[Federal Register Volume 63, Number 129 (Tuesday, July 7, 1998)]
[Notices]
[Pages 36710-36719]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-17757]


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DEPARTMENT OF JUSTICE

Office of Justice Programs
Bureau of Justice Assistance
[OJP(BJA)-1150]


Prison Industry Enhancement Certification Program Guideline

AGENCY: Office of Justice Programs, Bureau of Justice Assistance (BJA), 
Justice.

ACTION: Proposed Guideline for public comment.

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SUMMARY: The Office of Justice Programs, Bureau of Justice Assistance 
(BJA), is issuing this proposed revision to the Prison Industry 
Enhancement Certification Program (PIECP) Guideline, 50 FR 12661-64 
(March 29, 1985). Under Title 18 U.S.C. 1761(c), BJA certification 
excepts participating agencies from certain Federal restraints placed 
on the marketability of prison-made goods by permitting the transport 
of such goods in interstate commerce and the sale of such goods to the 
Federal government. This guideline reflects efforts by the Bureau of 
Justice Assistance to enhance guidance to the field through amendments 
proposed to the initial guideline published in March 1985. Since that 
time, there have been amendments to the statutory authority governing 
the administration of the PIECP and operations issues emerging at cost 
accounting centers. As a result, BJA seeks to clarify for the field the 
applicable statutes and guidelines. This revision provides a more 
comprehensive and responsive document to promote compliance with and 
direction for PIECP.
    The publication of this proposed guideline is considered to be a 
Federal action that will not significantly affect the quality of the 
human environment. Therefore, the preparation of an environmental 
impact statement is not necessary.

DATES: All comments received on or before September 8, 1998 will be 
considered in drafting the Final Guideline.

ADDRESSES: Bureau of Justice Assistance, Office of Justice Programs, 
U.S. Department of Justice, 810 Seventh Street, N.W., Washington, D.C. 
20531.

FOR FURTHER INFORMATION CONTACT: J.A. Marshall, Acting Chief, 
Corrections Branch, Bureau of Justice Assistance (202) 616-3215.

SUPPLEMENTARY INFORMATION:

Scope of Program Announcement

I. Introduction: Program Purposes and Objectives

II. Background of the Prison Industry Enhancement Certification Program 
(PIECP)

a. The Legislative History
    1. Unregulated Prison Labor
    2. Prisoner Idleness and Prisoners' Need for Job Skills Training
b. The PIECP Program
    1. Current State of the Program
    2. Future Challenges
c. Request for Comments

III. Program Guidance

a. PIECP Purposes
b. Definitions
c. BJA's Initial Considerations for Determining Propriety of Work 
Pilot Project Certification
    1. BJA's Exercise of Discretionary Authority to Define and 
Certify 50 Work Pilot Projects
    2. Threshold Inquiry for Determining Applicability of PIECP 
Exception Status
d. Mandatory Program Criteria for PIECP Participation
    1. Eligibility
    2. Prevailing Wages
    3. Non-Inmate Worker Displacement
    4. Benefits
    5. Deductions
    6. Voluntary PIECP Inmate Worker Participation
    7. Consultation with Organized Labor
    8. Consultation with Local Private Industry
    9. Compliance with NEPA

IV. PIECP Administration

a. Certificate Holders
    1. Project Structure
    2. Application Content
    3. BJA Review
    4. Standard or Provisional Certification
    5. Certificate Holder Designation Authority
    6. Certificate Holder Monitoring Responsibilities
b. Cost Accounting Centers' PIECP Exception Status
c. Compliance Reviews
    1. Performance Reports
    2. On-Site Monitoring Reviews
d. BJA's PIECP Administration
e. Exception Status Suspension/Termination
    1. Notice of Possible Compliance Violation
    2. Voluntary Compliance Agreements
    3. Failure to Achieve Compliance and Effect of Non-Compliance
    4. PIECP Exception Status Suspension and Termination

I. Introduction: Program Purposes and Objectives

    The Prison Industry Enhancement Certification Program (PIECP), 
codified at 18 U.S.C. 1761(c), was first

[[Page 36711]]

authorized by the Justice System Improvement Act of 1979, Pub. L. 96-
157, 93 Stat. 1215. The PIECP was expanded from 7 to 20 pilot projects 
under the Justice Assistance Act of 1984, Pub. L. 98-473 
Sec. 609k(a)(1), 98 Stat. 2077, 2102. In 1990, The Crime Control Act of 
1990, Pub.L. 101-647 Sec. 2906, 104 Stat. 4789, 4914, raised to 50 the 
number of PIECP projects that may be excepted by the Bureau of Justice 
Assistance (BJA) from certain Federal restrictions on the marketability 
of prison-made goods, including the Ashurst-Sumners Act (18 U.S.C. 
1761(a)) and the Walsh-Healey Act (41 U.S.C. 35).
    PIECP has grown since its inception in 1979, with 38 prison work 
pilot projects now certified throughout the country. Prison 
administrators find PIECP participation an effective way to address 
idleness among ever-increasing prison populations and as a cost-
efficient method for providing inmates with marketable job skills. 
Taxpayers benefit because PIECP inmate wage deductions result in 
reductions in incarceration costs. Inmate wages benefit society, 
generally, in that deduction amounts are authorized to address victim 
compensation, inmate family support needs, and taxes. Lastly, PIECP 
industries obtain broad market access for their products because they 
are excepted from the Ashurst-Sumners Act prohibition against the 
interstate transport of prison-made goods and from the Walsh-Healey Act 
prohibition against certain contract sales of prison-made goods to the 
Federal government.
    BJA issued a Guideline to implement this program (50 FR 12661-64) 
on March 29, 1985 and now publishes revisions in this Proposed 
Guideline to provide programmatic clarification based on experience 
gained over the past 13 years. The legislative underpinnings of 
relevant laws are examined to ensure that program administration 
practices are consistent with Congressional intent and that the scope 
of their applicability is clearly defined. Refined administrative 
practices are set forth for comment.

II. Background of the Prison Industry Enhancement Certification 
Program (PIECP)

a. Legislative History

1. Unregulated Prison Labor
    The 19th Century evolution of industrial capitalism and private 
sector use of prisoner labor spawned a number of conditions that 
adversely affected several major segments of society. By the turn of 
the 20th Century, these segments joined in an organized appeal to 
Congress and state legislatures nationwide. They collectively asserted 
that the production and distribution of unregulated prisoner-made goods 
in interstate commerce needed to be eliminated or, at a minimum, 
controlled.
    Human rights activists turned the public's attention to poor prison 
work conditions and inmate exploitation. Organized labor argued that 
the demand for prison-made products, anywhere, necessarily displaced a 
possible demand for the product of free labor. Free enterprise 
manufacturers were disturbed because manufacturers of prison-made goods 
did not bear the burden of overhead costs borne by private industry 
competitors, such goods were being sold at below market prices. The 
viability of private industry competition was thereby undercut. In 
December 1924, Herbert Hoover, as Secretary of Commerce, held a 
conference on the subject of the ``ruinous and unfair competition 
between prison-made products and free industry and labor.'' 70 Cong. 
Rec. S656 (1928).
    Then-Secretary Hoover authorized an advisory committee to study the 
problem. This committee issued a report in 1928 wherein Arthur 
Davenport, Chairman of the Advisory Committee on Prison Industries, 
submitted the following report conclusions to Congress:

    (1) Certain major factors in the normal cost of production which 
must be met by all manufacturers are entirely absent in the case of 
prison industries. If anything approaching normal efficiencies of 
operation can be attained with the use of prison facilities and 
labor, the total costs of production are obviously below those of 
the manufacturer who must meet large overhead expenses as well as 
employ free labor.
    (2) It is the universal belief that prisoners should be usefully 
occupied whether as a part of their punishment or as a means of 
rehabilitation by teaching them the habits of industry. To this end 
nearly every State * * * provid[es] productive work for their 
prisoners * * *
    (3) The volume of goods produced by prison labor is already very 
large in some lines, but as more prisoners are put to work, and the 
industries become more efficient, the output of our prisons will be 
greatly increased.
    (4) The effect of placing on the open market a volume of goods 
which have been produced below normal costs, is to lower prices and 
disorganize the market * * *. The increase in prison production 
which is predicted will exaggerate this evil and make it difficult 
if not impossible for manufacturers employing free labor to exist in 
trade where the prison output becomes heavy.
    (5) The solution of this problem, if prison production is to 
continue * * *. would seem to be the elimination, in one way or 
another, of the direct price competition of the prison products with 
so called ``free products'' * * *. 70 Cong. Rec. S656 (1928).

    In closing, Chairman Davenport urged that solutions be found, 
``[o]therwise either prison industries must cease and prisoners kept in 
idleness or the manufacture of products competing with prison output 
will become impossible. Either of these developments would be 
disastrous * * *.'' See S. Rep. No. 344, 70th Cong., 1st Sess., re-
printed, Cong. Rec. S656 (Dec.15, 1928), ``Statement of Prison Labor 
Problems as Shown by Report of Senate Committee.''
    Even if a state prohibited its own correctional institutions from 
producing and marketing prison-made goods, that same state had no 
jurisdiction to control such goods produced in other states, 
transported in interstate commerce and sold within its boundaries. As 
an initial solution to this problem, Congress enacted the Hawes-Cooper 
Act in 1929, Pub. L. 70-669, 45 Stat. 1084, re-codified by Pub. L. 95-
473, 92 Stat. 1449 (1978) [formerly codified at 49 U.S.C. 11507, 
omitted in the revision of Title 49 by Pub. L. 104-88, Title I 
Sec. 102(a), 109 Stat. 804 (effective January 1, 1996); See S. Rep. No. 
104-176]. This law divested prison-made products of their interstate 
character upon their arrival in the state of their destination and 
permitted the laws of that state to become operative with respect to 
the sale and distribution of such products. It was described, at the 
time of enactment, as an enabling act because it did not prohibit the 
transportation of convict-made goods or force the enactment of state 
legislation.
    In 1935, Congress enacted the Ashurst-Sumners Act, Pub. L. 74-215, 
49 Stat. 494 (1935), which authorized Federal criminal prosecutions of 
violations of state laws enacted pursuant to the Hawes-Cooper Act. 
Subsequent amendments to this law, including Pub. L. 76-851, 54 Stat. 
1134 (1940), strengthened Federal enforcement authority by making any 
transport of prison-made goods in interstate commerce a Federal 
criminal offense. As amended, 18 U.S.C. 1761(a) now provides:

    Whoever knowingly transports in interstate commerce or from any 
foreign country into the United States any goods, wares, or 
merchandise manufactured, produced, or 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. [herein referred to as the Ashurst-
Sumners Act].


[[Page 36712]]


    Certain prison-made products were excepted by statute from the 
Ashurst-Sumners Act prohibition, including ``agricultural commodities 
or parts for the repair of farm machinery'' as well as ``commodities 
manufactured in a Federal, District of Columbia or State institution 
for use by the Federal Government, or by the District of Columbia, or 
by any State or Political subdivision of a State or not-for-profit 
organizations.'' Title 18 U.S.C. 1761(b).
    The Walsh-Healey Act, 49 Stat. 2036 (1936), as amended in 1979 by 
Pub. L. 90-351, Sec. 827(b) and codified at 41 U.S.C. 35, also controls 
the production of prison-made goods. This statute prohibits the use of 
prison labor to fulfill general government contracts which exceed 
$10,000. BJA certification pursuant to Sec. 1761(c) excepts prison-made 
goods produced by PIECP work pilot projects from the Walsh-Healey Act 
contracting restrictions, as well as the Ashurst-Sumners Act interstate 
transportation restrictions.
2. Prisoner Idleness and Prisoners' Need for Job Skills Training
    The PIECP exception to the Ashurst-Sumners and the Walsh-Healey Act 
restrictions was introduced in the Senate in 1979 after the 1978 
Pontiac, Illinois prison riot. In the wake of that uprising, Senator 
Charles Percy (R-IL) stated:

    [L]ast summer in Pontiac, Illinois, our worst fears about the 
conditions in the Nation's prisons erupted into a nightmarish 
reality. The Pontiac prison riot of 1978 ended with three guards 
dead, three others seriously wounded, and $4 million in property 
damage * * *
    The shopping list of problems and deficiencies in our prison 
system is long and well known. Overcrowding, old and obsolete 
facilities, lack of training or educational programs, crime within 
prison walls, frustration on the part of guards and inmates are all 
a part of the dreary picture * * *. Recidivism is now a substantial 
element in our overall crime rate, and prisons are often accurately 
characterized as a ``school for crime,'' rather than a deterrent to 
crime * * *. 125 Cong. Rec. S11834 (1979).

    These concerns caused Congress to take measures to encourage prison 
industries, provided that they not engage in unfair competition with 
private sector businesses and labor. Senator Percy's bill, now referred 
to as the Prison Industries Enhancement Act, Section 827 of the Justice 
System Improvement Act of 1979, Pub. L. 96-157, Sec. 827(a), 93 Stat. 
1215, was enacted on December 27, 1979. As amended, it now offers 50 
Federally certified projects an opportunity to participate in the 
interstate market, provided certain safeguards to free-world labor and 
industry, and to prisoner-workers themselves, are met. See The Crime 
Control Act of 1990, Pub. L. 101-647, Sec. 2906, 104 Stat. at 4914.
    In describing the purpose of his introduced legislation, Senator 
Percy explained (125 Cong. Rec. S11834 (1979)):

    My amendment would do two basic things: First, it would 
authorize the [BJA] to encourage development of pilot demonstration 
projects for prison industry at the State level, involving private 
sector industry * * *. Under this approach, prison programs benefit 
from the private business, develop access to new markets, and 
attract needed capital. The goal of these pilot projects would be to 
create as realistic a working environment as possible within the 
prison walls, while enabling an inmate to become more self-
sufficient to the benefit of himself, the prison system, and the 
taxpayer.
    Secondly, my amendment creates a partial exemption to two 
Federal laws which severely restrict the ability of State prison 
industries to market their goods * * *. When these laws were enacted 
decades ago, they represented significant reforms against 
exploitation of prison labor. Over the years, however, they have 
developed into heavy-handed roadblocks to growth among * * * prison 
industry programs * * *.
    My amendment would provide limited exemptions to these 
restrictions where inmates have been paid a wage comparable to that 
paid for similar work in the private sector in the locality * * *.

    The statutory exception that was enacted to establish PIECP is 
codified at 18 U.S.C. Section 1761(c):

    * * * [the Federal marketability prohibitions] shall also not 
apply to goods, wares, or merchandise manufactured, produced, or 
mined by convicts or prisoners who--
    (1) Are participating in one of not more than 50 non-Federal 
prison work pilot projects designated by the Director of the Bureau 
of Justice Assistance; * * *

    To become eligible for Bureau of Justice Assistance (BJA) 
certification, an applicant state or local department of corrections 
must comply with specified statutory requirements. It must pay 
participating prisoners ``wages not less than that paid for work of a 
similar nature in the locality in which the work was performed'' and 
cannot take more than 80 percent in deductions from gross wages for 
specified purposes including taxes, reasonable charges for room and 
board, family support and victims' compensation. 18 U.S.C. 1761(c)(2).
    Certain other conditions of employment must also be met. An 
eligible applicant cannot deprive participating offenders, solely 
because of their status as offenders, of the right to participate in 
benefits made available by the Federal or state government to other 
individuals on the basis of their employment, such as workmen's 
compensation. Title 18 U.S.C. 1761(c)(3). PIECP inmates must also 
participate on a voluntary basis and must have agreed to the specific 
deductions made from gross wages pursuant to 18 U.S.C. 1761(c)(2), and 
all other financial arrangements resulting from participation in such 
employment. Title 18 U.S.C. 1761(c)(4).
    The note following 18 U.S.C. 1761, although not codified, is public 
law and adds two additional requirements on certified prison 
industries. The note requires participating prison industries to 
consult with local union organizations prior to initiating any project 
qualifying for a Sec. 1761(c) exemption. Also, the qualifying applicant 
must ensure that paid inmate employment under the program will not 
result in the ``displacement of employed workers, or be applied in 
skills, crafts, or trades in which there is a surplus of available 
gainful labor in the locality, or impair existing contracts for 
services.'' The Justice System Improvement Act of 1979 added these 
provisions, which became Sec. 827(c) of the Omnibus Crime Control and 
Safe Streets Act of 1968. See Pub. L. 96-157, 93 Stat. 1215, reprinted 
in 1979 U.S.C.C.A.N. 2471. In 1984, Sec. 827(c) was redesignated 
Sec. 819 of the Omnibus Crime Control and Safe Streets Act of 1968, as 
amended. See Pub. L. 98-473, 98 Stat. 2093.
    If all eligibility requirements are met and an applicant agency 
acquires BJA certification, that agency is thereafter authorized to 
operate irrespective of Federal prohibitions on the marketing of state 
prison-made goods. Conversely, non-compliance with these statutory 
eligibility requirements could expose an industry to criminal 
prosecution under the Ashurst-Sumners Act. Title 18 U.S.C. 1761(a).

b. The PIECP Program

1. Current State of the Program
    Currently, 38 departments of correction or umbrella authorities are 
PIECP Certificate Holders. Under the Justice System Improvement Act of 
1979, Arizona, California, Idaho, Kansas, Minnesota, Nevada and Utah 
were certified. In 1984, under the Justice Assistance Act of 1984, 13 
prison work pilot projects were certified in: Alaska, Belnap County 
(NH), Connecticut, Iowa, Maine, Missouri, Nebraska, New Mexico, 
Oklahoma, Oregon, South Carolina, Strafford County (NH) and Washington 
State. Under the Crime Control Act of 1990, the following additional 
state and local departments of corrections have been certified:

[[Page 36713]]

Colorado, Delaware, Florida, Hawaii, Indiana, Louisiana, Maryland, 
Montana, North Carolina, Ohio, Red River County (TX), South Dakota, 
Tennessee, Texas, the Texas Youth Commission, Vermont, Virginia and 
Wisconsin.
    Over 125 private sector businesses now work in partnership with 
these PIECP certified correctional agencies to employ a total of about 
2,500 inmates. Either the correctional agency or the private sector 
enterprise retains project authority to direct and control inmate 
labor, depending on the management model used. Project implementation 
has resulted in the production of myriad products, including such items 
as furniture, sheet metal, video equipment, clothing, food products, 
office products, mattresses, drapery, crutches, and road signs. In 
addition, although service industries were not a threat to the private 
sector in 1935 and, thus, were not included within the scope of the 
Ashurst-Sumners prohibition, a number of service industries have 
elected to comply with the PIECP requirements.
    Between January 1979 and December 1996, PIECP projects generated 
approximately $75 million in gross wages for inmates. Nearly half of 
this amount was diverted to non-inmate recipients: $5.5 million was 
deducted for victims of crime, $16 million was deducted for room and 
board payments, $4.4 million was deducted for family support and about 
$8.9 million was withheld in local, State and Federal taxes.
    BJA monitors the performance of PIECP work pilot projects to ensure 
that they operate in full compliance with all legislative and 
administrative program requirements. Under a grant to the Correctional 
Industries Association (CIA), prison industry professionals conduct 
regular, on-site reviews of all PIECP projects. BJA responds to matters 
involving possible non-compliance by taking appropriate remedial action 
such as providing technical assistance or proposing a corrective action 
plan.
2. Future Challenges
    PIECP is utilized nationwide as a cost-efficient way to provide 
inmates with work experience and training in marketable job skills, as 
well as to reduce idleness among growing prison populations.
    Over time, the limit on the authorized number of pilot projects has 
been raised to meet the demands of interested applicants. When Congress 
last increased the project ceiling to 50, the House took into 
consideration a waiting list of states and counties that had wanted to 
participate and noted that ``the demand for certification by state and 
local governments indicates a need for this amendment which will enable 
the program to expand and other jurisdictions to apply.'' H.R. 681(I), 
101st Cong. 202 (1990).
    BJA administers PIECP with the objective of making participation 
available to as many qualified applicants as possible, within the limit 
imposed by statutory ceiling. This Guideline provides applicants with 
clarity as to Federal participation requirements, as well as 
programmatic flexibility to allow for PIECP Project growth in ways that 
are responsive to local needs. The Federal requirements are intended to 
ensure that the interests of the private sector and organized labor are 
protected. In this way, BJA's administrative practices are intended to 
address the concerns reflected in the legislative history antecedent to 
the enactment of earlier Federal regulation of prison-made goods, the 
Hawes-Cooper Act.
    Finally, this revised Guideline addresses novel issues presented by 
new PIECP participants, the private sector prisons. These entities are 
unique in that they render an essential service traditionally 
undertaken by public agencies and they do so for a profit. Thus, BJA 
has altered some PIECP program requirements to insure program 
implementation remains consistent with Congressional intent. Congress 
enacted PIECP to introduce public departments of correction to private 
sector profit-making enterprises. Therefore, private prison industries 
are invited to participate in PIECP only as Cost Accounting Centers 
designated under the authority of certified public departments of 
correction.

c. Request for Comments

    Comments on revisions described in this Proposed Guideline must be 
submitted to BJA no later than 60 days following the date of 
publication and will be considered in the drafting of the Final 
Guideline. Existing Certificate Holders and designated Cost Accounting 
Centers will be provided with a time period of one year, after the 
publication date of the Final Guideline, to make whatever program 
adjustments are necessary to come into full compliance.

III. Program Guidance

a. PIECP Purposes

    <bullet> To provide a cost-efficient means to address inmate 
idleness and to provide inmates with work experience and training in 
marketable job skills. BJA encourages private sector PIECP partners to 
consider post-incarceration employment to PIECP inmate workers.
    <bullet> Through inmate wage deductions, to increase advantages to 
the public by providing departments of correction with a means for 
collecting taxes and partially recovering for inmate room and board 
costs, by providing crime victims with a greater opportunity to obtain 
compensation, as well as by promoting inmate family support.
    <bullet> Through PIECP participation conditions, to prevent unfair 
competition between prison-made goods and private sector goods.
    <bullet> To prevent the exploitation of prison labor.

b. Definitions

    Benefits refers to inmate benefit coverage required by 18 U.S.C. 
1761(c)(3). PIECP projects must provide inmate workers appropriate 
benefits comparable to those made available by the Federal or state 
government to private sector employees. The scope of appropriate 
benefits coverage is impacted by whether management of the Cost 
Accounting Center is structured as an employer or customer model and 
whether the inmate labor work force is controlled by a public agency or 
the private sector.
    BJA refers to the Bureau of Justice Assistance within the Office of 
Justice Programs, U.S. Department of Justice.
    Certificate Holder refers to a public department of corrections, or 
an alternate umbrella authority, which is approved by BJA for PIECP 
Project certification. Certificate Holders assume monitoring and 
designation responsibilities with respect to their designated Cost 
Accounting Centers. All PIECP prison-made goods are produced within 
Cost Accounting Centers that a Certificate Holder designates within 
itself, its private prison agents or, in the case or an umbrella 
authority, within its membership agencies.
    Certification refers to an exercise of BJA's discretionary 
authority to designate a Prison Work Pilot Project pursuant to Title 18 
U.S.C. 1761(c). BJA may issue either standard or a provisional 
certifications to applicant projects. BJA certified projects are 
excepted from certain Federal marketability restraints on the transport 
of prison-made goods in interstate commerce, including 18 U.S.C. 
1761(a), and sales to the Federal government in excess of $10,000, 41 
U.S.C. 35.
    Cost Accounting Center (CAC) refers to a distinct PIECP goods 
production unit of the industries system that is managed as a separate 
accounting entity under the authority of a Certificate Holder. All 
PIECP production activities

[[Page 36714]]

are conducted within the context of a designated CAC which, generally, 
is structured either as a Customer or Employer Model. All designated 
CACs must operate in compliance with the provisions set forth in 18 
U.S.C. 1761(c) and this Guideline.
    Customer Model is a form of a PIECP Cost Accounting Center 
management structure. In this model, the private sector is engaged in a 
CAC enterprise only to the extent that it purchases all or a 
significant portion of the output of a prison-based business owned and 
operated by the CAC agency. A customer model private sector partner 
assumes no major role in industry operations, does not direct 
production and has no control over inmate labor. These functions are 
performed, rather, by a department of corrections.
    Deductions. CACs may elect to take deductions from a PIECP inmate 
worker's wages for certain authorized items. Deductions from PIECP 
inmate gross wages, if taken, may be made only for those items 
specified in 18 U.S.C. 1761(c)(2), including: Payment of taxes, 
reasonable charges for room and board, allocations for family support 
and contributions to any funds established by law to compensate victims 
of crime (no less than 5 percent and no more than 20 percent). In no 
event may a PIECP inmate worker's total deductions exceed 80 percent of 
gross wages and each and every PIECP inmate worker must agree, in 
advance, to all deductions from gross wages.
    Designation is an exercise of a Certificate Holder's discretionary 
authority to bring a CAC within its certified PIECP Project. This 
exercise of authority results in an extension of PIECP exception status 
and an imposition of compliance requirements on an identified CAC 
operating within the certified PIECP Project.
    Employer Model is a form of a PIECP management structure. In this 
model, the private sector owns and operates the CAC by controlling the 
hiring, firing, training, supervision, and payment of the inmate work 
force. The department of corrections assumes no major role in industry 
operations, does not direct production, and exercises minimum control 
over inmate labor performance. These functions are performed, rather, 
by the private sector.
    Goods include tangible items, wares, and merchandise.
    Locality means the geographic area impacted by the presence of a 
PIECP CAC operation. For PIECP CACs, it is relevant with regard to: 
determining prevailing wage, providing consultation to appropriate 
labor and private sector organizations, and determining whether a PIECP 
CAC operation will displace the private sector labor force. All 
locality determinations must be documented as part of a Notice of 
Designation. As used in the calculation of CAC wage rates, locality is 
usually a matter for definition by the appropriate state agency which 
normally determines wage rates (i.e., the State Department of Economic 
Security).
    Minimum wage means the Federal minimum wage which is the lowest 
possible wage that can be paid to private sector employees under the 
Fair Labor Standards Act, 29 U.S.C. 206. Any special wage program, 
excepted by law from the minimum wage requirement in the private 
sector, may be utilized by a PIECP CAC as long as the CAC meets the 
same program participation conditions as private sector participants.
    Monitoring refers to the process of examining Prison Work Pilot 
Project activities to ensure continuing compliance with 18 U.S.C. 
1761(c) and this Guideline. It includes, at a minimum, BJA's receipt 
and analysis of performance reports and on-site CAC monitoring visits 
by BJA, BJA contractors and Certificate Holders.
    NEPA means the National Environmental Policy Act, Pub. L. 91-190, 
83 Stat. 852 (1970) (codified as amended at 42 U.S.C. 4321-4347; 
implemented under 40 C.F.R. pt. 1500).
    Participation means engaging in the activities and operations of an 
18 U.S.C. 1761(c) excepted PIECP Project.
    PIECP means the Prison Industry Enhancement Certification Program 
as authorized by 18 U.S.C. 1761(c).
    PIECP Exception Status. Any PIECP Project which produces prison-
made goods pursuant to and under the conditions set forth in 18 U.S.C. 
1761(c) is excepted from certain Federal restraints imposed on the 
marketability of prison-made goods, including 18 U.S.C. 1761(a) and 41 
U.S.C. 35.
    PIECP Inmate Worker is a convict or prisoner who provides labor for 
a Prison Work Pilot Project certified under 18 U.S.C. 1761(c); the 
prisoner benefits from PIECP by receiving training and work experience.
    Prevailing wage is a wage rate which is not less than that paid for 
work of a similar nature in the locality in which the work is to be 
performed, 18 U.S.C. 1761(c)(2).
    Prison-made goods include all goods, wares, and merchandise 
manufactured, produced, or mined, wholly or in part, by convicts or 
prisoners (except convicts or prisoners on parole or probation), or in 
any penal or reformatory institution.
    Prison Industry means an organized utilization of inmate labor to 
produce goods or render services.
    Prison Work Pilot Project (PIECP Project) refers to one of 50 
possible projects which may be designated by the Director of BJA under 
18 U.S.C. 1761(c). This term encompasses the operations of the 
Certificate Holder's designated Cost Accounting Centers (CACs). Any 
Prison Work Pilot Project may consist of one or more CACs.
    Prisoner includes prison and jail inmates, convicts and 
incarcerated juvenile offenders, and does not include prisoners on 
parole, probation, or supervised release. Title 18 U.S.C. 1761(a) does 
not regulate the transport of goods produced by prisoners on parole, 
supervised release, or probation.
    Production is the forming anew or transforming of marketable goods. 
The term includes mining and manufacture and excludes services.
    Provisional Certification is issued by BJA in instances where an 
applicant has not yet come into full compliance with all PIECP 
requirements, but such compliance appears imminent. It entitles the 
holder to PIECP exception status for an identified period of time, may 
be made contingent upon the occurrence of identified conditions, and 
may or may not be renewed by BJA.
    Statutory Exception Status refers to a prison industry which meets 
the statutory requirements set forth in 18 U.S.C. 1761(b), and is 
thereby entitled to an exception from the prohibition set forth in 18 
U.S.C. 1761(a).
    Supervised Release. 18 U.S.C. 1761(a) states that the Ashurst-
Sumners Act prohibition does not apply to ``convicts on parole, 
supervised release, or probation.'' The reference to ``supervised 
release'' was added to Sec. 1761(a) in 1984, Pub. L. 98-473, Sec. 223, 
and is responsive to changes made at that same time in state and 
Federal Sentencing Guidelines. Policy statements issued by the U.S. 
Sentencing Commission explain that supervised release is a ``new form 
of post-imprisonment supervision created by the Sentencing Reform 
Act.'' See Federal Sentencing Guidelines, 18 U.S.C.A. ch. 7, pt. A 
(1997).
    Umbrella Authority refers to a type of Certificate Holder which is 
authorized by law to administer a PIECP Project and which consists of 
state and/or local correctional agencies located within the same state. 
A certified umbrella authority may designate CACs within its membership 
agencies, as well as within members' private prisons, and assumes 
responsibility for monitoring compliance with respect to those same 
centers.

[[Page 36715]]

c. BJA's Initial Considerations for Determining Propriety of Work Pilot 
Project Certification

1. BJA's Exercise of Discretionary Authority To Define and Certify 50 
Prison Work Pilot Projects
    (A) BJA may exercise discretionary authority to designate up to 50 
PIECP Pilot Projects, 18 U.S.C. 1761(c).
    (B) BJA may define PIECP eligibility qualifications and, in 
accordance with its own definitions, may exercise agency discretion to 
extend or withdraw certification privileges, as it deems appropriate.
2. Threshold Inquiry for Determining Applicability of PIECP Exception 
Status
    Appropriate PIECP participants include prison industries whose 
activities would likely violate the 18 U.S.C. 1761(a) prohibition and 
would likely not fit within an 18 U.S.C. 1761(b) exception. BJA has 
devised an administrative approach for identifying such industries. 
This approach incorporates relevant Sec. 1761 (a) and (b) 
considerations, including whether a given prison-made item qualifies as 
an excepted agricultural product, whether a given prison industry 
activity qualifies as an unregulated service, and whether a product 
distribution activity qualifies as an intrastate distribution of goods. 
These considerations are reflected in the following threshold inquiry, 
which BJA will use to determine whether a prison industry should be 
encouraged to apply for PIECP exception status:
    (A) Is a statutory exception applicable under 18 U.S.C. 1761(b)? 
The following prison-made items are excepted from the prohibition set 
forth in Sec. 1761(a):
    <bullet> Parts for the repair of farm machinery; or
    <bullet> Commodities manufactured in a Federal, District of 
Columbia, or state institution for use by the Federal Government, or by 
the District of Columbia or by any state or political subdivision of a 
state or not-for-profit organizations. This exception is intended to 
inure to the benefit of the Federal Government, the District of 
Columbia, the states (or political subdivisions thereof) and not-for-
profit organizations and is not intended to benefit private prisons; or
    <bullet> Agricultural commodities grown or cultivated on a farm 
which retain continuing substantial identity through processing stages, 
if any. In making the determination as to whether a processing stage 
changes a product from an agricultural commodity to a manufactured 
commodity, a relevant consideration is whether the processing is 
incidental or ancillary to agricultural commodity growth and or 
cultivation. If the processing is incidental or ancillary in nature and 
is commonly undertaken by agricultural enterprises, then it would 
likely fall within the scope of the statutory exception.
    (B) Could the contemplated activity trigger 18 U.S.C. Sec. 1761(a) 
by resulting in a production of goods by inmates in any penal or 
reformatory institution? The production of goods, which is regulated by 
18 U.S.C. 1761(a), must be distinguished from inmate services which are 
not regulated by the criminal prohibition. The following factors are 
relevant in determining whether a given activity results in the 
production of prison-made goods:
    <bullet> Has a tangible item been produced, manufactured or mined?
    <bullet> Has a tangible item been formed or transformed?
    <bullet> Has the activity resulted the creation of property or in a 
new, marketable item?
    (C) Could the contemplated activity trigger 18 U.S.C. 1761(a) by 
resulting in a post-production, interstate transportation of prison-
made goods?
    <bullet> Will there be transportation of prison-made goods into the 
flow of interstate commerce, i.e., across state lines or from a foreign 
country into the United States?
    <bullet> Is there a commercial economic enterprise present?
    BJA will use this preliminary threshold inquiry to instill greater 
consistency in PIECP eligibility decision-making. If a prison industry 
activity falls within the scope of the Sec. 1761(b) statutory 
exception, the involved industry need not seek Sec. 1761(c) exception 
status to avoid Sec. 1761(a) criminal sanctions. Additionally, if a 
prison industry activity would not result in the production of goods, 
interstate transport of prison-made goods, or would not in any other 
way trigger Sec. 1761(a), the involved industry need not seek 
compliance with the requirements set forth in Sec. 1761(c) or this 
Guideline.
    This threshold inquiry was devised only for 18 U.S.C. 1761(c) 
programmatic purposes and does not reflect the Department of Justice's 
18 U.S.C. 1761(a) prosecution guidelines. Thus, reliance on this 
Guideline, or any BJA determination based thereon, is not a complete 
defense to any civil or criminal action, but would depend on other 
factors as well.

d. Mandatory Program Criteria for PIECP Participation

    1. Eligibility. All public departments of correction and juvenile 
justice agencies authorized by law to administer prison industry 
programs are eligible to apply for PIECP certification; such public 
agencies are also eligible members of umbrella authorities, authorized 
by law to administer prison industry programs, that are seeking 
certification. PIECP Certificate Holders may designate CACs within 
themselves, as well as within private prisons with which they contract 
for incarceration services and which are located in the same state. 
Private prison industries may participate in PIECP only as designated 
CACs and as part of certified PIECP Projects located within their 
respective states. Non-compliance by any one designated CAC may result 
in PIECP exception status suspension and/or termination as to that CAC, 
and if warranted, its respective Certificate Holder. Also, within a 
reasonable period of time after certification, each Certificate Holder 
must have at least one CAC producing goods and operating pursuant to 
its authority or risk losing certification.
    2. Prevailing Wage. PIECP inmate workers must receive wages at a 
rate which is not less than that paid for work of a similar nature in 
the locality in which the work is to be performed. This requirement 
benefits society by allowing for the development of prison industries 
while protecting private businesses from unfair competition that would 
otherwise stem from the flow of low-cost, prison-made goods into the 
marketplace. PIECP participants must, therefore, implement the 
prevailing wage requirements under like conditions experienced by 
private sector competition. In this regard, the following requirements 
are applicable:
    (A) Section 1761(c) requires that the PIECP wage amount be set 
exclusively in relation to the amount of pay received by similarly 
situated non-inmate workers. The statute does not allow other cost 
variables to be taken into consideration, such as unique expenses 
incurred as a result of undertaking production within the prison 
environment.
    (B) Prevailing wage verification must be obtained by the 
appropriate state agency which determines wage rates (usually the 
Department of Economic Security).
    (C) When making PIECP prevailing wage verifications and re-
verifications, the responsible state agency should recommend the 
utilization of a non-inmate wage scale which will not result in the 
displacement of non-inmate workers performing similar work in the 
relevant locality.
    (D) The PIECP prevailing wage must be received by those inmate 
workers performing notable tasks necessary to produce and / or 
transport goods in

[[Page 36716]]

interstate commerce. If a similarly situated, private sector company is 
paying wages to obtain services that are necessary to production, e.g. 
refuse pickup, then the PIECP CAC must also pay such wages to the 
inmate provider of like services. In determining which tasks are 
covered, the following considerations are relevant: the amount of 
inmate time involved, effort and skill necessary to accomplish the 
task, the regularity of task performance, and whether the task would 
have been performed by the inmate absent PIECP production.
    (E) The prevailing wage must be verified prior to the initiation of 
PIECP participation. Annually, thereafter, the PIECP participant must 
re-verify the adopted wage to ensure that it continues to be comparable 
to wages paid for work of a similar nature in the locality in which the 
project is located.
    (F) If no such verification can be obtained from the State 
Department of Economic Security, or other similar department, the PIECP 
participant is responsible for establishing a reasonable prevailing 
wage. In such instances, the participant should retain on file, for 
BJA's review:
    (1) relevant wage data from a sufficient number of competitors in 
the locality;
    (2) data analyses for determining a reasonable prevailing wage 
result; and
    (3) if possible, a written assessment of the reasonableness of the 
resulting prevailing wage determination by an appropriate state agency 
which normally determines wage rates.
    (G) The PIECP prevailing wage can not be set below the Federal 
minimum wage, as defined in the Fair Labor Standards Act (FLSA), 29 
U.S.C. 201 et seq. Payment of the Federal minimum wage, however, does 
not automatically achieve compliance with the prevailing wage 
requirement unless the prevailing wage for the comparable private 
sector industries is, in fact, the Federal minimum wage.
    (H) Overtime, at one and a half times the rate of regular or 
prevailing wage, must be paid for prisoner hours worked in excess of 40 
hours per week. See 29 U.S.C. 207(a) (a payment standard imposed on 
private sector competition).
    (I) If a CAC pays a wage based on piece work, the project must 
apply a calculation to convert regular wages paid into a comparable 
hourly wage. The calculation should be used as a routine check to 
ensure that inmate workers, paid according to piece rate work, do not 
receive less than the Federal minimum wage. In instances where the CAC 
is paying Federal minimum wage and such a wage is less than the 
industry standard for the prevailing wage, the CAC must be able to 
identify inmate worker performance variances as justification for the 
wage rate.
    (J) BJA strongly encourages the use of wage plans that take into 
consideration a PIECP worker's experience, seniority, and performance.
    3. Non-Inmate Worker Displacement. PIECP CAC operations must not 
result in displacement of employed workers; be applied in skills, 
crafts, or trades in which there is a surplus of available gainful 
labor in the locality; or significantly impair existing contracts. The 
term ``displacement,'' as used in this provision, includes all such 
prohibited activities, as well as the transfer of private sector jobs 
to PIECP inmates. This prohibition is intended to protect the private 
sector partner's non-inmate employees, as well as all other non-inmate 
workers who perform work of a similar nature in the same locality in 
which the CAC is located.
    (A) Regarding the possibility of displacement among non-inmate 
employees of private sector partners in the same locality as the CAC:
    (1) BJA will presume non-compliance where there is a non-inmate 
worker's job replacement by a PIECP inmate worker or where a non-inmate 
worker's job function is eliminated or adversely impacted, to a 
significant degree, and there is a concomitant assumption of a similar 
job function by a PIECP inmate worker. When evaluating such 
circumstances, BJA will not consider the private sector partner's 
intent or economic viability.
    (2) Prior to CAC initiation, the CAC applicant must provide BJA 
with written documentation reflecting the private sector partner's 
agreement not to displace its non-inmate employees with PIECP inmate 
labor in violation of the 18 U.S.C. 1761(c) statutory note.
    (B) Prior to project initiation, all CAC applicants must show 
through written verification by the State Department of Economic 
Security (or other appropriate state agency) that the PIECP project 
will not result in displacement of non-inmate workers performing the 
same work, regardless of wage rate. In cases where an appropriate state 
agency cannot provide this service, the applicant CAC should propose to 
and confer with BJA as to alternative measures to address this 
requirement.
    (C) In instances where BJA finds that CAC implementation results in 
private sector worker displacement, the CAC must either cease its 
operations or comply with a BJA-approved corrective action plan, if BJA 
proposes such a plan under Section IV. f. of this Guideline, infra.
    (D) BJA strongly recommends that CAC job development be oriented 
toward the creation of new jobs within the locality.
    4. Benefits. PIECP projects must provide inmate workers appropriate 
benefits comparable to those made available by the Federal or State 
Government to private sector employees, including workers' compensation 
and, under certain circumstances, Social Security.
    (A) By statute, in some states, inmates are not eligible to 
participate in workers' compensation programs. Provision of comparable 
workers' compensation benefits is acceptable as long as the CAC can 
demonstrate comparability of such benefits with those secured by the 
Federal or state Government for private sector employees.
    (B) The PIECP CAC management model impacts whether the CAC must 
provide Social Security benefits to PIECP inmate workers. Where the 
employer model is utilized and the private sector directs and controls 
the PIECP inmate worker, the PIECP participant must provide PIECP 
inmate workers with Social Security benefits. Where a customer model is 
utilized and the state directs or controls the PIECP inmate worker, BJA 
recognizes the applicability of other provisions of Federal law which 
may operate to preclude the provision of PIECP inmates with certain 
benefits, including Social Security.
    5. Deductions. Participating CAC's are not required to take 
deductions from PIECP inmate wages. However, if a CAC exercises its 
discretion to take deductions from a PIECP inmates' gross wages, such 
deductions can be taken only under the following conditions:
    (A) Deductions from gross wages, if made, may be withheld only for 
the following authorized purposes:
    (1) taxes (Federal, state, local);
    (2) in the case of a state prisoner, reasonable charges for room 
and board as determined by regulations issued by the Chief State 
Correctional Officer;
    (3) allocations for support of family pursuant to state statute, 
court order, or agreement by the offender; and
    (4) contributions of not more than 20 percent, but not less than 5 
percent of gross wages to any fund established by law to compensate the 
victims of crime.
    Such deductions, in aggregate, cannot exceed 80 percent of gross 
wages.
    (B) PIECP inmate workers must be paid, credited with, or otherwise 
benefit legally from, the 20 percent gross remainder. In this regard, 
the CAC may direct the 20 percent gross remainder to

[[Page 36717]]

a PIECP inmate worker's expense accounts, savings accounts, or toward 
the settling of the worker's legal obligations, including the payment 
of fines and restitution.
    (C) Each Certificate Holder, through its respective Chief State 
Correctional Officer, retains flexibility with respect to determining 
appropriate room and board charges that may be deducted from PIECP 
inmate workers' gross wages.
    (1) Consistent with 18 U.S.C. Sec. 1761(c)(2)(B), BJA requires only 
that such charges be reasonable as determined by regulations issued by 
the Chief State Correctional Officer, in the case of state prisoners. 
In the case of non-state prisoners, this determination shall be made in 
accordance with regulations issued by the Chief Correctional Officer of 
the state in which the PIECP inmate is incarcerated.
    (2) The legislative history of 18 U.S.C. Sec. 1761(c) reflects a 
congressional intent to permit the use of the room and board deduction 
to lower costs otherwise incurred by the public for inmate 
incarceration. Thus, prior to making room and board deductions, private 
prison CACs must obtain written approval of such a proposed deduction 
from the Chief State Correctional Officers for the states in which the 
PIECP inmate workers were convicted.
    (D) A PIECP inmate's gross wages may be subjected to a deduction 
for the purpose compensating crime victims if the deducted amount is 
deposited into a fund established by law for the purpose of providing 
crime victim compensation. State crime victim compensation funds 
typically qualify as authorized recipients of such deducted amounts. 
Amounts deducted by private prison CACs should be deposited in the 
crime victim compensation funds established in those states in which 
the PIECP inmates were convicted.
    6. Voluntary PIECP Inmate Worker Participation. The Inmate Worker 
must indicate, in writing, that he or she:
    (A) agrees voluntarily to participate in the PIECP project, and
    (B) agrees voluntarily, and in advance, to specific deductions made 
from gross wages, as well as all other financial arrangements made as 
to earned PIECP wages.
    7. Consultation with Organized Labor. PIECP CACs must:
    (A) consult with representatives of local union central bodies or 
similar labor union organizations prior to the initiation of any 
certified or designated CAC project. CACs should consult with as many 
of such organizations as have members which may be affected by the 
types of work to be performed by the PIECP inmates. If there are no 
local union bodies or labor organizations, consultation must be made 
with state union bodies or similar state-wide labor organizations.
    (B) provide adequate information about the contemplated PIECP 
participation such as, at a minimum, an identification of the scope of 
the intended CAC and projected initiation date, as well as an 
explanation of the fact that statutory consultation is required and 
comments are invited. CACs should retain documentation reflecting 
provision of adequate consultation.
    8. Consultation with Local Private Industry. PIECP CACs must:
    (A) consult with representatives of local businesses that may be 
economically impacted by CAC production prior to beginning operations, 
and
    (B) provide adequate information about the contemplated PIECP 
participation such as, at a minimum, an identification of the scope of 
the intended CAC and projected initiation date as well as an 
explanation of the fact that statutory consultation is required and 
comments are invited. CACs should retain documentation reflecting 
provision of adequate consultation.
    9. Compliance with the National Environmental Policy Act (NEPA). 
The review and approval of PIECP certification applications as well as 
the designation of PIECP CACs must comply with NEPA and other related 
Federal environmental review requirements. See NEPA, 42 U.S.C. 4321-
4347 and 40 C.F.R. pt. 1500. See also 28 C.F.R. pt. 61 (Department of 
Justice procedures for implementing NEPA); 28 C.F.R. pt. 61 app. D 
(procedures specific to Federal actions undertaken by the Office of 
Justice Programs).
    (A) A BJA PIECP certification, or a CAC designation under an issued 
certification, constitutes a ``Federal action,'' as defined by 40 
C.F.R. Sec. 1508.18 of the Council on Environmental Quality's (CEQ) 
regulations for implementing NEPA. Consistent with the CEQ regulations, 
PIECP applicants and CACs are required to submit for BJA review 
environmental data and information regarding their proposed activities 
and, if necessary, environmental assessments. Applicants and CACs must 
also assist BJA in the preparation of any required environmental impact 
statements.
    (B) Title 28 C.F.R. Part 61 App. D provides NEPA compliance 
guidance to PIECP applicants and CACs, including the following:
    (1) Actions entailing minor renovation projects or remodeling do 
not normally require an environment impact statement or an 
environmental assessment, unless, for example the actions would be 
located in or potentially affect a floodplain; a wetland; a listed 
species or critical habitat for an endangered species; or a property 
that is listed on or may be eligible for listing on the National 
Register of Historic Places.
    (2) Actions that normally require an environmental assessment, but 
not necessarily an environmental impact statement include: renovations 
and expansions that change the basic prior use of a facility or 
substantially change its size; change in use of an existing facility 
that results in the increased production of liquid, gaseous, or solid 
wastes; new construction; research and technology whose anticipated and 
future application could be expected to have an effect on the 
environment; and new operations involving the use of hazardous, toxic, 
radioactive, or odorous materials. Assessments of such activities which 
result in BJA ``findings of significant impact'' will necessitate the 
preparation of environmental impact statements in compliance with NEPA 
and its implementing regulations.
    (3) Additionally, no certification will be approved nor can any 
designation be provided or maintained if the application or designation 
includes a facility in non-compliance with any Federal, state, or local 
environmental law or regulation.

IV. PIECP Administration

    a. Certificate Holders. BJA may exercise its discretionary 
authority to certify up to 50 PIECP Projects. Eligible applicants may 
seek certification by submitting an application to BJA in accordance 
with the requirements set forth in BJA's PIECP Certification 
Application, which will be provided upon request, and subpart IV.a.2, 
infra. BJA's review of submitted applications will be conducted as 
outlined in subparts IV.a.3 and a.4, infra. Once a certificate is 
issued, the holder assumes the authority and responsibilities set forth 
in subparts IV.a.5 and a.6, infra.
    1. Project Structure. All public departments of correction, 
authorized by law to administer prison industry programs, are eligible 
to apply for BJA certification. Certified applicants may designate one 
or a number of Cost Accounting Centers (CACs) under their authority. 
Certificate Holders may also designate CACs within private prisons with 
which they contract for incarceration services and which are located in 
their respective states. BJA

[[Page 36718]]

will consider alternative program structures suggested by certification 
applicants, including, but not limited to, applicant umbrella 
authorities, as described in subpart III. D. 1, supra.
    2. Application Content. All applications for PIECP Project 
Certification shall include the following:
    (A) Assurances of Authority. The Certificate Holder must provide 
written assurance to BJA that it has in place appropriate statutory and 
administrative authority to meet all mandatory program criteria and, in 
particular, to monitor CAC compliance throughout the proposed PIECP 
Project.
    (B) Documentation to Show Compliance with Mandatory Program 
Criteria. The applicant must submit all documentation necessary to show 
CAC compliance with the nine mandatory program criteria outlined in 
Section III. d., supra.
    (C) Project Description. The applicant must describe key project 
elements, including the process to be used to designate and monitor 
compliance of CACs with 18 U.S.C. Sec. 1761(c) and this Guideline.
    3. BJA Review. PIECP applications will be reviewed by BJA on a 
first-come, first-served basis. Awards of certification are 
discretionary exercises of authority by BJA under 18 U.S.C. 1761(c). No 
certification will be awarded, however, unless there is a determination 
that the applicant has met the mandatory participation criteria 
outlined in this Guideline. Applicants will be notified in writing of 
BJA's award or denial of certification. The hearing and appeal 
procedures set forth in 28 C.F.R. Part 18 do not apply to denied PIECP 
applicants. Certified applicants will be informed of the effective date 
of BJA's certification.
    4. Standard or Provisional Certification. A standard certification 
may be issued by BJA to an approved Certificate Holder applicant when 
all mandatory program criteria have been met. When one or more 
mandatory program criteria have not been met, but when steps have been 
taken to ensure that those criteria will be met within a reasonable 
period of time, then a provisional certification may be issued by BJA 
in instances where the withholding of certification would significantly 
impair the applicant's ability to further develop its project. The 
terms of the provisional certification will be made specific to the 
nature of the unmet mandatory criteria and may be made contingent upon 
the occurrence of identified conditions. Provisional certifications may 
be issued for no longer than one year from the date of issuance and may 
be subject to renewal, at BJA's discretion.
    5. Certificate Holder Designation Authority:
    (A) The Certificate Holder may exercise CAC designation authority 
with respect to CACs operating under its authority, including in 
private prisons with which it contracts for incarceration services and 
which are located in its respective state. To exercise this authority, 
a Certificate Holder must first determine that a proposed CAC has 
complied with the requirements set forth in this Guideline and in 18 
U.S.C. 1761(c). Whenever the Certificate Holder elects to exercise this 
authority after certification application approval, it must submit a 
Notice of Designation Form to BJA that provides the following 
information and documentation:
    (1) Cost Accounting Center Name and Location;
    (2) Proposed number of workers;
    (3) Item(s) to be produced;
    (4) Proposed consumer market (including anticipated geographic 
distribution);
    (5) Description of private sector involvement, including models 
that will be used in working with private enterprise;
    (6) Locality determination, and supporting justification;
    (7) Description of inmate compensation plans;
    (8) Documentation of prevailing verification;
    (9) Identification of deductions to be taken and percentage of each 
from PIECP inmate's gross wages;
    (10) Documentation of private sector partner's agreement not to 
displace its non-inmate employees with PIECP inmate labor 
determination;
    (11) Documentation of non-displacement verification;
    (12) As to any CACs within private prisons, written state approval 
of a proposed room and board deduction, in compliance with Section 
III.d.5.(D) of this Guideline, supra; and
    (13) Documentation of the environmental impacts of the CAC's 
existing and proposed activities.
    (B) The Certificate Holder may, in its own discretion, undesignate 
any previously designated CAC. In such instances, the Certificate 
Holder must submit to BJA an Undesignation Form providing the following 
information:
    (1) Cost Accounting Center Name and Location;
    (2) Reasons for Undesignation; and
    (3) Effective Date of Undesignation.
    (C) BJA may, at any time deemed necessary to resolve compliance 
concerns and upon the issuance of written notice, suspend a Certificate 
Holder's authority to designate additional Cost Accounting Centers.
    6. Certificate Holder Monitoring Responsibilities: As to all 
designated CACs, the Certificate Holder must assume the following 
monitoring responsibilities:
    (A) Undertake all reporting and evaluation activities deemed 
necessary to ensure continuing designated CAC compliance; and
    (B) Respond to all BJA requests for information and cooperation 
aimed at ensuring Project compliance.
    b. Cost Accounting Centers' PIECP Exception Status. A CAC is 
entitled to operate under PIECP exception status.
    1. To retain this status, the CAC must comply with all PIECP 
participation obligations to its Certificate Holder and to BJA, 
including:
    (A) Maintaining continuous compliance with the requirements set 
forth in 18 U.S.C. 1761(c) and in III.d), supra, of this Guideline; and
    (B) Responding to all monitoring requests for information and 
cooperation aimed at maintaining continued compliance with this 
Guideline.
    2. The CAC must promptly report to the Certificate Holder any 
contemplated change in operations which may affect its ability to 
maintain statutory and regulatory compliance.
    c. Compliance Reviews:
    1. Performance Reports. Within 30 days following the close of each 
calendar quarter, each CAC must submit a quarterly performance report 
to its Certificate Holder in a form prescribed by BJA. The performance 
report describes activities undertaken during the prescribed period. A 
consolidated report of all CAC activity must be submitted to BJA by the 
Certificate Holder within 45 days following the close of each calendar 
quarter.
    2. Monitoring Reviews. BJA and BJA technical assistance contractors 
are authorized to perform desk and on-site reviews of all PIECP 
participants, including all CACs, as deemed necessary. On-site 
reviewers may request access to any and all documentation necessary to 
assist in determining compliance with the requirements of this 
guideline and 18 U.S.C. 1761. Monitored participants will be advised in 
writing of the results of any such reviews. Immediate corrective action 
must be taken to address determinations of non-compliance and/or to 
respond to issues that raise compliance related concerns for BJA.
    d. BJA's PIECP Administration. BJA's PIECP responsibilities include 
the following:

[[Page 36719]]

    1. Review and approval of Certificate Holder PIECP applications;
    2. Monitoring to determine compliance status of operations within 
all CACs;
    3. PIECP exception status termination or suspension for cause 
related to substantial non-compliance;
    4. Liaison with other Federal agencies that may affect PIECP 
operations;
    5. Provision of compliance-related technical assistance; and
    6. Any and all other functions necessary to administer the program 
in compliance with 18 U.S.C. 1761(c).
    e. PIECP Exception Status Suspension/Termination
    1. Notice of Possible Compliance Violation. Alleged facts 
indicative of non-compliance shall be communicated in writing by BJA to 
the involved Certificate Holder and the involved designated CAC. These 
parties must respond to the allegations, in writing, within 15 days 
after receipt of the notice of non-compliance determination. Immediate 
corrective action must be taken to address determinations of non-
compliance.
    2. Voluntary Compliance Agreements. If BJA determines that 
noncompliant practices persist, BJA may, in its discretion, propose a 
voluntary compliance agreement to the involved Certificate Holder.
    3. Failure to Achieve Compliance and Effect of Non-Compliance. If a 
voluntary compliance agreement is not presented by BJA or is not 
accepted or adequately implemented by the Certificate Holder within 30 
days after receipt of such an agreement, BJA may suspend the 
Certificate Holder's certification and/or CAC exception status.
    4. PIECP Exception Status Suspension and Termination. A 
certification may be terminated by BJA if it has been inactive (no 
production within a designated CAC) or suspended for six consecutive 
months. A certification and/or designation may be suspended, and six 
months thereafter, terminated upon: (1) Issuance of a notice of a 
determination that the Certificate Holder and/or designated CAC is not 
acting in compliance with the requirements of 18 U.S.C. 1761, this 
Guideline or the conditions set forth in its certificate; or (2) in the 
discretion of the Director of BJA and upon a re-definition of a PIECP 
Project authorized under 18 U.S.C. 1761(c). Termination or suspension 
of the exception status of one designated CAC will not automatically 
impact the PIECP exception status of other CACs under the same 
certification unless the PIECP Project certification is suspended or 
terminated. The hearing and appeal procedures set forth in 28 C.F.R. 
Part 18 do not apply to PIECP applicants or participants who have had 
PIECP exception status suspended or terminated under this provision.

    Dated: June 26, 1998.
Nancy Gist,
Director, Bureau of Justice Assistance.
[FR Doc. 98-17757 Filed 7-6-98; 8:45 am]
BILLING CODE 4410-18-P