provided FPI, and the prison industries 
of the States and their local governments, authority to sell 
inmate-furnished services in the commercial market, either 
directly or in partnerships with private sector firms, without 
meeting the standards for PIE certification. Among the 
restrictions associated with the PIE Program, that could now be 
bypassed, was the prohibition against displacement of non-
inmate workers to provide jobs for inmate workers. Similarly, 
there would no longer be any requirement to pay inmate workers 
providing services to the commercial market at rates comparable 
to wages being paid non-inmate workers of private firms 
providing the same types of services. Without the protection of 
a comparable wage requirement, with a floor of the Minimum Wage 
set pursuant to the Fair Labor Standards Act, private sector 
firms using non-inmate workers who are paid at market driven 
wages faced unfair competition from firms using inmate workers 
who are paid inmate wages.
    Subsection (b) of this section provides a 
``grandfathering'' provision, to provide relief to State prison 
industry programs that reasonably relied upon the new 
interpretation of 18 U.S.C. 1761(a) by DOJ and began offering 
inmate-furnished services to the commercial market, either 
directly or in partnership with a private firm. First, the 
provision permits the completion of an agreement between a 
private sector firm and a state or local prison industry 
program, for whatever term of years is specified in their 
agreement as of October 1, 2004. Similarly, it permits a state 
program making direct sales to continue until September 30, 
2008, after which the activity can only be operated pursuant to 
a PIE Program certification.
    Subsection (d) of this section permits the completion of 
any agreement, in effect on the date of enactment, between a 
private for-profit business and FPI under which Federal inmates 
are furnishing services which are being introduced into the 
commercial market.
    Subsection (e) of this section further amends Section 1761 
by adding a new subsection. This subsection would explicitly 
permit the recovered scrap, which is recovered by certain 
recycling programs operated by state or local departments of 
correction, to be sold in the commercial market. BIFMA, the 
Business and Institutional Furniture Manufacturers Association, 
has a program with the Michigan Department of Corrections in 
which inmates disassemble, scrap, and recycle office furniture 
products for landfill avoidance. BIFMA is seeking to foster 
similar programs in other States. This provision will help with 
that effort.
    The Committee believes that recycling programs such as 
those operated by Federal Prison Industries can simultaneously 
teach marketable skills to Federal inmates and provide the 
environmentally desired outcome of reducing the disposal in 
landfills of hazardous materials. Nothing in H.R. 2965, as 
amended, is intended to restrict the continuation of FPI's 
recycling activities for Federal agencies. Subsection (e) 
guarantees that any inmate work program operated by a State or 
local jurisdiction of a State may continue to provide inmate 
labor to furnish services for sale in the commercial market, if 
such program has obtained certification pursuant to the PIE 
Program.

Sec. 8. Conforming Amendment

    This section provides FPI with explicit statutory authority 
to offer services to the various Federal departments and 
agencies. Presently, FPI's authorizing statute only 
specifically addresses the sale of products.

Sec. 9. Rules of Construction Relating to Chapter 307

    This section adds a new Section 4130 to Chapter 307 
(Employment, Prisons and Prisoners), which establishes a series 
of rules of construction for such chapter. First, it would make 
it clear that no inmate has a right to a work assignment with 
FPI or the payment of any particular wage, except as provided 
by law or regulation. Next, the provision makes explicit that 
no inmate worker has the status of an employee for the purposes 
of any law or regulation. Finally, the new section 18 U.S.C. 
4130 makes explicit that nothing in Chapter 307 establishes any 
cause of action against the United States by or on behalf of 
any inmate.

Sec. 10. Providing Additional Rehabilitative Opportunities for Inmates

    Subsection (a)(1) of this section reflects the important 
Enhanced in-Prison Educational and Vocational Assessment and 
Training Program for Federal inmates, which were added by an 
amendment offered by Rep. Conyers of Michigan and Rep. Frank of 
Massachusetts during the Committee's consideration of H.R. 1577 
during the 107th Congress. It affords improved inmate access to 
educational opportunities, both remedial and modern ``hands-
on'' vocational programs, and other release-preparation 
programs, which will improve inmates prospects of making a 
successful return to society. This Conyers-Frank amendment 
began the process of modifying the bill to expand Federal 
inmates' access to alternative rehabilitative opportunities and 
alternative work opportunities.
    The value of such programs in reducing recidivism has been 
demonstrated by a Department of Justice study. In fact, it 
shows that participation in such educational program reduces 
recidivism more than participation in prison work programs. 
Beginning in 1983, BOP has conducted a on-going study of the 
effects of vocational training and inmate work experiences on 
post-release success. The most recent analysis of the Post 
Release Employment Project (PREP) shows that work experiences 
have a positive effect on post-release employment success, 
resulting in a 24% reduction in recidivism. What is 
infrequently cited is that same PREP data showed that 
vocational and remedial education programs have even a more 
positive effect on reducing recidivism, resulting in a 33 
percent reduction in recidivism.
    H.R. 2965, tries to provide more opportunities that are 
better able to reduce recidivism.
    Subsection (a)(2) requires a comprehensive program 
encompassing all of the following: (i) in-prison assessments of 
an inmates needs and aptitudes; (ii) a broad range of 
educational opportunities; (iii) vocational and apprenticeship 
training; and (iv) comprehensive release-readiness preparation. 
Subsection (a)(3) authorizes $75 million per fiscal year to 
administer the program. It expresses a sense of Congress that 
FPI should also use profits toward the support of such 
programs.
    Section 10 of the Sensenbrenner-Conyers amendment in the 
nature of a substitute to H.R. 2965, as introduced, was further 
amended by adding a new subsection (a)(4), which was added by 
an amendment offered by Rep. Maxine Waters (CA-35). New Section 
10(a)(4) expresses a sense of the Congress that in promulgating 
the rate for a special inmate training wage under section 14(a) 
of the Fair Labor Standards Act, pursuant to paragraph (a)(1), 
the Secretary of Labor should promulgate such special inmate 
training wage at a rate that is not less than 50 percent of the 
minimum wage required by section 6(a) of such Act.
    Subsection (b)(1) of this section adds a new section 4124a 
to Chapter 307 of title 18, United States Code, authorizing a 
program providing additional inmate work opportunities through 
public service activities.
    Subsection (a) of new Section 4124a authorizes inmates with 
assignments within the prisons to perform work in support of 
the public service activities of non-profit organizations, 
including religious organizations, and units of local 
government and special purpose districts of such governments, 
such as school districts.
    The program is based upon a program currently being 
conducted by the Ohio Department of Corrections. An assessment 
of that program conducted by the Enterprise Prison Institute 
showed that the Ohio Department of Corrections was able to 
double its inmate work opportunities through such a program. 
The Enterprise Prison Institute is a group dedicated to 
bringing alternative work opportunities to Federal, State, and 
local correctional systems through partnerships with private-
sector companies. The Institute's Board Chairman is former 
Attorney General Edwin Meese.
    Subsection (b) of new Section 4124a specifies the types of 
entities eligible to make use of the labor of Federal inmates 
in furtherance of their public service activities.
    Subsection (c) of new Section 4124a creates the new 
position of the Inmate Work Training Administrator. The 
function of this new position is to identify alternative inmate 
work opportunities by facilitating the types of programs 
authorized by new Section 4124a and by new Section 4124b of 
title 18, United States Code, which is subsequently added by 
Section 11 of the bill. At the request of the Department of 
Justice, the FPI's Chief Executive Officer will designate the 
Inmate Work Training Administrator, with the approval of the 
FPI Board of Directors. FPI's Chief Operating Officer will 
provide day-to-day supervision of the Inmate Work Training 
Administrator.
    H.R. 2965, as introduced, contemplated much greater 
autonomy for the Inmate Work Training Administrator. Such 
autonomy was strongly recommended by the Enterprise Prison 
Institute. By giving the Administrator the authority derived 
from direct appointment by the FPI Board of Directors and 
working with, rather than for, FPI's Chief Operating Officer, 
the Enterprise Prison Project believed that the selected Inmate 
Work Training Administrator would be better equipped and more 
motivated to pursue, with greater entrepreneurial spirit, the 
contemplated alternative inmate work opportunities. Today, the 
FPI Program is essentially managed at all levels by individuals 
drawn from the ranks of correctional officers, too frequently 
lacking any business background.
    Subsection (d) of new Section 4124a prescribes the matters 
that must be addressed a proposed agreement to conduct an 
alternative inmate work program under the new authority. 
Subsection (e) of new Section 4124a prescribes the 
representations that must accompany any proposed agreement. The 
representations are in the form of written certifications from 
the chief executive officer of the entity that will be making 
use of the inmate workers.
    Subsection (e)(1) of new Section 4124 relates to 
representations regarding the type of work the inmates will be 
performing for the non-profit organization, local government or 
special purpose district. The work must be limited to providing 
direct support to the public service activities of the entity. 
The subsection specifically prohibits inmates from performing 
work for a for-profit business subsidiary of a non-profit 
organization, since this would likely result in the 
introduction of inmate-furnished services into the commercial 
market. It is specifically contemplated that inmates would do 
work, such as refurbishing items donated to a non-profit 
organization, for example, furniture or automobiles, which the 
non-profit organization would then sell to raise funds to 
support its public service activities. With respect to the two 
cited examples, inmates could learn skills that would strongly 
enhance their prospects for post-release employment, if such 
work for a non-profit organization were coupled with a 
structured apprenticeship-like training program.
    A broad array of alternative inmate work opportunities 
similarly exist with units of local government or their special 
purpose districts, such as school districts. Inmates can be 
used to fabricate training aids or displays, which now divert 
teachers from their primary instructional functions. Similar 
opportunities exist with local government entities such as 
police, fire, and EMS organizations.
    Subsection (e)(2) of new Section 4124a explicitly prohibits 
the displacement of non-inmate workers of the non-profit 
organization, local government, or special purpose district. At 
the suggestion of American Federation of State, County, and 
Municipal Employees (AFSCME), the provision against 
displacement was modified to provide protection to individuals 
performing work for a local government under the work 
requirements of TANF, who may not have the status of being an 
``employee.''
    Subsection (f) of new Section 4124a requires that each 
proposed agreement presented to the FPI Board of Directors be 
subject to a public comment process comparable to that required 
when the Board is considering a proposal to permit FPI to 
expand its sales of products or services to Federal agencies. 
The subsection also specifies the issues to be considered by 
the Board in evaluating a proposed agreement and states the 
circumstances under which a proposed agreement cannot be 
approved.
    Subsection (g) of new Section 4124a specifies the wages to 
be paid to participating Federal inmates and the deductions 
that may be taken from those wages. It also requires that each 
participating inmate confirm in writing that he or she is 
participating voluntarily and she understands the wages to be 
paid and the deductions to be taken from those wages.
    Subsection (h) of new Section 4124a makes explicit the 
application of the Bureau of Prisons Program Statement Number 
1040.10 (Non-Discrimination Toward Inmates) with respect to any 
agreement pursuant to new Section 4124a or new Section 4124b of 
title 18, United States Code, which is subsequently added by 
Section 11 of the bill.
    Subsection (i) of new Section 4124a specifies the 
enforceable protections provided to non-inmate workers with 
respect to any agreement pursuant to new Section 4124a or new 
Section 4124b of title 18, United States Code, which is 
subsequently added by Section 11 of the bill.
    Subsection (i)(1) of new Section 4124a permits any 
interested party to request verification by the Secretary of 
Labor that a proposed agreement will not result in the 
displacement of non-inmate workers. Both the Secretary of Labor 
and the interested party may suggest modifications to the Board 
to effect any needed corrective modification to the proposed 
agreement.
    Subsection (i)(2) of new Section 4124a empowers the 
Secretary of Labor, upon her own initiative or upon request, to 
determine if the actual performance of any approved agreement 
is resulting in the displacement of non-inmate workers or 
permitting participating inmates to be performing unauthorized 
work activities. The subsection provides to the Secretary of 
Labor an array of sanctions that can be applied if the 
Secretary finds such displacement of non-inmate workers or 
unauthorized work activity by the participating Federal 
inmates.
    Subsection (c) requires the development of an action plan 
and implementation schedule for having Federal Prison 
Industries donate products and services to non-profit 
organizations that assist low-income individuals, who would 
likely be unable to purchase such products or services in the 
commercial market. The provision authorizes the appropriation 
of $7 million in each of fiscal years 2008 through 2012 for the 
purposes of paying inmate wages and otherwise administering the 
program.
    Subsection (d) authorizes a ``Cognitive Abilities 
Assessment Demonstration Program'' within the Federal Bureau of 
Prisons. Use of such assessment techniques in the special adult 
education setting have shown important results in matching 
education and training programs with the needs of the 
individual. Some limited application to the local government 
correctional setting warrants authorization of the three-year 
demonstration program proposed by the bill.
    Subsection (3) requires the establishment of Pre-Release 
Employment Assistance program, first added to H.R. 1577 at the 
suggestion of the AFL-CIO. Priority for participation is 
accorded to inmates in the final 24 months of incarceration.

Sec 11. Re-entry employment preparation through work-based training and 
        apprenticeship

    Subsection (a) of this section adds a new section 4124b to 
Chapter 307 of title 18, United States Code, authorizing a 
Work-based Employment Preparation Program for Federal inmates.
    Subsection (a) of new Section 4124b authorizes a private 
for-profit business to sponsor a Work-based Employment 
Preparation Program for Federal Inmates. In contrast to FPI, 
such businesses will be able to expose participating inmates to 
work situations more akin to that the inmates will find upon 
release. The byproducts of the program are authorized by 
another provision to be sold in the commercial market. Inmates 
participating in the Program must be paid wages at a rate not 
less than an inmate training wage promulgated by the Secretary 
of Labor pursuant to Section 14(a) of the Fair Labor Standards 
Act. Such inmate training wage will be less than the Federal 
Minimum Wage. In the past, special wages promulgated pursuant 
to Section 14(a) have typically been around 50 percent of the 
Federal Minimum Wage.
    Subsection (b) of new Section 4124b limits the subject 
matter of the Work-based Employment Preparation Program to 
products or services that are no long produced or furnished 
within the United States by non-inmate workers. This limitation 
avoids subjecting other private sector businesses, with 
employees being paid market-driven wages, from unfair 
competition in the commercial market by products produced or 
services furnished by inmates participating in the program 
being paid an Inmate Training Wage.
    The Committee has been informed by the Department of 
Justice that it is the practice of other countries with whom 
the United States trades to permit, under various terms and 
conditions, the introduction into those countries's commercial 
markets of products and services produced or performed by 
prison inmates in those countries. The Committee believes that 
H.R. 2965, as amended, would authorize a practice within the 
United States that is consistent with existing laws and 
treaties, and the practices of our trading partners, as 
described by the Department of Justice.
    Subsection (c) of new Section 4124b specifies the 
requirements of an acceptable proposal to conduct a Work-based 
Employment Preparation Program. Subsection (c)(1) requires the 
program afford participating inmates apprenticeship training, 
or its functional equivalent. The objective is to combine 
hands-on work experience with a conceptual understanding of the 
work being performed.
    Subsection (c)(2) requires the for-profit business 
sponsoring the program to furnish each participating inmate who 
successfully completes the program with a certificate 
memorializing such successful completion. The firm must commit 
to furnishing copies of such documents to the participant for 
24 months after release. A reference from a business will be 
substantially more valuable than one issued by FPI. This 
provision also requires that an inmate successfully completing 
a program be provided, at the time of release, all of the 
documents, including a State government-issued photo 
identification card that a person would be required to present 
to a prospective employer in order to complete an Employment 
Eligibility Verification (ICE Form I-9).
    Subsection (d) of new Section 4124b requires that an inmate 
participating in a Work-based Employment Preparation Program be 
paid not less than the inmate training wage to be promulgated 
by the Secretary of Labor. The provision directs the FPI Board 
of Directors to request the Secretary of Labor to request the 
promulgation of such an inmate training wage.
    Subsection (e) of new Section 4124b allocates funding 
received from the firm participating in the program to support 
remedial, vocational, and other release preparation program for 
non-participating inmates.
    Subsection (f) of new Section 4124b specifies issues that 
the Board of Directors shall consider in evaluating proposals 
from a private for-profit applying to sponsor a Work-based 
Employment Preparation Program.
    Subsection (g) of new Section 4124b specifies the duration 
of the Work-based Employment Preparation Program. No proposed 
Program agreement may be approved by the FPI Board of Directors 
after September 30, 2016. Performance under all program 
agreements must be concluded prior to October 1, 2021.
    Subsection (b) of this section imposes certain review and 
reporting requirement on the Attorney General regarding the 
Departments implementation of the alternative inmate work 
opportunities provided by new section 4124a and section 4124b.
    Subsection (c) of this section provides for long-term 
monitoring of the implementation of the Work-based Employment 
Training Program by the Government Accountability Office (GAO). 
The subsection specifies the matters to be assessed and directs 
the Comptroller General to seek public comment on the scope and 
methodology he intends to use to conduct the assessment. 
Additionally, it provides a schedule for the submission of an 
interim and a final report to the Congress.
    Subsection (d) makes a further amendment to Section 1761 of 
Title 18, United States Code, to permit the commercial sale of 
the byproducts of the Work-based Employment Preparation Program 
established in Subsection (a).

Sec. 12. Restructuring the Board of Directors

    This section fundamentally restructures FPI's governing 
Board of Directors. It replaces the current 6 member Board, 
unchanged since 1934, with an eleven member Board. The Board's 
members would continue to be appointed by the President, but 
would not be subject to Senate confirmation.
    Currently, the six-member Board has two public members and 
four private sector members. One of the public members 
represents the Attorney General and the other represents the 
Secretary of Defense. Of the four private sector members, one 
represents ``industry,'' one represents ``labor,'' one 
represents ``agriculture'' (although FPI does not sell 
agricultural products); and one represents ``retailers and 
consumers'' (although FPI is not authorized to sell products or 
services in the commercial market).
    Under this section, the new 11-member Board would be 
comprised of three members representing business, three members 
representing labor, one member with special expertise in inmate 
rehabilitation techniques, one member representing victims of 
crime, one member representing inmate workers, and two 
additional members ``whose background and expertise the 
President deems appropriate.''
    The provision establishes procedures for the initial 
appointment of each of the eleven members, with staggered 
terms, and provides authority regarding their reappointment. It 
also provides for the filling of any Board vacancies that may 
occur. The section empowers the President to designate a 
Chairperson, who in turn is empowered to designate the Vice 
Chairperson.
    To provide the Board with needed staff support, in addition 
to the staff of the corporation, the provision authorizes the 
Chairperson to procure temporary and intermittent personal 
services and to utilize Federal detailees on a non-reimbursable 
basis.
    The provision recognizes the Director of the Bureau of 
Prisons as the Chief Executive Officer of the corporation, and 
empowers the Director to designate a person as the Chief 
Operating Officer of the corporation. The Chief Operating 
Officer need not necessarily be the incumbent Assistant 
Director of the Federal Bureau of Prisons for Industries, 
Education, and Vocational Training, which has been the past 
practice.

Sec. 13. Providing additional management flexibility to Federal Prison 
        Industries operations

    This section makes explicit FPI's authority to locate more 
than one factory (workshop) at a single Federal correctional 
institution. It also provides statutory authority for FPI to 
operate a factory (workshop) outside of a correctional 
institution if all of its inmate workers are classified as 
minimum security inmates.

Sec. 14. Transitional personnel management authority

    This section provides some relief to correctional officers 
and other staff whose salaries are paid from the revenues of 
the corporation and who might be separated from service due to 
a reduction in the income derived from FPI activities. Such 
reductions may arise if there is an unexpectedly rapid shift to 
alternative rehabilitative work opportunities with non-profit 
entities, which may maintain inmate work opportunities but 
result in reduced corporate income. Under the provision, such 
correctional officers and other staff would be eligible for 
appointment or reappointment in the competitive services and 
given priority for placement for available positions within the 
Federal Bureau of Prisons through a priority placement list.

Sec. 15. Federal Prison Industries report to Congress

    This section amends Section 4127 of title 18, United States 
Code, to enhance the existing requirement for FPI's Annual 
Report to the Congress. It adds specificity to the information 
required to be reported regarding FPI sales of products and 
services and FPI's resulting share of the total Federal 
Government market. For the first time, it requires FPI to 
report some data regarding the inmates in rehabilitative work 
opportunities with FPI and their post-release employment. 
Finally, the provision seeks to maintain the guarantee of 
public access to the annual report.

Sec. 16. Definitions

    This section amends Chapter 307 of title 18, United States 
Code, by adding a new Section 4130 specifying definitions for 
key terms used in Sections 4122 and 4124.
    Paragraph (1) of Section 4130 adds a definition of the term 
``assembly'' derived from Department of Labor regulations 
implementing the Walsh-Healey Public Contracts Act (41 U.S.C. 
35).
    Paragraph (2) of Section 4130 adds a definition of the term 
``current market price''. The definition equates the term 
``current market price'' to the term ``fair market price'' as 
defined in the Small Business Act (15 U.S.C. 644(a)), which is 
the standard that must be met by small businesses selling to 
the Government.
    Paragraph (3) of Section 4130 adds a definition of the term 
``import-sensitive product'' derived from a standard used by 
the Office of the United States Trade Representative.
    Paragraph (4) of Section 4130 adds a definition of the term 
``labor-intensive manufacture'' derived from a standard used by 
the Bureau of Economic Analysis at the Department of Commerce.
    Paragraph (5) of Section 4130 adds a definition of the term 
``manufacture'' derived from Department of Labor regulations 
implementing the Walsh-Healey Public Contracts Act (41 U.S.C. 
35).
    Paragraph (7) of Section 4130 adds a definition of the term 
``reasonable share of the market''. FPI's share of the Federal 
market for a specific product would be recognized as a 
``reasonable share of the market'', if FPI's share of the total 
Federal purchases for a specific product, averaged over a 
three-year period, does not exceed 20 percent. It should be 
noted that new Section 4122(b)(10)(C), added by Section 3 of 
the H.R. 1829, provides the FPI Board of Directors with limited 
authority to approve, on a case-by-case basis, a proposed FPI 
expansion that would result in FPI sales in excess of the 
percentages specified.
    Paragraph (8) of Section 4130 adds a definition of the term 
``services'' through a cross-reference to the Government-wide 
Federal Acquisition Regulation (FAR).

Sec. 17. Implementation regulations and procedures

    Subsection (a) of this section requires regulatory 
implementation through the Government-wide Federal Acquisition 
Regulation (FAR), specifying a schedule for the publication of 
proposed and final regulations and their effective date. The 
provision provides for 60 days for public comment on the 
proposed regulations, which was the standard set in Section 22 
of the Office of Federal Procurement Policy Act (41 U.S.C. 
418b).
    Subsection (b) directs the FPI Board of Directors to use 
notice and comment rulemaking conducted pursuant to the 
Administrative Procedure Act (APA), to issue definitions 
relating to four terms: (a) ``prison-made product;'' (b) 
``prison-furnished service;'' (c) ``specific product;'' and 
``specific service.'' The public is accorded 60 days to comment 
on the Board's proposals.
    Subsection (b)(4)(C) also set forth a provision regarding 
the manner in which the Board operates by requiring that Board 
act on the basis of deliberations and a recorded vote conducted 
during a public meeting, unless the meeting is closed pursuant 
to the standards of the APA. This requirement applies to the 
full range of regulations, procedures, and guidelines relating 
to the governance of the corporation.
    Subsection (c) of this section specifies the timetable for 
various actions by the Secretary of Labor in promulgating a 
special inmate training wage under the authority of Section 
14(a) of the Fair Labor Standards Act, and related matters.
    Subsection (c)(1) directs the Secretary of Labor, in 
consultation with the Attorney General, to promulgate an 
``inmate training wage'' under the authority of Section 14(a) 
of the Fair Labor Standards Act, upon receipt of a request by 
the FPI Board of Directors to issue such wages. It prescribes 
deadlines for each step in the regulatory process and provides 
a sense of Congress that such wage should be not less than 50% 
of the minimum wage issued pursuant to the Fair Labor Standards 
Act.
    Subsection (c)(2) authorizes the FPI Board of Directors to 
issue an interim inmate training wage in the event that the 
Secretary of Labor fails to issue an interim inmate training 
wage by the deadline specified in paragraph (1). The interim 
inmate training wage issued by the Board may not be less than 
50 percent of the Federal Minimum Wage.
    Subsection (c)(3) provides that the interim inmate training 
wage issued by the FPI Board of Directors or the Secretary of 
Labor remains valid until the effective date of the final 
inmate training wage promulgated by the Secretary. Section 
(c)(3)(B) permits a firm conducting a Work-based Employment 
Preparation Program to continue paying the wages specified in 
the agreement for the duration of the agreement, if those wages 
are not less than the interim inmate training wage issued by 
the FPI Board of Directors or the Secretary of Labor.
    Subsection (c)(4) permits a for-profit business that has an 
agreement with FPI in effect on the date of enactment of the 
Act, under which Federal inmates are furnishing services that 
are being introduced into the commercial market, to continue to 
pay inmates at wage rates specified in the agreement for the 
duration of the agreement.

Sec. 18. Rule of construction

    This section sets forth a rule of construction relating to 
Section 4124(e)(2), added by Section 2 of the bill. New Section 
4124(e)(2) specifies FPI's right to appeal an adverse decision 
by an agency contracting officer regarding an agency decision 
not to make a contract award to FPI. This provision applies 
exclusively to FPI. There is no intention to alter the existing 
bid protest processes available to private sector vendors with 
the agency making the purchase, before the Government 
Accountability Office, or within the Federal courts.

Sec. 19. Effective date and applicability

    This section establishes the effective dates for the 
various provisions of the ``Federal Prison Industries 
Competition in Contracting Act of 2006''.

Sec. 20. Clerical amendments

    This section makes clerical amendments to the table of 
sections for chapter 307 of title 18, United States Code.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 18, UNITED STATES CODE

           *       *       *       *       *       *       *

PART I--CRIMES

           *       *       *       *       *       *       *

CHAPTER 85--PRISON-MADE GOODS

           *       *       *       *       *       *       *

Sec. 1761. Transportation or importation

  (a) Whoever knowingly transports in interstate commerce or 
from any foreign country into the United States any [goods, 
wares, or merchandise manufactured, produced, or mined] 
products manufactured, services furnished, or minerals mined, 
wholly or in part by convicts or prisoners, except convicts or 
prisoners on parole, supervised release, or probation, or in 
any penal or reformatory institution, shall be fined under this 
title or imprisoned not more than two years, or both.

           *       *       *       *       *       *       *

  (c) In addition to the exceptions set forth in subsection (b) 
of this section, this chapter shall not apply to [goods, wares, 
or merchandise manufactured, produced, or mined] products 
manufactured, services furnished, or minerals mined by convicts 
or prisoners who--
          (1) * * *

           *       *       *       *       *       *       *

  (d) This section shall not apply to services performed as 
part of an inmate work program conducted by a State or local 
government to disassemble, scrap, and recycle products, other 
than electronic products, that would otherwise be disposed of 
in a landfill. Recovered scrap from such program may be sold.
  (e) This section shall not apply to products produced or 
services furnished with inmate labor incidental to the work-
based training program authorized pursuant to section 4124b of 
this title.
  [(d)] (f) For the purposes of this section, the term 
``State'' means a State of the United States and any 
commonwealth, territory, or possession of the United States.

           *       *       *       *       *       *       *

PART III--PRISONS AND PRISONERS

           *       *       *       *       *       *       *

                        CHAPTER 307--EMPLOYMENT

Sec.
[4121.  Federal Prison Industries; board of directors.]
4121.  Federal Prison Industries; Board of Directors: executive 
          management.
     * * * * * * *
[4124.  Purchase of prison-made products by Federal departments.]
4124.  Governmentwide procurement policy relating to purchases from 
          Federal Prison Industries.
4124a.  Additional inmate work opportunities through public service 
          activities.
4124b.  Re-entry employment preparation through work-based training and 
          apprenticeship.
     * * * * * * *
[4127.  Prison Industries report to Congress.]
4127.  Federal Prison Industries report to Congress.
     * * * * * * *
4130. Construction of provisions.
4131. Definitions.

           *       *       *       *       *       *       *

[Sec. 4121. Federal Prison Industries; board of directors

  [``Federal Prison Industries'', a government corporation of 
the District of Columbia, shall be administered by a board of 
six directors, appointed by the President to serve at the will 
of the President without compensation.
  [The directors shall be representatives of (1) industry, (2) 
labor, (3) agriculture, (4) retailers and consumers, (5) the 
Secretary of Defense, and (6) the Attorney General, 
respectively.]

Sec. 4121. Federal Prison Industries; Board of Directors: executive 
                    management

  (a) Federal Prison Industries is a government corporation of 
the District of Columbia organized to carry on such industrial 
operations in Federal correctional institutions as authorized 
by its Board of Directors. The manner and extent to which such 
industrial operations are carried on in the various Federal 
correctional institutions shall be determined by the Attorney 
General.
  (b)(1) The corporation shall be governed by a board of 11 
directors appointed by the President.
  (2) In making appointments to the Board, the President shall 
assure that 3 members represent the business community, 3 
members represent organized labor, 1 member shall have special 
expertise in inmate rehabilitation techniques, 1 member 
represents victims of crime, 1 member represents the interests 
of Federal inmate workers, and 2 additional members whose 
background and expertise the President deems appropriate. The 
members of the Board representing the business community shall 
include, to the maximum extent practicable, representation of 
firms furnishing services as well as firms producing products, 
especially from those industry categories from which Federal 
Prison Industries derives substantial sales. The members of the 
Board representing organized labor shall, to the maximum 
practicable, include representation from labor unions whose 
members are likely to be most affected by the sales of Federal 
Prison Industries.
  (3) Each member shall be appointed for a term of 5 years, 
except that of members first appointed--
          (A) 2 members representing the business community 
        shall be appointed for a term of 3 years;
          (B) 2 members representing labor shall be appointed 
        for a term of 3 years;
          (C) 2 members whose background and expertise the 
        President deems appropriate for a term of 3 years;
          (D) 1 member representing victims of crime shall be 
        appointed for a term of 3 years;
          (E) 1 member representing the interests of Federal 
        inmate workers shall be appointed for a term of 3 
        years;
          (F) 1 member representing the business community 
        shall be appointed for a term of 4 years;
          (G) 1 member representing the business community 
        shall be appointed for a term of 4 years; and
          (H) the members having special expertise in inmate 
        rehabilitation techniques shall be appointed for a term 
        of 5 years.
  (4) The President shall designate 1 member of the Board as 
Chairperson. The Chairperson may designate a Vice Chairperson.
  (5) Members of the Board may be reappointed.
  (6) Any vacancy on the Board shall be filled in the same 
manner as the original appointment. Any member appointed to 
fill a vacancy occurring before the expiration of the term for 
which the member's predecessor was appointed shall be appointed 
for the remainder of that term.
  (7) The members of the Board shall serve without 
compensation. The members of the Board shall be allowed travel 
expenses, including per diem in lieu of subsistence, at rates 
authorized for employees of agencies under subchapter I of 
chapter 57 of title 5, United States Code, to attend meetings 
of the Board and, with the advance approval of the Chairperson 
of the Board, while otherwise away from their homes or regular 
places of business for purposes of duties as a member of the 
Board.
  (8)(A) The Chairperson of the Board may appoint and terminate 
any personnel that may be necessary to enable the Board to 
perform its duties.
  (B) Upon request of the Chairperson of the Board, a Federal 
agency may detail a Federal Government employee to the Board 
without reimbursement. Such detail shall be without 
interruption or loss of civil service status or privilege.
  (9) The Chairperson of the Board may procure temporary and 
intermittent services under section 3109(b) of title 5, United 
States Code.
  (c) The Director of the Bureau of Prisons shall serve as 
Chief Executive Officer of the Corporation. The Director shall 
designate a person to serve as Chief Operating Officer of the 
Corporation.

Sec. 4122. Administration of Federal Prison Industries

  (a) Federal Prison Industries shall determine in what manner 
and to what extent industrial operations shall be carried on in 
Federal penal and correctional institutions for the [production 
of commodities] production of products or furnishing of 
services for consumption in such institutions or for sale to 
the departments or agencies of the United States, but not for 
sale to the public in competition with private enterprise.
  (b)(1) * * *

           *       *       *       *       *       *       *

  (3)(A) Federal Prison Industries shall diversify its products 
so that its sales are distributed among its industries as 
broadly as possible.
  (B) Federal Prison Industries may locate more than one 
workshop at a Federal correctional facility.
  (C) Federal Prison Industries may operate a workshop outside 
of a correctional facility if all of the inmates working in 
such workshop are classified as minimum security inmates.
  [(4) Any decision by Federal Prison Industries to produce a 
new product or to significantly expand the production of an 
existing product shall be made by the board of directors of the 
corporation. Before the board of directors makes a final 
decision, the corporation shall do the following:
          [(A) The corporation shall prepare a detailed written 
        analysis of the probable impact on industry and free 
        labor of the plans for new production or expanded 
        production. In such written analysis the corporation 
        shall, at a minimum, identify and consider--
                  [(i) the number of vendors currently meeting 
                the requirements of the Federal Government for 
                the product;
                  [(ii) the proportion of the Federal 
                Government market for the product currently 
                served by small businesses, small disadvantaged 
                businesses, or businesses operating in labor 
                surplus areas;
                  [(iii) the size of the Federal Government and 
                non-Federal Government markets for the product;
                  [(iv) the projected growth in the Federal 
                Government demand for the product; and
                  [(v) the projected ability of the Federal 
                Government market to sustain both Federal 
                Prison Industries and private vendors.
          [(B) The corporation shall announce in a publication 
        designed to most effectively provide notice to 
        potentially affected private vendors the plans to 
        produce any new product or to significantly expand 
        production of an existing product. The announcement 
        shall also indicate that the analysis prepared under 
        subparagraph (A) is available through the corporation 
        and shall invite comments from private industry 
        regarding the new production or expanded production.
          [(C) The corporation shall directly advise those 
        affected trade associations that the corporation can 
        reasonably identify the plans for new production or 
        expanded production, and the corporation shall invite 
        such trade associations to submit comments on those 
        plans.
          [(D) The corporation shall provide to the board of 
        directors--
                  [(i) the analysis prepared under subparagraph 
                (A) on the proposal to produce a new product or 
                to significantly expand the production of an 
                existing product,
                  [(ii) comments submitted to the corporation 
                on the proposal, and
                  [(iii) the corporation's recommendations for 
                action on the proposal in light of such 
                comments.
In addition, the board of directors, before making a final 
decision under this paragraph on a proposal, shall, upon the 
request of an established trade association or other interested 
representatives of private industry, provide a reasonable 
opportunity to such trade association or other representatives 
to present comments directly to the board of directors on the 
proposal.
  [(5) Federal Prison Industries shall publish in the manner 
specified in paragraph (4)(B) the final decision of the board 
with respect to the production of a new product or the 
significant expansion of the production of an existing 
product.]
  (4)(A) Federal Prison Industries is authorized to offer a new 
specific product or furnish a new specific service in response 
to a competitive solicitation or other purchase request issued 
by a Federal department or agency. No subsequent offering of 
such product or service may be made by Federal Prison 
Industries until the board of directors has approved the 
offering for sale of such new specific product or new specific 
service, in conformance with the requirements of paragraphs (5) 
through (9).
  (B) Federal Prison Industries may produce a product or 
furnish a service in excess of the authorized level of 
production for such product or service, in response to an order 
placed pursuant to an existing contract with a Federal 
department or agency, if the agency's need for the product or 
service is of such an urgency that it would justify the use of 
procedures other than competitive procedures pursuant to 
section 2304(c)(2) of title 10 or section 303(c)(2) of the 
Federal Property and Administrative Services Act of 1949 (41 
U.S.C. 253(c)(2)), as may be applicable.
  (5) A decision to authorize Federal Prison Industries to 
offer a new specific product or specific service or to expand 
the production of an existing product or service for sale to 
the Federal Government shall be made by its board of directors 
in conformance with the requirements of subsections (b), (c), 
(d), and (e) of section 553 of title 5, and this chapter.
  (6)(A) Whenever Federal Prison Industries proposes to offer 
for sale a new specific product or specific service or to 
expand production of a currently authorized product or service, 
the Chief Operating Officer of Federal Prison Industries shall 
submit an appropriate proposal to the board of directors and 
obtain the board's approval before initiating any such 
expansion. The proposal submitted to the board shall include a 
detailed analysis of the probable impact of the proposed 
expansion of sales within the Federal market by Federal Prison 
Industries on private sector firms and their non-inmate 
workers.
  (B)(i) The analysis required by subparagraph (A) shall be 
performed by an interagency team on a reimbursable basis or by 
a private contractor paid by Federal Prison Industries.
  (ii) If the analysis is to be performed by an interagency 
team, such team shall be led by the Administrator of the Small 
Business Administration or the designee of such officer with 
representatives of the Department of Labor, the Department of 
Commerce, and the Federal Procurement Data Center.
  (iii) If the analysis is to be performed by a private 
contractor, the selection of the contractor and the 
administration of the contract shall be conducted by one of the 
entities referenced in clause (ii) as an independent executive 
agent for the board of directors. Maximum consideration shall 
be given to any proposed statement of work furnished by the 
Chief Operating Officer of Federal Prison Industries.
  (C) The analysis required by subparagraph (A) shall identify 
and consider--
          (i) the number of vendors that currently meet the 
        requirements of the Federal Government for the specific 
        product or specific service;
          (ii) the proportion of the Federal Government market 
        for the specific product or specific service currently 
        furnished by small businesses during the previous 3 
        fiscal years;
          (iii) the share of the Federal market for the 
        specific product or specific service projected for 
        Federal Prison Industries for the fiscal year in which 
        production or performance will commence or expand and 
        the subsequent 4 fiscal years;
          (iv) whether the industry producing the specific 
        product or specific service in the private sector--
                  (I) has an unemployment rate higher than the 
                national average; or
                  (II) has a rate of unemployment for workers 
                that has consistently shown an increase during 
                the previous 5 years;
          (v) whether the specific product is an import-
        sensitive product;
          (vi) the requirements of the Federal Government and 
        the demands of entities other than the Federal 
        Government for the specific product or service during 
        the previous 3 fiscal years;
          (vii) the projected growth or decline in the demand 
        of the Federal Government for the specific product or 
        specific service;
          (viii) the capability of the projected demand of the 
        Federal Government for the specific product or service 
        to sustain both Federal Prison Industries and private 
        vendors; and
          (ix) whether authorizing the production of the new 
        product or performance of a new service will provide 
        inmates with the maximum opportunity to acquire 
        knowledge and skill in trades and occupations that will 
        provide them with a means of earning a livelihood upon 
        release.
  (D)(i) The board of directors may not approve a proposal to 
authorize the production and sale of a new specific product or 
continued sale of a previously authorized product unless--
          (I) the product to be furnished is a prison-made 
        product; or
          (II) the service to be furnished is to be performed 
        by inmate workers.
  (ii) The board of directors may not approve a proposal to 
authorize the production and sale of a new prison-made product 
or to expand production of a currently authorized product if 
the product is--
          (I) produced in the private sector by an industry 
        which has reflected during the previous year an 
        unemployment rate above the national average; or
          (II) an import-sensitive product.
  (iii) The board of directors may not approve a proposal for 
inmates to provide a service in which an inmate worker has 
access to--
          (I) personal or financial information about 
        individual private citizens, including information 
        relating to such person's real property, however 
        described, without giving prior notice to such persons 
        or class of persons to the greatest extent practicable;
          (II) geographic data regarding the location of 
        surface and subsurface infrastructure providing 
        communications, water and electrical power 
        distribution, pipelines for the distribution of natural 
        gas, bulk petroleum products and other commodities, and 
        other utilities; or
          (III) data that is classified.
  (iv)(I) Federal Prison Industries is prohibited from 
furnishing through inmate labor construction services, unless 
to be performed within a Federal correctional institution 
pursuant to the participation of an inmate in an apprenticeship 
or other vocational education program teaching the skills of 
the various building trades.
  (II) For purposes of this clause, the term ``construction'' 
has the meaning given such term by section 2.101 of the Federal 
Acquisition Regulation (48 C.F.R. part 2.101), as in effect on 
June 1, 2004, including the repair, alteration, or maintenance 
of real property in being.
  (7) To provide further opportunities for participation by 
interested parties, the board of directors shall--
          (A) give additional notice of a proposal to authorize 
        the production and sale of a new product or service, or 
        expand the production of a currently authorized product 
        or service, in a publication designed to most 
        effectively provide notice to private vendors and labor 
        unions representing private sector workers who could 
        reasonably be expected to be affected by approval of 
        the proposal, which notice shall offer to furnish 
        copies of the analysis required by paragraph (6) and 
        shall solicit comment on the analysis;
          (B) solicit comments on the analysis required by 
        paragraph (6) from trade associations representing 
        vendors and labor unions representing private sector 
        workers who could reasonably be expected to be affected 
        by approval of the proposal to authorize the production 
        and sale of a new product or service (or expand the 
        production of a currently authorized product or 
        service); and
          (C) afford an opportunity, on request, for a 
        representative of an established trade association, 
        labor union, or other private sector representatives to 
        present comments on the proposal directly to the board 
        of directors.
  (8) The board of directors shall be provided copies of all 
comments received on the expansion proposal.
  (9) Based on the comments received on the initial expansion 
proposal, the Chief Operating Officer of Federal Prison 
Industries may provide the board of directors a revised 
expansion proposal. If such revised proposal provides for 
expansion of inmate work opportunities in an industry different 
from that initially proposed, such revised proposal shall 
reflect the analysis required by paragraph (6)(C) and be 
subject to the public comment requirements of paragraph (7).
  (10) The board of directors shall consider a proposal to 
authorize the sale of a new specific product or specific 
service (or to expand the volume of sales for a currently 
authorized product or service) and take any action with respect 
to such proposal, during a meeting that is open to the public, 
unless closed pursuant to section 552(b) of title 5.
  (11) In conformance with the requirements of paragraph (10) 
of this subsection, the board of directors may--
          (A) authorize the donation of products produced or 
        services furnished by Federal industries and available 
        for sale;
          (B) authorize the production of a new specific 
        product or the furnishing of a new specific service for 
        donation; or
          (C) authorize a proposal to expand production of a 
        currently authorized specific product or specific 
        service in an amount in excess of a reasonable share of 
        the market for such product or service, if--
                  (i) a Federal agency or department, 
                purchasing such product or service, has 
                requested that Federal Prison Industries be 
                authorized to furnish such product or service 
                in amounts that are needed by such agency or 
                department; or
                  (ii) the proposal is justified for other good 
                cause and supported by at least two-thirds of 
                the appointed members of the board.
  (12)(A) The Board of Directors of Federal Prison Industries 
shall prescribe the rates of hourly wages to be paid inmates 
performing work for or through Federal Prison Industries. The 
Director of the Federal Bureau of Prisons shall prescribe the 
rates of hourly wages for other work assignments within the 
various Federal correctional institutions. In the case of an 
inmate whose term of imprisonment is to expire in not more than 
2 years, wages shall be earned at an hourly rate of not less 
than $2.50, but paid at the same rate and in the same manner as 
to any other inmate, and any amount earned but not paid shall 
be held in trust and paid only upon the actual expiration of 
the term of imprisonment.
  (B) The various inmate wage rates shall be reviewed and 
considered for increase on not less than a biannual basis.
  (C) The Board of Directors of Federal Prison Industries 
shall--
          (i) not later than September 30, 2008, increase the 
        maximum wage rate for inmates performing work for or 
        through Federal Prison Industries to an amount equal to 
        50 percent of the minimum wage prescribed by section 
        6(a)(1) of the Fair Labor Standards Act of 1938 (29 
        U.S.C. 206(a)(1)); and
          (ii) not later than September 30, 2013, increase such 
        maximum wage rate to an amount equal to such minimum 
        wage.
  (D) Wages earned by an inmate worker shall be paid in the 
name of the inmate. Deductions, aggregating to not more than 80 
percent of gross wages, shall be taken from the wages due for--
          (i) applicable taxes (Federal, State, and local);
          (ii) payment of fines and restitution pursuant to 
        court order;
          (iii) payment of additional restitution for victims 
        of the inmate's crimes (at a rate not less than 10 
        percent of gross wages);
          (iv) allocations for support of the inmate's family 
        pursuant to statute, court order, or agreement with the 
        inmate;
          (v) allocations to a fund in the inmate's name to 
        facilitate such inmate's assimilation back into 
        society, payable at the conclusion of incarceration; 
        and
          (vi) such other deductions as may be specified by the 
        Director of the Bureau of Prisons.
  (E) Each inmate worker working for Federal Prison Industries 
shall indicate in writing that such person--
          (i) is participating voluntarily; and
          (ii) understands and agrees to the wages to be paid 
        and deductions to be taken from such wages.
  [(6)] (13) Federal Prison Industries shall publish, after the 
end of each 6-month period, a list of sales by the corporation 
for that 6-month period. Such list shall be made available to 
all interested parties.

           *       *       *       *       *       *       *

[Sec. 4124. Purchase of prison-made products by Federal departments

  [(a) The several Federal departments and agencies and all 
other Government institutions of the United States shall 
purchase at not to exceed current market prices, such products 
of the industries authorized by this chapter as meet their 
requirements and may be available.
  [(b) Disputes as to the price, quality, character, or 
suitability of such products shall be arbitrated by a board 
consisting of the Attorney General, the Administrator of 
General Services, and the President, or their representatives. 
Their decision shall be final and binding upon all parties.
  [(c) Each Federal department, agency, and institution subject 
to the requirements of subsection (a) shall separately report 
acquisitions of products and services from Federal Prison 
Industries to the Federal Procurement Data System (as referred 
to in section 6(d)(4) of the Office of Federal Procurement 
Policy Act) in the same manner as it reports other 
acquisitions. Each report published by the Federal Procurement 
Data System that contains the information collected by the 
System shall include a statement to accompany the information 
reported by the department, agency, or institution under the 
preceding sentence as follows: ``Under current law, sales by 
Federal Prison Industries are considered intragovernmental 
transfers. The purpose of reporting sales by Federal Prison 
Industries is to provide a complete overview of acquisitions by 
the Federal Government during the reporting period.''.
  [(d) Within 90 days after the date of the enactment of this 
subsection, Federal Prison Industries shall publish a catalog 
of all products and services which it offers for sale. This 
catalog shall be updated periodically to the extent necessary 
to ensure that the information in the catalog is complete and 
accurate.]

Sec. 4124. Governmentwide procurement policy relating to purchases from 
                    Federal Prison Industries

  (a) In General.--Purchases from Federal Prison Industries, 
Incorporated, a wholly owned Government corporation, as 
referred to in section 9101(3)(E) of title 31, may be made by a 
Federal department or agency only in accordance with this 
section.
  (b) Solicitation and Evaluation of Offers and Contract 
Awards.--(1)(A) If a procurement activity of a Federal 
department or agency has a requirement for a specific product 
or service that is authorized to be offered for sale by Federal 
Prison Industries, in accordance with section 4122 of this 
title, and is listed in the catalog referred to in subsection 
(g), the procurement activity shall solicit an offer from 
Federal Prison Industries, if the purchase is expected to be in 
excess of the micro-purchase threshold (as defined by section 
32(f) of the Office of Federal Procurement Policy Act (41 
U.S.C. 428(f))).
  (B) The requirements of subparagraph (A) shall also apply to 
a procurement that a Federal department or agency intends to 
meet by placing an order against a contract maintained by the 
General Services Administration under the Multiple Award 
Schedule Contracts Program.
  (C) Federal Prison Industries, upon its request, shall be 
listed on any Schedule, referred to in subparagraph (B), as 
offering products or services which Federal Prison Industries 
believes to be comparable to those products and services being 
offered by commercial contractors through the Multiple Award 
Schedule Contracts Program.
  (2) A contract award for such product or service shall be 
made using competitive procedures in accordance with the 
applicable evaluation factors, unless a determination is made 
by the Attorney General pursuant to paragraph (3) or an award 
using other than competitive procedures is authorized pursuant 
to paragraph (7).
  (3) The procurement activity shall negotiate with Federal 
Prison Industries on a noncompetitive basis for the award of a 
contract if the Attorney General determines that--
          (A) Federal Prison Industries cannot reasonably 
        expect fair consideration to receive the contract award 
        on a competitive basis; and
          (B) the contract award is necessary to maintain work 
        opportunities otherwise unavailable at the penal or 
        correctional facility at which the contract is to be 
        performed to prevent circumstances that could 
        reasonably be expected to significantly endanger the 
        safe and effective administration of such facility.
  (4) Except in the case of an award to be made pursuant to 
paragraph (3), a contract award shall be made with Federal 
Prison Industries only if the contracting officer for the 
procurement activity determines that--
          (A) the specific product or service to be furnished 
        will meet the requirements of the procurement activity 
        (including any applicable prequalification requirements 
        and all specified commercial or governmental standards 
        pertaining to quality, testing, safety, serviceability, 
        and warranties);
          (B) timely performance of the contract can be 
        reasonably expected; and
          (C) the contract price does not exceed a current 
        market price.
  (5) A determination by the Attorney General pursuant to 
paragraph (3) shall be--
          (A) supported by specific findings by the warden of 
        the penal or correctional institution at which a 
        Federal Prison Industries workshop is scheduled to 
        perform the contract;
          (B) supported by specific findings by Federal Prison 
        Industries regarding why it does not expect to win the 
        contract on a competitive basis; and
          (C) made and reported in the same manner as a 
        determination made pursuant to section 303(c)(7) of the 
        Federal Property and Administrative Services Act of 
        1949 (41 U.S.C. 253(c)(7)).
  (6) If the Attorney General has not made the determination 
described in paragraph (3) within 30 days after Federal Prison 
Industries has been informed of a contracting opportunity by a 
procurement activity, the procurement activity may proceed to 
conduct a procurement for the product or service in accordance 
with the procedures generally applicable to such procurements 
by the procurement activity.
  (7) A contract award may be made to Federal Prison Industries 
using other than competitive procedures if such product or 
service is only available from Federal Prison Industries and 
the contract may be awarded under the authority of section 
2304(c)(1) of title 10 or section 303(c) of the Federal 
Property and Administrative Services Act of 1949 (41 U.S.C. 
253(c)(1)), as may be applicable, and pursuant to the 
justification and approval requirements relating to such 
noncompetitive procurements specified by law and the 
Governmentwide Federal Acquisition Regulation.
  (8) A contract award may be made to Federal Prison Industries 
using other than competitive procedures by the Federal Bureau 
of Prisons.
  (9) A solicitation for a contract shall first be made to 
Federal Prison Industries using other than competitive 
procedures if the product or service to be acquired would 
otherwise be furnished by a contractor performing the work 
outside of the United States.
  (c) Offers From Federal Prison Industries.--(1) A timely 
offer received from Federal Prison Industries to furnish a 
product or service to a Federal department or agency shall be 
considered for award without limitation as to the dollar value 
of the proposed purchase, unless the contract opportunity has 
been reserved for competition exclusively among small business 
concerns pursuant to section 15(a) of the Small Business Act 
(15 U.S.C. 644(a)) and its implementing regulations.
  (2) Any offer made by Federal Prison Industries to furnish a 
product or service may exclude from the offer the price of the 
following:
          (A) The costs related to security of the facilities 
        at which the contract will be performed.
          (B) The costs of educating and training the prison 
        work force performing the contract.
          (C) Excess capital costs of machinery and excess 
        inventories used within a prison environment that are 
        the result of the unique environment of prison life.
          (D) Other costs of performing the contract resulting 
        from the unique environment of prison facilities.
  (d) Performance by Federal Prison Industries.--Federal Prison 
Industries shall perform its contractual obligations under a 
contract awarded by a Federal department or agency to the same 
extent as any other contractor.
  (e) Finality of Contracting Officer's Decision.--(1) A 
decision by a contracting officer regarding the award of a 
contract to Federal Prison Industries or relating to the 
performance of such contract shall be final, unless reversed on 
appeal pursuant to paragraph (2) or (3).
  (2)(A) The Chief Operating Officer of Federal Prison 
Industries may protest a decision by a contracting officer not 
to award a contract to Federal Prison Industries pursuant to 
subsection (b)(4), in accordance with section 33.103, (Protests 
to the agency) of the Federal Acquisition Regulation (48 C.F.R. 
part 33.103).
  (B) In the event of an adverse decision of a protest filed 
pursuant to subparagraph (A), the Assistant Attorney General 
for Administration may request a reconsideration of such 
adverse decision by the head of the Federal agency or 
department, which shall be considered de novo and the decision 
issued by such agency head on a non-delegable basis. Such 
decision upon reconsideration by the agency head shall be 
final.
  (3) A dispute between Federal Prison Industries and a 
procurement activity regarding performance of a contract shall 
be subject to--
          (A) alternative means of dispute resolution pursuant 
        to subchapter IV of chapter 5 of title 5; or
          (B) final resolution by the board of contract appeals 
        having jurisdiction over the procurement activity's 
        contract performance disputes pursuant to the Contract 
        Disputes Act of 1978 (41 U.S.C. 601 et seq.).
  (f) Reporting of Purchases.--Each Federal department or 
agency shall report purchases from Federal Prison Industries to 
the Federal Procurement Data System (as referred to in section 
6(d)(4) of the Office of Federal Procurement Policy Act (41 
U.S.C. 405(d)(4))) in the same manner as it reports to such 
System any acquisition in an amount in excess of the simplified 
acquisition threshold (as defined by section 4(11) of the 
Office of Federal Procurement Policy Act (41 U.S.C. 403(11))).
  (g) Catalog of Products.--Federal Prison Industries shall 
publish and maintain a catalog of all specific products and 
services that it is authorized to offer for sale. Such catalog 
shall be periodically revised as products and services are 
added or deleted by its board of directors (in accordance with 
section 4122(b) of this title).
  (h) Compliance With Standards.--Federal Prison Industries 
shall be subject to Federal occupational, health, and safety 
standards with respect to the operation of its industrial 
operations.

Sec. 4124a. Additional inmate work opportunities through public service 
                    activities

  (a) In General.--Inmates with work assignments within Federal 
Prison Industries may perform work for an eligible entity 
pursuant to an agreement between such entity and the Inmate 
Work Training Administrator in accordance with the requirements 
of this section.
  (b) Definition of Eligible Entities.--For the purposes of 
this section, the term ``eligible entity'' means an entity--
          (1) that is an organization described in section 
        501(c)(3) of the Internal Revenue Code of 1986 and 
        exempt from taxation under section 501(a) of such Code 
        and that has been such an organization for a period of 
        not less than 36 months prior to inclusion in an 
        agreement under this section;
          (2) that is a religious organization described in 
        section 501(d) of such Code and exempt from taxation 
        under section 501(a) of such Code; or
          (3) that is a unit of local government, a school 
        district, or another special purpose district.
  (c) Inmate Work Training Administrator.--There is hereby 
established the position of Inmate Work Training Administrator, 
who shall be responsible for fostering the creation of 
alternative inmate work opportunities authorized by this 
section. The Administrator shall be designated by the Chief 
Executive Officer of Federal Prison Industries, with the 
approval of the Board of Directors, and be under the 
supervision of the Chief Operating Officer, but may directly 
report to the Board.
  (d) Proposed Agreements.--An eligible entity seeking to enter 
into an agreement pursuant to subsection (a) shall submit a 
detailed proposal to the Inmate Work Training Administrator. 
Each such agreement shall specify--
          (1) types of work to be performed;
          (2) the proposed duration of the agreement, specified 
        in terms of a base year and number of option years;
          (3) the number of inmate workers expected to be 
        employed in the specified types of work during the 
        various phases of the agreement;
          (4) the wage rates proposed to be paid to various 
        classes of inmate workers; and
          (5) the facilities, services and personnel (other 
        than correctional personnel dedicated to the security 
        of the inmate workers) to be furnished by Federal 
        Prison Industries or the Bureau of Prisons and the 
        rates of reimbursement, if any, for such facilities, 
        services, and personnel.
  (e) Representations.--
          (1) Eleemosynary work activities.--Each proposed 
        agreement shall be accompanied by a written 
        certification by the chief executive officer of the 
        eligible entity that--
                  (A) the work to be performed by the inmate 
                workers will be limited to the eleemosynary 
                work of such entity in the case of an entity 
                described in paragraph (1) or (2) of subsection 
                (b);
                  (B) the work would not be performed in the 
                United States but for the availability of the 
                inmate workers; and
                  (C) the work performed by the inmate workers 
                will not result, either directly or indirectly, 
                in the production of a new product or the 
                furnishing of a service that is to be offered 
                for other than resale or donation by the 
                eligible entity or any affiliate of the such 
                entity.
          (2) Protections for non-inmate workers.--Each 
        proposed agreement shall also be accompanied by a 
        written certification by the chief executive officer of 
        the eligible entity that--
                  (A) no non-inmate employee (including any 
                person performing work activities for such 
                governmental entity pursuant to section 607 of 
                subchapter IV of the Social Security Act (42 
                U.S.C. 607)) of the eligible entity (or any 
                affiliate of the entity) working in the United 
                States will have his or her job abolished or 
                work hours reduced as a result of the entity 
                being authorized to utilize inmate workers; and
                  (B) the work to be performed by the inmate 
                workers will not supplant work currently being 
                performed in the United States by a contractor 
                of the eligible entity.
  (f) Approval by Board of Directors.--
          (1) In general.--Each such proposed agreement shall 
        be presented to the Board of Directors, be subject to 
        the same opportunities for public comment, and be 
        publicly considered and acted upon by the Board in a 
        manner comparable to that required by paragraphs (7) 
        and (8) of section 4122(b).
          (2) Matters to be considered.--In determining whether 
        to approve a proposed agreement, the Board shall--
                  (A) give priority to an agreement that 
                provides inmate work opportunities that will 
                provide participating inmates with the best 
                prospects of obtaining employment paying a 
                livable wage upon release;
                  (B) give priority to an agreement that 
                provides for maximum reimbursement for inmate 
                wages and for the costs of supplies and 
                equipment needed to perform the types of work 
                to be performed;
                  (C) not approve an agreement that will result 
                in the displacement of non-inmate workers 
                contrary to the representations required by 
                subsection (e)(2) as determined by the Board or 
                by the Secretary of Labor (pursuant to 
                subsection (i)); and
                  (D) not approve an agreement that will 
                result, either directly or indirectly, in the 
                production of a new product or the furnishing 
                of a service for other than resale by an 
                eligible entity described in paragraph (1) or 
                (2) of subsection (b) or donation.
  (g) Wage Rates and Deductions From Inmate Wages.--
          (1) In general.--Inmate workers shall be paid wages 
        for work under the agreement at a basic hourly rate to 
        be negotiated between the eligible entity and Federal 
        Prison Industries and specified in the agreement. The 
        wage rates set by the Director of the Federal Bureau of 
        Prisons to be paid inmates for various institutional 
        work assignments are specifically authorized.
          (2) Payment to inmate worker and authorized 
        deductions.--Wages shall be paid and deductions taken 
        pursuant to section 4122(b)(12)(D).
          (3) Voluntary participation by inmate.--Each inmate 
        worker to be utilized by an eligible entity shall 
        indicate in writing that such person--
                  (A) is participating voluntarily; and
                  (B) understands and agrees to the wages to be 
                paid and deductions to be taken from such 
                wages.
  (h) Assignment to Work Opportunities.--Assignment of inmates 
to work under an approved agreement with an eligible entity 
shall be subject to the Bureau of Prisons Program Statement 
Number 1040.10 (Non-Discrimination Toward Inmates), as 
contained in section 551.90 of title 28 of the Code of Federal 
Regulations (or any successor document).
  (i) Enforcement of Protections for Non-Inmate Workers.--
          (1) Prior to board consideration.--Upon request of 
        any interested person, the Secretary of Labor may 
        promptly verify a certification made pursuant 
        subsection (e)(2) with respect to the displacement of 
        non-inmate workers so as to make the results of such 
        inquiry available to the Board of Directors prior to 
        the Board's consideration of the proposed agreement. 
        The Secretary and the person requesting the inquiry may 
        make recommendations to the Board regarding 
        modifications to the proposed agreement.
          (2) During performance.--
                  (A) In general.--Whenever the Secretary deems 
                appropriate, upon request or otherwise, the 
                Secretary may verify whether the actual 
                performance of the agreement is resulting in 
                the displacement of non-inmate workers or the 
                use of inmate workers in a work activity not 
                authorized under the approved agreement.
                  (B) Sanctions.--Whenever the Secretary 
                determines that performance of the agreement 
                has resulted in the displacement of non-inmate 
                workers or employment of an inmate worker in an 
                unauthorized work activity, the Secretary may--
                          (i) direct the Inmate Work Training 
                        Administrator to terminate the 
                        agreement for default, subject to the 
                        processes and appeals available to a 
                        Federal contractor whose procurement 
                        contract has been terminated for 
                        default; and
                          (ii) initiate proceedings to impose 
                        upon the person furnishing the 
                        certification regarding non-
                        displacement of non-inmate workers 
                        required by subsection (d)(2)(B) any 
                        administrative, civil, and criminal 
                        sanctions as may be available.

Sec. 4124b. Re-entry employment preparation through work-based training 
                    and apprenticeship.

  (a) Participation Authorized.--A private for-profit business 
entity shall be an eligible entity for participation in the 
program authorized by section 4124a of this title, if such 
participation conforms with the requirements and limitations of 
this section.
  (b) Requirements Relating to Products and Services.--A 
private for-profit business entity is eligible for such 
participation if such business entity proposes to train 
participating inmates, pursuant to subsection (c), by producing 
a product or performing a service, if such product or service 
is of a type for which there is no production or performance 
within the United States by noninmate workers.
  (c) Requirements Relating to Training.--
          (1) In general.--For purposes of this section, the 
        training of participating inmates shall be work-based 
        training that provides to a participating inmate 
        apprenticeship training or a functionally equivalent 
        structured program that combines hands-on work 
        experience with conceptual understanding of the work 
        being performed. Other inmates with regular work 
        assignments within Federal Prison Industries may be 
        assigned to support the program.
          (2) Documentation of program participation.--
                  (A) Each inmate who successfully completes 
                participation in training undertaken pursuant 
                to this section shall be provided a certificate 
                or other written document memorializing such 
                successful completion, providing a marketable 
                summary of the skills learned and an overall 
                assessment of performance.
                  (B) Copies of such documents shall be 
                furnished to perspective employers upon the 
                request of the participant for a period of not 
                less than 24 months from the date of such 
                participant's release from incarceration.
          (3) Documents required for employment.--The Federal 
        Bureau of Prisons, in cooperation with a business 
        entity providing an inmate work-based training at the 
        time of his or her scheduled release, shall make every 
        reasonable effort to help the inmate timely obtain such 
        documentation (including a State government-issued 
        photo identification card) as a person may be required 
        to provide to a prospective employer, after such person 
        completes an Employment Eligibility Verification (ICE 
        Form I-9).
  (d) Wage Rates.--
          (1) In general.--Business entities participating in 
        the program authorized by subsection (a) shall propose 
        wages for inmates participating in the program at rates 
        not less than the inmate training wage promulgated 
        pursuant to section 17(c) of the Federal Prison 
        Industries Competition in Contracting Act of 2006.
          (2) Inmate training wage.--Not more than 30 days 
        after the date of enactment of this section, the Board 
        of Directors of Federal Prison Industries shall request 
        the Secretary of Labor to promulgate an inmate training 
        wage pursuant to section 14(a) of the Fair Labor 
        Standards Act of 1938 (29 U.S.C. 214(a)).
  (e) Support for Other Release Preparation Programs.--In 
addition to the matters listed in section 4124a(d) of this 
title, a proposal for an agreement referred to in such section 
submitted by an eligible business entity shall specify an 
amount of any supplemental funding, specified as a per-capita 
amount for each inmate participating pursuant to the agreement, 
that the business entity will provide for the purpose of 
supporting remedial, vocational, and other release preparation 
programs for other nonparticipating inmates.
  (f) Additional Standards Applicable.--In considering a 
proposed agreement pursuant to section 4124a(f)(1) of this 
title, the Board of Directors shall--
          (1) give preference to an agreement that proposes--
                  (A) work-based training opportunities that 
                provide the participating inmate the best 
                prospects for obtaining employment paying a 
                livable wage upon release;
                  (B) the highest per-capita amount pursuant to 
                subsection (e) relating to providing financial 
                support for release preparation for other 
                inmates; and
                  (C) the highest inmate wage rates;
          (2) not approve any agreement with respect to 
        furnishing services of the type described in section 
        4122(b)(6)(D)(iii) of this title;
          (3) not approve any agreement with respect to 
        furnishing construction services described in section 
        4122(b)(6)(D)(iv) of this title, unless to be performed 
        within a Federal correctional institution;
          (4) not approve an agreement that does not meet the 
        standards of subsection (b); and
          (5) request a determination from the International 
        Trade Commission (and such other executive branch 
        entities as may be appropriate), regarding whether a 
        product or service is of the type being produced or 
        performed in the United States by noninmate workers, 
        whenever the Board determines that such an additional 
        assessment is warranted, including upon a request from 
        an interested party presenting information that the 
        Board deems to warrant such additional assessment prior 
        to the Board's consideration of the proposed agreement.
  (g) Limitations on the Use of the Authority.--
          (1) No sales by federal prison industries.--Federal 
        Prison Industries is prohibited from directly offering 
        for commercial sale products produced or services 
        furnished by Federal inmates, including through any 
        form of electronic commerce.
          (2) Duration.--
                  (A) No proposed agreement pursuant to this 
                subsection may be approved by the Board of 
                Directors after September 30, 2016.
                  (B) Performance of all such agreements shall 
                be concluded prior to October 1, 2021.

           *       *       *       *       *       *       *

[Sec. 4127. Prison Industries report to Congress

  [The board of directors of Federal Prison Industries shall 
submit an annual report to the Congress on the conduct of the 
business of the corporation during each fiscal year, and on the 
condition of its funds during such fiscal year. Such report 
shall include a statement of the amount of obligations issued 
under section 4129(a)(1) during such fiscal year, and an 
estimate of the amount of obligations that will be so issued in 
the following fiscal year.]

Sec. 4127. Federal Prison Industries report to Congress

  (a) In General.--Pursuant to chapter 91 of title 31, the 
board of directors of Federal Prison Industries shall submit an 
annual report to Congress on the conduct of the business of the 
corporation during each fiscal year and the condition of its 
funds during the fiscal year.
  (b) Contents of Report.--In addition to the matters required 
by section 9106 of title 31, and such other matters as the 
board considers appropriate, a report under subsection (a) 
shall include--
          (1) a statement of the amount of obligations issued 
        under section 4129(a)(1) of this title during the 
        fiscal year;
          (2) an estimate of the amount of obligations that 
        will be issued in the following fiscal year;
          (3) an analysis of--
                  (A) the corporation's total sales for each 
                specific product and type of service sold to 
                the Federal agencies and the commercial market;
                  (B) the total purchases by each Federal 
                agency of each specific product and type of 
                service;
                  (C) the corporation's share of such total 
                Federal Government purchases by specific 
                product and type of service; and
                  (D) the number and disposition of disputes 
                submitted to the heads of the Federal 
                departments and agencies pursuant to section 
                4124(e) of this title;
          (4) an allocation of the profits of the corporation, 
        both gross and net, to--
                  (A) educational, training, release-
                preparation opportunities for inmates;
                  (B) opening new factories; and
                  (C) improving the productivity and 
                competitiveness of existing factories;
          (5) an analysis of the inmate workforce that 
        includes--
                  (A) the number of inmates employed;
                  (B) the number of inmates utilized to produce 
                products or furnish services sold in the 
                commercial market;
                  (C) the number and percentage of employed 
                inmates by the term of their incarceration; and
                  (D) the various hourly wages paid to inmates 
                employed with respect to the production of the 
                various specific products and types of services 
                authorized for production and sale to Federal 
                agencies and in the commercial market; and
          (6) data concerning employment obtained by former 
        inmates upon release to determine whether the 
        employment provided by Federal Prison Industries during 
        incarceration provided such inmates with knowledge and 
        skill in a trade or occupation that enabled such former 
        inmate to earn a livelihood upon release.
  (c) Public Availability.--Copies of an annual report under 
subsection (a) shall be made available to the public at a price 
not exceeding the cost of printing the report.

           *       *       *       *       *       *       *

Sec. 4130. Construction of provisions

  Nothing in this chapter shall be construed--
          (1) to establish an entitlement of any inmate to--
                  (A) employment in a Federal Prison Industries 
                facility; or
                  (B) any particular wage, compensation, or 
                benefit on demand, except as otherwise 
                specifically provided by law or regulation;
          (2) to establish that inmates are employees for the 
        purposes of any law or program; or
          (3) to establish any cause of action by or on behalf 
        of any inmate against the United States or any officer, 
        employee, or contractor thereof.

Sec. 4131. Definitions

  As used in this chapter--
          (1) the term ``assembly'' means the process of 
        uniting or combining articles or components (including 
        ancillary finished components or assemblies) so as to 
        produce a significant change in form or utility, 
        without necessarily changing or altering the component 
        parts;
          (2) the term ``current market price'' means, with 
        respect to a specific product, the fair market price of 
        the product within the meaning of section 15(a) of the 
        Small Business Act (15 U.S.C. 644(a)), at the time that 
        the contract is to be awarded, verified through 
        appropriate price analysis or cost analysis, including 
        any costs relating to transportation or the furnishing 
        of any ancillary services;
          (3) the term ``import-sensitive product'' means a 
        product which, according to Department of Commerce 
        data, has experienced competition from imports at an 
        import to domestic production ratio of 25 percent or 
        greater;
          (4) the term ``labor-intensive manufacture'' means a 
        manufacturing activity in which the value of inmate 
        labor constitutes at least 10 percent of the estimate 
        unit cost to produce the item by Federal Prison 
        Industries;
          (5) the term ``manufacture'' means the process of 
        fabricating from raw or prepared materials, so as to 
        impart to those materials new forms, qualities, 
        properties, and combinations;
          (6) the term ``reasonable share of the market'' means 
        a share of the total purchases by the Federal 
        departments and agencies, as reported to the Federal 
        Procurement Data System for--
                  (A) any specific product during the 3 
                preceding fiscal years, that does not exceed 20 
                percent of the Federal market for the specific 
                product; and
                  (B) any specific service during the 3 
                preceding fiscal years, that does not exceed 5 
                percent of the Federal market for the specific 
                service; and
          (7) the term ``services'' has the meaning given the 
        term ``service contract'' by section 37.101 of the 
        Federal Acquisition Regulation (48 C.F.R. 36.102), as 
        in effect on July 1, 2004.

           *       *       *       *       *       *       *

                              ----------                              

SECTION 318 OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 
                                  1949

SEC. 318. PRODUCTS OF FEDERAL PRISON INDUSTRIES: PROCEDURAL 
                    REQUIREMENTS.

  (a) Market Research.--Before purchasing a product listed in 
the latest edition of the Federal Prison Industries catalog 
under section 4124(g) of title 18, United States Code, the head 
of an executive agency shall conduct market research to 
determine whether the Federal Prison Industries product is 
comparable to products available from the private sector that 
best meet the executive agency's needs in terms of price, 
quality, and time of delivery.
  (b) Competition Requirement.--If the head of the executive 
agency determines that a Federal Prison Industries product is 
not comparable in price, quality, or time of delivery to 
products available from the private sector that best meet the 
executive agency's needs in terms of price, quality, and time 
of delivery, the agency head shall use competitive procedures 
for the procurement of the product or shall make an individual 
purchase under a multiple award contract. In conducting such a 
competition or making such a purchase, the agency head shall 
consider a timely offer from Federal Prison Industries.
  (c) Implementation by Head of Executive Agency.--The head of 
an executive agency shall ensure that--
          (1) the executive agency does not purchase a Federal 
        Prison Industries product or service unless a 
        contracting officer of the agency determines that the 
        product or service is comparable to products or 
        services available from the private sector that best 
        meet the agency's needs in terms of price, quality, and 
        time of delivery; and
          (2) Federal Prison Industries performs its 
        contractual obligations to the same extent as any other 
        contractor for the executive agency.
  (d) Market Research Determination Not Subject to Review.--A 
determination by a contracting officer regarding whether a 
product or service offered by Federal Prison Industries is 
comparable to products or services available from the private 
sector that best meet an executive agency's needs in terms of 
price, quality, and time of delivery shall not be subject to 
review pursuant to section 4124(b) of title 18.
  (e) Performance as a Subcontractor.--(1) A contractor or 
potential contractor of an executive agency may not be required 
to use Federal Prison Industries as a subcontractor or supplier 
of products or provider of services for the performance of a 
contract of the executive agency by any means, including means 
such as--
          (A) a contract solicitation provision requiring a 
        contractor to offer to make use of products or services 
        of Federal Prison Industries in the performance of the 
        contract;
          (B) a contract specification requiring the contractor 
        to use specific products or services (or classes of 
        products or services) offered by Federal Prison 
        Industries in the performance of the contract; or
          (C) any contract modification directing the use of 
        products or services of Federal Prison Industries in 
        the performance of the contract.
  (2) In this subsection, the term ``contractor'', with respect 
to a contract, includes a subcontractor at any tier under the 
contract.
  (f) Protection of Classified and Sensitive Information.--The 
head of an executive agency may not enter into any contract 
with Federal Prison Industries under which an inmate worker 
would have access to--
          (1) any data that is classified;
          (2) any geographic data regarding the location of--
                  (A) surface and subsurface infrastructure 
                providing communications or water or electrical 
                power distribution;
                  (B) pipelines for the distribution of natural 
                gas, bulk petroleum products, or other 
                commodities; or
                  (C) other utilities; or
          (3) any personal or financial information about any 
        individual private citizen, including information 
        relating to such person's real property however 
        described, without the prior consent of the individual.
  (g) Definitions.--In this section:
          (1) The term ``competitive procedures'' has the 
        meaning given such term in section 4(5) of the Office 
        of Federal Procurement Policy Act (41 U.S.C. 403(5)).
          (2) The term ``market research'' means obtaining 
        specific information about the price, quality, and time 
        of delivery of products available in the private sector 
        through a variety of means, which may include--
                  (A) contacting knowledgeable individuals in 
                government and industry;
                  (B) interactive communication among industry, 
                acquisition personnel, and customers; and
                  (C) interchange meetings or pre-solicitation 
                conferences with potential offerors.

                            DISSENTING VIEWS

    These views dissent from the Committee Report on H.R. 2965.

                              Introduction

    The Federal Prison Industries program is not only the 
Department of Justice's most important correctional management 
tool, it is also one of the Department's most effective means 
of rehabilitating inmates, thereby reducing recidivism. Federal 
Prison Industries, Inc., or FPI was signed into law by 
President Roosevelt in 1934, in the midst of the Great 
Depression, as a way to protect the public by teaching 
prisoners real work habits and skills so that when they were 
released they would be better able to find and hold jobs to 
support themselves and their families, and be less likely to 
commit additional crimes. It is clear that the FPI program 
works to do just that. Follow-up studies covering as much as 16 
years of data have shown that inmates who work in FPI are less 
likely to return to a life of crime after they are released. 
Research shows that inmates in FPI are 24% less likely to 
recidivate than similar inmates who didn't participate in FPI. 
Also, inmates in FPI are 14% more likely to find and maintain a 
job than those without FPI experience. Working in FPI has an 
even greater positive impact on minority offenders who are at 
the greatest statistical risk of recidivism. While the program 
certainly benefits offenders and their families, that is not 
the primary benefit of FPI from a public policy perspective. 
The real benefit to all of us is that, as a result of this 
program, we are less likely to be victims of crime.

                           What the Bill Does

    H.R. 2965 would immediately eliminate the current 
``mandatory source'' procurement authority for federal agency 
purchases from (FPI). While the bill provides for an agency 
option to purchase goods from FPI on a non-competitive basis 
which is phased out over a 5-year period, there should be no 
mistake-- the mandatory source rule in effect today would be 
eliminated immediately upon the effective date of this bill 
becoming law. The 1934 law required purchases by federal 
agencies to ensure work opportunities for inmates. The law 
recognizes that prison work operations are necessarily less 
efficient, less productive and more costly to run when compared 
to private work conditions. This is due in large measure to the 
high level of security and control that must be maintained in a 
prison factory, no or very low beginning work skills among the 
inmate workforce, and the objective of labor intensive 
activities to maximize the number of inmates employed. It is 
estimated that it takes four inmates to equate to the 
production of one private worker.
    Ironically, most of the adverse impact of this bill will 
fall on private sector companies and their workers. FPI would 
not exist, and certainly could not offer quality products and 
services without the direct support of private sector companies 
that provide the raw materials and services FPI needs to 
produce its products. Each of these companies responded to 
solicitations issued by FPI (as a Federal agency, FPI follows 
all the Federal procurement regulations) and were awarded the 
contracts through competitive procedures. In order to fulfill 
their contractual obligations, these companies have hired law-
abiding citizens as staff, added equipment, and some have even 
opened entire new plants. Many of these companies have FPI 
contracts which extend 5-10 years. FPI estimates that 
approximately 5,000 U.S. jobs, of which many are unionized, are 
sustained by the program.
    Last year, FPI spent 74% of its sales revenue on purchases 
of raw materials, equipment, supplies, and services from 
private sector companies, 66% of which were purchased from 
small businesses including women, minorities and those who are 
disadvantaged. These expenditures exceeded $500 million last 
year. The private sector companies selling their goods to FPI 
have played by the rules, competing fair and square for the 
contracts. These companies and their employees do not deserve 
to be on the receiving end of an unjustified animus toward 
inmates or FPI.
    The bill amends the current requirement in the law for 
agencies to purchase goods from FPI and establishes a 
competitive bid process for agency purchases of goods and 
services, unless the Attorney General, Bureau of Prisons BOP 
and FPI officials certify that they cannot safely run a prison 
without the particular contract award. It is unlikely that any 
of these officials will publicly admit such a level of 
incompetence in order to obtain an inmate work contract.
    The bill makes a halfhearted effort to replace mandatory 
source and service contract jobs by providing a transition 
preference program for agencies using FPI, by authorizing new 
options such as providing products or services to charitable 
and non-profit organizations contingent on appropriations, by 
allowing FPI to provide services and products to federal 
agencies on a non-competitive basis if they would otherwise be 
provided from offshore, and by authorizing a work training 
program for FPI to produce goods and services for private 
companies if the goods and services are not produced anywhere 
in the U.S. However, there is no basis for concluding that 
these authorities would generate any significant inmate job 
opportunities, and certainly not replace the loss of current 
inmate jobs now performed by FPI under mandatory source and 
legally sanctioned commercial services.
    In addition to restrictions on FPI's ability to produce 
products for federal agencies, the bill severely restricts the 
ability of FPI to obtain commercial service contracts. An 
alternative currently employed by FPI to decrease its federal 
market share for products, thus reducing its reliance on 
mandatory source, is performing services for companies which 
are currently being performed in foreign countries. These 
contracts are competitively obtained by FPI. Because of the 
restrictions in the bill, current FPI service contracts 
employing over 2,000 inmates, which involve no competition with 
domestic workers, will be eliminated. This work will then go 
back offshore.
    The bill, which is purportedly designed to reform federal 
prison industries, also prohibits state prison industries from 
performing commercial service contracts. These restrictions 
will also have significant negative impact on numerous state 
correctional systems, hurt private sector businesses as well as 
prisoners and bring about increased numbers of crime victims as 
a result of inmates that do not have the rehabilitative and job 
skills training benefits of prison industries. Remy 
International (formerly, Delco Remy) advised that for its 
service contracts with Virginia prison enterprises, for 
example, the restriction on state services in the bill would 
mean the following:

        If section 7 passes, the bottom line is that we will 
        ABSOLUTELY close our correctional facility factory in 
        Virginia and every single one of those 230 inmate jobs 
        and 25 civilian jobs will go to Mexico and China--no 
        hyperbole here. Moreover, we recently sent 55 jobs to 
        Mexico which we are considering returning to a 
        correctional facility in West Virginia. Until we have a 
        greater sense of security that Section 7 will be 
        deleted, those jobs will remain in Mexico.

    The same thing will occur regarding similar Remy 
International operations in other states, as well. The combined 
impact of the federal and state prohibitions on service 
contracts with private businesses will have the effect of 
eliminating a substantial number of federal and state prison 
industries service contracts where hundreds of civilian workers 
and thousands of inmate workers will lose their jobs.
    Further, the bill will have an unintended discriminatory 
effect upon small, minority and women-owned businesses. As 
noted above, roughly two thirds of FPI purchases are made from 
small, women and minority owned and disadvantaged businesses. 
This is three times higher than the Small Business 
Administration goal, and one of the highest rates among all 
Federal agencies. It is well established that small businesses 
create more jobs per dollar of revenue than large businesses. 
Accordingly, to the extent that FPI's sales decline, the 
hardest hit will be the socio-economically disadvantaged 
businesses which are deliberately targeted to provide them 
federal procurement opportunities.
    Of course, the adverse effects of reducing the FPI program 
will also disproportionately affect minority inmates since 
racial and ethnic minorities are disproportionately represented 
among the inmate population. Their representation in FPI jobs, 
however, mirrors this overrepresentation in the prison 
population. Important research on the value to inmates of 
working in prison industries jobs demonstrates that these 
minority inmates benefit at a higher rate than majority group 
members regarding their likelihood of remaining crime-free and 
being successfully employed upon release. Thus, job reductions 
in FPI of the magnitude certain to occur under the bill will 
fall hardest on racial and ethnic minorities.
    We have already seen the effects of what eliminating 
mandatory source will do the FPI program. Since 2001, as a 
result of the ``Levin Amendment'', other similar legislative 
restrictions added to appropriations bills, and FPI Board 
restrictions, FPI's inmate employment level has fallen from 25% 
of the eligible inmate workforce to approximately 18% today. In 
the same time frame, 13 FPI factories have closed and the 
overall number of inmates employed has fallen from 
approximately 22,000 to approximately 20,000, while the overall 
prison population has increased by more than 23,000 inmates. 
Further, as a result of these restrictions, only about half of 
FPI's work results from use of mandatory source, with the vast 
majority of it resulting from activities supporting the 
Nation's war effort. When the war effort declines as 
anticipated, inmate employment levels are expected to also 
decline, precipitously, from current levels. Moreover, as 
mentioned above, over 2,000 inmates employed in FPI performing 
services for private sector entities will all lose their jobs 
as a result of this bill.
    Some supporters of the bill suggest that vocational 
education is a good substitute for FPI work experience. The 
bill provides authority for increased vocational training 
programs. A vocational education program typically runs for two 
years or less and is generally thought better to be provided 
toward the end of the sentence. The average sentence for 
prisoners in the federal system is eight years. Whenever the 
vocational training is provided, the question becomes what to 
do with the other six years of the sentence prior to or after 
completion of what is considered a beneficial period of 
vocational education. Furthermore, unlike FPI which is 
completely selfsustaining, such vocational programs would 
require significant appropriated funding. Of course, the 
prospects of getting significant appropriations authorized by 
this bill approved for vocational education for inmates are 
virtually non-existent.
    The bill also provides an authorization for FPI to make 
products and donate them to non-profit organizations as a way 
to maintain work opportunities for inmates. Producing products 
to give to charitable organizations would generate very limited 
work for inmates. Because the products would be donated, by 
definition the work would not be self-sustaining, transferring 
to the tax payer costs for a program that is currently wholly 
self-supporting. It is completely improbable that any funding 
will be made available for these work alternatives, and even 
with funding, the programs would not make up for many of the 
jobs that will be lost due to elimination of the mandatory 
source program and commercial service contracts.
    Over the past decade, many offers have been made by 
defenders of the FPI program for viable alternatives to the 
mandatory source program opponents are dead-set on eliminating. 
Rep. Frank Wolf, Rep. Mark Green and Rep. Bobby Scott have all 
made proposals for viable inmate work alternatives to mandatory 
source. All such efforts have been rejected by members 
representing the business/labor coalition that opposes FPI. And 
defenders of FPI have been open to any and all alternatives for 
jobs suggested by opponents, with the simple proviso that 
mandatory source be phased down over an agreed period of time 
as those alternatives are brought on line. Recently, the 
Department of Justice (DOJ) entered the tray in an effort to 
work with the business/labor coalition in coming up with viable 
inmate work alternatives to mandatory source, but, after eight 
months of attempted negotiations, DOJ was also unsuccessful. In 
the final analysis, the coalition rejected its own proposal in 
order to, once again, arrive at the inevitable conclusion that 
it could prevail without compromises on anything that would 
allow FPI to attain and maintain its traditional goal of 
providing job skills training to 25% of the inmate population. 
As a result, the Department of Justice has gone on record as 
being unable to support H.R. 2965.

                             FPI Operations

    The total revenues of FPI represent a very small portion 
(about \1/4\ of 1%) of total federal agency procurement dollars 
and only 2.5% of the overall federal market in the 
approximately 80 products and services it provides. The 
furniture and apparel industries are two of the industries in 
which FPI produces the highest volume of work. When asked, 
representatives of these industries conceded that FPI sales 
represent an ``insignificant'' and ``negligible'' portion of 
their industries, respectively. If such industries are having 
problems, it is clearly not due to the impact of FPI. In 
textiles, for example, it is said that over 600,000 jobs were 
lost during the past 10 years. There are roughly 6,600 inmates 
working in textiles in FPI. Clearly, the blame for the loss of 
600,000 jobs cannot be a few thousand prisoners. The same is 
true of revenue reductions and job loss due to economic 
downturns in the office furniture business. FPI's office 
furniture sales total $140 million. This represents just 1% of 
the $13.4 billion domestic office furniture market.
    In the period between 1990 and 2004, the federal inmate 
population increased from approximately 58,500 to almost 
180,000, more than 207%. By 2011, the population is projected 
to reach approximately 225,000. All able-bodied inmates in the 
federal system are required, by law to work. Yet, few offenders 
enter prison with marketable work skills. The vast majority do 
not have even credible work habits such as showing up for work 
on time each day, and working cooperatively and productively 
with others. Such habits are required to maintain an FPI job 
just as they are required to obtain and maintain a job in the 
free world. While vocational education is important and ought 
to be available to all inmates, no amount of educational course 
work can substitute for the real world workplace experience of 
a meaningful job.
    With the elimination of parole, good conduct credits, Pell 
grants, and other positive incentive programs, the federal 
prison system has little to offer as ongoing incentives for 
self development. The one shining exception is the FPI program. 
Non-FPI inmate jobs pay from $.12 an hour to $.44 cents an 
hour. The average non-FPI inmate job pays $.23 an hour. FPI 
jobs pay from $.23 to $1.15 per hour with the average pay being 
$.93 per hour. Only 18% of inmates currently have access to a 
FPI job. The remaining 80% work in non-FPI jobs. In addition to 
work training and benefits, FPI also serves as an effective 
institutional management tool by requiring good conduct to 
remain in the program and it serves as an excellent education 
development incentive. To hold down an FPI job, an inmate must 
have completed high school or be making steady progress toward 
obtaining a GED. This is true not only for those already in an 
FPI job, but also for those on the waiting list for a job, as 
well as those seeking to establish eligibility to be placed on 
the waiting list. Contributions to inmate development and 
prison management are important, but the least important of 
FPI's contributions. Reductions in crime, restitution payments 
to crime victims and support payments to inmate dependants are 
far more compelling reasons for the program. Last year, inmate 
workers paid almost $3 million toward these obligations.
    It is readily conceded that there are problems with the FPI 
program which should be fixed. When a small business making a 
single product depends upon a government contract for its 
operations, FPI should not be able to take that business away. 
But this bill should be fixing the program--not gutting it by 
taking away all of its primary business sources all at once. 
While the bill suggests that the lack of competition is the 
problem, the bill seeks to strangle-hold FPI as a competitor 
not only by strengthening the prohibition against activities in 
the commercial market, but in the government market, as well. 
We should fix FPI's problems, but we should do so in ways that 
assure the viability of this vital crime reducing program. With 
additional prisons scheduled to come on line over the next few 
years, we can ill afford to diminish the FPI program's 
beneficial effects. About 98% of prisoners serving time will 
eventually return to society and our oversight focus should be 
on their rehabilitation and productive return as a matter of 
public safety. We can do better than this bill, and we should.

                                   Steve Chabot.
                                   Robert C. Scott.
                                   Henry Hyde.
                                   Zoe Lofgren.
                                   Daniel E. Lungren.

          Statement of Remy International, Inc., July 12, 2006

    We appreciate the opportunity to submit a written statement 
for the record regarding Remy International's correctional 
industries program as it pertains to Section 7 of House Bill 
2965, Federal Prison Industries Competition in Contracting Act 
of 2005.
    Remy International, Inc. (formerly ``Delco Remy 
International'') is one of the leading manufacturers and 
refurbishers of automotive components in the world. Integrating 
correctional industries along with a variety of lean industrial 
engineering initiatives has enabled Remy to survive in a highly 
competitive global marketplace--a marketplace that has forced a 
reduction in product prices to the point of causing insolvency 
for many of Remy's competitors during the past decade.
    Remy respectfully submits that Section 7 of H.R. 2965 
pertaining to the prohibition of service agreements should be 
deleted. If service agreements were prohibited, Remy--which 
currently has such an agreement in Virginia--would be forced to 
pay offenders the higher of minimum wage or the prevailing wage 
for the area in which such jobs are located. This is tantamount 
to compelling Remy to move these operations abroad. In today's 
global economy, there simply is no way in which Remy can 
competitively price its products without the use of low-cost 
labor. Many major companies are in the process of moving a 
portion of their operations abroad; some have moved their 
entire operations to foreign countries.

            correctional industries preserves civilian jobs

    We live and work in a different world now, and it has 
forced us to look to countries with lower labor costs, as we 
are continually pressured by our customer base to reduce costs 
in the products that we produce and refurbish. Through the use 
of correctional services, Remy has been able to preserve 600 
civilian jobs in Virginia. (A former Remy subsidiary, Williams 
Technologies preserved 500 civilian jobs in South Carolina by 
entering into a Services Agreement with the State of South 
Carolina) With a total of nearly 3,000 civilian employees in 
the United States, Remy continues to maintain a strong presence 
in this country; correctional industries is one of many 
initiatives exercised to maintain this presence and to ensure 
the company survives intense competition from abroad.
    As presently composed, H.R. 2965 will result in the loss of 
600 civilian jobs in Virginia. This is because the operations 
that employ these workers are dependent upon the refurbishment 
of automotive components produced in the correctional 
facilities that would be closed through the passage of this 
Bill. If these correctional facility operations were to be 
closed, this work would NOT be placed in the United States. 
Rather, it would be relocated to existing factories in Xiamen, 
China and San Luis Potosi, Mexico. We respectfully urge you to 
consider deleting Section 7 of H.R. 2965 to preserve not only 
the 230 offender jobs in Virginia but also the 600 civilian 
jobs that are supported by our correctional industries 
operations.
    Remy is committed to employing American workers. Using 
service agreements with correctional institutions helps ensure 
that Remy can keep both civilian and inmate jobs here in the 
United States, and provides significant work experience to 
participating inmates that helps reduce recidivism once they 
are released from confinement.

            remy's virginia correctional industries program

    Remy's agreement with the Virginia Department of 
Corrections has provided 230 lobs for inmates in Virginia. The 
Commonwealth of Virginia receives $1,732,224 annually in Remy 
payments.
    Since opening a factory in Leiber Correctional Facility in 
South Carolina, Remy has opened a refurbishment factory in a 
state correctional facility in Culpeper, Virginia. The Culpeper 
operation is a worthy substitute for our traditional production 
model of having low-variety, high-volume production capacity in 
countries with low-labor costs while maintaining high-variety, 
low-volume production in the United States. Again, these 
operations were initiated with the understanding that civilian 
workers would not be displaced by such operations. For the 
Culpeper operation, Remy pays $3.47 per offender hour to 
Virginia, and Virginia pays either 65 cents or $1.25 (depending 
on length of service) per hour to the offender workers. (The 
difference between what we pay and the amount the offenders 
receive is used to help fund a program for victim restitution 
as well as help pay the cost of operating the correctional 
institution).

                        why a sub-minimum wage?

    The services agreement with the Commonwealth of Virginia 
ensures that we can keep both civilian and offender jobs within 
the United States. Because of challenges unique to operating a 
factory in correctional facility (versus a civilian factory), 
Remy utilizes more offenders for jobs in the correctional 
facility operations than it would ordinarily require in its 
civilian factories and, therefore, to ensure financial 
viability of the program, the offenders are paid a sub-minimum 
wage. It is not uncommon to have ``lockdowns'' within the 
entire correctional facility, causing us to lose productivity 
for several days at a time. If there is a heavy fog, offenders 
are not released from their dormitories to work. Offenders are 
frequently transferred from our correctional facility to other 
correctional facilities with little or no notice, causing a 
disruption to our operations. Many of the offenders suffer 
medical problems that require special accommodation through 
frequent medical treatment. Moving products in and out of the 
correctional facility is a very time-consuming procedure with 
costly delays. Contractors charge us a premium to service our 
equipment and machinery because of delays to enter and exit the 
factory within the walls of the correctional institution. With 
the significant inefficiencies inherent in a correctional 
industries environment, it is most difficult for a company to 
develop a business case for operating a factory within a 
correctional facility. A sub-minimum wage, as afforded by 
service agreements, enables correctional industries to be 
competitive with foreign labor and, as such, Remy has 
repatriated work from China and Malaysia to the United States.
    If service agreements were to be prohibited, we would be 
required to close our correctional facility operation in 
Virginia, and these jobs would be relocated to existing 
operations in San Luis Potosi, Mexico and/or Xiamen, China, 
resulting in the loss of 230 offender jobs in Virginia.

           why remy's correctional institutional progams work

    1. Service agreements with correctional facilities add jobs 
for American civilian citizens, and prevent the relocation of 
these jobs to other countries.
    As described above, our correctional facility operations 
actually add jobs, rather than displace American workers. Our 
contract with the Commonwealth of Virginia states that civilian 
workers shall not be displaced by the activities we operate in 
the correctional facility. In addition, we usually use U.S.-
based vendors for most of the component parts required in 
correctional facility operations. Since beginning our 
correctional industries programs, we have added 65 civilian 
jobs in Virginia. (Our former transmission division in South 
Carolina added 30 civilian jobs following the opening of its 
correctional industry program.)
    The location of these jobs in the United States helps 
ensure that related parts and support services stay rooted in 
our local and national economy. The competitive realities of 
today's automotive parts manufacturing and refurbishment world, 
both for ourselves and our competitors, is that most of this 
type of work is done in Mexico and Asia. When the product 
servicing process is located in Mexico or China, most of the 
required components are also procured from vendors in these 
countries. Therefore, servicing our products in U.S. 
correctional facilities is much better for the U.S. economy and 
the U.S. job market than servicing them in Mexico or China. If 
H.R. 2965 becomes law without deletion of Section 7, it will 
most certainly result in the loss of U.S. jobs.
    2. Since any of Remy's competitors can enter into service 
agreements with correctional facilities, these agreements are 
well within the realm of fair competition.
    U.S. companies, including our competitors, are flocking to 
develop operations in Mexico and Asia. Some of them also have 
operations in correctional facilities. Both small and large 
businesses can participate in correctional industries with 
service agreements and, in fact, most companies that have 
operations within correctional facilities are small businesses.
    In Virginia, there are over 30,000 offenders incarcerated 
at anyone time and there are over 2,000,000 people incarcerated 
nationwide. Remy employs a total of 230 offenders in its state 
correctional operations, leaving hundreds of thousands of 
offenders seeking gainful work. Any of our competitors who are 
not currently using offender labor have the same opportunity to 
use it as we do. (Recently, one competitor ceased using 
correctional industries labor because they secured lower costs 
by relocating to Mexico.) Such global examples demonstrate that 
using offender employment programs are not only fair 
competition, but also require as strong a business case 
regarding wages as any other factory site decision.
    3. Remy's program of employing offenders provides them with 
valuable work experience and reduces recidivism.
    Since 94% of all those incarcerated will eventually be 
released into society, work experience assists our correctional 
institutions and society at large in preparing offenders for a 
stable transition into society. According to some studies, work 
experience can reduce recidivism by up to 60%, according to 
Pride Enterprises of Florida. Most offenders learn what it 
means to ``get up each morning and go to a job'' for the first 
time in their lives. This would not be possible if service 
agreements were to be prohibited.
    It is important to note that all of the workers in our 
correctional facility operations are working because they 
desire to work. No one is required to work for us and any 
offender may resign at any time without providing notice to us. 
Offenders consider Remy jobs very desirable because they 
provide:
           real-life work experience (the first 
        ``real'' job for many offenders);
           hand-tool skills amenable to various trade 
        jobs;
           compensation that is significantly more than 
        traditional correctional work programs such as floor 
        sweeping, food preparation, and litter collection.
    As a matter of policy, Remy offers civilian jobs to 
successful ex-offenders after they complete their sentences, 
and such offenders have come to work for Remy following their 
release from incarceration.
    Remy provides a safe working environment for all of its 
offenders, as our correctional industry factories must adhere 
to the same high standards for safety and cleanliness as our 
civilian factories. Offenders receive the same mandatory safety 
training programs that are provided to our civilian employees. 
The environmental regulations in our correctional facility 
operations are just as strict as in our civilian operations. 
Moreover, because Remy's staff within the correctional facility 
must work in an OSHA-compliant environment, the correctional 
facility factories adhere to OSHA rules and regulations.
    We are very proud of our correctional industry programs and 
we strongly encourage those who are interested to tour these 
operations. Remy is a U.S.-owned company with a 110-year 
history, but the truth is that we have struggled to survive in 
the new global economy and have been forced to develop capacity 
abroad. Our correctional industries program has enabled us to 
slow down, hopefully on a long-term basis, the exodus of many 
jobs leaving U.S. soil for Mexico and Asia.
                                      Gary P. Held,
                                        Remy International,
                            Vice President, Strategy & Development.

                                  

```