The Federal Prison Industries, Inc. (FPI), is a government-owned corporation that employs offenders incarcerated in correctional facilities under the Department of Justice's (DOJ's) Federal Bureau of Prisons (BOP). The FPI manufactures products and provides services that are primarily sold to executive agencies in the federal government. Although the FPI's industries are located within various federal prisons, they operate independently. The FPI was created to serve as a means for managing, training, and rehabilitating inmates in the federal prison system through employment in one of its six industries. The FPI's enabling legislation and the Federal Acquisition Regulation (FAR) require federal agencies to procure products offered by the FPI, unless authorized by the FPI to solicit bids from the private sector. This is commonly referred to as the "mandatory source clause." The FPI may grant waivers to executive agencies if its price exceeds the current market price for comparable products. Federal agencies, however, are not required to procure services provided by the FPI. Instead, agencies are encouraged to do so pursuant to the FAR. It is the mandatory source clause, and its effect on private businesses, that has drawn controversy over the years. This report provides background on the FPI's operations and statutory authority. It does not address the related debates on inmate labor, criminal rehabilitation, or competition in federal government contracting. This section of the report provides background information on the FPI, including a brief history of the FPI, an overview of the FPI's current activities, a review of the FPI's sales and earnings for FY1993-FY2015, and data on trends in the number and proportion of federal inmates who work in the FPI. The FPI has its origins in an act passed in 1930 by the 71 st Congress (P.L. 71-271). Even though there was growing hostility to prisoner-made goods at the time, the act expanded the use of inmate labor to all federal prisons. Prior to this act, in 1918 and 1924, Congress authorized the establishment of factories at two federal prisons (one in Atlanta and another in Leavenworth, KS). P.L. 71-271 required the Attorney General to provide work opportunities for all physically fit inm ates, which could provide for their rehabilitation, and the sale of goods produced by inmates could help offset some of the cost of their incarceration. The act required the Attorney General to diversify the industries operated in the federal prison system in order to minimize competition with private businesses. The act allowed the Attorney General to make inmate labor available to federal agencies for the purpose of engaging in federal public works projects. It also allowed the Attorney General to establish industries where inmates would produce products that would be used in federal prisons or would be sold to other federal agencies. At the same time—in response to concerns raised by private business, trade associations, and labor organizations—the act prohibited inmate-made goods from being sold on the open market. The act required federal agencies to purchase products made by federal inmates if they did not exceed current market prices, were available for sale, and met their requirements. Congress established work programs for federal inmates as a way to reduce inmate idleness and provide for the reformation and rehabilitation of inmates. The act required the Attorney General to provide industrial work assignments that would give inmates the knowledge and skills necessary to find work after being released. The BOP experienced difficulties implementing the authorities Congress granted the Attorney General to create and expand prison industries in order to provide work assignments for inmates. The House Judiciary Committee reported that "[a]ttempted diversification of prison employment by prison authorities has been met by resistance from every industry into the field of which is has sought to go even to a minor extent, and the major portion of prison-industry production has, therefore, been largely limited to the particular industries already carried on by the Bureau of Prisons prior to the enactment of [P.L. 71-271]." , The committee noted that it was impossible to provide employment for all "physically fit inmates" without allowing the BOP to expand into new industries or to continue to capture an increasing market share. The FPI was created in 1934 when Congress passed and President Franklin Delano Roosevelt signed P.L. 73-461, which granted the President the authority to establish a federally chartered corporation known as the "Federal Prison Industries." Subsequently, President Roosevelt signed Executive Order 6917, which implemented the provisions of P.L. 73-461. Congress established the FPI—which was to be governed by a board of directors with representatives of labor, industry, agriculture, retailers, and consumers, and the Attorney General—as a way to help expand prison industries in a manner consistent with P.L. 71-271. The act allowed the President to transfer any of the powers vested with the Attorney General under P.L. 71-271 to the FPI. The board of directors was charged with determining in what manner and to what extent industrial operations would be conducted in federal prisons. The board was also required to diversify, to the extent practicable, prison industrial operations so that no one industry would face unfair competition from products made by the FPI. P.L. 80-772 codified the FPI's authorizing legislation in Title 18 of the United States Code. This incarnation of the FPI's authorizing statute had many of the same elements of previous authorizations for federal prison industries. The FPI was to be administered by a board of directors which would be responsible for determining what products would be produced by the FPI. The goods made by the FPI could only be sold to the federal government. The FPI was required to provide employment for all physically fit inmates. The FPI was required to diversify, as much as practicable, its prison industries and decrease competition with the private sector. Jobs for federal inmates through the FPI were required to give inmates the opportunity to acquire knowledge and skills that would allow them to find work after being released. Federal agencies were required to purchase goods offered by the FPI if the goods met the agency's requirements, were available, and did not exceed market prices. The FPI's authorizing legislation remained relatively unchanged for more than 50 years. The FPI's industrial production grew from the early 1940s through the late 1960s, spurred, in part, by providing goods for the federal government during World War II, and the Korean and Vietnam wars. Strong wartime demand raised the FPI's sales from approximately $7 million (nominal) in 1941 to nearly $19 million (nominal) in 1943. Demand for FPI products during the Korean War helped mitigate the decline in sales that resulted from the end of World War II. After the Korean War and during the late 1950s, the FPI invested in building new factories and renovating existing ones along with expanding vocational training. The purpose of the FPI's capital investment in the 1950s was to produce new products in response to changing markets. For example, the FPI opened new factories that specialized in the repair, refurbishment, and reconditioning of furniture, office equipment, tires, and other government property. Demand for products during the Vietnam War resulted in a short-term spike in production and sales. However, during the late 1960s, military orders were offset by cutbacks in purchases from civilian federal agencies, which resulted in declining overall sales. The past 40 years marked a new approach for the FPI. In 1974 the FPI re-organized into seven different divisions, each of which was responsible for handling resource management, production, and sales in a specific FPI industry. At the same time, the FPI established regional market positions, and soon afterward, the FPI created a program to improve product quality and acceptability. Since the mid-1970s the FPI has focused on increasing sales through a greater emphasis on marketing and customer service and satisfaction. In 1977, the FPI introduced a new trade name: UNICOR. Starting in the early 1980s, the federal prison population began a nearly unabated, three-decade increase. In FY1980 there were approximately 24,000 inmates in federal prisons; by FY1990 approximately 58,000 inmates; by FY2000 almost 126,000 inmates; and by FY2015 over 205,000 inmates in federal prisons. The growth in the federal prison population prompted the FPI to increase the number of factories it operated so it could employ a greater number of inmates. The FPI implemented additional state-of-the-art production techniques, which in turn increased product offerings and created new work opportunities for inmates. The new production techniques, according to the FPI, helped better prepare inmates for post-release employment. The FPI also started requiring inmates to have higher levels of literacy in order to advance beyond entry level pay status. By 1991, inmates working for the FPI were required to have a high school diploma or General Equivalency Degree (GED) in order to advance beyond the entry level pay grade. The FPI operates 80 factories and three farms in 62 federal prisons representing six different business segments: agribusiness, clothing and textiles, electronics, office furniture, recycling, and services (which include data entry and encoding). The FPI is intended to be economically self-sustaining and does not receive funding through congressional appropriations. The FPI uses the revenue it generates to purchase raw material and equipment; pay wages to inmates and staff; and invest in expansion of its facilities. Of the revenues generated by the FPI's products and services, 72% is used to purchase raw material and equipment; 23% funds staff salaries; and 5% funds inmate salaries. Inmates earn from $0.23 per hour up to a maximum of $1.15 per hour, depending on their proficiency, educational level, and time in the position, among other things. Additionally, inmates can earn bonuses based on work performance.