‘‘(i) a Federal agency or department, pur-
chasing 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 eight members 
of the board.’’. 
SEC. 4. TRANSITIONAL MANDATORY SOURCE AUTHORITY. 
(a) IN
GENERAL.—Notwithstanding the require-
ments 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 au-
thorized 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 Fed-
eral Prison Industries and make purchases on a non-
competitive basis in accordance with this section or in ac-
cordance 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 sub-
section (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 In-
dustries if the contracting officer for the procurement ac-
tivity determines that— 
(1) the product offered by Federal Prison In-
dustries will meet the requirements of the procure-
ment activity (including commercial or governmental 
standards or specifications pertaining to design, per-
formance, testing, safety, serviceability, and warran-
ties as may be imposed upon a private sector sup-
plier of the type being offered by Federal Prison In-
dustries); 
(2) timely performance of the contract by Fed-
eral 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 condi-
tions of the contract and the price to be paid to Federal 
Prison Industries shall be determined by negotiation be-
tween Federal Prison Industries and the Federal agency 
making the purchase. The negotiated price shall not ex-
ceed a fair and reasonable price determined in accordance 
with the procedures of the Federal Acquisition Regulation. 
(d) PERFORMANCE
OF
CONTRACTUAL
OBLIGA-
TIONS.—
(1) IN
GENERAL.—Federal Prison Industries 
shall perform the obligations of the contract nego-
tiated pursuant to subsection (c). 
(2) PERFORMANCE DISPUTES.—If the head of 
the contracting activity and the Chief Operating Of-
ficer of Federal Prison Industries are unable to re-
solve 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 Govern-
ment made pursuant to subsection (b) and sub-
section (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
SEC-
TORS.—Use of the authority provided by subsections 
(b) and (c) shall not result in sales by Federal Pris-
on Industries to the Government that are in excess
of its total sales during the base year for each busi-
ness sector. 
(3) LIMITATIONS RELATING TO SPECIFIC PROD-
UCTS.—Use of the authorities provided by sub-
sections (b) and (c) shall not result in contract 
awards to Federal Prison Industries that are in ex-
cess of its total sales during the base period for such 
product. 
(4) CHANGES
IN
DESIGN
SPECIFICATIONS.— 
The limitations on sales specified in paragraphs (2) 
and (3) shall not be affected by any increases in the 
unit cost of production of a specific product arising 
from changes in the design specification of such 
product directed by the buying agency. 
(f) DURATION
OF AUTHORITY.—The preferential 
contracting authorities authorized by subsection (b) may 
not be used on or after October 1, 2011, and become effec-
tive on the effective date of the final regulations issued 
pursuant to section 18. 
(g) DEFINITIONS.—For the purposes of this sec-
tion— 
(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);