Private Businesses Fight Federal Prisons for Contracts
As chief financial officer of a military clothing manufacturer, Steven W. Eisen was accustomed to winning contracts to make garments for the Defense Department.
But in December, Mr. Eisen received surprising news. His company, Tennier Industries, which is in a depressed corner of Tennessee, would not receive a new $45 million contract.
Tennier lost the deal not to a private sector competitor, but to a corporation owned by the federal government, Federal Prison Industries.
Federal Prison Industries, also known as Unicor, does not have to worry much about its overhead. It uses prisoners for labor, paying them 23 cents to $1.15 an hour. Although the company is not allowed to sell to the private sector, the law generally requires federal agencies to buy its products, even if they are not the cheapest.
Mr. Eisen, who laid off about 100 workers after losing out on the new contract, said the system took sorely needed jobs from law-abiding citizens. “Our government screams, howls and yells how the rest of the world is using prisoners or slave labor to manufacture items, and here we take the items right out of the mouths of people who need it,” he said.
Although Federal Prison Industries has been around for decades, its critics are gaining more sympathy this year as jobs, competition and the role of government have become potent political issues. Recently, a clothing company complained that the government company had expressed interest in making Air Force windbreakers like one worn by the president. Last month, amid negative news reports and pressure from the Senate minority leader, Mitch McConnell, F.P.I. said it would stop competing for the contract because it could damage the private company that makes the jackets, Ashland Sales and Service.
In addition, a bipartisan coalition of lawmakers is resuscitating a bill to overhaul the way the prison manufacturing company does business, proposing to eliminate its preferential status.
Under current practice — governed by intricate laws, regulations and policies — an agency must buy prisoner-made goods if the company offers an item that is comparable in price, quality and time of delivery to that of the private sector, with certain exceptions. The company’s prices are not always the lowest, but it frequently has been able to underbid private companies, Congressional aides say.
The bill seeks to limit those advantages by putting a limit on F.P.I.’s sales to the federal government, opening more product areas to private companies and strengthening requirements that the prices for prisoner-made products be competitive. The legislation would also impose federal work-safety standards and higher wages, starting at $2.50 an hour.
Separately, Senator McConnell has introduced a bill that would subject the Bureau of Prisons, including its manufacturing company, to greater Congressional oversight.
F.P.I. has traditionally relied on office furniture, electronics and clothing manufacturing for the bulk of its business, but it has been moving into new industries like renewable energy. The company already has one factory each in New York and Oregon to build solar panels and is looking into making energy-efficient lighting and small wind turbines.
“This is a threat to not just established industries; it’s a threat to emerging industries,” said Representative Bill Huizenga, a Michigan Republican who is the lead sponsor of the proposed overhaul legislation. “If China did this — having their prisoners work at subpar wages in prisons — we would be screaming bloody murder.”
Begun in 1934 as a way to teach inmates useful skills and help supply federal agencies with needed products, Federal Prison Industries is something of an anachronism. Its operations are patterned after a “mass-production, low-skilled labor economy of the 1930s,” according to a report last year from the Congressional Research Service. It is at root a correctional program intended to keep inmates busy (and therefore less likely to become violent), reinforce the value of work and the sense of self-worth work can provide, and reduce recidivism. It is inefficient by design, employing as many inmates as possible, which diminishes the advantage of its low wages.
“The program has been important to the Federal Bureau of Prisons for a long time,” said George Keiser, a consultant and former official at the National Institute of Corrections in the Justice Department. “It’s one of the areas where they can demonstrate a high correlation between people who work in prison industries and who eventually, as they return to their communities, have a higher-than-average success rate at not being rearrested, not being reconvicted and not returning to prison.”
According to the Bureau of Prisons, inmates who go through the program are 24 percent less likely to return to jail and 14 percent more likely to find employment upon release because of the skills and experience they receive. The program operates in a range of industries — including fleet management and data services — to lessen the effect on any particular one. Over the years, its board has adopted various resolutions to reduce competition with small businesses, like raising the threshold for buying the prisoner-made goods to $3,000, from $25, and eliminating its preferential status for products when the prison share of the federal market rises above certain levels.
“F.P.I. supplies only a small fraction of the government’s goods and services,” Traci Billingsley, a spokeswoman for the Bureau of Prisons, said in a prepared statement. “F.P.I. also helps support American jobs as it often partners with private American companies as a supplier.” (Mr. Eisen said Tennier once received a contract to provide precut fabric for military gear to the government company so it could avoid having inmates use cutting equipment.)
With a tight economy, dwindling agency budgets and past Congressional moves to weaken its preferential status, the prison manufacturing company has faced its own business pressures, closing down some factories and employing fewer inmates. Its overall sales fell to about $745 million in fiscal 2011 from about $772 million the year before, according to its annual report to Congress. Its net loss narrowed to $1.8 million from $56.3 million the year before, when it took $35 million in write-offs for defective helmets recalled by the military — still the subject of a Justice Department investigation — and for solar cells.
“F.P.I. continues to face the negative impact of economic and legislative forces,” the report says. “F.P.I. continues to address these external challenges through aggressively pursuing new customers and new products, involvement in legislative initiatives, capacity reductions and strict measures to control cash.”
The move into solar panels and other energy technologies is meant to help government agencies meet mandates for using energy from renewable sources and to “provide inmates with job skills in a new and growing market,” according to Julie Rozier, a spokeswoman for the company.
Across the country, some correctional facilities have begun preparing inmates for the green economy, offering training in solar panel installation and energy-efficient heating, ventilation and cooling systems. Inmates do not install solar panels, but assemble them; when fully operational, the plants in Otisville, N.Y., and Sheridan, Ore., can employ about 400 inmates and produce 75 megawatts’ worth of panels a year, Ms. Rozier said.
So far, response from the solar industry has been measured, with representatives saying that production is too small to pose a serious threat. A pool of trained solar workers might even be beneficial, the Solar Energy Industries Association says.
But industries that have long been competing against the federal company, like the clothing and furniture industries, are leaning on lawmakers to do something.
Chris Reynolds, president of Campbellsville Apparel in Kentucky, said he had contacted Senator McConnell, a Kentucky Republican, to express concern about possible competition for his military T-shirt contract, a move that inspired Mr. McConnell’s bill.
“My employees just cannot believe the fact that a prisoner who should be paying a debt to society is being promoted through the federal government to take a job from an American taxpaying citizen,” he said.
As chief financial officer of a military clothing manufacturer, Steven W. Eisen was accustomed to winning contracts to make garments for the Defense Department.
But in December, Mr. Eisen received surprising news. His company, Tennier Industries, which is in a depressed corner of Tennessee, would not receive a new $45 million contract.
Tennier lost the deal not to a private sector competitor, but to a corporation owned by the federal government, Federal Prison Industries.
Federal Prison Industries, also known as Unicor, does not have to worry much about its overhead. It uses prisoners for labor, paying them 23 cents to $1.15 an hour. Although the company is not allowed to sell to the private sector, the law generally requires federal agencies to buy its products, even if they are not the cheapest.
Mr. Eisen, who laid off about 100 workers after losing out on the new contract, said the system took sorely needed jobs from law-abiding citizens. “Our government screams, howls and yells how the rest of the world is using prisoners or slave labor to manufacture items, and here we take the items right out of the mouths of people who need it,” he said.
Although Federal Prison Industries has been around for decades, its critics are gaining more sympathy this year as jobs, competition and the role of government have become potent political issues. Recently, a clothing company complained that the government company had expressed interest in making Air Force windbreakers like one worn by the president. Last month, amid negative news reports and pressure from the Senate minority leader, Mitch McConnell, F.P.I. said it would stop competing for the contract because it could damage the private company that makes the jackets, Ashland Sales and Service.
In addition, a bipartisan coalition of lawmakers is resuscitating a bill to overhaul the way the prison manufacturing company does business, proposing to eliminate its preferential status.
Under current practice — governed by intricate laws, regulations and policies — an agency must buy prisoner-made goods if the company offers an item that is comparable in price, quality and time of delivery to that of the private sector, with certain exceptions. The company’s prices are not always the lowest, but it frequently has been able to underbid private companies, Congressional aides say.
The bill seeks to limit those advantages by putting a limit on F.P.I.’s sales to the federal government, opening more product areas to private companies and strengthening requirements that the prices for prisoner-made products be competitive. The legislation would also impose federal work-safety standards and higher wages, starting at $2.50 an hour.
Separately, Senator McConnell has introduced a bill that would subject the Bureau of Prisons, including its manufacturing company, to greater Congressional oversight.
F.P.I. has traditionally relied on office furniture, electronics and clothing manufacturing for the bulk of its business, but it has been moving into new industries like renewable energy. The company already has one factory each in New York and Oregon to build solar panels and is looking into making energy-efficient lighting and small wind turbines.
“This is a threat to not just established industries; it’s a threat to emerging industries,” said Representative Bill Huizenga, a Michigan Republican who is the lead sponsor of the proposed overhaul legislation. “If China did this — having their prisoners work at subpar wages in prisons — we would be screaming bloody murder.”
Begun in 1934 as a way to teach inmates useful skills and help supply federal agencies with needed products, Federal Prison Industries is something of an anachronism. Its operations are patterned after a “mass-production, low-skilled labor economy of the 1930s,” according to a report last year from the Congressional Research Service. It is at root a correctional program intended to keep inmates busy (and therefore less likely to become violent), reinforce the value of work and the sense of self-worth work can provide, and reduce recidivism. It is inefficient by design, employing as many inmates as possible, which diminishes the advantage of its low wages.
“The program has been important to the Federal Bureau of Prisons for a long time,” said George Keiser, a consultant and former official at the National Institute of Corrections in the Justice Department. “It’s one of the areas where they can demonstrate a high correlation between people who work in prison industries and who eventually, as they return to their communities, have a higher-than-average success rate at not being rearrested, not being reconvicted and not returning to prison.”
According to the Bureau of Prisons, inmates who go through the program are 24 percent less likely to return to jail and 14 percent more likely to find employment upon release because of the skills and experience they receive. The program operates in a range of industries — including fleet management and data services — to lessen the effect on any particular one. Over the years, its board has adopted various resolutions to reduce competition with small businesses, like raising the threshold for buying the prisoner-made goods to $3,000, from $25, and eliminating its preferential status for products when the prison share of the federal market rises above certain levels.
“F.P.I. supplies only a small fraction of the government’s goods and services,” Traci Billingsley, a spokeswoman for the Bureau of Prisons, said in a prepared statement. “F.P.I. also helps support American jobs as it often partners with private American companies as a supplier.” (Mr. Eisen said Tennier once received a contract to provide precut fabric for military gear to the government company so it could avoid having inmates use cutting equipment.)
With a tight economy, dwindling agency budgets and past Congressional moves to weaken its preferential status, the prison manufacturing company has faced its own business pressures, closing down some factories and employing fewer inmates. Its overall sales fell to about $745 million in fiscal 2011 from about $772 million the year before, according to its annual report to Congress. Its net loss narrowed to $1.8 million from $56.3 million the year before, when it took $35 million in write-offs for defective helmets recalled by the military — still the subject of a Justice Department investigation — and for solar cells.
“F.P.I. continues to face the negative impact of economic and legislative forces,” the report says. “F.P.I. continues to address these external challenges through aggressively pursuing new customers and new products, involvement in legislative initiatives, capacity reductions and strict measures to control cash.”
The move into solar panels and other energy technologies is meant to help government agencies meet mandates for using energy from renewable sources and to “provide inmates with job skills in a new and growing market,” according to Julie Rozier, a spokeswoman for the company.
Across the country, some correctional facilities have begun preparing inmates for the green economy, offering training in solar panel installation and energy-efficient heating, ventilation and cooling systems. Inmates do not install solar panels, but assemble them; when fully operational, the plants in Otisville, N.Y., and Sheridan, Ore., can employ about 400 inmates and produce 75 megawatts’ worth of panels a year, Ms. Rozier said.
So far, response from the solar industry has been measured, with representatives saying that production is too small to pose a serious threat. A pool of trained solar workers might even be beneficial, the Solar Energy Industries Association says.
But industries that have long been competing against the federal company, like the clothing and furniture industries, are leaning on lawmakers to do something.
Chris Reynolds, president of Campbellsville Apparel in Kentucky, said he had contacted Senator McConnell, a Kentucky Republican, to express concern about possible competition for his military T-shirt contract, a move that inspired Mr. McConnell’s bill.
“My employees just cannot believe the fact that a prisoner who should be paying a debt to society is being promoted through the federal government to take a job from an American taxpaying citizen,” he said.