SPEAKERS CONTENTS INSERTS
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62–449
2000
PRISON INDUSTRIES REFORM ACT OF 1999 AND FEDERAL PRISON INDUSTRIES COMPETITION IN CONTRACTING ACT OF 1999
HEARING
BEFORE THE
SUBCOMMITTEE ON CRIME
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
ON
H.R. 2558 and H.R. 2551
AUGUST 5, 1999
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Serial No. 4
Printed for the use of the Committee on the Judiciary
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR S. SMITH, Texas
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
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LINDSEY O. GRAHAM, South Carolina
MARY BONO, California
SPENCER BACHUS, Alabama
JOE SCARBOROUGH, Florida
DAVID VITTER, Louisiana
JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York
THOMAS E. MOONEY, SR., General Counsel-Chief of Staff
JULIAN EPSTEIN, Minority Chief Counsel and Staff Director
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Subcommittee on Crime
BILL McCOLLUM, Florida, Chairman
STEVE CHABOT, Ohio
BOB BARR, Georgia
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR S. SMITH, Texas
CHARLES T. CANADY, Florida
ASA HUTCHINSON, Arkansas
ROBERT C. SCOTT, Virginia
MARTIN T. MEEHAN, Massachusetts
STEVEN R. ROTHMAN, New Jersey
ANTHONY D. WEINER, New York
SHEILA JACKSON LEE, Texas
GLENN R. SCHMITT, Chief Counsel
DANIEL J. BRYANT, Chief Counsel
RICK FILKINS, Counsel
BOBBY VASSAR, Minority Counsel
C O N T E N T S
HEARING DATE
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August 5, 1999
TEXT OF THE BILLS
H.R. 2558
H.R. 2551
OPENING STATEMENT
McCollum, Hon. Bill, a Representative in Congress from the State of Florida, and chairman, Subcommittee on Crime
WITNESSES
Braun, Fred P., Jr., President, The Workman Fund, Leavenworth, KS
Felt, John H., Marketing Manager for Government Accounts, HON Industries, Muscatine, IA
Glover, Phillip, President, Council of Prison Locals, Johnstown, PA
Hoekstra, Hon. Peter, a Representative in Congress from the State of Michigan
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Linder, Andrew S., President, Power Connector, Inc., Bohemia, NY
Martin, Larry K., President, American Apparel Manufacturers Association, Arlington, VA
Petersik, Thomas W., Representing Citizens United for the Rehabilitation of Errants (CURE), Washington, DC
Sawyer, Kathleen M. Hawk, Director, Federal Bureau of Prisons, U.S. Department of Justice
Wilkinson, Reginald A., Director, Ohio Department of Rehabilitation and Correction, Columbus, OH
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Braun, Fred P., Jr., President, The Workman Fund, Leavenworth, KS: Prepared statement
Coble, Hon. Howard, a Representative in Congress from the State of North Carolina: Prepared statement
Felt, John H., Marketing Manager for Government Accounts, HON Industries, Muscatine, IA: Prepared statement
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Glover, Phillip, President, Council of Prison Locals, Johnstown, PA: Prepared statement
Hoekstra, Hon. Peter, a Represemtative in Congress from the State of Michigan: Prepared statement
Linder, Andrew S., President, Power Connector, Inc., Bohemia, NY: Prepared statement
Martin, Larry K., President, American Apparel Manufacturers Association, Arlington, VA: Prepared statement
Petersik, Thomas W., Representing Citizens United for the Rehabilitation of Errants (CURE), Washington, D.C.: Prepared statement
Sawyer, Kathleen M. Hawk, Director, Bureau of Prisons, U.S. Department of Justice: Prepared statement
Scott, Hon. Robert C., a Representative in Congress from the State of Virginia: Prepared statement
Wilkinson, Reginald A., Director, Ohio Department of Rehabilitation and Correction, Columbus, OH: Prepared statement
PRISON INDUSTRIES REFORM ACT OF 1999 AND FEDERAL PRISON INDUSTRIES COMPETITION IN CONTRACTING ACTS OF 1999
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THURSDAY, AUGUST 5, 1999
House of Representatives,
Subcommittee on Crime
Committee on the Judiciary,
Washington, DC.
The subcommittee met, pursuant to call, at 9:35 a.m., in Room 2141, Rayburn House Office Building, Hon. Bill McCollum [chairman of the subcommittee] presiding.
Present: Representatives Bill McCollum, Steve Chabot, George W. Gekas, Howard Coble, Asa Hutchinson, Robert C. Scott and Sheila Jackson Lee.
Staff Present: Glenn R. Schmitt, Chief Counsel; Bobby Vassar, Minority Counsel; and Veronica Eligan, Staff Assistant.
OPENING STATEMENT OF CHAIRMAN McCOLLUM
Mr. MCCOLLUM. The Subcommittee on Crime will come to order. Today, the subcommittee holds hearings on two bills that would dramatically reform the prison industries in this country. There is no question that prison industry programs are a crucial part of both State and Federal correctional programs. The principal purpose of these programs are to teach work skills to inmates so that when they are released from prison, they will be more likely to find and hold jobs and less likely to repeat their crimes.
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Now, these programs work. State and Federal studies have consistently shown that inmates who work in prison industries program have significantly lower recidivism rates than those who do not, and these programs do not cost taxpayer dollars. The Federal Prison Industries program, and many if not most State programs, are self-supporting from the sales of their goods and services.
But there are other benefits to these programs, aside from the public safety benefits. Through them, prisoners can earn money to support their families, pay restitution and fines, and make payments to victims compensation funds. And I believe that prison industries, structured correctly, have the potential to raise millions of dollars in revenue to defray a portion of the costs of incarcerating the prisoners who work in them.
Because of this clear public safety benefit and its potential to help pay for the costs of our prisons, it is my judgment that these programs be expanded on both the State and Federal levels.
But it is also clear that the 1930's legislation that governs these programs has outlived its usefulness, and now is producing very unintended consequences. These outdated laws constrain prison industry programs to only sell goods to the government, and so they place a disproportionate burden on those private businesses who also seek to sell their goods and services to the government. And the mandatory source preference given to Federal Prison Industries, which requires the government to buy specified quantities of goods from FPI, prevents free and fair competition for government contracts; and I strongly support competition as the way to award these contracts.
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And so it is my judgment, again, that a whole-scale restructuring of prison industry programs is needed. That is why, along with Congressman Scott, I have introduced H.R. 2558, the Prison Reform Act of 1999. I am very pleased that Mr. Scott, as well as the Chairman of the full committee, Mr. Hyde, has joined me in this effort as cosponsors of this important bill.
H.R. 2558 will completely eliminate the mandatory source preference over a fixed period of time. In return, the bill will open the market to prison-made goods so that competition, not legislation, will decide what goods and services are produced and for what price and for what quantities.
H.R. 2558 will also involve the private sector in the operation of prison industries by allowing private companies to contract with the Bureau of Prisons for the opportunity to produce their goods and services in a prison industry. Recently, the United States Chamber of Commerce expressed concern that there may be a shortage of workers for American companies early next century. And some people have suggested that even more foreign workers be imported to meet possible shortages of American workers.
Well, I believe we need not look any farther than the Americans in our prisons to fill these jobs. At every Federal prison today there is a waiting list of inmates who volunteer for these jobs. Why? Because they prefer meaningful work to menial work. They want opportunities to earn money to help support their families and to pay their obligations to society. I think that before we look to foreigners to fill jobs in America, we should look to Americans, even if they are temporarily in our prisons.
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I want to stress that H.R. 2558 has been written with provisions designed to protect American workers. The bill requires that when private companies employ inmates to make their products, or when FPI sells its products on the open market, the inmate workers must be paid minimum wage. From the wages paid, FPI is required to deduct amounts for fines and restitution, family support payments, and room and board charges. And the bill specifically prohibits an American company from laying off its noninmate workers in order to hire inmate workers.
The only instance of which workers can be paid less than the minimum wage is when they are competing against foreign work ers, by producing products that are made outside the U.S. In fact, the bill makes it a priority for FPI to bring back to the U.S. jobs which have been lost to foreign workers. To further protect Americans, the bill requires that an independent review panel of government, business and labor representatives first determine what goods fall into this category.
I want to stress how important I believe this portion of the bill to be. I know that some companies use foreign work ers because they cannot find a reliable source of inexpensive labor in today's U.S. economy, where we have the lowest unemployment rate in 30 years. By authorizing a wage rate for prison work ers of less than minimum wage when the goods or services to be sold would otherwise be produced offshore, we will provide those companies with a means to stay competitive by using American citizens to produce their products and not resorting to using foreign labor.
Finally, H.R. 2558 benefits State prison industries by lifting the Federal restriction on the interstate transportation of goods and services produced in those programs. As a result of these changes, States may also invite private companies to operate their prison industry programs and sell the goods made there in the open market. To take advantage of these provisions, however, State prison industry programs must also pay minimum wage to workers who produces the goods and services to be sold on the open market. States musts also eliminate any mandatory source preferences they impose on their State agencies and departments within 7 years.
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I want to stress that this provision is voluntary. States may choose to use it or to continue to do business as they have under current authority. I also want to emphasize that it is in addition to the existing Prison Industries Enhancement Program that authorizes a limited number of State prison industries to sell their goods on the open market.
In today's hearing we will also consider H.R. 2551, a bill introduced by Congressman Peter Hoekstra of Michigan and cosponsored by several Members, including Mr. Coble and Mr. Frank. As I read the bill, it will reduce the number of meaningful work opportunities available to Federal prisoners, and it will simply preserve the status quo in State prison industry programs. I note that it specifically prohibits the private sector from partnering with the Federal Prison Industry program, even to sell goods to the Federal Government. I must say that, if for no other reason than the demonstrated public safety benefits of these programs, it would not be, in my judgment, a step forward to do that, but that is why we are having the hearing today.
We need to have a full and fair debate on this issue. We need to hear from all of the participants who have to express their opinions on this legislation, and let the subcommittee and then the full committee and the House work its will.
[The text of the bills, H.R. 2558 and H.R. 2551, follow:]
106TH CONGRESS
1ST SESSION
H. R. 2558
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To amend title 18, United States Code, to reform Federal Prison Industries, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 20, 1999
Mr. MCCOLLUM (for himself and Mr. SCOTT) introduced the following bill; which was referred to the Committee on the Judiciary
A BILL
To amend title 18, United States Code, to reform Federal Prison Industries, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ''Prison Industries Reform Act of 1999''.
SEC. 2. GENERAL PROVISIONS RELATING TO THE STRUCTURE AND MISSION OF FEDERAL PRISON INDUSTRIES.
Sections 4121 through 4122 of title 18, United States Code, are amended to read as follows:
''§4121. Industrial operations in Federal prisons
''The Attorney General shall determine in what manner and to what extent industrial operations shall be carried on in Federal correctional institutions. Such operations shall be conducted so as (1) to provide employment for the greatest number of those inmates in the United States correctional institutions who are eligible to work as is reasonably possible, (2) generate sufficient revenues to fund the industrial operations, (3) generate revenue, to be returned to the Treasury of the United States, to defray a portion of the cost of confining inmates in United States correctional institutions, and (4) minimize any adverse impact on domestic companies or workers to the greatest extent possible consistent with its mission.
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''§4122. Federal Prison Industries
''(a) Federal Prison Industries is a government corporation of the District of Columbia, and shall carry on such industrial operations in Federal correctional institutions as shall be determined by the Attorney General in accordance with section 4121. The corporation shall be governed by a board of 12 directors appointed by the Attorney General. In making appointments to the Board, the Attorney General shall appoint to the Board one person recommended by each of the Speaker of the House of Representatives, the minority leader of the House of Representatives, the majority leader of the Senate, and the minority leader of the Senate. The members of the Board shall serve for 4 years and may be reappointed. The members of the Board shall serve without compensation. The Director of the Bureau of Prisons shall serve as Chief Executive Officer of the Corporation.
''(b) Federal Prison Industries shall endeavor, consistent with the priorities established in section 4121, to produce products that otherwise would be produced by foreign workers outside the United States. Federal Prisons Industries shall also endeavor, consistent with those priorities, to enter into contracts pursuant to section 4131 with private companies that employ foreign workers outside the United States to produce products, for the purpose of inducing such companies to employ inmates in a Federal Prison Industry Shop to produce such products.
''(c) The Attorney General shall appoint an Independent Review Panel composed of one representative from each of the Department of Commerce, the Department of Labor, the International Trade Commission, the Small Business Administration, the business community, and organized labor, and such other persons as the Attorney General deems appropriate. The Panel shall advise the Board regarding the type and quantity of products to be produced by Federal Prison Industries for sale in interstate commerce consistent with the purposes set forth in subsection (a). The members of the Panel shall serve without compensation. The Federal Advisory Committee Act shall not apply with respect to the Panel.''.
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SEC. 3. ELIMINATION OF MANDATORY SOURCE PREFERENCE AND CREATION OF FAIR COMPETITION AUTHORITY.
Chapter 307 of title 18, United States Code, is amended by adding at the end the following:
''§4130. Federal Prison Industry inmate labor
''The Attorney General shall endeavor to make available to inmates who have been committed to the custody of the Bureau of Prisons opportunities to work in a Federal Prison Industry Shop. The Attorney General may set standards regarding education and conduct for those inmates who work in a Federal Prison Industry Shop.
''§4131. Sale of products; contracts for the provision of labor; inmate wages
''(a) Federal Prison Industries is authorized to sell its products generally on the open market to the public, to departments and agencies of the United States, to a State or municipality, and to foreign governments.
''(b) Federal Prison Industries is authorized, and shall make it a priority, to enter into contracts with one or more private companies through which such private company may produce products at a Federal Prison Industry Shop for sale. In addition to any other provision negotiated by the private company and Federal Prison Industries, any such contract shall provide—
''(1) for the amount to paid to Federal Prison Industries by the private company;
''(2) that if the private company employs any non inmate workers, on or after a date that is 60 days prior to the execution of the contract, who reside within the United States, that the private company agrees to continue to employ non-inmate workers who reside within the United States in at least the same number for a period of at least 18 months after the date of the contract or the date the private company begins to produce products at a Federal Prison Industry Shop, whichever is later; and
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''(3) that the Attorney General shall make available to such private company under reasonable terms and conditions such number of inmates who have been selected to work in a prison industry carried on by Federal Prison Industries as shall be specified in the contract.
''(c) Federal Prison Industries shall pay wages to all inmates who work in a prison industry carried on by Federal Prison Industries (including those at which products are produced by a private company pursuant to a contract with Federal Prison Industries) at a rate not less than the Federal minimum wage from time to time in effect. From the amounts paid to inmates pursuant to this section, the Attorney General is authorized to deduct amounts, not exceeding in their aggregate 90 percent, for—
''(1) payment of fines, special assessments, and restitution owed by the prisoner pursuant to court order;
''(2) allocations for support of the inmate's family pursuant to statute, court order, or agreement by the inmate;
''(3) reasonable charges for room and board, as determined by the Attorney General, but not less than 50 percent of the total amounts deducted under this subsection;
''(4) amounts to be held on account and paid to the inmate upon release from the custody of the Bureau of Prisons; and
''(5) contributions to any fund established by law to compensate the victims of crime.
''(d) Federal Prison Industries shall be relieved from payment of the amount specified in subsection (c) if the Independent Review Panel determines that the products are—
''(1) foreign-made products; or
''(2) any product described in section 1761(b).
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Inmates producing such products shall, instead of the amount specified in subsection (c), be paid wages not less than would be paid at the rate set forth in the schedule of compensation paid to inmates working at prison industries carried on by Federal Prison Industries on the date of enactment of the Prison Industries Reform Act of 1999. From the wages paid to such inmates under this subsection, the Attorney General is authorized to deduct amounts, not exceeding in their aggregate 50 percent of the amount paid to an inmate, for the purposes set forth in subsection (c).
''(e) An inmate may agree to deductions in additional to those provided for in subsections (c) and (d) if the additional deductions are used solely for the purposes described in paragraphs (2) and (4) of subsection (c).
''(f) Nothing in this section shall be construed to prohibit more than one Federal Prison Industry Shop from being located at a Federal correctional facility. A Federal Prison Industry Shop may be located outside a correctional facility if all of the inmates working at that Shop are classified as minimum security inmates.
''(g) After consultation with the Independent Review Panel, the Attorney General may waive the requirement of subsection (b)(2) if the Attorney General determines that exigent circumstances exist and the private company has taken all reasonable steps to continue to employ its non-inmate workers who reside within the United States.
''§4132. Elimination of mandatory source purchase requirement
''(a) Not later than 180 days after the date of enactment of the Prison Industries Reform Act of 1999, the Attorney General shall submit to Congress a plan for the elimination of the use by Federal Prison Industries of the mandatory source preference requirement described in section 4124. Such plan shall provide for annual reductions in that portion of the total sales of Federal Prison Industries made pursuant to that requirement, and shall further provide that no sales shall be made pursuant to that requirement after the date which is 7 years after the date of enactment of such Act. The plan shall also provide that Federal Prison Industries shall designate those products, described by Standard Industrial Product Code (as published by the Office of Management and Budget) as to which it has determined to no longer sell to Federal departments and agencies under the authority described in section 4124 of this chapter. Within 30 days of such designation, Federal Prison Industries shall publish in the Federal Register and in a commercial business publication with a national circulation a list of those products so designated. Federal Prison Industries shall make available to the public, on request, a list of all such products so designated. The plan shall take effect 180 days after its submission to Congress, unless Congress by law provides otherwise.
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''(b) Federal Prison Industries shall not undertake the production of any new product or significantly expand the rate of production of a product for sale to any Federal department, agency, or institution, unless the procurement requirement for that product described in section 4124 has been eliminated in accordance with the plan described in subsection (a).
''(c) Federal agencies may purchase directly from Federal Prison Industries those products for which the procurement requirement has been eliminated in accordance with the plan described in subsection (a) in such quantities and by such method they deem appropriate.
''§4133. Procurement from the private sector
''For purchases from the private sector in support of its operations, Federal Prison Industries shall be exempt from the provisions of the Competition in Contracting Act and the Federal Acquisition Regulation. Nothing in this section shall be construed to modify any requirement that any department, agency, or other institution of the Federal Government comply with the provisions of the Competition in Contracting Act and the Federal Acquisition Regulation.
''§4134. Applicability of other law
''Nothing in this chapter shall be construed to entitle an inmate to employment in a Federal Prison Industry Shop, to any wage, compensation, or benefit, to imply that inmates are employees for the purposes of other laws or programs, or to provide a cause of action by or on behalf of any person against the United States or any officer, employee, or contractor thereof.
''§4135. Definitions
''In this chapter—
''(1) the term 'private company' means a corporation, partnership, joint venture, or sole proprietorship;
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''(2) the term 'product' includes both goods and services;
''(3) the term 'Federal Prison Industry Shop' means a prison industry operation at which a product is made or provided;
''(4) the term 'foreign-made product' means a product that would otherwise be produced by foreign workers outside the United States.''.
SEC. 4. REVIVAL OF OLD LAW UPON FAILURE OF CONDITIONS.
(a) IN GENERAL.—
(1) DETERMINATION.—On the date that is—
(A) 3 years after the date of the enactment of this Act; and
(B) 5 years after the date of the enactment of this Act;
the Attorney General shall determine what percentage of the total eligible inmates are employed by Federal Prison Industries.
(2) NOTICE TO CONGRESS.—If the Attorney General determines under paragraph (1) that less than 25 percent of the total number of eligible inmates are employed by the Federal Prison Industries, the Attorney General may, not later than 180 days after that determination, provide notice of that determination to Congress.
(3) EFFECT OF NOTICE.—If the Attorney General provides notice to Congress under paragraph (2) the amendments made by this Act shall cease to have any further effect 60 days after that notice is so provided.
(b) DEFINITION.—As used in this section, the term ''eligible inmate'' means a person—
(1) committed to the custody of the Bureau of Prisons pursuant to section 3621 of this title;
(2) designated to a low, medium, or high security facility operated by the Bureau of Prisons; and
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(3) who is physically and mentally able to work.
SEC. 5. STATE PRISON INDUSTRY SALES AUTHORITY.
Section 1761 of title 18, United States Code, is amended by adding at the end the following:
''(e)(1) In addition to the exceptions set forth in subsections (b) and (c), this chapter does not apply to goods, wares, or merchandise manufactured, produced, or mined by convicts or prisoners if—
''(A)(i) in connection with that manufacture, production, or mining, such convicts or prisoners receive wages at a rate equal to the Federal minimum wage from time to time in effect; or
''(ii) such goods, wares, or merchandise, would otherwise be produced by foreign workers outside the United States; and
''(B) on or before any such sales commence, the State adopts a plan to eliminate, not later than 7 years after the date on which such sales commence, any requirement that departments or agencies of that State purchase the goods, merchandise, or wares manufactured, produced, or mined by convicts or prisoners incarcerated in that State.
''(2) Nothing in this subsection shall prohibit a State or municipality deducting from any wages paid under this subsection amounts for—
''(A) payment of fines and restitution owed by the prisoner pursuant to court order;
''(B) reasonable charges for room and board;
''(C) allocations for support of the inmate's family pursuant to statute, court order, or agreement by the inmate;
''(D) contributions to be held on account and paid out to the inmate upon release; and
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''(E) contributions to any fund established by law to compensate the victims of crime.''.
SEC. 6. CONFORMING AMENDMENTS.
(a) SECTION 1761.—Section 1761 of title 18, United States Code, is amended by adding at the end the following:
''(f) This section does not apply to sales of products made pursuant to section 4131.''.
(b) SECTION 1762.—Title 18, United States Code, is amended by striking section 1762.
(c) SECTION 4123.—Title 18, United States Code, is amended by striking section 4123.
(d) CLERICAL AMENDMENTS.—
(1) CHAPTER 307.—The table of sections at the beginning of chapter 307 of title 18, United States Code, is amended—
(A) so that the items relating to sections 4121 through 4122 read as follows:
''4121. Industrial operations in Federal prisons.
''4122. Federal Prison Industries.'';
(B) by striking the item relating to section 4123; and
(C) by adding at the end the following new items:
''4130. Federal Prison Industry inmate labor.
''4131. Sale of products; contracts for the provision of labor; inmate wages.
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''4132. Elimination of mandatory source purchase requirement.
''4133. Procurement from the private sector.
''4134. Applicability of other law.
''4135. Definitions.''.
(2) CHAPTER 85.—The table of sections at the beginning of chapter 85 of title 18, United States Code, is amended by striking the item relating to section 1762.
106TH CONGRESS
1ST SESSION
H. R. 2551
To amend title 18, United States Code, to require Federal Prison Industries to compete for its Federal contracts to minimize unfair competition with private firms (depriving law-abiding workers of job opportunities), to save taxpayer dollars by empowering Federal contracting officers to be able to acquire commercial products that better meet agencies' needs, more quickly and at less cost without having to obtain permission from Federal Prison Industries, to further empower contracting officers to compel Federal Prison Industries to fully perform its contract obligations to the same extent as all other contractors, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 19, 1999
Mr. HOEKSTRA (for himself, Mr. FRANK of Massachusetts, Mr. COLLINS, Mrs. MALONEY of New York, Mr. HILLEARY, Mr. COBLE, Mr. KENNEDY of Rhode Island, Mr. SENSENBRENNER, Mr. CLAY, Mr. CUNNINGHAM, Mr. CONYERS, Mr. CHAMBLISS, Mr. ROEMER, Mr. SMITH of Texas, Mr. FROST, Mr. BALLENGER, Mr. EDWARDS, Mr. GILMAN, Mr. STUMP, Mr. BARCIA, Mr. MCINTOSH, Mr. DOYLE, Mr. SOUDER, Ms. STABENOW, Mr. EHLERS, Mr. WEYGAND, Mr. MANZULLO, Mr. BERRY, Mrs. CUBIN, Mr. FILNER, Mr. UPTON, Ms. WOOLSEY, Mr. CAMP, Mr. KLINK, Mr. EWING, Mr. DEAL of Georgia, Mr. KNOLLENBERG, Mr. NETHERCUTT, Mr. NORWOOD, Mr. MCKEON, Mr. SCHAFFER, Mr. TANCREDO, Mr. NEY, Mr. ROYCE, Mrs. MYRICK, Mr. BARTLETT of Maryland, Mr. COBURN, Mr. LINDER, Mr. SHADEGG, Mr. SAM JOHNSON of Texas, Mr. KINGSTON, Mr. HOSTETTLER, Mr. TERRY, and Mr. DUNCAN) introduced the following bill; which was referred to the Committee on the Judiciary
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A BILL
To amend title 18, United States Code, to require Federal Prison Industries to compete for its Federal contracts to minimize unfair competition with private firms (depriving law-abiding workers of job opportunities), to save taxpayer dollars by empowering Federal contracting officers to be able to acquire commercial products that better meet agencies' needs, more quickly and at less cost without having to obtain permission from Federal Prison Industries, to further empower contracting officers to compel Federal Prison Industries to fully perform its contract obligations to the same extent as all other contractors, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ''Federal Prison Industries Competition in Contracting Act of 1999''.
SEC. 2. GOVERNMENTWIDE PROCUREMENT POLICY RELATING TO PURCHASES FROM FEDERAL PRISON INDUSTRIES.
Section 4124 of title 18, United States Code, is amended to read as follows:
''§4124. Governmentwide procurement policy relating to purchases from Federal Prison Industries
''(a) IN GENERAL.—Purchases from Federal Prison Industries, Incorporated, a wholly owned Government corporation, as defined in section 9101(3)(E) of title 31, may be made by a Federal department or agency only in accordance with this section.
''(b) SOLICITATION AND EVALUATION OF OFFERS AND CONTRACT AWARDS.—(1) When a procurement activity of a Federal department or agency has a requirement for a specific product or service that is authorized to be offered for sale by Federal Prison Industries, in accordance with section 4122 of this title, and is listed in the catalog referred to in subsection (g), the procurement activity shall solicit an offer from Federal Prison Industries, if the purchase is expected to be in excess of the micro-purchase threshold (as defined by section 32(f) of the Office of Federal Procurement Policy Act (41 U.S.C. 428(f))).
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''(2) A contract award for such product or service shall be made using competitive procedures in accordance with the specifications and evaluation factors specified in the solicitation (or other request for offers), unless a determination is made by the Attorney General pursuant to paragraph (3).
''(3) The procurement activity shall negotiate with Federal Prison Industries on a noncompetitive basis for the award of a contract if the Attorney General determines that—
''(A) Federal Prison Industries cannot reasonably expect to receive the contract award on a competitive basis; and
''(B) the contract award is necessary to maintain work opportunities otherwise unavailable at the penal or correctional facility at which the contract is to be performed to prevent circumstances that could reasonably be expected to significantly endanger the safe and effective administration of such facility.
''(4) A contract award shall be made with Federal Prison Industries if the contracting officer for the procurement activity determines that—
''(A) the prison-made product or service to be furnished will meet the requirements of the procurement activity (including any applicable prequalification requirements and all specified commercial or governmental standards pertaining to quality, testing, safety, serviceability, and warranties);
''(B) timely performance of the contract can be reasonably expected; and
''(C) the contract price does not exceed a current market price.
''(5) A determination by the Attorney General pursuant to paragraph (3) shall be—
''(A) supported by specific findings by the warden of the penal or correctional institution at which a Federal Prison Industries workshop is scheduled to perform the contract;
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''(B) supported by specific findings by Federal Prison Industries regarding why it does not expect to win the contract on a competitive basis; and
''(C) made and reported in the same manner as a determination made pursuant to section 303(c)(7)
of the Federal Property and Administrative Services Act of 1949 (41 U.S.C. 253(c)(7)).
''(6) If the Attorney General has not made the determination described in paragraph (3) within 30 days after Federal Prison Industries has been informed of a contracting opportunity by a procurement activity, the procurement activity shall conduct a procurement for the product in accordance with the procedures generally applicable to such procurements by the procurement activity.
''(c) COMPETITIVE OFFERS FROM FEDERAL PRISON INDUSTRIES.—A timely offer made by Federal Prison Industries shall be considered for award in accordance with the applicable specification and evaluation factors specified in any solicitation (or other request for offers).
''(d) PERFORMANCE BY FEDERAL PRISON INDUSTRIES.—Federal Prison Industries shall perform its contractual obligations under a contract awarded by a Federal department or agency to the same extent as any other contractor.
''(e) FINALITY OF CONTRACTING OFFICER'S DECISION.—(1) A decision by a contracting officer regarding the award of a contract to Federal Prison Industries or relating to the performance of such contract shall be final, unless reversed on appeal pursuant to paragraph (2) or (3).
''(2) The Chief Executive Officer of Federal Prison Industries may appeal to the head of a Federal department or agency a decision by a contracting officer not to award a contract to Federal Prison Industries pursuant to subsection (b)(4). The decision of the head of a Federal department or agency on appeal shall be final.
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''(3) A dispute between Federal Prison Industries and a procurement activity regarding performance of a contract shall be subject to—
''(A) alternative means of dispute resolution pursuant to subchapter IV of title 5; or
''(B) final resolution by the board of contract appeals having jurisdiction over the procurement activity's contract performance disputes pursuant to the Contract Disputes Act of 1978 (41 U.S.C. 601 et seq.).
''(f) REPORTING OF PURCHASES.—Each Federal department or agency shall report purchases from Federal Prison Industries to the Federal Procurement Data System (as referred to in section 6(d)(4) of the Office of Federal Procurement Policy Act (41 U.S.C. 405(d)(4))) in the same manner as it reports to such System any acquisition in an amount in excess of the simplified acquisition threshold (as defined by section 4(11) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(11))).
''(g) CATALOG OF PRODUCTS.—Federal Prison Industries shall publish and maintain a catalog of all specific products and services that it is authorized to offer for sale. Such catalog shall be periodically revised as products and services are added or deleted by its board of directors (in accordance with section 4122(b) of this title).''.
SEC. 3. PUBLIC PARTICIPATION REGARDING EXPANSION PROPOSALS BY FEDERAL PRISON INDUSTRIES.
Section 4122(b) of title 18, United States Code, is amended—
(1) by redesignating paragraph (6) as paragraph (10); and
(2) by striking paragraphs (4) and (5) and inserting the following paragraphs:
''(4) A decision to authorize Federal Prison Industries to offer a new specific product or service or to expand the production of an existing product or service shall be made by its board of directors in conformance with the requirements of subsections (b), (c), (d), and (e) of section 553 of title 5, and this chapter.
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''(5)(A) Whenever Federal Prison Industries proposes to offer for sale a new specific product or service or to expand production of a currently authorized product or service, the Chief Operating Officer of Federal Prison Industries shall submit an appropriate proposal to the board of directors and obtain the board's approval before initiating any such expansion. The proposal submitted to the board shall include a detailed analysis of the probable impact of the proposed expansion of inmate-work activities by Federal Prison Industries on private sector firms and their noninmate workers.
''(B)(i) The analysis required by subparagraph (A) shall be performed by an interagency team on a reimbursable basis or by a private contractor paid by Federal Prison Industries.
''(ii) If the analysis is to be performed by an interagency team, such team shall be led by the Federal Procurement Data Center with representatives of the Department of Labor, the Department of Commerce, and the Small Business Administration.
''(iii) If the analysis is to be performed by a private contractor, the selection of the contractor and the administration of the contract shall be conducted by one of the entities references in clause (ii) as an independent executive agent for the board of directors.
''(C) The analysis required by subparagraph (A) shall identify and consider—
''(i) the number of vendors that currently meet the requirements of the Federal Government for the specific product or service;
''(ii) the proportion of the Federal Government market for the specific product or service currently furnished by small businesses during the previous 3 fiscal years;
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''(iii) the share of the Federal market for the specific product or service projected for Federal Prison Industries for the fiscal year in which production or performance will commence or expand and the subsequent 3 fiscal years;
''(iv) whether the industry producing the specific product or service in the private sector—
''(I) has an unemployment rate higher than the national average;
''(II) has a rate of employment for workers that has consistently shown an increase during the previous 5 years; or
''(III) has an import to domestic production ratio of 25 percent or greater;
''(v) the total volume of domestic production during each of the 5 previous years in the industry producing the specific product or service in the private sector;
''(vi) whether the specific product is an import-sensitive product;
''(vii) the requirements of the Federal Government and the demands of entities other than the Federal Government for the specific product or service during the previous 3 fiscal years;
''(viii) the projected growth or decline in the demand of the Federal Government for the specific product or service;
''(ix) the capability of the projected demand of the Federal Government for the specific product or service to sustain both Federal Prison Industries and private vendors; and
''(x) whether authorizing the production of the new product or performance of a new service will provide inmates with the maximum opportunity to acquire knowledge and skill in trades and occupations that will provide them with a means of earning a livelihood upon release.
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''(C)(i) The board of directors may not approve a proposal to authorize the production and sale of a new specific product or continued sales of a previously authorized product unless—
''(I) the product to be furnished is a prison-made product; or
''(II) the service to be furnished is to be performed by inmate workers.
''(ii) The board of directors may not approve a proposal to authorize the production and sale of a new prison-made product or to expand production of a currently authorized product if the product is—
''(I) produced in the private sector by an industry which has reflected during the previous year an unemployment rate above the national average; or
''(II) an import-sensitive product.
''(iii) The board of directors may not approve a proposal for inmates to provide a service in which an inmate worker has access to—
''(I) personal or financial information about individual private citizens, including information relating to such person's real property, however described, without giving prior notice to such persons; or
''(II) data that is classified, or that will become classified after being merged with other data.
''(iv)(I) Federal Prison Industries is prohibited from furnishing construction services relating to buildings, structures, or other real property.
''(II) For purposes of this clause, the term 'construction' has the meaning given such term by section 36.102 of the Federal Acquisition Regulation (48 CFR part 36.102), as in effect on January 1, 1999, including the repair, alteration, or maintenance of real property in being.
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''(6) To provide further opportunities for participation by interested parties, the board of directors shall—
''(A) give additional notice of a proposal to authorize the production and sale of a new product or expand the production of a currently authorized product in a publication designed to most effectively provide notice to private vendors and labor unions representing private sector workers who could reasonably be expected to be affected by approval of the proposal, which notice shall offer to furnish copies of the analysis required by paragraph (5) and shall solicit comment on the analysis;
''(B) solicit comments on the analysis required by paragraph (5) from trade associations representing vendors and labor unions representing private sector workers who could reasonably be expected to be affected by approval of the proposal to authorize the production and sale of a new product or expand the production of a currently authorized product; and
''(C) afford an opportunity, on request, for a representative of an established trade association, labor union, or other representatives of private industry to present comments on the proposal directly to the board of directors.
''(7) The board of directors shall be provided copies of all comments received on the expansion proposal.
''(8) Based on the comments received on the initial expansion proposal, the Chief Operating Officer of Federal Prison Industries may provide the board of directors a revised expansion proposal. If such revised proposal provides for expansion of inmate work opportunities in an industry different from that initially proposed, such revised proposal shall be subject to the public comment requirements of paragraph (6).
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''(9) The board of directors shall consider a proposal to authorize the sale of a new product or service (or to modify the volume of sales for a currently authorized product or service) and take any action with respect to such proposal, during a meeting that is open to the public, unless closed pursuant to section 5526 of title 5.
''(10) In conformity with the requirements of paragraphs (5) through (9) of this subsection, the board of directors may—
''(A) authorize the donation of products produced by Federal industries and available for sale; or
''(B) authorize the production of a new specific product for donation.''.
SEC. 4. SALES TO PRIVATE SECTOR FIRMS.
(a) IN GENERAL.—In accordance with subsections (a) and (b) of section 1761 of title 18, United States Code, Federal Prison Industries is prohibited from offering products or services as a subcontractor or supplier to a private for-profit business concern, notwithstanding that the product or service being furnished by such concern will ultimately be supplied to the United States Government, the government of the District of Columbia, an agency of a State government or any political subdivision of a State government, or an eligible not-for-profit organization.
(b) CLARIFYING AMENDMENT.—Section 1761 of title 18, United States Code, is amended—
(1) in subsection (a), by striking ''any goods, wares, or merchandise manufactured, produced, mined'' and inserting ''products manufactured, services furnished, or minerals mined'';
(2) in subsection (a), by striking ''any goods, wares, or merchandise manufactured, produced, mined'' and inserting ''products manufactured, services furnished, or minerals mined''.
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SEC. 5. DEDUCTIONS FOR VICTIM RESTITUTION AND OTHER PURPOSES.
Section 4126 of title 18, United States Code, is amended—
(1) by redesignating subsections (d), (e), and (f) as subsections (e), (f), and (g); and
(2) by inserting after subsection (c) the following new subsection:
''(d) Wages earned by an inmate worker of Federal Prison Industries shall be paid in the name of the inmate worker. Deductions, aggregating to not more than 80 percent of gross wages, shall be taken from the wages due for—
''(1) applicable taxes (Federal, State, and local);
''(2) payment of fines and restitution pursuant to court order;
''(3) payment of additional restitution for victims of the inmate's crimes (at a rate not less than 10 percent of gross wages);
''(4) allocations for support of the inmate's family pursuant to statute, court order, or agreement with the inmate;
''(5) allocations to a fund in the inmate's name to facilitate such inmate's assimilation into society, payable at the conclusion of incarceration; and
''(6) such other deductions as may be specified by the Director of the Bureau of Prisons.''.
SEC. 6. ALLOCATION OF PROFITS TO VOCATIONAL TRAINING.
(a) Section 4126 of title 18, United States Code (as amended by section 5) is further amended by adding at the end the following new subsection:
''(h) Not less than 20 percent of the gross profits of the corporation at the end of each fiscal year shall be allocated to fund vocational training for inmates without regard to the type of work activities to which they are assigned.''.
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SEC. 7. FEDERAL PRISON INDUSTRIES REPORT TO CONGRESS.
Section 4127 of title 18, United States Code, is amended to read as follows:
'' 4127. Federal Prison Industries report to Congress
''(a) IN GENERAL.—Pursuant to chapter 91 of title 31, the board of directors of Federal Prison Industries shall submit an annual report to Congress on the conduct of the business of the corporation during each fiscal year and the condition of its funds during the fiscal year.
''(b) CONTENTS OF REPORT.—In addition to the matters required by section 9106 of title 31, and such other matters as the board considers appropriate, a report under subsection (a) shall include—
''(1) a statement of the amount of obligations issued under section 4129(a)(1) of this title during the fiscal year;
''(2) an estimate of the amount of obligations that will be issued in the following fiscal year;
''(3) an analysis of—
''(A) the corporation's total sales for each specific product and type of service sold to the Federal agencies and the commercial market;
''(B) the total purchases by each Federal agency of each specific product and type of service;
''(C) the corporation's share of such total Federal Government purchases by specific product and type of service; and
''(D) the number and disposition of disputes submitted to the heads of the Federal departments and agencies pursuant to section 4124(e) of this title;
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''(4) an analysis of the inmate workforce that includes—
''(A) the number of inmates employed;
''(B) the number of inmates utilized to produce products or furnish services sold in the commercial market;
''(C) the number and percentage of employed inmates by the term of their incarceration; and
''(D) the various hourly wages paid to inmates employed with respect to the production of the various specific products and types of services authorized for production and sale to Federal agencies and in the commercial market; and
''(5) data concerning employment obtained by former inmates upon release to determine whether the employment provided by Federal Prison Industries during incarceration provided such inmates with knowledge and skill in a trade or occupation that enabled such former inmate to earn a livelihood upon release.
''(c) PUBLIC AVAILABILITY.—Copies of an annual report under subsection (a) shall be made available to the public at a price not exceeding the cost of printing the report.''.
SEC. 8. DEFINITIONS.
Chapter 307 of title 18, United States Code, is amended by adding at the end the following new section:
'' 4130. Definitions
''As used in this chapter—
''(1) the term 'assembly' means the process of uniting or combining articles or components (including ancillary finished components or assemblies) so as to produce a significant change in form or utility, without necessarily changing or altering the component parts;
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''(2) the term 'current market price' means, with respect to a specific product, the fair market price of the product within the meaning of section 15(a) of the Small Business Act (15 U.S.C. 644(a)), at the time that the contract is to be awarded, verified through appropriate price analysis or cost analysis, including any costs relating to transportation or the furnishing of any ancillary services;
''(3) the term 'import-sensitive product' means a product which, according to Department of Commerce data, has experienced competition from imports at an import to domestic production ratio of 25 percent or greater;
''(4) the term 'labor-intensive manufacture' means a manufacturing activity in the private sector in which the ratio of the value of direct labor to the value of the product prior to shipment exceeds 20 percent;
''(5) the term 'manufacture' means the process of fabricating from raw or prepared materials, so as to impart to those materials new forms, qualities, properties, and combinations;
''(6) the term 'prison-made products' means specific products that require labor-intensive manufacture or assembly employing Federal prison inmates for not less than 75 percent of the hours of direct labor required for the production of the product;
''(7) the term 'reasonable share of the market' means a share of the total purchases by the Federal departments and agencies, as reported to the Federal Procurement Data System for—
''(A) any specific product during the 3 preceding fiscal years, that does not exceed 20 percent of the Federal market for the specific product; and
''(B) any specific service during the 3 preceding fiscal years, that does not exceed 5 percent of the Federal market for the specific service;
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''(8) the term 'services' has the meaning given the term 'service contract' by section 37.101 of the Federal Acquisition Regulation (48 CFR part 36.102), as in effect on July 1, 1997;
''(9) the term 'specific product' means a product that is designed and manufactured to meet requirements distinct in function and predominant material of manufacture from another product, as described by—
''(A) the 6-digit classification for the product in the 1997 North American Industry Classification System (or any revisions to such system) published by the Office of Management and Budget; and
''(B) for purposes of reporting on sales by Federal Prison Industries, the current National Stock Number assigned to such product under the Federal Stock Classification System (including group, part number and section), as determined by the General Services Administration; and
''(10) the term 'specific service' means a type of service included within one of the categories of services used by Federal agencies in reporting to the Federal Procurement Data System, as described in the current edition of the Product and Service Code Manual issued by the Federal Procurement Data Center of the General Services Administration as Executive Agent for the Administrator for Federal Procurement Policy (as referred to in section 6(d)(4) of the Office of Federal Procurement Policy Act (41 U.S.C. 405(d)(4))).''.
SEC. 9. IMPLEMENTATION IN THE FEDERAL ACQUISITION REGULATION.
(a) PROPOSED REVISIONS.—Proposed revisions to the Governmentwide Federal Acquisition Regulation to implement the amendments made by this Act shall be published not later than 60 days after the date of the enactment of this Act and provide not less than 60 days for public comment.
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(b) FINAL REGULATIONS.—Final regulations shall be published not later than 180 days after the date of the enactment of this Act and shall be effective on the date that is 30 days after the date of publication.
(c) PUBLIC PARTICIPATION.—The proposed regulations required by subsection (a) and the final regulations required by subsection (b) shall afford an opportunity for public participation in accordance with section 22 of the Office of Federal Procurement Policy Act (41 U.S.C. 418b).
SEC. 10. RULE OF CONSTRUCTION.
Subsection (e) of section 4124 of title 18, United States Code, as amended by section 2, is not intended to alter any rights of any offeror other than Federal Prison Industries to file a bid protest in accordance with other law or regulation in effect on the date of the enactment of this Act.
SEC. 11. EFFECTIVE DATE AND APPLICABILITY.
(a) EFFECTIVE DATE.—Except as provided in subsection (b), this Act and the amendments made by this Act shall take effect on the date of enactment of this Act.
(b) APPLICABILITY.—Section 4124 of title 18, United States Code, as amended by section 2, shall apply to any requirement for a product or service offered by Federal Prison Industries needed by a Federal department or agency after the effective date of the final regulations issued pursuant to section 6(b), or after September 30, 2000, whichever is earlier.
SEC. 12. CLERICAL AMENDMENTS.
The table of sections for chapter 307 of title 18, United States Code, is amended—
(1) by amending the item relating to section 4124 to read as follows:
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''4124. Governmentwide procurement policy relating to purchases from Federal Prison Industries.'';
(2) by amending the item relating to section 4127 to read as follows:
''4127. Federal Prison Industries report to Congress.'';
and
(3) by adding at the end the following new item:
''4130. Definitions.''.
Mr. MCCOLLUM. With that, I yield for any opening remarks you may have, Mr. Scott.
Mr. SCOTT. Thank you, Mr. Chairman.
I am pleased to join you in convening this hearing on the Federal Prison Industries program, or the FPI.
First, I would like to welcome my colleague, Congressman Pete Hoekstra, with whom I serve on the House Education Workforce Committee's Subcommittee on Oversight and Investigations, which he chairs. I look forward to his testimony today.
We have in the bills before us two distinct proposals for restructuring the Federal prison industries program. One proposal emphasizes the potential harm to society associated with operating a Federal Prison Industries program. The other enhances the potential benefits to society of operating such a program. Both bills seek to recognize the importance of both potentials, though in markedly different ways.
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I am a cosponsor with you, Mr. Chairman, on the bill that emphasizes the potential benefits of the prison industries program, and that is for a number of reasons. First, there is a security benefit to the Federal prison system. FPI keeps inmates productively occupied and reduces inmate idleness and the violence and disruptive behavior associated with it.
Second, FPI programs provide inmates with training and experience and develop job skills and a strong work ethic. BOP's research has confirmed the value of FPI as a correctional program. For example, a long-term post-release employment study done by the Bureau of Prisons has found that inmates who were released as long as 8 to 12 years ago and who participated in industries work or vocational training programs were 24 percent less likely to be recommitted to Federal prisons than a comparable group of inmates who did not have such an opportunity.
Another benefit of the program is that a portion of the funds earned by the prisoners will be paid to fines, restitution and support orders. In 1998, $2 million were paid in fines, restitution or other legal obligations. Federal criminal fines go into the victim's compensation fund. So, much of the money benefits victims of crime.
Equipment, materials, supplies and other raw materials used to make prison industry products are purchased from the private sector. Over 95 percent of every dollar earned by FPI is reinvested into the stream of commerce for goods and services, and FPI has received commendations for the extent of its purchases from small, minority, and disadvantaged, and women-owned businesses as compared to other Federal agencies. Jobs and other economic activities are not only generated by the purchase of these materials, but also by the delivery and other handling of them. Also, the employees of FPI are a part of that stream of commerce, at no cost to the government.
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I have long been aware of the value of the prison industries program. Prior to my election in Congress, I was a member of the Virginia General Assembly where I chaired a joint senate/house subcommittee on prison industries. Many of the same issues before us today were, and continue to be, associated with the Virginia prison program and those of other States as well, and the same benefits are associated with State prison industries program as we have with the Federal program.
We must be mindful of the fact that over 95 percent of inmates will return to society upon the completion of their sentence. With the Federal prison population now at an all-time high, and with the increase of more than 50 percent expected in the next 7 years, we can ill-afford to ignore the impact of a program which has proven itself to be a crime reduction mechanism.
We have a full complement of knowledgeable witnesses today. Their testimony spans the breadth of the diversity of views and interests regarding prison industries. These views and interests run from restricting FPI to its lowest level to eliminating all the barriers to inmates being an integral part of the work force.
So I look forward to hearing the testimony, Mr. Chairman, and working with you to ensure that the prison industries maximizes its benefits to the greater society while avoiding any unfair competition with industry and labor.
Thank you.
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Mr. MCCOLLUM. Thank you very much, Mr. Scott.
[The prepared statement of Mr. Scott follows:]
PREPARED STATEMENT OF HON. ROBERT C. SCOTT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VIRGINIA
Mr. Chairman, I am pleased to join you in convening this hearing on the Federal Prison Industries program, or FPI.
First, I would like to welcome my colleague, Congressman Pete Hoekstra, whom I serve with on the House Education and the Workforce Committee's Subcommittee on Oversight and Investigations, of which he is Chairman. I look forward to hearing his testimony.
We have in the bills before us today two distinct proposals for restructuring the federal prison industries program. One proposal emphasizes the potential harms to society associated with operating a federal prison industries program; the other emphasizes the potential benefits to society of operating the program. Both bills seek to recognize the importance of both potentials, though in markedly different ways.
I am a cosponsor of the bill that emphasizes the potential benefits of prison industries, HR 2558. And although I am not adverse to the fact that prison industries programs benefit the inmates who participate in them, my reasons for supporting these programs are based on the benefits of the programs to others.
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First, there is a security benefit to the federal prison system. FPI keeps inmates productively occupied and reduces inmate idleness and the violence and disruptive behavior associated with it. Second, FPI programs provide inmates with training and experience that develop job skills and a strong work ethic. BOP's research has confirmed the value of FPI as a correctional program. For example, a long-term post-release employment study by the Bureau of Prisons has found that inmates who were released as long as 8 to 12 years ago and who participated in industries work or vocational training programs were 24 percent less likely to be recommitted to federal prisons than a comparison group of inmates who had no such training.
Another benefit of the program is that a portion of the funds earned by the prisoners is paid against pending fines, restitution and support orders. In 1998, $2 million were paid in fines, restitution and other legal obligations. Federal criminal fines go into the victim's compensation fund, so much of the money benefits victims of crime.
Of course, the equipment, materials, supplies and other raw materials used to make prison industries products are purchased from the private sector. Over 95% of every dollar earned by FPI are reinvested into the stream of commerce for goods and services. And FPI has received commendations for the extent of its purchases from small, minority, disadvantaged and women-owned businesses as compared to federal agencies. Jobs and other economic activities are not only generated by the purchases of these materials, but also by the delivery and other handling of them. Also, the employees of FPI are a part of that stream of commerce, at no cost to the government.
I have long been aware of the value of prison industries programs. Prior to my election to Congress, I was a member of the Virginia General Assembly where I chaired ajoint Senate/House subcommittee on prison industries. Many of the same issues before us today were, and continue to be, associated with the Virginia prison industries program and those of other states, as well. And the same benefits are associated with state prison industries as with federal prison industries.
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We must be mindful of the fact that over 95% of inmates return to society at the completion of their sentence. With the federal prison population now at an all-time high and with an increase of more than 50% expected over the nest 7 years, we can ill-afford to ignore the impact of a program which has proven itself to be a crime reduction mechanism.
We have a full complement of knowledgeable witnesses today. Their testimony spans the breadth of the diversity of views and interests regarding prison industries. Those views and interests run from restricting FPI below its current level to eliminating all the barriers to inmates being an integral part of the workforce.
I look forward to hearing the testimony, Mr. Chairman, and to working with you in assuring that prison industries maximizes it benefits to the greater society while avoiding any unfair competition with industry and labor. Thank you, Mr Chairman.
Mr. MCCOLLUM. Mr. Gekas, do you have opening remarks?
Mr. GEKAS. I thank the Chair. I, too, welcome the gentleman from Michigan, who will lead off what I believe will be an interesting set of witnesses. No matter what approach we ultimately adopt, or if we adopt none because we find ourselves in a position where we can agree on nothing, though I hope that doesn't happen here, everyone understands that the whole purpose of the proposals and the current status of the prison industries work is to prevent recidivism as much as possible; to keep people busy within the prison walls, thus creating an atmosphere of stability within the walls and predictability for when they get outside the walls for the purpose of blending in with the mainstream citizenry whom they had abandoned while in prison.
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So we are going to profit from these hearings today and from the work of the Chairman and the Minority Ranking Member, and I look forward to the remainder of the day. Thank you.
Mr. MCCOLLUM. Thank you, Mr. Gekas.
Mr. Coble, do you have any opening remarks?
Mr. COBLE. Mr. Chairman, I apologize for my belated arrival. I was at another meeting. I will be very brief.
On the tail end of George's comments, I am all for rehabilitation. I think most everyone in the room would be, but I have always felt, and will probably go to my grave thinking it, that this is a situation that is geared to the detriment of private enterprise back home.
I represent, Mr. Chairman, as you know, thousands of workers who earn their living in furniture factories and in the textile mills, and I am confident that FPI enjoys—good to see you, Madam Director, and you have heard me say it before—I am convinced, Mr. Chairman, that they enjoy the luxury of a benefit.
I hope that we can strike some sort of balance and continue the importance of rehabilitation with our inmates to prepare them for a fulfilling life when they are released, but I don't want to do it to cause my textile and furniture folks back home to lose their jobs.
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I guess that is the direction I come from, Mr. Chairman. I thank you for recognizing me.
Mr. MCCOLLUM. You are quite welcome, Mr. Coble.
[The prepared statement of Mr. Coble follows:]
PREPARED STATEMENT OF HON. HOWARD COBLE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH CAROLINA
Mr. Chairman and Members of the Subcommittee,
While I support efforts to retain prisoners to become productive members of society, I strongly believe that such efforts should take good care not to threaten the jobs of hard-working Americans. By law, Federal Prisons Industries (FPI) products must be purchased by federal agencies. This ''sole source'' requirement gives the FPI a competitive advantage over private manufactures. Two major items which are produced by FPI are textiles and furniture. My district is home to more than 40,000 textile and furniture workers who are required to compete against FPI inmates for federal contracts.
For these reasons, I am greatly concerned about FPI's proposal to begin selling inmate-furniture services in the commercial marketplace. I am equally concerned with FPI's publication in January of a regulation that professes to be the codification of ''existing standards and procedures utilized to accomplish FPI's mission.'' It is my opinion that FPI is in need of reform before it is allowed to expand.
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In previous Congresses, I have sponsored and co-sponsored legislation to do just that. Again this Congress, I am a cosponsor of H.R. 2551, the Federal Prison Industries Competition in Contracting Act, which would remove FPI's mandatory source status for products sold to the federal government. While I realize Rep. McCollum has introduced legislation which would alter the current FPI system, I hope my colleagues will duly consider H.R. 2551 and the positive it will have on American business and workers who compete with FPI.
Mr. MCCOLLUM. Mr. Hutchinson, do you wish to make any opening remarks?
Mr. HUTCHINSON. No, Mr. Chairman. I will look forward to the testimony.
Mr. MCCOLLUM. Thank you very much.
Well, with great pleasure I welcome our first witness and our only witness on this panel. It has been stated a couple of times, Pete, we are glad to have you here. You are a friend indeed of all of us in this Congress.
The Representative from Michigan's Second Congressional District was first elected to the House in 1992. Pete Hoekstra was born in The Netherlands and immigrated to Holland, Michigan, with his family when he was 4 years old. He graduated from Hope College. Pete Hoekstra then earned his MBA from the University of Michigan before going to work at Herman Miller, Inc., an office furniture manufacturer based in Zeeland, Michigan. Congressman Hoekstra rose to the level of vice president in the company before running for Congress in 1992.
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He is the sponsor of H.R. 2551, one of the two bills before us today, and you are welcome to submit your entire testimony to the record. Without objection, it will be admitted, and you may give us any portion thereof you wish.
STATEMENT OF HON. PETER HOEKSTRA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN
Mr. HOEKSTRA. I thank the chairman, Ranking Member, my other colleagues, for inviting me to be here this morning and talk about an issue that obviously we have been in dialogue on over the last at least 3 years. Maybe it has been as many as 4 to 5 years. I will submit the entire testimony for the record and take parts of it, but thank you very much for having the hearing.
I think that as you and I have had the discussion over the last couple of years, we both recognize the benefits that prison work programs can bring to reduce recidivism; also in securing the safety of the prisons. Our bill also recognizes the harm that prison industries and prison work efforts may do to the private sector. As the largest program, FPI provides probably the clearest example, I think, of what can go wrong.
First, we both talked about this issue, the mandatory sourcing. FPI holds the Federal Government captive. A Federal agency must actually obtain FPI's permission before being able to solicit offers from private vendors. This is so even if the Federal agency has determined, through market analysis, that a commercial product better meets the buying agency's mission needs, can be delivered more quickly, and cost less, even if it is substantially less.
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Congress and the administration, working in concert, have adopted procurement practices to get the best value for the taxpayers' dollars. Their mantra is faster, better, cheaper, and it is often repeated, but it doesn't apply to FPI, with its mandatory source. FPI, rather than the buying agency, can determine if FPI's product and delivery schedule meets the agency's mission needs. FPI, rather than the buying agency, determines the price that the agency will pay to FPI.
By statute, competition is absolutely foreclosed. Private sector firms can't even bid on contracts claimed by FPI, even though these contracting opportunities are funded by their own taxpayer dollars. I believe, and I think my tax cosponsors believe, that is unfairness in the extreme.
The end result is law-abiding workers lose job opportunities, sometimes their very jobs, to provide opportunities for inmates. The current system can't be explained to those hit by FPI's unfair competition. It is simply indefensible. Let me give you an example.
Last week I had the opportunity to visit Glamour Gloves, went there with Representative Maloney. This is the last union glove manufacturer in New York City, started in 1954 by an immigrant. In 1997, FPI proposed an expansion that would have put them out of business. Confronted by the outrage, the size of FPI's expansion was scaled back, but still, when we visited this company, there was 25 fewer Glamour Gloves employees today than there were 2 years ago.
The 120 work ers of Virginia Metal Industries of Orange, Virginia, weren't that lucky. VMI closed its doors earlier this year when it was foreclosed from supplying partitions for the multibillion-dollar Pentagon renovation.
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A similar fate befell the work ers at an Alabama plant of American Apparel Manufacturers, which was closed when FPI expanded its production of the military clothing items they were manufacturing. The work ers at another of American Apparel's Alabama plants may shortly face the same fate. American Apparel's workforce has declined from 1,200 to 800. Explain mandatory sourcing to the 400 people of American Apparel's work force who have lost their jobs.
Fifty workers at Tenere Industries plant in LaFollette, Tennessee, also got their pink slips when FPI deprived their employer of the opportunity—not the opportunity to supply, they lost the opportunity to bid on new orders for the military clothing items they were producing.
General Engineering Services of Clayton County, Georgia, a manufacturer of precision metal products, specifically shipping containers for Air Force missiles, also fell victim to FPI's relentless efforts to create work opportunities for inmates. With its mandatory source status, FPI was able to claim all orders for the types of shipping containers General Engineering had been supplying. The firm closed its doors, 150 jobs gone.
Only by good luck did Tom Tyson, president of a Pontiac, Michigan, firm that manufactures specialized engine components for Army vehicles learn that FPI planned to take claim to this type of work, foreclosing him from contracts that comprised over 50 percent of his annual sales. Large company, now small company. Sixteen inner-city workers were saved by his hard fight.
Ironically, Mr. Chairman, your bill, H.R. 2558, repeals the provision which provides an opportunity for public comment on expansion proposals. While I believe that the FPI board of directors is informationally captive of the FPI staff, board approval of FPI expansion proposals should be strengthened rather than scrapped.
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Your bill would also extend, upon enactment, FPI's mandatory source status to services, the undisputed growth market within the Federal Government. FPI would be given an absolute lock on these contracting opportunities. With FPI able to take service contracts, displaced Federal employees would be deprived of their right of first refusal for employment with the contractor performing their functions.
The Hoekstra-Frank-Collins-Maloney bill requires FPI to compete for all of its Federal contracts. To protect prison guards, it does provide special authority for contract awards to FPI on a noncompetitive basis, when necessary, to maintain prison safety. Justification for its use is to be provided by prison wardens.
Phil Glover, who is the president of the Council of Prison Locals, who will be testifying later, has repeatedly stated to my staff that prison guards support the Hoekstra-Frank-Collins-Maloney bill. It addresses the safety concerns of his members. It protects noninmate workers. It stops FPI's various abuses of its captive Federal agency customers. With fundamental change, other AFGE members will continue to have to live with shoddy and overpriced FPI goods. As you will no doubt hear, he does strongly advocate changing H.R. 2551 to provide more FPI inmate work opportunities. During his most recent visit, he urged letting inmates perform commercial work currently performed by foreign workers, provided noninmate workers were protected from displacement.
Our bill protects the Federal buying agency. As with every other contractor, the buying agency should be, and we would enable it to be, the determiner of the agency's mission, and if their needs are met by FPI's product or service, and whether its proposed delivery schedule meets its requirements. For the first time, the price the agency has to pay FPI can and will be determined by competition.
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Under our bill, FPI will be required to perform its contractual obligations fully and to the satisfaction of the buying agency. FPI will no longer be able to judge the adequacy of its own performance.
H.R. 2558 does not alter a single word of the statutory authority that provides the basis of FPI's status as a mandatory source. Rather, it only requires the Attorney General to submit a plan for FPI to voluntarily waive future use of its statutory status as a mandatory source within 7 years. H.R. 2558 does not phase out the use of FPI's mandatory source status. It is only an item to be addressed in the plan.
Neither does H.R. 2558 cap the amount of sales FPI can take through its unchanged, statutorily-based status as a mandatory source. It only requires that the plan prohibit FPI from producing a new product or significantly expanding production of a currently authorized product if the sales of such products are to be made using FPI's mandatory source status. This is under policies approved by FPI's board of directors.
I think in the past our experience has been that this protection is meaningless. To FPI, a newly offered item is not a new product if it falls within one of some 100 broad classes of approved products, each of which may encompass literally hundreds of individual items. Under the same FPI policies, production increases of up to 15 percent for an individual item within an approved class is not considered to be significant.
Mr. Chairman, the congressional landscape is littered with examples of legislative directives to the executive branch which have either been ignored, delayed or resulted in an other-than-intended submission. If FPI fails to comply, it only faces congressional ire, expressed by this committee or individuals like me or you. A couple weeks ago, I had the opportunity to listen to Chairman Hyde's testimony before the Rules Committee. I wasn't left with the impression that he found the Justice Department wholly cooperative.
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Further, Mr. Chairman, H.R. 2558 expressly forecloses any judicial enforcement by adversely affected noninmate workers or the firms that employ them. I have to believe that this provision was suggested by FPI's career staff.
The claim that 2558 protects the jobs of law-abiding workers by repatriating commercial work that is currently being performed by foreign workers doesn't hold water.
The claim that 2558 could generate 3.8 billion in revenues to offset the costs of incarcerating the 1.8 million inmates held in Federal and State institutions, if only 40 percent of those inmates work at minimum wages under the broad new authority to sell products and services in the commercial service, it also does not stand scrutiny.
Under 2558 as we read it, a private firm using inmate labor to produce a product or provide a service is exempt from paying the minimum wage if the work is currently being performed offshore. This puts American firms offering the same type of commercial product or service at a huge competitive disadvantage.
H.R. 2558 does not provide any real protection against law-abiding workers losing their jobs so that a private firm can use FPI inmate workers. A displaced noninmate worker would have to depend on FPI for help, since H.R. 2558 expressly forecloses any legal challenge by the displaced workers.
H.R. 2558, the bill even grants the Attorney General the discretion to nullify the changes made by the legislation on the third and fifth anniversary of the date of enactment if FPI is employing less than 25 percent of the work-eligible inmates. This means that law-abiding workers and the firms that employ them can expect substantial and sustained FPI expansion. Why? FPI employed approximately 18 percent of the work-eligible inmates in 1998 and hasn't attained 25 percent for almost a decade.
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H.R. 2558 also grants State and local prison industry programs new authority to sell in the commercial market. This new commercial sales authority is exempt from even the limited protections for noninmate workers applicable to commercial sales.
To conclude, Mr. Chairman, I believe that H.R. 2551 is good for the taxpayer, for FPI's Federal agency customers, and for law-abiding workers and to the firms that employ them. That view is shared by organized labor and virtually every segment of the business community.
With your permission, I would like to submit for the record a current list of organizations that support enactment of H.R. 2551 and some explanatory materials regarding the bill.
Mr. MCCOLLUM. Without objection, it is so ordered.
[The information referred to follows:]
FEDERAL PRISON INDUSTRIES COMPETITION IN CONTRACTING ACT OF 1999 (H.R.2551)
SUMMARY
The proposed ''Federal Prison Industries Competition in Contracting Act of 1999'' protects private-sector firms, especially small businesses, and their law-abiding workers from Federal Prison Industries, Inc. (FPI), by ftindamentally reforming FPI's 1934 authorizing statute. The bill eliminates FPI's unique preferences in Federal contracting, which enable FPI to compel its Federal agency ''customers'' to buy an FPI product on a non-competitive basis, even if commercial products better meet the agency's mission need, can be acquired more quickly and at substantially less cost from commercial suppliers on a competitive basis.
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SPECIFICALLY, THE BILL WOULD
make FPI less predatory and a more accountable player in the Federal Government market, by
— requiring FPI to compete for its contracts, by eliminating FPI's status as a of mandatory source'',
— unless the Attorney-General authorizes the sole-source award of a specific contract, based upon a finding by the warden of the correctional facility at which the contract's work is to be performed that the work is essential to avoid a prison disturbance, thereby protecting prison guards;
protect taxpayer dollars and the operating budgets of FPI's Federal agency ficustomers'', notably scarce ''readiness'' dollars at DOD, by-
— eliminating FPI's ability to overcharge by specifying that FPI's price cannot exceed a fair market price (as determined by the agency contracting officer, generally through competition), replacing the existing standard which permits FPI to charge any price that doesn!t exceed the highest price offered to the Government (even if purchases haven't actually been made at that price);
— empowering agency contracting officers, rather than FPI, to determine if FPI's offered product or service best meets the buying agency's mission needs in terms of quality and time of delivery, 00
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— empowering the buying agency, rather than FPI, to determine the adequacy of FPI's performance after getting the contract;
enhance substantially the opportunity for public participation in the process by which FPI is authorized to produce a new product (or expand its production of a currently authorized product), and extends the process to services, a Federal market in which FPI plans to grow substantially; and
specify that FPI's Board of Directors cannot authorize expansion of FPI production under certain circumstances (e.g., if FPI's market share would exceed 20 percent of the Government market for a specific item or five percent for a class of services).
OTHER KEY PROVISIONS OF THE BILL—
prohibit FPI from selling services in the commercial market by making explicit that the 65-year old statutory prohibition on the commercial sale of the results of inmate labor applies to services as well as to products, reversing a flimsy 1998 interpretation of the statute's legislative history, some of the ''new'' analysis'written by FPI's own General Counsel, which purports to grant FPI such commercial sales authority;
make explicit that FPI is prohibited from offering products or services as a subcontractor to a private for-profit business concern, notwithstanding that the product or service being fin-nished will ultimately be supplied to the Federal Goverriment;
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authorize FPI to produce products or provide services to be donated to meet public needs that will not be met by private-sector for-profit businesses;
enhance deductions from the wages of inmate workers of FPI to pay restitution to their crime victims, support the inmate's family, and help accumulate a ''gate fund'' to facilitate reintegration into society upon release;
require better reporting of FPI sales to its Federal agency customers;
specify data to be included in FPI's annual report to Congress to perinit Congress and the public to better assess the impact of FPI on private sector firms and their law-abiding workers; and
define key terms, currently undefined in FPI's authorizing statute.
Overall, the bill implements-
the recommendation contained in the September 1993 Report of the Vice President Gore's National Performance Review, which also called for the elimination of FPI's mandatory source status; and
a ''Top-10'' recommendation of the 1995 White House Conference on Small Business, relating to unfair government competition.
Business organizations supporting the legislation:
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Aerospace Industries Association
American Apparel Manufacturers Association
American Electronics Association
American Furniture Manufacturers
Association American Society of Interior Designers
American Subcontractors Association
American Traffic Safety Services Association
Associated Builders and Contractors
Associated General Contractors of America
BIFMA International
Business Products Industry Association
Coalition for Government Procurement
Computing Technology Industry Association
Contract Services Association
Industrial Fabrics Association International
Industrial Safety Equipment Association
International Hand Protection Association
Management Association for Private Photogrammetric Surveyors
National Association of Manufacturers
National Association of Uniform Manufacturers and Distributors National Center for Fair Competition
National Defense Industrial Association
National Emergency Equipment Dealers Association
National Federation of Independent Business
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Quarters Furniture Manufacturers Association
Small Business Legislative Council
Textile Rental Services Association U.S.
Chamber of Commerce
U.S. Hispanic Chamber of Commerce
AND
the ''Federal Prison Industries Competition in Contracting Coalition''with over 1,000 members across the Nation, including individual companies hit by unfair competition from FPI, local chambers of commerce, and other regional business associations.
Working in Cooperation with Organized Labor:
AFL-CIO, its Building and Construction Trades Department, and affiliated unions, especially IAM (International Association of Machinists and Aerospace Workers); UNITE! (Union of Needletrades, Industrial, and Textile Employees), and the UAW (United Automobile, Aerospace and Agricultural Implement Workers of America).
Mr. HOEKSTRA. We talked with the business and the labor community about expanding the services and the products of FPI. I can tell you, with the people that we have talked to, the proposal was almost universally unequivocally rejected. Why? Simply they have an abiding distrust of FPI that is based on years of bad experiences. Federal Prison Industries and their management have not fostered and have not exhibited a management track record that would enable any of these groups to have trust or increase trust in Federal Prison Industries. That distrust was reinforced last year by FPI's new and self-generated legal interpretation that granted them authority to initiate the sale of services in the commercial marketplace, reversing 65 years of practice that such sales were statutorily prohibited. This year, FPI further reinforced that abiding distrust by proposing regulations that sought to give the force and effect of law to a broad array of highly expansive policy pronouncements by FPI's board of directors and its career management staff.
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In essence, H.R. 2558 calls upon business and labor to trust FPI. I think that is an unreasonable expectation.
Just in summary, Mr. Chairman, I suspect that you will subsequently hear, and I think that it will be a key part of the debate over the coming months, that the vast majority of the business community and organized labor will view H.R. 2558's blind trust in FPI and its State counterparts as simply unrealistic.
I do thank you for having the hearing. I do thank you for what I hope will be a process that will enable these two different approaches to move through the process, move through subcommittee, move through committee, and hopefully reach the floor of the House sometime this fall. As we move through, they may stay competing ideas, but we may be able to reach a compromise that takes the best of both bills and enables us to do that. But right now and over the last 3 years as we have been talking about this, we have been far apart, and we haven't found a way to come together, and if that continues that way, at least I hope we have an opportunity to debate this on the floor and to resolve the issue and to move forward.
Mr. MCCOLLUM. Well, thank you very much, Congressman Hoekstra.
[The prepared statement of Mr. Hoekstra follows:]
PREPARED STATEMENT OF HON. PETER HOEKSTRA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN
Mr. Chairman, thank you for holding today's legislative hearing regarding our starkly differing bills on how to fundamentally change Federal Prison Industries (FPI). Your bill would grant sweeping new authority for prison industry programs, Federal, state and local, to sell products and services in the commercial market.
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At the outset, I want to make clear that the proponents of H.R. 2551 agree that inmate work programs, including FPI, combat inmate idleness. Putting inmates to work helps to make prisons safer. In combination with vocational education, inmate work experiences, including those in prison industry programs, have been shown to increase, in a small way, the likelihood that an inmate will successfully return to society. Even small reductions in recidivism do pay dividends to public safety.
Unlike other inmate work opportunities relating to the operation and maintenance of the prison, prison industry programs can and do inflict harm. As the largest program, FPI provides the clearest examples of what can go wrong.
First, FPI holds the Federal Government captive. A Federal agency must actually obtain FPI's permission before being able to solicit offers from private vendors. This is so even if the Federal agency has determined, through market analysis, that a commercial product better meets the buying agency's mission needs, can be delivered more quickly, and costs less, even substantially less.
Congress and the Administration, working in concert, have adopted procurement practices to get the ''best value'' for the taxpayers' dollars. The mantra of ''faster, better, cheaper'' is often repeated. But it does not apply to FPI, with its ''mandatory source.'' FPI, rather than the buying agency, can determine if FPI's product and delivery schedule meets the agency's mission needs. FPI, rather than the buying agency, determines the price that the agency will pay to FPI. Examples of overpricing by FPI, late deliveries, and FPI products inferior in quality to commercial items are common, and costly. FPI is ''self supporting'' because it is free to prey on its captive Federal agency ''customers.''
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By statute, competition is absolutely foreclosed. Private-sector firms can't even bid on contracts claimed by FPI, even though these contracting opportunities are funded by their tax dollars. That's tax unfairness in the extreme.
Their law-abiding workers lose job opportunities—and sometimes their very jobs—to provide work opportunities for inmates. The current system can't be explained to those hit by FPI's unfair competition. It is simply indefensible.
I recently visited Glamour Gloves, the last union glove manufacturer in New York City. In 1997, FPI proposed an expansion that would have put them out of business. Confronted by outrage, the size of FPI's expansion was scaled back, but 25 Glamour Glove workers still lost their jobs due to FPI.
The 120 workers of Virginia Metal Industries, Inc. of Orange, Virginia, weren't so lucky. VMI closed its doors early this year when it was foreclosed from supplying partitions for the multi-billion dollar Pentagon renovation.
A similar fate befell the workers at a Alabama plant of American Apparel Manufacturers, which was closed when FPI expanded its production of the military clothing items they were manufacturing. The workers at another of American Apparel's Alabama plants may shortly face the same fate. American Apparel's workforce has declined from 1,200 to 800,
Fifty workers at Tenere Industries plant in LaFollette, Tennessee, also got their pink slips when FPI deprived their employer of the opportunity to bid on new orders for the military clothing items they were producing. Alternative job opportunities in rural east Tennessee are simply non-existent.
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General Engineering Services of Clayton County, Georgia, a manufacturer of precision metal products, specifically shipping containers for Air Force missiles, also fell victim to FPI's relentless efforts to create work opportunities for inmates. With its mandatory source status, FPI was able to claim all orders for the types of shipping containers General Engineering had been supplying. Weakened by substantial legal costs from fighting FPI's actions in Federal court and foreclosed from bidding on any future Air Force orders, the firm closed its doors and 150 jobs were lost.
Only by good luck did Tom Tyson, president of a Pontiac, Michigan, firm that manufactures specialized engine components for Army vehicles, learn that FPI planned to take claim this type of work, foreclosing him from contracts that comprised over 50 percent of his annual sales. His 16 inner-city workers were saved by his hard fight.
Ironically, Mr, Chairman, your bill repeals the provision which provides an opportunity for public to comment on expansion proposals. While I believe that the FPI Board of Directors is an informationally captive of the FPI staff, Board approval of FPI expansion proposals should be strengthened rather than scrapped.
Your bill would also extend, upon enactment, FPI's mandatory source status to services, the undisputed growth market within the Federal Government. Under H.R. 2558, FPI would be given an absolute lock on these contracting opportunities. With FPI able to take service contracts, displaced Federal employees would be deprived of their right of first refusal for employment with the contractor performing their functions.
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The Hoekstra-Frank-Collins-Maloney bill, H.R. 2551, requires FPI to compete for all of its Federal contracts. To protect prison guards, it provides special authority for contract awards to FPI on a non-competitive basis, when necessary to maintain prison safety. Justification for its use is to be provided by prison wardens.
Phil Glover, president of the Council of Prison Locals who will be testifying later, has repeatedly stated to my staff that prison guards support the Hoekstra-Frank-Collins-Maloney bill. It addresses the safety concerns of his members. It protects non-inmate workers. It stops FPI's various abuses of its captive Federal agency customers. With fundamental change, other AFGE members will continue to have to live with shoddy and overpriced FPI goods. As you will no doubt hear, he does strongly advocate changing H.R. 2551 to provide more FPI inmate-work opportunities. During his most recent visit, he urged letting inmates perform commercial work currently performed by foreign workers, provided non-inmate workers were protected from displacement.
Our bill protects the Federal buying agencies. As with every other contractor, the buying agency will be able to determine if the agency's mission needs are met by FPI's product or service, and its proposed delivery schedule For the first time, the price the agency has to pay FPI can be determined by competition.
Under our bill FPI will be required to perform its contractual obligations fully and to the satisfaction of the buying agency. FPI will no longer be able to judge the adequacy of its own performance.
Your bill (H.R. 2558), Mr. Chairman, does absolutely nothing to empower Federal agencies to protect taxpayer dollars when they buy from FPI.
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H.R. 2558 does not alter a single word of the statutory authority that provides the basis of FPI's status as a ''mandatory source.'' Rather, it only requires the Attorney General to submit a ''plan'' for FPI to voluntarily waive future use of its statutory status as a mandatory source, within seven years. H.R. 2558 does not phase out the use of FPI's mandatory source status over the seven years. It is only an item to be addressed in the ''plan.''
Neither does H.R. 2558 cap the amount of amount of sales FPI can take through its unchanged statutorily-based status as a mandatory source. It only requires that the ''plan'' prohibit FPI from producing a ''new product'' or ''significantly expand[ing]'' production of a currently authorized product, if the sales of such products are to be made using FPI's mandatory source status. Under policies approved by FPI's Board of Directors, this protection is meaningless.
To FPI, a newly offered individual item is not a ''new product'' if it falls within one of the some 100 broad classes of approved products, each of which may encompass literally hundreds of individual items. Under the same FPI policies, production increases of up to 15 percent for an individual item within an approved class is not considered to be ''significant.''
Mr. Chairman, the Congressional landscape is littered with examples of legislative directives to the Executive Branch which have either been ignored, delayed, or resulted in an other-than-intended submission. If FPI fails to comply, it only faces Congressional ire, expressed by this Committee or individual Members like me. From listening to Chairman Hyde's recent testimony before the Rules Committee, I wasn't left with the impression that he found the Justice Department wholly cooperative.
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Further, Mr. Chairman, your bill expressly forecloses any judicial enforcement by adversely affected non-inmate workers or the firms that employ them. I have to believe this provision was suggested by FPI's career staff.
You claim that your bill protects the jobs of law-abiding workers by repatriating commercial work that is currently being performed by foreign workers.
You also claim that your bill could generate $3.8 billion in revenues to offset the cost of incarcerating the 1.8 million inmates held in Federal and state institutions, if ''only'' 40 percent of those inmates work at minimum wages under the broad new authority to sell products and services in the commercial.
Neither claim withstands scrutiny.
Under your bill, a private firm using inmate labor to produce a product or provide a service is exempt from paying the minimum wage, if the work is currently being performed offshore. This puts American firms offering the same type of commercial product or service at a huge competitive disadvantage.
Your bill does not provide any real protection against law-abiding workers losing their jobs so that a private firm can use FPI inmate-workers. A displaced non-inmate worker would have to depend on FPI for help, since H.R. 2558 expressly forecloses any legal challenge by the displaced worker.
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Your bill even grants the Attorney General the discretion to nullify the changes made by the legislation on the third and fifth anniversary of the date of enactment, if FPI is employing less than 25 percent of the work-eligible inmates. This means that law-abiding workers and the firms that employ them can expect substantial and sustained FPI expansions: FPI employed approximately 18 percent of the work-eligible inmates in 1998 and hasn't attained 25 percent for almost a decade (since 1989).
Your bill also grants state and local prison industry programs new authority to sell in the commercial market. This new commercial sales authority is exempt from even the limited protections for non-inmate workers applicable to commercial sales of inmate-furnished products or services under your Prison Industry Enhancement (PIE) Program.
Under your new commercial sales authority for state and local prison industry programs, there would be no prohibition against displacing non-inmate workers or any requirement to pay inmates at prevailing or even minimum wage rates. The adverse impacts on law-abiding workers and those that employ them are all too obvious.
To conclude, Mr. Chairman and Members of the Subcommittee, I believe that H.R. 2551, the Hoekstra-Frank-Collins-Maloney ''Federal Prison Industries Competition in Contracting Act of 1999'' is good for the taxpayer, for FPI's Federal agency customers, and for law-abiding workers and for the firms that employ them. That view is shared by organized labor and virtually every segment of the business community.
With your permission, I would like to submit for the record a current list of organizations that support the enactment of H.R. 2551 and some explanatory materials regarding the bill.
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Mr. Chairman, as you plan to move forward with the virtually unfettered authority for prison industry programs to sell products and services commercially, I would like to share my experience in obtaining comments on the bill that became H.R. 2551. At one point, my staff suggested providing FPI limited access to the commercial market, restrained by unambiguous and enforceable protections for non-inmate workers and the firms that employ them. The proposal was universally and unequivocally rejected by all segments of the business community participating in our coalition as well as by representatives of organized labor.
Simply, they have an abiding distrust of FPI that is based on years of bad experiences. That distrust was reinforced last year by FPI's new and self-generated legal interpretation that granted them authority to initiate the sale of services in the commercial marketplace, reversing 65 years of practice that such sales were statutorily prohibited. This year FPI further reinforced that abiding distrust by proposing regulations that sought to give the force and effect of law to a broad array of highly expansive policy pronouncements by FPI's Board of Directors and its career management staff.
In essence, H.R. 2558 calls upon business and labor to trust FPI. First, they must trust for seven years that FPI will not abuse its newly expanded mandatory source status or its unchanged authority to dictate the terms of its business relations with its Federal agency customers. Next, they must trust that FPI will not abuse its authority to sell products and services in the commercial market, subject only to cosmetic protections for non-inmate workers and the firms that employ them. Finally, your bill asks organized labor and business to accept new authority for state and local prison industry programs to sell products and services commercially, devoid of any protections for non-inmate workers and business.
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Mr. Chairman, I suspect that your will subsequently hear that the vast majority of the business community and organized labor will view your bill's blind trust in FPI and its state counterparts is simply unrealistic.
Mr. MCCOLLUM. I would like to ask some questions. I don't know if the Members do, and the question is, would you prefer to go vote and come back, or do you want me to start with my questions?
Mr. HOEKSTRA. I would be more than willing to come back.
Mr. MCCOLLUM. All right. Why don't we do that. Why don't we take a recess, because we have got to do it anyway. This should be a quick vote, and we will be back right after the vote, as soon as Members can get back.
[Recess.]
Mr. MCCOLLUM. The Subcommittee on Crime will come to order. At the time we went on recess, Mr. Hoekstra had just finished his testimony, and we were ready for the question period, and I will yield myself 5 minutes to ask questions, if I could.
Pete, you and I do agree on a couple of things that are important about this. I do agree we ought to do away with mandatory source preferences. I know you don't think our bill goes far enough to make sure that actually happen, but we do agree on that, and I think we both agree that to the maximum extent we reasonably can, we ought to have inmates employed in something meaningful, but the question is how we get there.
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One of the things I am curious about is your testimony would lead me to believe that—and I am not sure of this—that even if we see the minimum wage being paid to a worker and require that that be the case, who is an inmate, that we should not allow or permit the private industry to contract or to employ that prison inmate in a job in the general market, forget the overseas for a minute, and of course the bill I have introduced does do that.
I am curious, you know, right now we don't have anything near the minimum wage being paid, so it is a very unfair competition, clearly unfair, and I want to change that. But I am curious as to why, if I am correct, you have a problem with allowing the prison industries to contract with private industry to use prison inmate labor if the minimum wage is required to be paid?
Mr. HOEKSTRA. That was one of the opportunities that we raised with business and labor, and the business and labor community were or are at least at this point in time vehemently opposed to that, and you know, I think there is a number of things it can lead there. One of the elements may be the lack of protection for workers in the private sector today if there were a partnership or whatever that moved, you know, jobs from the private sector into prisons. Even with those workers getting minimum wage, and they found out it worked, there is no real protection for those workers who are displaced.
Mr. MCCOLLUM. Have you looked into the demographic issue that I have been looking at now about the next few years? I know Chamber of Commerce has studies we have looked at that shows you are going to have fewer employees in the workforce for the next 10, 15 years, coming up very shortly, as to whether that would make any difference in terms of the pressures that are out there, assuming again there is a fair competition for the labor, which there isn't today, of course.
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Mr. HOEKSTRA. Actually this week we issued the American worker report. The focus on that has been over the last year and a half going around the country and talking to business, talking with labor, and talking about the trends that we were going to be experiencing in the future. We saw it around the country. There are labor shortages today. So the question I don't think is about whether you bring prison labor into the work force. The question really is how are you going to do it, and how are you going to structure the businesses in the prisons so that the people in the private sector are not at an unfair disadvantage and are given at least the opportunity to compete.
Mr. MCCOLLUM. You were quoted in a Detroit newspaper, and I think you were alluding to it in your statement, but it wasn't really clear to me, that you support the concept of allowing UNICOR and prison industries to repatriate workers back to the United States, but I think you misunderstood what is in the bill I introduced, or Bobby Scott and I did, on that regard in that we certainly intended that the only products that could be brought back here to be produced in a prison would have to be in those areas where it is certified by the panel, including the Department of Labor, that none of those products in that product line are currently being produced in the United States, not just an individual company that happens to be producing it offshore. That would be our intent. Would you have a problem if that indeed is the way the legislation were written? Even if it were your bill, would you be willing to have it amended to allow that type and encourage that type of labor to be brought back here?
Mr. HOEKSTRA. Again, it is how that the products and the labor are actually defined. If they are defined in a specific contract or whatever, potentially that works. If it is defined as a broad product category where this product may fit in, but you may also have some of those products or similar-type products being produced in the U.S., and allows Federal prisons to move into that whole broad range of categories, I think that is something we would have to take a look at. I am very nervous about picking a certain product that comes in from overseas and saying obviously this work is now being done overseas, we are going to repatriate that and open up the full category to prison industries.
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Mr. MCCOLLUM. I would really like for you to work with us on this because I think that is a critical element, because I believe that without that, and perhaps even with it, the proposal you put forward would indeed shrink the present level of employment in the prison below where it is today. Of course, I would like to expand it for reasons that I think you know are good public policy, but yours would actually shrink it unless we at least do that.
Mr. Scott, I would yield to you.
Mr. SCOTT. Thank you, Mr. Chairman.
Mr. Chairman, do you acknowledge that if your bill were to pass, the present employment level at FPI would go down?
Mr. HOEKSTRA. I don't know. I mean, if we assume that it would go down, it would mean that prisoners could not compete, and they are delivering a quality product at the right price at the right service.
Mr. SCOTT. Well, if you eliminate mandatory source, how would the FPI create new markets?
Mr. HOEKSTRA. You eliminate mandatory sourcing—well, creating new markets, I mean going in, and you know, the way we are creating new markets today in Federal Prison Industries is they look out there and, say, oh, this is an interesting product, let us make that. You will remember it was 3 years ago that they surveyed the scene and said the Federal Government buys a lot of flags for the Veterans Department. Let us go in and create a new product category of American flags, and without competition or whatever, they said, we are going to get into the business of making American flags. That is one heck of a way to create a new market.
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The way they would create new markets if we reduce mandatory sourcing is if they saw that with their assets, which are their labor and the resources and those types of things, that they could compete in the private sector or that they could compete against private sector companies and win the business. They would have to win it on price, quality and delivery, which I think would be a valuable asset for prisoners to learn that if they are going to be in the marketplace and successful, they have to learn how to compete, and that would more finely tune their skills and their understanding of the workplace than what we have today.
Mr. SCOTT. How would the FPI do a costs analysis to determine whether comparable costs—is there any problem in that area?
Mr. HOEKSTRA. I am sure that there would have to be decisions that needed to be made as to what you would put into the cost buildup, you know, how much do you put in for their cost of capital, the cost of plants, the plant and equipment, the facilities, the rent or the lease on the land, and sure, you would have to go through and make some judgments.
Mr. SCOTT. Does your bill anticipate any changes in that area from what they are doing now?
Mr. MONTALTO. Representative Scott, I am William Montalto. I am special counsel to Representative Hoekstra. Our bill has a straight competition requirement, basically like any private firm, with the exception that the Attorney General can take contracts on a sole-source basis as needed to maintain order and to keep work programs alive. So you don't have to do a cost analysis. FPI is supposed to today do a cost analysis to set its price. We would submit that FPI merely sets its price at what it thinks the traffic will bear.
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And to answer your first question to Mr. Hoekstra, will it reduce levels of contracting, FPI report asserts we only deliver quality products on time, at a fair market price, at a current market price under the statute. If that is true, then they should have no problem competing. If it is not true, then the agencies who buy from them, whose operating money is being used have a big problem.
Mr. SCOTT. Now, is there any prohibition in your bill of going into the private sector to sell goods?
Mr. HOEKSTRA. Yes. We do not allow them to go into the private sector.
Mr. SCOTT. So you would still be relegated to the government market?
Mr. HOEKSTRA. We are saying let us work out the problems and the issues in the government market before we take a look at any expansion going into the private sector.
Mr. SCOTT. Do you expect there to be enough government business alone to accommodate the significant increase in prison population that we expect in the upcoming years?
Mr. HOEKSTRA. I mean, the Federal Government is a huge purchaser of products, okay. I would expect that there is plenty of demand. The issue here is not demand. The issue is the ability of workers to compete and to produce the products, and I think initially there is plenty of demand within the Federal Government for the needs of Federal prisons.
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Mr. MONTALTO. And, Representative Scott, it is not an accident that FPI chose to go into the commercial services. We know that the government is looking to have more of its noninherently governmental functions provided by the private sector. FPI wants to be first in line to take those contracts, and the current legislation that you and the Chairman have sponsored gives them that immediately. They will now be able to take those service contracts, the growth segment of the government procurement arena.
Mr. MCCOLLUM. Thank you, Mr. Scott.
Mr. Gekas, you are recognized for 5 minutes.
Mr. GEKAS. Yes. Thank you, Mr. Chairman.
Peter, did you say during your opening statement, during your presentation, that the FPI at some juncture expanded its capabilities to include services as well as products as such?
Mr. HOEKSTRA. That is correct.
Mr. GEKAS. Could you outline for me one or two services that would be provided by prison industry workers?
Mr. HOEKSTRA. We are doing——
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Mr. GEKAS. Do they go outside of the prison to perform services?
Mr. MONTALTO. No. Mr. Gekas, the operations are conducted within the facilities. To give you some examples of what FPI is out hawking for partners on: packaging items, mailing service, data processing.
Mr. GEKAS. I see.
Mr. MONTALTO. Digitalization of data, a big activity in government.
Mr. GEKAS. I noticed in the bill that the Chairman and the Ranking Minority Member offered, I don't see the word ''services'' actually delineated, that it seems to be honing in on ''products.'' could I engage the Chair in a colloquy on that?
Mr. MCCOLLUM. Certainly.
Mr. GEKAS. In looking through the bill you introduced, you seem to hone in on products. Does that include services?
Mr. MCCOLLUM. If the gentleman would yield, it is by definition, in certain ways, it does include services, but let me state something so you understand as I understand it and I think Mr. Hoekstra does.
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Current law of the Federal law prohibits the interstate sale of prison-made goods. It does not prohibit the interstate sale of services, inmate engagement in employment for services, and so State prison industries and the Federal Government's prison industries are free to engage in performing services and selling those services anywhere in the United States to anyone right now.
Mr. Hoekstra's bill would, as I understand it, eliminate that ability and would say they no longer could sell, at least at the Federal level. I think the State is left alone, but the Federal Government prison industries would no longer be able to sell in interstate services. Our bill, however, does define services as part of it for certain purposes. That is on page 10, line 17. The definition there, the term ''product'' includes both goods and services.
So we are going to say that in the future for Federal Prison Industries, not for States, but for Federal Prison Industries there will have to be a minimum wage on all the other applications. So we do change the law.
Mr. GEKAS. My only remaining question is whether the current law has this same provision.
Mr. MCCOLLUM. No, it does not, and the current law does not.
Mr. GEKAS. So that's a change?
Mr. MCCOLLUM. We include services, that is correct.
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Mr. GEKAS. I have no further questions.
Mr. MCCOLLUM. Mr. Coble, you are recognized for 5 minutes.
Mr. COBLE. Thank you, Mr. Chairman. Mr. Scott and I were coming back from the floor after our vote, and I said, Bobby, I don't want to be a nay-sayer on this subject. He said, well, when you gave your opening statement, it was full of nays, and I don't mean for it to be, Mr. Chairman, and as Bobby and I said, I think we are looking for balance here.
Now, Mr. Hoekstra, when I indicated concern about my folks who work in the factories back home is not restricted to the factories. It could apply to people who sell furniture and who sell textiles, interior decorators, so the line is endless. But in view of the fact that I don't want to be a nay-sayer, I don't want to get in the bad graces of the Chairman and the gentleman from Virginia, Mr. Hoekstra, can you visualize or embrace any sort of situation that would involve partnering between FPI and private enterprise or the private sector? And maybe you can't.
Mr. HOEKSTRA. I can visualize it. I also can tell you that business and labor are very, very suspicious of that, and they have obviously developed some partnerships in office furniture and those types of things, and I think probably to the detriment of the industry.
Mr. COBLE. Well, as Mr. Scott and I said coming back from the floor, Mr. Chairman, I do think we need some balance, because I will stipulate the fact that this obviously contributes favorably inside the walls. I have no problem with that, but if we can iron out some of the differences where I think that there is detriment to private sector.
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And unfortunately, Mr. Chairman, I have another meeting going on now, so I am going to have to go back and forth from two hearing rooms, but I thank you for having this hearing. You and the Ranking Minority Member, I think, have done a good job to this end. I am leaning toward Mr. Hoekstra's side of the argument right now, but I won't be a nay-sayer completely, and I will try to have an open mind.
Mr. MCCOLLUM. Thank you very much, Mr. Coble.
Mr. Hutchinson, you are recognized for 5 minutes.
Mr. HUTCHINSON. Thank you, Mr. Chairman. I appreciate you conducting this hearing. I thank Mr. Hoekstra for his testimony today.
Mr. Hoekstra, it is my understanding that in the Federal prisons, somewhat less than 20 percent of the Federal prisoners are actually working in prison industries.
Mr. HOEKSTRA. The percentage right now is about 18 percent.
Mr. HUTCHINSON. What is the key reason that there is not fuller employment in our prisons, more prisoners working; and secondly, would your bill increase the opportunities or decrease the opportunities for prison workers?
Mr. HOEKSTRA. The people who are managing the prisons will have to tell you why there is not fuller employment. It has been as high as 25 percent in 1989, perhaps the increase in prison population or whatever.
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My bill, as Bill indicated earlier, we are asking for the private sector to be able to compete, for the people in your district and my district to be able to compete with products and now services to the Federal Government rather than mandatory sourcing. Federal Prison Industries say that they provide a quality product at appropriate delivery schedules, at an appropriate and fair market price. If that is true, removing mandatory sourcing should not impact their business. If it is not true, if they are delivering an inferior product on an inappropriate schedule at a higher price, they will lose market share, that is correct.
Mr. HUTCHINSON. If you do away with mandatory sourcing, the prison industries have to compete just like anyone else in order to find a customer. Are there any restrictions on FPI that would hamper them in competing under your bill?
Mr. HOEKSTRA. I don't think so, no.
Mr. MONTALTO. In fact, Mr. Hoekstra's legislation goes an extra step and requires a buying agency to solicit, to actively come to FPI for any product or service which they may offer.
Mr. HUTCHINSON. It looks like——
Mr. MONTALTO. No small business in Arkansas is solicited by buying activity. They have to find the contract. We deliver the opportunity to compete on the silver platter.
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Mr. HUTCHINSON. It looks to me like the prison industry should have an opportunity to compete, and it looks like they have a competitive advantage because you have got a work force there that I think would be paid minimum wage. Under your bill what would they be paid?
Mr. MONTALTO. The current rate of pay for Federal industry workers is—I don't know. I can be corrected by staff, 23 cents to a $1.23 range. That would not change with respect to items being done and sold to the government by either piece of legislation.
Mr. HOEKSTRA. The key here, Mr. Hutchinson, is that we are driving for—business community and American workers, the labor side of this issue. All they are asking for is very simply the opportunity to compete for the business, which they don't have today. And with the advantages that are built in, the prisons ought to be able to compete, and people outside should have the opportunity to compete.
Mr. HUTCHINSON. I want to thank both the Chairman and Congressman Hoekstra for raising this issue. I want you to know that I have learned a lot in terms of the low percentage of workers that are employed in the Federal system and also what it means to private industry and the employment in the outside world. I yield back the balance of my time.
Mr. MCCOLLUM. Thank you, Congressman Hutchinson.
Thank you, Mr. Hoekstra, for being here today, and we will be discussing this in the next coming weeks.
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Our second panel consists of Kathleen Hawk Sawyer. Kathleen Hawk Sawyer was appointed Director of the Federal Bureau of Prisons on December 4, 1992. She is a career public administrator in the Federal Bureau of Prisons, and only the sixth Director of the Bureau since it was established in 1930. As the Bureau of Prisons Director, Dr. Sawyer oversees approximately 94 Federal institutions, over 30,000 staff members, and is responsible for confinement of more than 130,000 offenders. She has held numerous positions within BOP, including serving as warden of the Federal Correctional Institution in Butner, North Carolina, and as the Bureau's chief of staff, training—being responsible for the three training centers. She has received numerous awards for her work, including the Presidential Meritorious Rank Award and the Distinguished Executive Award, the highest award given by the President to members of the senior executive service.
She received her bachelor's degree in psychology from Wheeling Jesuit College in Wheeling, West Virginia, and her master's degree and doctorate of education degree in counseling and rehabilitation from West Virginia University.
Accompanying Dr. Hawk Sawyer today is Steve Schwalb, the Assistant Director of the Federal Bureau of Prisons and the Chief Operating Officer of the Federal Prison Industries. He has held these positions since 1993. He began his career in the BOP in 1993, and has held numerous positions, including Chief of the Office of Inspections and warden of the Federal Correctional Institution in Oakdale, Louisiana. He holds a bachelor's degree in personnel management and labor relations from the University of Washington.
I welcome both of you today. Your statement will be submitted for the record in their entirety without objection. I hear none, and you may summarize, and I will start with you, Dr. Sawyer.
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STATEMENT OF KATHLEEN M. HAWK SAWYER, DIRECTOR, FEDERAL BUREAU OF PRISONS, U.S. DEPARTMENT OF JUSTICE
Ms. SAWYER. Good morning, Mr. Chairman and members of the subcommittee. I appreciate the opportunity to provide comment on H.R. 2551 and H.R. 2558, both of which propose to reform the Federal Prison Industries program, referred to as FPI. I want to thank you for calling attention to this complex issue. The administration's position on both of these bills is currently under review, but the administration is not opposed to reform of the existing statutes which govern prison industries provided that reform does not jeopardize the security of the Federal prison system.
I would like to provide a little background on the Federal prison system. At both the Federal and State levels, America is experiencing dramatic and relentless increases in inmate population, the result of more people being incarcerated for much longer periods of time. The Bureau of Prisons inmate population grew by more than 10,000 inmates in 1998, the largest 1-year growth in our history. The 1999 increase is expected to set another record. Congress and the administration have provided necessary support. We have 18 new prisons that are currently in some stage of planning, design or construction, with another nine requested in the fiscal year 2000 budget. In the next 7 years, our inmate population is expected to surge by 50 percent, adding another 65,000 inmates, which takes our population to 197,000 inmates by 2006. Despite the activation of these new prisons, by the end of 2006, overcrowding will be greater than 30 percent. This represents a daunting prison management challenge in the Bureau.
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One way to manage this increasing population is to have FPI provide new inmate jobs. It is also noteworthy that significantly greater numbers of Federal inmates who are serving longer sentences are coming in unskilled, undereducated, criminally sophisticated and violent. At some point virtually all of these inmates will be released back into our neighborhoods and will need work skills if they are to successfully reintegrate into society.
The Bureau's inmate population growth is not likely to abate in the foreseeable future, and there is a concomitant need for inmates to be offered opportunities for positive change while incarcerated. These are the realities we must face and the impacts we must consider as we develop responsible public policy.
As I have testified on several previous occasions, we rely heavily on the FPI program to manage our crowded prisons. It reduces inmate misconduct and lowers the cost of incarceration by precluding the need for other inmate programs supported through appropriated funds. Also our inmate employment in FPI reduces recidivism, thereby increasing public safety by improving inmates'probability of being employed after release. These benefits do not obviate the necessity that FPI operate in a manner which minimizes any adverse impact on domestic companies and workers, and we recognize this. FPI takes this obligation very seriously and continues to seek employment opportunities which take into account the concerns of our critics.
We don't believe that crafting a responsible revision of the prison industry statute necessitates an either or choice. We think it is appropriate to begin with the presumption that a solution can be developed which can simultaneously satisfy the legitimate concerns of the business community, organized labor, our Federal customers, Members of Congress and Federal Prison Industries.
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In fact, we believe there is a consensus support for five basic principles which should guide the development of the legislation.
First, private businesses should be allowed to compete for Federal business.
Second, Federal customers should have more discretion in procuring products.
Third, FPI should operate in a manner which minimizes any adverse impact on domestic companies and workers.
Fourth, FPI should employ inmates and provide job skills training to contribute to secure prison management by reducing inmate idleness and favorably impacting the recidivism rate.
Fifth, FPI should operate in a self-sustaining manner thereby avoiding additional taxpayer costs.
We believe these principles need to be addressed simultaneously if the legitimate interests of all parties are to be accommodated.
Mr. Chairman, prison industries is one of the most complex public issues we face. The current statutes were crafted more than 60 years ago, as you noted in your comments, with the same spirit of compromise and commitment that all of us must display today. Much has changed since then, but more than ever it is of paramount importance that all the parties have their views respected and their legitimate concerns addressed as we develop the strategy for the next century, and we thank you for holding this hearing allowing such discussion to occur.
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Mr. Chairman, this concludes my remarks. Mr. Schwalb and I are prepared to answer any questions that you or any members of the subcommittee may have.
Mr. MCCOLLUM. Thank you very much, Dr. Sawyer. I gather that Mr. Schwalb does not have a separate statement.
[The prepared statement of Dr. Sawyer follows:]
PREPARED STATEMENT OF KATHLEEN M. HAWK SAWYER, DIRECTOR, FEDERAL BUREAU OF PRISONS, U.S. DEPARTMENT OF JUSTICE
Mr. Chairman and Members of the Subcommittee, I appreciate the
opportunity to appear before you today to provide comment on two bills, H.R. 2551, the ''Federal Prison Industries Competition in Contracting Act of 1999'' and H.R. 2558, the ''Prison Industries Reform Act of 1999'', both of which propose to reform the Federal Prison Industries (commonly referred to as FPI or UNICOR, its trade name) program. The Administration's position on both bills is currently under review. I want to thank you for calling attention to this important and complex issue.
The Administration is not opposed to reform of the existing statutes which govern prison industries, provided that reform does not jeopardize the security of the federal prison system. To start out with, I would like to provide you with some background on the federal prison system.
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FACING REALITY
At both the federal and state level, America is experiencing dramatic and relentless increases in the inmate population, the result of more people being incarcerated for longer periods. The Bureau of Prisons (BOP) inmate population grew by more than 10,000 inmates in 1998, the largest one year net growth in our history; the 1999 increase is expected to be yet another record. Congress and the Administration have provided the necessary support; 18 prisons are currently in some stage of planning, design or construction, with another 9 requested in the Fiscal Year 2000 budget. Nonetheless, in the next 7 years, our inmate population is expected to surge by 50 percent, adding another 65,000 inmates. This growth will exceed our ability to add capacity and, despite the activation of new prisons, by the end of Fiscal Year 2006, our institutions will see their overcrowding rates significantly increase from the current level of 29 percent. Under the best of circumstances, this represents a daunting prison management challenge to the BOP. One way to manage this increasing population is to have FPI provide new inmate jobs. It is also noteworthy that significantly greater numbers of federal inmates who are serving longer sentences are unskilled, undereducated, criminally sophisticated, and physically violent. At some point, virtually all of them will be released back into our neighborhoods and will need work skills if they are to successfully reintegrate into society.
The Bureau of Prisons' inmate population growth is not likely to abate in the foreseeable future. Nonetheless, there is a concomitant need for inmates to be offered opportunities for positive change while incarcerated.
These are the realities we must face and the impacts we must consider as we develop responsible public policy.
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SEEKING SOLUTIONS
As I have testified on several previous occasions, we rely heavily on the FPI program to successfully manage our crowded prisons. It reduces inmate misconduct and lowers the costs of incarceration by precluding the need for other inmate programs supported through appropriated funds. More important, inmate employment in FPI reduces recidivism, thereby increasing public safety by improving an inmate's probability of being employed and law-abiding after release.
These benefits, however, do not obviate the necessity that FPI operate in a manner which minimizes any adverse impact on domestic companies and workers. As the record indicates, FPI takes this obligation seriously and continues to seek inmate employment alternatives which take into account the concerns of its critics.
We do not believe that crafting a responsible revision of the prison industries statutes necessitates an either-or choice. Rather, we think it is appropriate to begin with the presumption that a solution can be developed which can simultaneously satisfy the legitimate concerns of the business community, organized labor, our federal customers, Members of Congress, and Federal Prison Industries.
In fact, we believe there is consensus support for several principles, which should guide the development of legislation:
Private businesses should be allowed to compete for federal business.
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Federal customers should have more discretion in procuring products.
FPI should operate in a manner which minimizes any adverse impact on domestic companies and workers.
FPI should employ inmates and provide job skills training to contribute to secure prison management by reducing inmate idleness and favorably impact recidivism.
FPI should operate in a self-sustaining manner, thereby avoiding additional taxpayer costs for the operations of federal prisons.
These principles are deliberately not numbered or prioritized because we believe strongly that they need to be accomplished simultaneously if the legitimate interests of all the parties are to be accommodated.
CONCLUSION
Mr. Chairman, prison industries is one of the most complex public policy issues we face. The current statutes were crafted more than 60 years ago with the same spirit of compromise and commitment that all of us must display today. Much has changed since then but, more than ever, it is of paramount importance that all the parties have their views respected and their legitimate concerns addressed as we develop a strategy for the next century.
Mr. Chairman, this concludes my remarks. I would be happy to answer any questions you or other members of the Subcommittee may have.
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Mr. MCCOLLUM. I am curious if either of you can tell me what percentage of the population ideally you would like to see involved in the prison industry program?
Ms. SAWYER. We had made an agreement with Congress a few years back when there was concern about our population and agreed to limit our total employment in prison industries to 25 percent of the eligible inmates. That ends up amounting to 18 percent of our total population because pretrial inmates are not eligible. They must be sentenced. Inmates that are medically unable to work are not involved in prison industries. So of the remaining inmates that are sentenced and medically able, 25 percent of our inmate population is employed there.
I know that you have asked the question before about what the ideal number would be. It varies somewhat based on overcrowding. If the institution is functioning at its capacity, the number of inmates that it was built to house and employ, then the 25 percent would serve us fine. We would like to have more for the sake of impacting recidivism, but in terms of prison management, 25 percent is acceptable.
Once the crowding level starts going up, we have far more inmates in a facility designed for lesser inmates. The number of jobs available in housekeeping, plumbing, electrical, and food service can get filled up quickly by the inmates, which leaves a larger than 25 percent proportion left over for which we need to find gainful, meaningful employment. So at levels of overcrowding, greater than 25 percent would really be the desire.
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Mr. MCCOLLUM. You are giving us a clear illustration of the competing concerns; that is, the management of the prisoners so that they can be controlled and also the concern of reducing recidivism, giving them job skills that they can use when they go on the outside. And I assume that both of you concur in addition to controlling the prisoners by working, it is a very positive thing to have these prisoners employed in industries where they can gain not only job skills, but also work habits so they are less likely to come back. And if we could get up to 30, 40 percent of the prisoners employed or more, assuming that doesn't have a problem with capacity and control, you would think that would be appropriate, I would assume?
Ms. SAWYER. Absolutely, Mr. Chairman.
Mr. MCCOLLUM. Do you believe that Congressman Hoekstra's bill, H.R. 2551, would decrease the number of inmates employed the way that it is presently written?
Ms. SAWYER. Yes.
Mr. MCCOLLUM. Why?
Ms. SAWYER. I would defer to Mr. Schwalb.
Mr. SCHWALB. Mr. Chairman, there are several features of the bill over which we have great concern. First of all, it exempts from any mandatory source or any other procedure for acquiring business all purchases under the small purchase threshold, currently $2,500. That represents roughly three-quarters of all the orders that Prison Industries gets. So immediately the current procedures for mandatory source are eliminated, and nothing is substituted for sales under that threshold.
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For the remaining one-quarter of our sales, a procedure is implemented that is very cumbersome, in our view, very unworkable and bureaucratic, with the Attorney General having to have certifications from every warden that the work we might get if we won the contract is necessary, and therefore it is taken on a nonnegotiable basis by the Attorney General.
The fact of the matter is that our Board establishes the number of jobs necessary to manage the growth that the Director referred to previously across all product lines, and the sales we have right now as a total are the level we have already determined are the minimum necessary to try to maintain the employment levels referred to.
So eliminating three-quarters of that right off the bat and setting up a cumbersome process for the remaining one-quarter will certainly result in fewer sales.
The other thing about the bill, it prohibits the sales that we currently have that are nonmandatory source sales, that we do as a subcontractor, to other companies that have government contracts. There are a lot of companies that utilize us—we have furniture subcontracts—we have missile assembly subcontracts, and data subcontracts, where companies have come to us with no obligation to do so. We have competed as a subcontractor for the business on a government contract they have, so we are still allowed to participate because the government is the end customer. We have millions of dollars worth of business and hundreds of inmates doing that, and this bill would preclude us from doing that, that will be a further detriment to our ability to maintain our sales.
Mr. MCCOLLUM. So the argument that Mr. Hoekstra was making to us, the mandatory preference being eliminated would present no problem, because if you are pricing the product appropriately in a competitive way and producing a good product, you wouldn't lose any business is not telling as much of the story as you think there is there to be told as to what damage would be done?
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Mr. SCHWALB. That is correct. The bill also limits the types of decisions that the Board can make as to kinds of products and services and the market share of those services. It precludes us from making certain types of products at all, if there is import penetration. So the flexibility is restricted considerably, and it offers no new authority in terms of offshore or other alternative markets at all.
Mr. MCCOLLUM. Thank you.
Mr. Scott, you are recognized for 5 minutes.
Mr. SCOTT. Thank you, Mr. Chairman.
Ms. Sawyer, you mentioned a reduction in recidivism that results from participation in prison industries. Can you quantify that?
Ms. SAWYER. As you referenced in your comments, we studied inmates for 8 to 12 years after release from the prison system, and even that long a period out, the inmates who have been in prison industries or in some type of vocational training program have shown a 24 percent benefit in terms of reduced recidivism rates. They also show improvement in the amount of money that they earn and, therefore, the amount of taxes they pay back to the government.
Mr. SCOTT. Do you know if that study was a controlled study in that it compared those who wanted to get into the job program but could not?
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Ms. SAWYER. Yes, sir, it was very much a one-for-one matching study where we did not just cream off the best inmates, place them in prison industries, and monitor their success. We matched an inmate who went into prison industries, and one who was not able to go into prison industries, for whatever reason, that had a like background, like criminal history and like personal history. So we were truly matching like individuals as they were released into society.
Mr. SCOTT. You mentioned 25 percent participated in the program. Is that 25 percent of the inmates or all inmates in the last 25 percent of their sentence?
Ms. SAWYER. It is 25 percent of all inmates who are in Federal prison institutions at any given time who are already sentenced, because we do hold some pretrial cases, and also medically able.
Mr. SCOTT. Is there a seniority preference; that is, those who have been there longer are more likely to get in than someone at the end of 2 years, at the end of their sentence? Is there any preference?
Ms. SAWYER. Somewhat. Most of the inmates have sufficiently long enough sentences that they are able to get into the program just by getting on the waiting list. If a person has job skill needs, we can move people around on the waiting list to try to get maximum benefit.
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Mr. SCOTT. What would the bidding process do to your ability to plan for who can work and who can't? Is the fact that you might win or lose a contract—how would you adjust to that within the prison industry program?
Mr. SCHWALB. Mr. Scott, are you talking about that——
Mr. SCOTT. Under bid process with Mr. Hoekstra's bill, I would assume that your demand for services could fluctuate depending on whether you won or lost a contract. How would you manage that with people? You have a set number. If you win a lot of contracts, you only have a certain number of workers. Can you function in that atmosphere?
Mr. SCHWALB. It is difficult because we don't determine the skills or the quantity or the duration of stay of our employees. They come in whether we like it or not, and they come in with whatever skills they have, and we hire them in whatever condition they show up. So we don't have the luxury of saying, we will just lay you off. If we lay you off from industries, the warden still has to manage the population.
It is a very difficult thing to be involved in an arrangement where every other day we are in a different employment mode. And on top of that, the market is restricted to only those orders over a certain dollar threshold.
Mr. SCOTT. Is there a budget impact on each bill? That is to say, if Mr. Hoekstra's bill were to pass, and you had fewer people working, does that have an adverse budget impact on the Bureau of Prisons?
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Mr. SCHWALB. Right now we are a self-sustaining program, so we don't get any appropriated funds on which to operate. We pay for all of our raw materials and equipment. Everything is paid for out of our operations. So if we don't have the ability to maintain that, and the Bureau needs alternative programs to substitute to manage the inmate population, whether it is more training programs or makeup work programs, all those staff salaries and all of the costs of those programs are shifted to the taxpayer side of the ledger.
Our estimate is that—depending on what kind of program you substitute, it is certainly in the hundreds of millions. We have seen estimates ranging from $200- to $600 million to offset the current program.
Mr. MCCOLLUM. Thank you, Mr. Scott.
Mr. Chabot, you are recognized for 5 minutes.
Mr. CHABOT. Thank you, Mr. Chairman. I want to personally thank you for your leadership in this area, Mr. McCollum. Before getting to Congress, I was very active in putting prisoners to work back in my local community as a city councilman and as a county commissioner.
Dr. Sawyer, H.R. 2558 would make it a priority for FPI to offer its factories to the private sector. Do you support the concept of involving private business in the operation of prison industries?
Ms. SAWYER. The administration's position on H.R. 2558 and 2551 are still under review, but speaking from the perspective of the Bureau of Prisons, for us to support any proposal that would eliminate mandatory source would have to allow us some new authorities that would enable us to replace the jobs that we would lose through mandatory source with other options. H.R. 2558 certainly does provide for some of those other authorities, both in terms of offshore and being able to sell to the commercial market if we pay minimum wage and meet the other requirements of the prison enhancement program.
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Mr. CHABOT. Also H.R. 2558 would make it a priority for FPI to work to produce goods and services that would otherwise be made by foreign workers. Do you believe that this is a viable option for FPI, and have any business offers been made to FPI that would involve this type of job repatriation?
Ms. SAWYER. We do believe that it would be a viable option, and we have had numerous discussions with businesses that would be interested in working with us or discussing this issue further should the authority be there.
I will defer to Mr. Schwalb to talk about some of the details of who the companies and the products are.
Mr. SCHWALB. We have had several companies approach us when they heard about this idea, and one thing that is important to note, they are not approaching us for cheap labor. They are already getting lower labor prices than we pay inmates. They are approaching us because they are not happy about the cost of doing business in a foreign country, freight, tariffs, foreign currency exchange, multiple time zones, the whole management of a foreign production operation.
So the opportunity to have a domestic alternative where a good quality product can be produced is appealing, and we have had companies in the apparel and textile business talk to us, and in the toy manufacturing business. We have had electronics manufacturers talk to us, the kind of businesses that you read about in the paper where jobs have been going offshore by the millions and importing back into the country.
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Mr. CHABOT. Thank you.
Finally, Doctor, do you believe that FPI can survive without the mandatory source preference if it has sufficient time to adjust its operations to new products? H.R. 2558 provides 7 years for that transition to be completed. Do you believe that adjustment period is sufficient?
Ms. SAWYER. We actually feel that period of time is relatively short. We would prefer something closer to 10 years. When you consider the complexities involved of removing our current factories, changing the equipment and all that is necessary, finding the new product lines and the companies to work with, all of the complexities that will be involved in shifting our operations at the same time that we are growing by 65,000 more inmates, which will mean losing some of our current jobs, plus all of the new jobs for new inmates, we feel that a more reasonable time frame is 10 years to ensure that this can be successful.
Mr. CHABOT. Thank you very much. I yield back the balance of my time.
Mr. MCCOLLUM. In light of the fact that this is so important, I yield myself 5 more minutes.
In the bill that Mr. Scott and I have introduced, H.R. 2558, there are provisions attempting to increase the number of inmates that would be employed by prison industries. There is an effort to encourage the opening of the door and opportunities. Do you believe, Dr. Sawyer, Mr. Schwalb, if this bill is enacted that it can be utilized by FPI to increase the number of inmates that are currently employed?
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Mr. SCHWALB. Mr. Chairman, that would certainly be our goal, to maximize whatever authority we are given. It depends on the nature of the business, but we think that by widening the number of markets and thereby the number of products—a lot of products there is no Federal market for because the government does not buy these products. We think that there is plenty of opportunity to increase the percentage of inmates employed if we had broader authority.
Mr. MCCOLLUM. You have part of that authority contemplating that private businesses contract in this bill with the Bureau of Prisons for the use of prison industry labor. And I gather that there has been some effort, and you have indicated that today, to do that sort of thing. Do you think that can be marketed? Do you believe that that can be successful?
Mr. SCHWALB. We believe that we offer a very attractive alternative to certain industries and certain product lines, both in the repatriation alternative and in the opportunity to have work done where we are paying minimum or higher wage where domestic workers cannot be found to do the work. Which alternatives are going to provide the best means we are not sure, but I think having as many options on the table, which I happen to believe that your bill is intending to offer, seems to make sense to us from the Bureau of Prisons' perspective.
Mr. MCCOLLUM. In 2551, you have alluded to it in your testimony or in answer to Mr. Scott's questions, I am concerned about the provision that restricts the Federal Bureau of Prisons from being able to market inmate labor services across State lines, and right now the States are not restricted, as I understand it, under the current law. Actually, you are not either, but my impression is that you haven't utilized that widely up to now, and his bill would keep you from doing that in the future while States would still be permitted to. Is this a problem?
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Mr. SCHWALB. Mr. Chairman, there is a general interstate commerce statute that restricts prison-made products in interstate commerce. There are a limited number of exceptions.
The most prominent one is the PIE program exception that the States enjoy that we are specifically not authorized to participate in where they pay higher wages, and they sell products in interstate commerce.
My impression is that the provision of your bill that provides a similar authority, if we pay minimum or higher wage, is an attempt to give us similar types of authority. And, of course, you extend similar authority to the States as well. Our own statute, the Bureau of Prison Industry statute, says that we can only sell products to the Federal Government. So in trying to define our opportunities, we have confined ourselves historically to the Federal Government and the PIE program, and some of the other exceptions are not available.
Now, the commercial services area is an idea that has a lot of merit. There are four or five of them doing this based on State attorney general opinions, and we got an opinion not from our staff, but from the Justice Department, and it was concurred with personally by the Attorney General that it made sense for us to do commercial services if we focus that effort on again repatriating services from foreign countries. We have a pilot that we are proud of in Texas, a facility for women there, doing data entry, and it is a job that was previously done in the Philippines, and this American company has chosen to bring it back and give it to us, and it is going to be a great opportunity to show why this authority is going to be a good.
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Mr. MCCOLLUM. Mr. Hoekstra's bill would restrict that because it would make it different than what it is today in current law.
Mr. SCHWALB. As we read the bill, it would restrict us from doing that example that I just provided.
Mr. MCCOLLUM. Mr. Scott, you are recognized for 5 minutes.
Mr. SCOTT. Thank you, Mr. Chairman.
Let me ask one question to allow Dr. Sawyer to comment on the impact that the prison industry program has on the private sector. Just generally how much of an impact does it have? Mr. Hoekstra mentioned specific jobs that were lost as a direct result of the prison industry program.
Ms. SAWYER. We take the statement that we should minimize the impact on private industry very seriously. That is why we make 100 different product lines. If we were trying to simply get as much work as we could and hone in our skills on specific areas, we would never diversify to a hundred and some different products. We do that so none of the things that we make will lean too harshly on one particular company.
We must also go through the Board of Directors' screening and approval ability whenever we want to expand or start a new product line. They look carefully at how such a move would impact private industry, and they have turned us down on proposals that we have made to the Board of Directors before in trying to achieve that.
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One of the other factors that is involved in the work that we do have is that for every dollar that we make in prison industries, 76 percent goes to the local community or the general economy in terms of buying products, buying raw materials, transporting items and those kinds of things, all of which is money which goes back into the community in terms of jobs and economy. Eighteen cents off of a dollar goes to employ 2,000 civilian staff to operate our prison industries factories, and only 6 cents per dollar goes to the inmate, and most of that money goes back into the economy in covering fines, restitution, child support, and other kinds of things. So we believe that we try to minimize our direct negative impact on private industry by diversifying and not collecting too much of an individual market, and also by ensuring the vast majority of the money that changes hands in terms of our products goes back into the economy very directly.
Mr. SCOTT. You mentioned the committee that has to approve new product lines?
Ms. SAWYER. Yes.
Mr. SCOTT. Who is on that committee?
Ms. SAWYER. Our Board of Directors is made up of six individuals appointed by the Attorney General and by statute—I'm sorry, by the President. And by statute, they represent retailers and consumers, agriculture, Department of Defense, a representative of the Attorney General, industry and organized labor, and they are appointed by the President.
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Mr. MCCOLLUM. Thank you, Mr. Scott.
Mr. Chabot, do you have further questions?
Mr. Coble, do you have any questions that I would like to ask this panel?
Mr. COBLE. No.
Mr. MCCOLLUM. Thank you, Dr. Sawyer and Mr. Schwalb. As we move this legislation to markup, we will have many opportunities to talk to you.
Our third panel I will introduce at this time.
Fred P. Braun, Jr., is president of The Workman Fund, a public foundation committed to training and employing inmates, established in 1990. For the past 20 years, he has purchased and rehabilitated several distressed manufacturing businesses, in many cases accomplishing the turnaround with inmate labor. In 1978, he purchased Zephyr Products, a sheet metal manufacturer in Kansas City. One hundred percent of the plant employees are inmates from Kansas State Penitentiary. In 1981, he purchased Heatron, Inc., an electronic heating element manufacturer, out of bankruptcy in 1981. The company is now profitable, and 30 percent of the plant employees are inmates from Kansas State Penitentiary. In 1993, he purchased Henke Manufacturing Corporation, a manufacturer of snow removal equipment, out of bankruptcy and moved it from Iowa to Kansas. That company is now profitable, with 90 percent of the plant employees from Kansas State Penitentiary.
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Mr. Braun received his bachelor's degree from Lafayette College and his MBA from Harvard University, and we welcome him.
John Felt is marketing manager for the HON Company. He has been actively involved in various aspects of the office furniture industry since 1973, both in design positions and in marketing and contracting positions. He appears today on behalf of BIFMA International, the trade association for the business and industrial furniture manufacturers. Mr. Felt received his bachelor's of fine arts degree from Arizona State University, and we welcome him.
Phillip W. Glover is president of the Council of Prison Locals, which represents 22,000 bargaining unit employees in the Federal Bureau of Prisons. Mr. Glover has been a correctional officer at the Federal Correctional Institution in Loretto, Pennsylvania, since 1990. In 1992, he was elected leader of his local union and has moved up the range to become president of the National Council of Prison Locals in 1997. He resides in Johnstown, Pennsylvania.
Andrew S. Linder is the president and owner of Power Connector, Incorporated, located in Bohemia, New York. His company manufactures connectors, cable hardware and mechanical assemblies and employs 23 persons. Mr. Linder is also president and owner of two other small businesses. He appears today on behalf of the Correctional Vendors Association, the trade association for those companies who sell raw materials and supplies to prison industry programs. He received his bachelor's degree from Colgate University and his MBA from New York University.
Larry Martin has been president of the American Apparel Manufacturers Association since 1994. AAMA is the national trade association representing the American apparel industry and its suppliers. AAMA members produce 80 percent of the cloth sold wholesale in the United States. Before becoming president of the AAMA, Mr. Martin was director of government relations at the association for 13 years. He also served in the Senate as chief of staff for former Senator Caleb Boggs of Delaware. We welcome you today, Mr. Martin.
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Thomas W. Petersik has long experience in prison research and offender issues. Beginning in the 1970 at the Bureau of Census, he designed and conducted major surveys of U.S. Corrections, including the 1974 and 1979 national surveys. He surveyed inmates in State correctional institutions and capital punishment enumerations of persons on death row. Since the 1980's, Dr. Petersik has taught economics inside the District of Columbia correctional facilities, researched private industry opportunities for D.C. Prison inmates. His most recent work funded by the Center on Crime Communities and Culture was the National Symposium on the Economics of Inmate Labor Forced Participation published in May. He holds a Ph.D. In economics from George Washington University and appears today on behalf of CURE, Citizens United for the Rehabilitation of Errants, and we want to thank you for that.
And at this point in time I will yield to my colleague from Ohio to introduce our next witness Reginald Wilkinson.
Mr. CHABOT. Thank you, Mr. Chairman. I would like to introduce and also welcome here Dr. Reginald Wilkinson, who is the director of the Ohio Department of Rehabilitation and Correction. He has worked in the Ohio correctional system since 1973, holding a variety of positions, including director of training and warden. Dr. Wilkinson is also the immediate past president of the American Correctional Association, the world's oldest and largest correctional association. He currently is vice chair for North America, the International Corrections and Prisons Association. He holds a bachelor's and master's degree from the Ohio State University and received his doctor of education degree from the University of Cincinnati, which happens to be in the heart of my congressional district. He has published a multitude of journal articles and book chapters on correctional topics, and he has lectured extensively throughout the United States.
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I would like to personally welcome you, Doctor.
Mr. MCCOLLUM. I thank all of the witnesses for coming today. Your testimony in its entirety, your written statements, will be admitted. Please feel free to summarize your testimony. We will start in a moment with Mr. Braun.
I want to first tell you that during some portions of your testimony, I am going to have to be out of the room and turn the gavel over to Mr. Chabot. I have a previous commitment.
With that in mind, Mr. Braun, please proceed with your testimony.
STATEMENT OF FRED P. BRAUN, JR., PRESIDENT, THE WORKMAN FUND, LEAVENWORTH, KS
Mr. BRAUN. My name is Fred Braun. I have been involved for 20 years now with private sector prison industries. I was the president of one of the first private sector prison industries, PIE, before it was even called PIE. I have been involved with inmates personally for this 20-year period. I interview them personally, and I tell them when they come to work for our company that this is going to be hard, tough, dirty work, and they are going to go back to the prison tired and dirty, but they are going to learn a lot by working for our companies. In essence, I tell them if they work for us for a year or two, they will be skilled and in demand when they get out of jail, and that is the case.
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As a result of that there is a demand of companies waiting to hire the people that work for our companies in Leavenworth, Kansas. Private companies line up and say, if you have a good welder, we want to employ that welder when he gets out from your company. As a result of that our recidivism rates are significantly better than most other prison recidivism rates, and we are very proud of that.
This is my mission. I am unpaid doing all of this. I have been at this 20 years. I don't take any salary from the foundation. I set the foundation up. We have a couple million bucks' worth of value now in the foundation as a result of these industries doing well financially. We loan the foundation money to private sector companies who then will invest it in these in-prison or adjacent-to-the-prison small businesses.
So I envision H.R. 2558 to be a great provider of opportunities for us. I see private sector companies going to FPI and saying, we want to hire, we want to contract with you to use your facility, to use your people, to use your inmates, and we will pay $5.25 an hour, and we want to do that immediately, and I don't believe that the 10-year time frame is required.
I think private sector people will be beating on the door of FPI to do deals if this kind of thing passes. I think this sort of thing can be beneficial to both parties, the private sector people and the public sector and to the inmates. I think that it is time to we came to some compromises. I think that H.R. 2558 provides solutions to the problems and pushes it in the right direction, and I am a firm believer that private enterprise people, and I am an entrepreneur, private enterprise guy from my roots up, but I believe working with inmates and working with government, we can accomplish a lot of these things together, and the private sector training programs can be far superior to any governmental or work education program. Real-world training by private sector people themselves is the best possible training that inmates can have when they get out and for them to stay out.
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Thank you.
Mr. MCCOLLUM. Thank you very much, Mr. Braun, for that passionate and very well-articulated presentation.
[The prepared statement of Mr. Braun follows:]
PREPARED STATEMENT OF FRED P. BRAUN, JR., PRESIDENT, THE WORKMAN FUND, LEAVENWORTH, KS
My name is Fred P. Braun, Jr. I am initiator and President of The Workman Fund. This is a public foundation, committed to inmate training through private enterprise. We believe that private sector prison industry work programs are the best method for turning inmates into productive, tax-paying citizens, by providing them real-world work opportunities while they are incarcerated. We believe this training prepares them physically, emotionally, and financially for the workplace, following release. Our recidivism results of the past 20 years reflect this success.
I take no salary or compensation from the foundation. I have no financial stake in the outcome of this proposed legislation. Therefore, it has been my personal mission over the past twenty years to encourage private sector prison industries. In 1978, my first inmate/employee company, Zephyr Products in Leavenworth, KS, was designated one of the two original PIE models. I believe I understand the advantages and disadvantages of private sector inmate employment more than any other independent businessman.
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H.R. 2558 proposes a solution to some of the current problems, especially the FPI mandatory source preference. Additionally, it allows time for the solution to be implemented. It encourages the private sector to get involved with these federal and state work programs, if they agree to pay federal minimum wage. It is my opinion that no private sector individuals or companies will take on these current work programs, if they are required to pay prevailing wage. There are hidden costs involved in employing inmates, which have recently been quantified by a Deloitte & Touche study commissioned by us, but few people understand these costs.
We also strongly believe that the current PIE program has been relatively unsuccessful, because it is conditioned upon prevailing wage. We believe that these PIE programs should be permitted to pay federal minimum wage, just as proposed for the other federal and state programs.
Mr. MCCOLLUM. Mr. Felt.
STATEMENT OF JOHN H. FELT, MARKETING MANAGER FOR GOVERNMENT ACCOUNTS, HON INDUSTRIES, MUSCATINE, IA
Mr. FELT. Good morning, Mr. Chairman and members of the committee. My name is John Felt. I am the marketing manager for the HON Company. It is a division of HON Industries. I am speaking today on behalf of BIFMA International and the Competition in Contracting Act Coalition. BIFMA International is an association of approximately 200 manufacturers of office furniture and suppliers to the contract office furniture industry. The Competition in Contracting Act Coalition represents more than 330 companies, associations and labor organizations from 48 States. The coalition is coordinated by the U.S. Chamber of Commerce and has long been an advocate of prison industry reform. On behalf of BIFMA and the coalition, I welcome the opportunity to comment on FPI reform.
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I'd like to acknowledge the Chairman for holding this hearing and also thank Congressman Hoekstra for providing a forum for business to discuss the impact of the Federal Prison Industries mandatory source monopoly. In my remarks this morning, I would like to touch on two areas of concern. First is the ongoing problem of FPI's mandatory source monopoly, and the second is the expansion of FPI into the commercial marketplace.
FPI and the effect of its mandatory source monopoly has been the subject of numerous hearings in the House Education and the Workforce Committee's Oversight and Investigation Subcommittee, chaired by Congressman Hoekstra. Whether it is a textile plant in Alabama, an electronics component plant in New Jersey, or a furniture company in Iowa, FPI's mandatory source monopoly has hurt people who want nothing more than to sell good-priced quality products to the Federal Government.
BIFMA supports the complete elimination of mandatory source, and favors the use of competitive means to level the field and to impart practical business perspectives on FPI's program. Businesses have been seeking to repeal the mandatory source for some time. We had a similar set of hearings in this committee last year to discuss this very same issue. Years of FPI's monopoly have left our industry with a sense of urgency that there needs to be a mechanism to reform FPI's mandatory source. We are encouraged that there seems to be a consensus that FPI's mandatory source needs to be eliminated. I certainly hope that it can happen in this Congress.
It is the industry's belief that before FPI is allowed to sell their products in the commercial marketplace, it must first learn to compete in its captive market. Under H.R. 2551, FPI would be required to play by the same rules as private industry for government procurements and earn its business through competition. H.R. 2551 provides FPI the chance to learn to compete.
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FPI's unilateral decision to expand into the commercial market is an alarming new development that is seen as a call to arms by industry. FPI's move into the commercial market is opposed by the coalition for three reasons. First, the decision by FPI's Board to expand into the commercial market is in conflict with the clear language of FPI's enabling legislation and therefore arbitrary, capricious and beyond the discretion of the Board.
Second, it is a reversal of more than 60 years of public policy.
Finally, the creation of a State-run enterprise competing with its own citizens is a policy so at odds with the role of government in a free society that it is a decision best left to Congress.
FPI's decision to expand into the commercial market was based on a series of internal Justice Department legal opinions which found that the expansion into the commercial market is not in conflict with FPI's enabling legislation. In a memo dated November 11, 1997, FPI concludes it is not prohibited from selling services on the open market. According to FPI's reasoning, because congressional debate on this provision focused mainly on products, that Congress did not intend to prohibit FPI from entering the commercial services market. The opinion only gives cursory treatment to 18 U.S.C. Section 4122(A), which states, the administration of Federal Prison Industries shall determine in what manner and to what extent industrial operations shall be carried on in the Federal penal and correctional institutions for the production of commodities for consumption in such institutions or for sale to departments or agencies of the United States, but not for sale to the public in competition with private enterprise. Since its inception in 1934, FPI has adhered to this statutory prohibition preventing it from entering commercial markets. They have exclusively and with preferential status sold their products to the Federal Government. In other words, for more than 60 years FPI has interpreted their statute to mean what it says, but not for sale to the public in competition with the private sector.
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Now based upon on an internal memorandum, 60 years of policy has been overturned without public debate. The United States will now be selling commercial services in competition with law-abiding, tax-paying businesses using prison labor, which is often paid less than a dollar an hour. Because the creation of a State-run enterprise using prison labor to offer products to the commercial market in competition with private enterprise is a dramatic shift in policy and in conflict with the clear language of 18 U.S.C. 4122(A), it is an expansion that cannot and should not take place by the administrative fiat, but rather by the passage of legislative mandate that is a matter of public record.
Legislation to reform FPI is not a new concept. Representatives of BIFMA and the Chamber of Commerce and the coalition have testified at previous hearings in the 104th and 105th Congresses, and the difference today is that FPI has decided to forgo the legislative process and to enter into the commercial market. The expansion is already under way. We support legislation which would halt FPI's expansion into the commercial marketplace, and to pass legislation which more clearly states that it is not the policy of the United States to use prison labor to compete with its own citizens. I thank you.
Mr. CHABOT. [Presiding.] Thank you very much.
[The prepared statement of Mr. Felt follows:]
PREPARED STATEMENT OF JOHN H. FELT, MARKETING MANAGER FOR GOVERNMENT ACCOUNTS, HON INDUSTRIES, MASCATINE, IA
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Good morning, Mr. Chairman and members of the Committee. My name is John Felt, and I am the Marketing Manager for Government Accounts for The HON Company, a HON INDUSTRIES company. I am speaking today on behalf of BIFMA International and the Competition in Contracting Act Coalition.
BIFMA International is an association of approximately 200 manufacturers of office furniture and suppliers to the contract furniture industry. The Competition in Contracting Act Coalition represents more than 330 companies, associations, and labor organizations from 48 states. The Coalition is coordinated by the U.S. Chamber of Commerce and has long been an advocate of prison industry reform. On behalf BIFMA and the Coalition, I welcome the opportunity to comment on FPI reform.
I'd like to acknowledge Chairman McCollum for holding this hearing and also thank Congressman Hoekstra for providing a forum for business to discuss the impact of the Federal Prison Industries (FPI) mandatory source monopoly.
In my remarks this morning, I would like to touch on two areas of concern. First is the ongoing problem of FPI's mandatory source monopoly, and second is the expansion of FPI into the commercial marketplace.
MANDATORY SOURCE:
FPI, and the effect of its mandatory source monopoly, has been the subject of numerous hearings in the House Education and Workforce Committee's Oversight and Investigations Subcommittee, Chaired by Congressman Hoekstra. Whether it is a textile plant in Alabama, an electronics component plant in New Jersey, or a furniture company in Iowa, FPI's mandatory source monopoly has hurt people who want nothing more than to sell good priced, quality goods to the federal government.
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BIFMA supports the complete elimination of ''mandatory source'' and favors the use of competitive means to level the field and to impart practical business perspectives into FPI's program. Businesses have been seeking a repeal of mandatory source for some time. We had a similar set of hearings in this committee last year to discuss this very same issue. Years of FPI's monopoly have left our industry with a sense of urgency that there needs to be a mechanism to reform FPI. We are encouraged that there seems to be a consensus that FPI's mandatory source needs to be eliminated, I certainly hope that it can happen in this Congress.
It is industry's belief that before FPI is allowed to sell their products in the commercial marketplace, it must first learn to compete in its captive market. Under HR 2551, FPI would be required to play by the same rules as private industry for government procurements, and earn its business through competition. HR 2551 would also preserve deductions from inmate wages to fund payments to victims and to pay for vocational training programs. In short, this legislation would require FPI to earn its business and teach inmates to produce quality goods in a competitive environment, real skills necessary for real world success. HR 2551 provides FPI the chance to learn to compete.
ADMINISTRATIVE EXPANSION MUST BE STOPPED
Federal Prison Industry's unilateral decision to expand into the commercial market is an alarming new development that is seen as a call to arms by industry. FPI's move into the commercial market is opposed by the Coalition for three reasons. First, the decision by FPI's Board to expand into the commercial market is in conflict with the clear language of FPI's enabling legislation and therefor arbitrary, capricious and beyond the discretion of the Board. Second, it is a reversal of more than sixty years of public policy. Finally, the creation of a state run enterprise, competing with its own citizens, is a policy so at odds with the role of government in a free society, that it is a decision best left to Congress.
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FPI's decision to expand into the commercial market was based on a series of internal Justice Department legal ''opinions'' which found that expansion into the commercial market is not in conflict with FPI's enabling legislation. In a memo dated November 11, 1997, FPI concludes, ''it is not prohibited from selling services on the open market.'' According to FPI's reasoning, because Congressional debate on this provision focused mainly on products, that congress did not intend to prohibit FPI from entering the commercial services market. The opinion gives only cursory treatment to 18 U.S.C. section 4122(a), which states:
18 U.S.C. 4122: Administration of Federal Prison Industries Federal Prison Industries: shall determine in what manner and to what extent industrial operations shall be carried on in Federal penal and correctional institutions for the production of commodities for consumption in such institutions or for sale to the departments or agencies of the United States, but not for sale to the public in competition with private enterprise.
This section, the very first provision in the statute governing the Administration of FPI, spells out in clear, plain language that the markets for prison commodities is other prisons and federal agencies, but ''not for sale to the public in competition with the private sector.'' Despite the seemingly clear prohibition on entering the commercial market found in the statute, FPI has repeatedly stated that they have the authority to do so, and are beginning commercial pilot programs.
Since its inception in 1934, FPI has adhered to this statutory prohibition preventing it from entering commercial markets. They have exclusively, and with preferential status, sold their products to the federal government. In other words, for more than sixty years, FPI has interpreted their statute to mean what it says, ''but not for sale to the public in competition with the private sector.''
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Now, based on an internal memorandum, sixty years of policy has been overturned, without public debate. The United States will now be selling commercial services in competition with law abiding taxpaying businesses, using prison labor which is often paid less than a dollar an hour. Because the creation of a state run enterprise, using prison labor to offer products to the commercial market in competition with private enterprise is a dramatic shift in policy, and in conflict with the clear language of 18 U.S.C. 4122(a). It is an expansion that cannot and should not take place by administrative fiat but rather by the passage of a legislative mandate that is a matter of public record.
Legislation to reform FPI is not a new concept. Representatives of BIFMA, the Chamber of Commerce, and the Coalition have testified at previous hearings in the 104th and 105th Congress. The difference today, is that FPI has decided to forego the legislative process and to enter the commercial market. The expansion is already underway. We support legislation which would halt FPI's expansion into the commercial marketplace, and to pass legislation which even more clearly states that it is not the policy of the United States to use prison labor to compete with its own citizens.
Mr. CHABOT. Mr. Glover.
STATEMENT OF PHILLIP GLOVER, PRESIDENT, COUNCIL OF PRISON LOCALS, JOHNSTOWN, PA
Mr. GLOVER. I am Phil Glover, president of the Council of Prison Locals, AFGE, AFL-CIO. I am the elected representative of all Federal prison workers nationwide. We have 91 local unions representing 97 facilities in the Federal prison system. Our members include correctional officers, case workers, food service workers, mechanical services workers and Federal Prison Industries employees, not inmates.
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I am a correction officer in the Federal system. I am not a paid union representative. I represent my coworkers in a voluntary capacity. I have worked in the Federal system going on 10 years. So what I have to say next is from someone who works behind the fence.
I am aware, however, that we walk a fine line on this issue. This is first and foremost a health and safety issue with the prison council. I appreciate the opportunity to give our views on H.R. 2558 introduced by Congressman McCollum and Congressman Scott and the other legislation recently introduced, H.R. 2551; also to comment on Federal Prison Industries in general, as I believe there are some misconceptions how this program works in our facilities.
This is a difficult subject for many concerned interests. It deals with labor, business, prison safety, humaneness, work skills and productive time. I would like to first comment on prison industries and the role it plays in the Federal prison system. I have heard about competition, that FPI has an unfair competitive advantage. I have heard that we have a chain of factories and that we are a growing threat.
Federal Prison Industries was created to make inmates work. It was put into place in 1934 in order to provide productive skills-building work opportunities for inmates. It also developed into the Federal prison system's most important correctional program. It keeps 25 percent of our eligible population busy and productive. It has proven to reduce recidivism, which is a benefit to everyone.
I have personally worked inside a prison with inmates who work with FPI. They are generally more disciplined, less prone to violence, are more aware of their responsibilities and are easier to supervise.
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It is imperative that work opportunities be provided to assist in good correctional management of the facility. When inmates work and feel like they are doing something productive, it is easier to manage them.
Currently we sell only to government agencies. We are spread out into many different products, not specializing in any one item. To some people even this is too much. It would be better to warehouse men and women serving time in our prisons.
The chain of factories and the perceived threat of prison industries has been created by the United States' own policies regarding eliminating parole, creating minimum mandatory sentences and putting in place three strikes and you are ''in'' laws. I have been involved in this issue for 6 years now, and I have yet to find anyone willing to say what product or service inmates should do. Each time it is discussed, the only thing that comes out are the things that we can't, and that is a long list.
What must be understood is that inmates need to do something productive. It is not enough to give them vocational training and say we are keeping them productive. How long can an inmate serving 40 years be trained?
There are two issues here: One, teaching inmates work skills and providing them with an understanding of work in general. For those inmates leaving the system, this lowers the risk of recidivism. Second, keeping long-term inmates productive and occupied for as much of their sentence as possible.
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I would like to briefly comment on 2551, which eliminates mandatory source for FPI without giving prisons any other work opportunity. As a correctional officer and union leader in our organization, we can't sign onto this piece of legislation. It simply reverses the order of contracting, and in effect eliminates the program. We believe safety of staff and inmates will be reduced should it be enacted. I also oppose this similar provision in the DOD authorization in the Senate.
I have reviewed H.R. 2558 and have come to the conclusion in general it is moving us in the best direction possible. In the meantime, I believe FPI should concentrate mainly on the repatriation of work from foreign companies and workers. There are many products and services that have moved completely offshore. We have a huge inmate population and must find ways to keep them productive. This appears to be the best way.
I do have several concerns with the legislation. The first is not having a designated labor representative chosen by AFL-CIO sitting on the Board of Directors as they do now. I realize a member of labor is on the Independent Review Panel, but not on the Board of Directors. I believe this needs to be corrected. We are not in favor of having the private sector come in and physically run our factories. FPI bargaining unit employees are correctional workers first and are trained and experienced in running many operations of the facility besides the factory. They know what to do in an emergency, and we believe that they represent the best in prison factory supervision.
We must move cautiously. I go back to competition in Federal Prison Industries having to currently compete just for Federal contracts. Inmates are not people that you get to hire because of education levels, work history and on-the-job training. We are discussing running industries with people removed from society for various reasons. Some are more difficult than others to deal with. Incidents occur in prisons where the entire institution is in a lock-down status for weeks, days and sometimes months on end. No production will take place, and competition goes out the window.
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As citizens we must decide how we deal with this growing inmate population. What will we do when the system is 150,000 or 190,000 inmates? We need to start looking at it now.
This concludes my statement. I thank you again for the opportunity to present our views.
Mr. CHABOT. Thank you, Mr. Glover.
[The prepared statement of Mr. Glover follows:]
PREPARED STATEMENT OF PHILLIP GLOVER, PRESIDENT, COUNCIL OF PRISON LOCALS, JOHNSTOWN, PA
Mr. Chairman and Subcommittee members, I am Philip W. Glover, President, of the Council of Prison Locals, AFGE, AFL–CIO. I am the elected representative of all Federal Prison workers nationwide. We have 91 Local Unions representing 94 facilities in the Federal Prison System. Our members include Correctional Officers, Case Workers, Food Service Workers, Mechanical Services and Federal Prison Industries employees.
I am a Correctional Officer in the Federal System. I am not a paid Union representative. I represent my co-workers in a voluntary capacity. I have worked in the Federal System going on ten years. So what I have to say next is from someone who works behind the fence.
I appreciate the opportunity to give our views on H.R. 2558 (introduced by Congressman McCollum and Congressman Scott) and the other legislation recently introduced, H.R. 2551. Also, to comment on Federal Prison Industries in general, as I believe there are some misconceptions of how this program works in our facilities. This is a difficult subject for many concerned interests. It deals with labor, business, prison safety, humaneness, work skills, and productive time.
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I would first like to comment on Federal Prison Industries and the role it plays in the Federal Prison System. I have heard recently about competition, that FPI has an unfair competitive advantage. I have heard that we have a ''chain'' of factories and that we are a growing threat. To what or whom I am not sure.
Federal Prison Industries was created to make inmates work. It was put into place in 1934 in order to provide productive, skills building work opportunities for inmates. It also has developed into the Federal Prison System's most important correctional program. It keeps twenty-five percent of our eligible population busy and productive. It has proven to reduce recidivism, which is a benefit to everyone.
I have personally worked inside a prison with inmates who work in FP1. They are generally more disciplined, less prone to violence, are more aware of their responsibilities, and are easier to supervise. It is imperative that work opportunities be provided to assist in good correctional management of the facility. When inmates work, and feel like they are doing something worthwhile, it is easier to manage them.
Currently, we sell only to government agencies. We are spread out into many different products, not specializing in any one item. To some people this is even too much, it would be better to warehouse men and women serving time in our prisons. The ''chain'' of factories and the perceived threat of prison industries has been created by the United States own policies. We have eliminated parole, created minimum-mandatory sentences, and put in place three strikes and your ''in'' laws.
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I have been involved in this issue for about six years now, and I have yet to find anyone willing to say what product or service inmates should do. Each time it is discussed, the only thing that comes out is the things we can't do, and that is a long list. What must be understood is inmates need to do something productive. It is not enough to give them ''vocational training'' and say we are keeping them productive. How long can an inmate serving forty years be ''trained''? There are two issues here. One, teaching inmates work skills and providing them with an understanding of work in general. For those inmates leaving the system this lowers the risk of recidivism. Second, keeping long term inmates productive and occupied for as much of their sentence as possible.
I would like to briefly comment on H.R. 2551, which eliminates mandatory source for FPI without giving prisons any other work opportunity. As a Correctional Officer and Union leader in our organization, we can't sign on to this piece of legislation. It simply reverses the order of contracting, and in effect eliminates the program. We believe safety of staff and inmates will be reduced should it be enacted.
I have reviewed H.R. 2558 and have come to the conclusion, in general, it is moving us in the best direction possible. As I stated earlier, people don't want to tell us what we can do, only what we can't. Perhaps, if we give up mandatory source over the next seven to ten years then those who want the government market so bad, can finally get our small percentage.
In the mean time, I believe FPI should concentrate mainly on the repatriation of work from foreign companies and workers. There are many products and services that have moved completely off shore. We have a huge inmate population and must find ways to keep them productive. This appears to be the best way.
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This bill is a good start in dealing with issues which have been raised during the long debate on prison industries. It addresses a minimum wage for inmates producing goods and services in the United States. It addresses wages for work taken from the overseas markets. It then lays out deductions which an inmate will have to pay when earning these wages. The bill provides a moratorium on future sales from FPI while this plan is being enacted. It has a non- layoff clause so companies in the United States can't just eliminate their free workers and move to a prison factory operation.
I do have several concerns with the legislation. The first is not having a designated labor representative chosen by AFL-CIO sitting on the Board of Directors as they do now. I realize a member of labor is on the Independent Review Panel, but not on the Board of Directors, I believe this needs to be corrected. We are not in favor of having the private sector come in and physically run our factories. FP1 bargaining unit employees are Correctional Professionals and are trained and experienced in running many operations of our prisons. It is a much safer place when everyone knows what is expected during an emergency. We believe that they represent the best in prison factory supervision.
Although this piece of legislation may be the best opportunity to expand inmate work opportunities in the future, we must move cautiously. I go back to ''Competition'' and prison industries having to currently compete just for Federal contracts. Inmates are not people you get to hire because of education levels, work history and on the job training. We are discussing running industries with people removed from society for various reasons. Some are more difficult then others to deal with. Incidents occur in prisons where the entire institution is in ''lock down'' status for days, weeks and sometimes months. No production will take place and ''competition'' goes out the window. As citizens, we must decide how we will deal with this growing inmate population. What will we do when the system is at 150,000 or 190,000 inmates? We need to start looking at it now.
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Mr. Chairman, and members of the subcommittee this concludes my statement. I thank you again for the opportunity to present the Council of Prison Locals views on this very important issue. I am willing to address any questions you may have.
Mr. CHABOT. We have been called for a vote on the floor. We are going to take one more witness before we recess.
Mr. Linder, I understand that Dr. Wilkinson has to catch a plane, so if you don't mind, we will go to Dr. Wilkinson at this time.
STATEMENT OF REGINALD A. WILKINSON, DIRECTOR, OHIO DEPARTMENT OF REHABILITATION AND CORRECTION, COLUMBUS, OH
Mr. WILKINSON. Good morning, Mr. Chairman and members of the House Judiciary Subcommittee on Crime. I am honored to appear before you today to testify regarding the impact of H.R. 2558 and other relevant issues on prison industries. I would especially like to thank the Correctional Industries Association for their ongoing support for the development of quality industry programs in our Nation's prisons and jails.
First I would like to provide the subcommittee with a thumbnail sketch of our overall approach to prisoner employment and give the subcommittee a perspective on what we have learned from our experiences in Ohio before delving further into the areas impacted by H.R. 2558.
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Prison industries have always been an integral part of modern corrections. My testimony this morning suggests that correctional administrators require more latitude in managing prisoners and prisons, not more regulation.
As a result of a special task force in 1991, the Ohio Department of Corrections made a concerted effort to move to adopt modern business practices. I appointed a prison industries director with extensive private sector experience. The Ohio Prison Industries, or OPI, created business and marketing plans, increased focus on profitability and the marketability of product lines, and introduced the concept of excellence as well as a focus on customer requirements. Our products and services are no longer viewed as second-class.
But why prison industries? Before we look at the impact of the legislation before us, let me address the issues of why we have prison industries in the first place.
In my view, there are at least six primary rationales. First, prison jobs are a management tool to keep prisoners busy. When they are forced to be idle, violence and tension increases, especially in light of prison crowding. Prison industry programs keeps thousands of inmates productively involved.
Second, job training reduces crime. Inmates who participate in meaningful job training demonstrate a statistical reduction in recidivism. Participation in OPI jobs reduced the rate of offenders released from prison by 20 percent. Participation in high-skilled OPI jobs resulted in a 50 percent reduction in recidivism.
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Third, meaningful job training increases an offender's chances of finding and keeping a job after release. As one can imagine, former prisoners attempting to find jobs are at a natural disadvantage. It is our mission to teach them skills so they can compete in the job market after they have served their prison sentences.
Fourth, partnerships with the private sector industries boost economic development. Our department has placed a heavy emphasis in recent years on partnering with the private sector. These partnerships benefit both the Department of Corrections and the companies we contract with. We currently have 22 agreements with private sector entities that employ 680 inmates. When we decide to partner with a private sector company, they must agree to sign a statement that they will not displace Ohio workers when utilizing inmate labor.
Fifth, prison industries offset the cost of incarceration. OPI, like most prison industries across the country, is a self-supporting entity that does not require financial assistance from Ohio's general revenue fund. According to our independent study commissioned by the Department of Corrections, the Ohio Prison Industries further defrays taxpayer cost by providing $15.9 million annual benefit to Ohio's economy.
OPI is the Nation's fifth largest correctional industry program. A listing of OPI shops and services is included in your packet.
Finally, prison industries imbue inmates with a work ethic and a sense of self-responsibility. Many inmates have never held a job for any length of time. Many do not know what it means to report to work at a designated time, take instruction, and feel the satisfaction of a job well done.
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Released inmates must support their families, pay their rent and other fiscal obligations. In many cases, they are required to pay restitution for their crimes, as well as other legal judgments. If we do not teach responsibility, who will?
I would now like to briefly address some of the main points of discussion regarding H.R. 2558. I am a proponent of the options presented in the proposed legislation that gives States the choice to maintain the status quo or adopt a more competitive stance. I appreciate the improvements that are implicit in H.R. 2558 relative to the previous version of the legislation, H.R. 4100, that was introduced last year.
I am especially pleased that the new bill provides States the options of continued participation in the Prison Industries Enhancement program without jeopardizing existing mandatory source laws.
While I generally support the legislation as proposed, I would like to suggest some possible alternatives that could enhance our ability to employ offenders, particularly in the PIE program.
I would like to caution the committee against consideration of amendments that would add ''services furnished'' to the list of products manufactured by prisoners that are restricted from interstate commerce under section 1761 of Title 18 of the U.S. Code. This change could force the elimination of 550 OPI jobs in Ohio alone.
Next, I would urge the elimination of language regarding workers compensation and prevailing wage from PIE. It is my firm belief that provisions such as workers compensation benefits imply that inmates are employees rather than wards of the State. The courts have continuously upheld that inmates working in the correctional industry programs are not employees.
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As an alternative to this language, we would suggest that the committee amend section 1761 to allow States the flexibility in the PIE statutes to establish programs to cover medical and liability coverage for inmates and to pay Federal minimum wage or, better yet, to allow States to set their own wage requirements.
In Ohio, we have worked very hard to increase the employability of ex-inmates. In addition to offering my support of H.R. 2558, I am here to seek your help in supporting and increasing those efforts.
The bottom line is that we must work together to help former prisoners become not just law-abiding citizens, but persons who will make a positive contribution to their community. It is a simple equation of pay now or pay later. Each gainfully employed ex-inmate means one less criminal on the street. That translates into fewer crime victims.
I appreciate the opportunity to appear before the subcommittee today to speak about the crucial issue of prison industries and prisoner employment. Mr. Chairman and subcommittee members, I thank you for your time.
Mr. CHABOT. Thank you very much, Dr. Wilkinson.
[The prepared statement of Mr. Wilkinson follows:]
PREPARED STATEMENT OF REGINALD A. WILKINSON, DIRECTOR, OHIO DEPARTMENT OF REHABILITATION AND CORRECTION, COLUMBUS, OH
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INTRODUCTION
Good morning Chairman Bill McCollum and members of the House Judiciary Subcommittee on Crime. I am Reggie Wilkinson, Director of the Ohio Department of Rehabilitation and Correction (DRC) and Immediate Past President of the American Correctional Association. I am honored to appear before you today to testify regarding the impact of House Resolution (HR) 2558 and other relevant issues on prison industries. I would especially like to thank the Correctional Industries Association for their ongoing support for the development of quality industry programs in our nations prisons and jails.
First, I'd like to provide the subcommittee with a thumbnail sketch of our overall approach to prisoner employment, and give the subcommittee a perspective on what we have learned from our experiences in Ohio, before delving further into the areas impacted by HR 2558.
Prison industries have always been an integral part of modern corrections. In the 1800's, prisoners at the Ohio Penitentiary worked at making shoes, uniforms, brooms, barrels and much more. In my 26-year career in corrections I have had the opportunity to observe the successes and pitfalls of various prison industry initiatives, and I feel confident that we are on the right track with our current programs.
Ohio has the fifth largest state correctional system in the country, housing over 46,700 inmates in 31 prisons. In 1991, when former Ohio Governor George Voinovich and former Lieutenant Governor Mike DeWine, now both U.S. Senators, took office they pledged to increase inmate productivity. Ohio Governor Bob Taft also endorses a comprehensive approach to prisoner work programming.
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One of the crucial areas targeted in these efforts was improving the efficiency and management of our Department's industrial training program known as the Ohio Penal Industries (OPI). As a result of an independent evaluation performed by Ohio's Operations Improvement Task Force in 1991, the Department made a concerted move to adopt modern business practices. I appointed a prison industries director with extensive private sector management experience. OPI created business and marketing plans, increased focus on profitability and the marketability of product lines, and introduced the concept of excellence as well as a focus on customer requirements. Our products and services are no longer viewed as second class, but more so, as well manufactured and competitively priced goods and services.
WHY PRISON INDUSTRIES?
Before we look at the impact of the legislation before us, let me address the issue of why we have effective prison industrial programs. In my view, there are at least six primary rationales:
First: Prison jobs are a management tool to keep prisoners busy. When prisoners are forced to be idle, tension and violence increase, especially in light of prison crowding that Ohio and many other correctional systems face on a daily basis. Prison industry programs keep thousands of inmates productively involved in the day-to-day, structured operation of our correctional facilities.
Second: Job training reduces crime. Inmates who participate in meaningful job training demonstrate a statistical reduction in recidivism. A 1995 study conducted by the Ohio Department of Rehabilitation and Correction showed that OPI is having a positive impact. Participation in OPI jobs reduced the return rate of offenders released from prison by 20 percent. Participation in high-skilled OPI jobs resulted in a 50 percent reduction in recidivism. The study also indicated that certain groups of prisoners benefited differently. For instance, prison industry participation had the greatest impact on African American males.
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Third: Meaningful job training increases an ex-offender's chances of finding and keeping a job after release. As one can imagine, former prisoners attempting to find jobs are at a natural disadvantage. It is our mission to teach them skills so that they can compete in the job market after they have served their prison sentences. Ohio's 105 vocational education programs range from building maintenance to welding, from brick laying to auto mechanics.
Our certified vocational programs are buttressed by a solid base of educational and treatment programs, pre-release activities, and formalized linkages to the community.
Fourth: Partnerships with private sector industries boost economic development. In an attempt to expand prison industries and create more real-world and high-skilled jobs, DRC has placed an emphasis in recent years on partnering with the private sector. These partnerships benefit both DRC and the companies we contract with. We currently have 22 agreements with private sector entities that employ 680 inmates.
Before signing, agreements are reviewed by Ohio's Prison Labor Advisory Council (PLAC), a six-member board which advises and assists DRC in our responsibility to create meaningful work for inmates. The Council is comprised of business and community leaders, who help insure that proposed private sector agreements will meet the Department's objectives to have no adverse impact on Ohio's labor market. If endorsed by the PLAC, companies agree to sign a statement that they will not displace Ohio workers in utilizing inmate labor.
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Fifth: Prison industries offset the cost of incarceration. OPI is a self-supporting entity that does not require financial assistance from Ohio's General Revenue Fund. According to an independent study commissioned by DRC, OPI further defrays taxpayer costs by providing a $15.9 million annual benefit to Ohio's economy and creating 62 private sector ''spin-off'' jobs. Customer surveys, moreover, consistently demonstrate that OPI is fulfilling its mission to produce quality products.
By the end of Fiscal Year 1999, OPI employed almost 3,000 inmates and generated sales of over $38 million, making OPI the fifth largest industrial training program in the nation. These sales enable OPI to cover expenses and operate self sufficiently. Enclosed in your packets is a listing of OPI shops and services, which range from the traditional production of license plates and janitorial supplies, to high-tech services such as asbestos abatement and computer refurbishing.
Finally, prison industries imbue inmates with a work ethic and a sense of self-responsibility. Many inmates have never held a job for any length of time. Many do not know what it means to report to work at a designated time, take instruction, and feel the satisfaction of a job well done. In Ohio, prison industries mirror the outside world as closely as possible so that when offenders are released to the community they are as ready as possible to join the world of work.
It is also important that former prisoners learn to accept the same employment obligations that you and I do. They must support their families, pay their rent, insurance and taxes. In many cases, they are required to pay restitution for their crimes and other legal judgements. If we don't teach responsibility, who will?
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COMMENTS ON H.R. 2558
I would now like to address some main points of discussion regarding HR 2558. I am a proponent of the options presented in the proposed legislation that give states the choice to maintain the status quo or adopt a more competitive stance. Despite the fact that OPI has made great strides in recent years in employing additional offenders, we realize that more inmates can and should be provided access to these meaningful jobs, especially in the growing service industry.
I applaud the efforts of the Chairman and this subcommittee to study ways that this can be accomplished. I appreciate the improvements that are implicit in HR 2558 relative to the previous version of the legislation (HR 4100) that was introduced last year.
I am especially pleased that the new bill provides states the option of continued participation in the Prison Industries Enhancement (PIE) program without jeopardizing existing mandatory source laws.
Providing states the option of eliminating their mandatory source laws in exchange for open markets is a reasonable alternative that balances the concerns of business, labor and correctional agency managers.
While I generally support the legislation as proposed, I would like to suggest some possible alternatives that could enhance our ability to employ offenders, particularly in the PIE program.
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I'd like to caution the subcommittee against consideration of amendments that would add ''services furnished'' to the list of products manufactured by inmates that are restricted from Interstate Commerce under Section 1761 of Title 18 of the U.S. Code. This change could force the elimination of 550 OPI jobs in Ohio alone. This would have an obvious adverse impact on Ohio's prison budget and management techniques.
Next, I would urge the elimination of language regarding ''workers compensation'' and ''prevailing wage'' from PIE. It is my firm belief that provisions, such as workers compensation benefits imply that inmates are ''employees'' rather than wards of the state. This continues to open up a quagmire of legal liability that could threaten to engulf states with lawsuits in the foreseeable future. The courts have continuously upheld that inmates working in correctional industry programs are not employees.
It is difficult, if not impossible, to determine a prevailing wage for some industries in many regional areas where OPI shops are established.
As an alternative to this language, we would suggest that the committee amend Section 1761, to allow states the flexibility in the PIE statutes to establish programs, to cover medical and liability coverage for inmates, and to pay federal minimum wage or, better yet, to set their own wage requirements.
TEACHING THE WORK ETHIC
In Ohio, we've worked very hard to increase the employability of ex-inmates. In addition to offering my support of HR 2558, I am here today to seek your help in supporting and increasing those efforts. Let me give you a couple of salient examples from a holistic approach that we've developed to impact offender employment readiness activities.
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A recent innovation designed to enhance the ability of offenders to successfully reintegrate into society is our Offender Job Linkage Program. Information on this program has been provided with my testimony. This initiative came about as a result of a meeting with Chuck Colson, Director of Prison Fellowship, and Ohio business leaders. In an environment of low unemployment, with employers aggressively seeking job applicants, Ohio industry leaders were asked to give certain inmates an opportunity to work following their release. The Department supported this effort by creating the ''job linkage'' program. We now invite local business leaders to interview skilled inmates close to release at job fairs in our prisons. As a prerequisite to participation in the job fairs, inmates must be within 90 days of release and are required to produce a current resume and participate in classroom training to develop interview skills. Staff from the Ohio Department of Human Services and the Ohio Bureau of Employment Services assist DRC staff in preparing the offenders for interviews.
To date, over 1,900 inmates and approximately 100 employers have participated in 92 job fairs across the state. Approximately 26 percent of the inmates participating were offered actual employment following their release, while the majority of the remaining offenders were encouraged to report after their release for additional interviewing and consideration.
We recently added teleconferencing technology to this initiative, encouraging employers in Ohio's urban centers to interview job-ready inmates in remote prisons via video linkages. While the video interviews cannot replace face-to-face meetings, employers have vouched for their value as pre-interview screening tools. Both employers and inmates are excited about the possibilities inherent in this technology.
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In Ohio, we're probably most proud of our community service initiative. We have expanded the numbers of inmates and hours devoted to community service from an estimated 50,000 hours in 1991 to an astonishing 3.3 million hours in 1998. This initiative has enabled literally thousands of inmates to learn valuable job skills and to experience the positive rewards of contributing to society. It has also provided much needed assistance to Ohio's schools, hospitals, parks, charitable organizations, and many other deserving non-profit and governmental agencies.
CONCLUSION
The bottom line is that we must work together to help former criminals become not just law abiding citizens, but persons who will make positive contributions to their communities. It's a simple equation of pay now or pay later.
Corrections professionals believe that our best hope is in the entry-level manufacturing and service industries.
Each gainfully employed ex-inmate typically means one less criminal.
That translates into fewer crime victims.
The title of the agency I lead is the Ohio Department of Rehabilitation and Correction. The correction part is accomplished through the separation of offenders from society and the limited freedom inherent in prison.
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The rehabilitation part is manifested by good counseling, treatment, educational, and industrial programs. We can either give ex-offenders the chance to participate in our society through meaningful work, or we can expect many of them to come back into our prisons after commiting more crimes.
I appreciate the opportunity to appear before the subcommittee today to speak about the crucial issues of prison industries and prisoner employment.
I support the overall aims of HR 2558, and it is my hope that these discussions will, once again, result in legislation that can bring about fruitful change and facilitate greater numbers of offenders in the future becoming taxpaying, contributing and productive citizens.
Thank you for your time, Mr. Chairman and subcommittee members.
Mr. CHABOT. My esteemed colleague up here, the Ranking Member Mr. Scott, said he thought that you had squeezed 8 minutes of testimony in 5 minutes. I think he is wrong. I think you squeezed 10 minutes into 5 minutes. But there was a commercial years ago about a guy that was on TV who used to read real fast. If you ever get out of this career and are looking for another one, I was really impressed there, and your testimony was very good.
We are going to recess right now and go over and vote. We will, I guess, return in 10 or 15 minutes.
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[Recess.]
Mr. MCCOLLUM. [Presiding.] Subcommittee on Crime will come to order. I understand that when we took the break, that we were ready for your testimony, Mr. Linder. We welcome you, and you may proceed.
STATEMENT OF ANDREW S. LINDER, PRESIDENT, POWER CONNECTOR, INC., BOHEMIA, NY
Mr. LINDER. Thank you. Good afternoon, Mr. Chairman and members of the subcommittee. I am Andy Linder, president and owner of Power Connector, a small electronics-business based on Long Island, New York, employing 73 people, a large percentage of which are minorities. My company commenced business on April 1st, 1987, and has since concentrated its manufacturing efforts primarily in the areas of electronic connectors and cable hardware for the U.S. Military. We supply these component parts primarily to the Department of Defense, Federal Prison Industries, FPI, and to our Nation's primary defense contractors.
I am here today to relay my FPI story as a private sector small business owner, and one which I believe many small businesses and other members of the Correctional Vendors Association from around the country could tell. It is a story that surprises many people involved in the FPI debate as many do not realize the extent to which private sector vendors are involved with the FPI.
But for the sake of a fair debate regarding FPI's impact on private sector vendors, one needs to examine how companies like mine, who currently have contracts with FPI, who have capitalized their businesses and hired employees based upon FPI contracts, could be impacted by changes to FPI. For example, in fiscal year 1998, I was just one of some 15,000 private industry vendors nationwide who were registered with FPI. Together we conducted $419 million in business with FPI, over 50 percent of which was from small business that had thousands of employees and families dependent on those same sales. That means that for every dollar in FPI sales, some 76 cents went directly back to private sector companies, like mine, from FPI purchases of our raw materials and services.
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On a personal level, I can tell you without equivocation that my company, Power Connector, would not be in business today without FPI's efforts and mission to seek out small operations like mine with whom to do business. I have personally witnessed the dedication of FPI's staff and commitment of resources to use the talent and skills of small business in order to fulfill FPI contracts. FPI has achieved this by breaking down their finished products into component parts and allowing small companies like mine the opportunity to bid, resulting in opportunities that we otherwise would not have had.
I believe that I can best tell you the importance and value that FPI's subcontracting endeavor has had on my business and me by telling you about my business. I was introduced to FPI through my work with a former employer who had several contracts with FPI. I became very familiar with the various elements of the electronic connectors and cable hardware industry through my work there. Unfortunately, that business, like many others, did not survive.
At that time, the U.S. Army's CECOM Division in Fort Monmouth, New Jersey, was seeking alternative suppliers to fulfill a contract for upgrading their SINCGARS Program, the single-channel ground-to-air radio system. The Army had become frustrated by a large prime defense contractor that had a monopoly on the supply of cable and components necessary for the SINCGARS upgrade program, and they turned to FPI to develop other sources for these labor-intensive, high-priced cables and connectors.
FPI recognized the opportunity to reach out to small businesses like mine. They broke down the contracts that they received from the U.S. Army into component parts and requested small businesses, including mine, to participate and bid on prototypes. They did this by partnering with small businesses and providing the capital through competitive bids for the costly testing and assembly, which allowed them to participate.
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By assuming the financial burden for the testing of prototypes, FPI eliminated the major financial barrier which precluded most small companies like mine from competing for these contracts, which were normally reserved for larger companies who had the necessary capital and human resources. Mine was a start-up company, struggling to make payroll, and it was only through FPI's sharing expenses and subcontracts that my company became successful.
As a result of FPI's efforts to work with the small business community, our products were approved. FPI provided the intensive labor required. We provided the component parts. Bidding on these contracts was required. I am proud to say my company won the bids for the component parts, enabling FPI to provide them to the Department of Defense at one-third the price that they had originally paid, thereby saving taxpayers millions of dollars over the last 9 years.
My point in relating my story today is to make clear that a start-up business like mine could not have done this on its own. FPI was interested in our ability to meet their requirements, not on our size or numbers. We could meet the military standards and perform. Being a small start-up business was not a liability. It was FPI's mission to afford fledgling companies like my own with this rare opportunity to partner, and it allowed us to gain contracts for which we otherwise would not have been able to compete. Without FPI, these contracts would have gone to and been absorbed by larger companies at higher prices. I am certain that the active involvement of FPI as a significant source to the Army ensured a small business growth and opportunity that otherwise would not have materialized.
In my first few years of business, 100 percent of my employees and my entire revenue was attributable to FPI business. My company's survival was firmly rooted in its relationship with FPI. Today, 17 out of my 73 employees, or approximately 25 percent of my labor force, is directly attributable to FPI business. This is a result of FPI's efforts to reach out to small businesses like mine. I now have over 40 employees dedicated to fulfilling contracts with other U.S. Government agencies and military defense contractors obtained on my own.
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I can honestly say that 100 percent of our capability to bid for and supply this other work has come from our ability to establish a credible performance track record as a result of FPI's business. By giving us the opportunity to prove ourselves, when most agencies or defense contractors would not look twice at a start-up company, FPI gave us that fighting chance to demonstrate our competitive spirit.
In addition to our own success, the amount of subcontracts and work we have outsourced over the past 9 years to over 40 other small businesses has generated the hiring of almost 120 full-time employees.
Mr. Chairman and members of the subcommittee, I respectfully request the views of small businesses such as mine who have been partnering with FPI for years be inserted into and carefully weighed in this very complex debate of how to optimize FPI's operations. I again reiterate that small businesses constitute over 50 percent of vendor sales from FPI, and like most small businesses, we are not usually as capable of absorbing large fluctuations in sale or as able to capitalize in new ventures. We are simply more fragile than larger companies. For this reason, it is of the utmost importance that the impact on small business be studied and carefully weighed when considering any changes to FPI's current structure. It is a lifeline for many small businesses like my own.
Thank you for your time and consideration.
Mr. MCCOLLUM. Thank you very much, Mr. Linder.
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[The prepared statement of Mr. Linder follows:]
PREPARED STATEMENT OF ANDREW S. LINDER, PRESIDENT, POWER CONNECTOR, INC., BOHEMIA, NY
Mr. Chairman and Members of the Subcommittee. I am Andy Linder, President and Owner of Power Connector, a small electronics business based on Long Island, NY employing 73 people. My company commenced business on April 1, 1987 and has since concentrated its manufacturing efforts primarily in the areas of electronic connectors and cable hardware for the U.S. military. We supply these component parts primarily to the Department of Defense, Federal Prison Industries (FPI) and to our nation's primary defense contractors.
I am here today to relay my FPI story as a private sector, small business owner and one which I believe many small businesses and other members of the Correctional Vendors Association from around the country could tell. It is a story that surprises many people involved in the FPI debate as many do not realize the extent to which private sector vendors are involved with FPI. But for the sake of a fair debate regarding FPI's impact on private sector vendors, one needs to examine how companies like mine who currently have contracts with FPI, who have capitalized their businesses and hired employees based on FPI contracts, could be impacted by changes to FPI. For example, in fiscal year 1998 I was just one of some 15,000 private industry vendors nationwide who were registered with FPI. Together, we conducted $419 million dollars in business with FPI, over 50% of which was from small businesses that had thousands of employees and families dependent on these same sales. That means that for every dollar in FPI sales, some $.76 cents went directly back to private sector companies like mine from FPI purchases of our raw materials and services.
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On a personal level, I can tell you without equivocation that my company, Power Connector, would not be in business today without FPI's efforts and mission to seek out small operations like mine with whom to do business. I have personally witnessed the dedication of FPI's staff and the commitment of resources to use the talent and skills of small business in order to fulfill FPI contracts. FPI has achieved this by breaking down their finished products into component parts and allowing small companies like mine the opportunity to bid, resulting in opportunities that we otherwise would not have had. I believe I can best tell you the importance and value that FPI's subcontracting endeavor has had on my business and me by telling you about my business.
I was introduced to FPI through my work with a former employer who had several contracts with FPI. I became very familiar with various elements of the electronic connectors and cable hardware industry through my work there. Unfortunately, that business like many others, did not survive.
At that time, the U.S. Army's CECOM Division in Fort Monmouth, NJ was seeking alternative suppliers to fulfill a contract for upgrading their SINCGARS Program—the single channel ground to air radio system. The Army had become frustrated by a large prime defense contractor that had a monopoly on the supply of cable and components necessary for the SINCGARS upgrade program and they turned to FPI seeking to develop other sources for these labor intensive, high priced cables and connectors.
FPI recognized the opportunity to reach out to small businesses like myself. They broke down the contracts that they received from the U.S. Army into component parts and requested small businesses, including mine, to participate and bid on proto-types. They did this by partnering with small businesses and providing the capital through competitive bids for the costly testing and assembly, which allowed them to participate.
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By assuming the financial burden for the testing of proto-types, FPI eliminated the major financial barrier, which precluded most small companies like mine from competing for these contracts, which were normally, reserved for larger companies who had the necessary capital and human resources. Mine was a start-up company, struggling to make payroll and it was only through FPI's sharing expenses and sub-contracts that my company became successful.
As a result of FPI's efforts to work with the small business community our products were approved. FPI provided the intensive labor required, we provided the component parts. Bidding on these contracts was required. I am proud to say my company won the bids for the component parts enabling FPI to provide them to the Department of Defense at 1/3 of the price they had originally paid, thereby saving taxpayers millions of dollars over the last nine years.
My point in relaying my story today is to make clear that a start-up business like mine could not have done this on its own. FPI was interested in our ability to meet their requirements, not our size or numbers. If we could meet the military standards and perform, being a small, start-up business was not a liability. It was FPI's mission to afford fledgling companies like my own with this rare opportunity to partner and it allowed us to gain contracts for which we would otherwise not have been able to compete. Without FPI, these contracts would have gone to and been absorbed by larger companies, at higher prices. I am certain that the active involvement of FPI as a significant source to the Army ensured small business growth and opportunity that otherwise would not have materialized.
In my first few years of business, 100% of my employees and my entire revenue was attributable to FPI business. My company's survival was firmly rooted in its relationship with FPI.
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Today, 17 out of my 73 employees or approximately 25% of my labor force are directly attributable to FPI business. This is a result of FPI's efforts to reach out to small businesses like mine. I now have over 40 employees dedicated to fulfilling contracts with other U.S. government agencies and military defense contractors obtained on my own. I can honestly say that 100% of our capability to bid for and supply this other work has come from our ability to establish a credible performance track record as a result of FPI's business. By giving us the opportunity to prove ourselves, when most agencies or defense contractors would not look twice at a start up company, FPI gave us that fighting chance to demonstrate our competitive spirit. In addition to our own success, the amount of subcontracts and work we have outsourced over the past nine years, to over 40 other small businesses has generated the hiring of almost 120 full time employees.
Mr. Chairman and Members of the Subcommittee, I respectfully request the views of small businesses such as mine who have been partnering with FPI for years be inserted into and carefully weighed in this very complex debate of how to optimize FPI operations. I again reiterate that small businesses constitute over 50% of vendor sales from FPI. And like most small businesses we are not usually as capable of absorbing large fluctuations in sales or as able to capitalize in new ventures. We are simply more fragile than larger companies. For this reason, it is of the utmost importance that the impact on small business be studied and carefully weighed when considering any changes to FPI's current structure. It is a lifeline for many small businesses like my own.
Thank you for your time and consideration.
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Mr. MCCOLLUM. Mr. Martin, you are recognized.
STATEMENT OF LARRY K. MARTIN, PRESIDENT, AMERICAN APPAREL MANUFACTURERS ASSOCIATION, ARLINGTON, VA
Mr. MARTIN. Thank you, Mr. Chairman. It is a great pleasure for me to be here today, and we commend the committee for its interest in this most important subject.
AAMA has long been concerned about the adverse impact FPI has had on private sector apparel manufacturers. FPI has been particularly harmful to the small, but important, group of manufacturers that produce uniforms and personal issue items for the U.S. Military. These companies are mostly small businesses. They sell almost exclusively to the Department of Defense. Collectively, they form the critical warm industrial base that ensures a steady stream of supplies to the military in times of national emergency. These companies are also threatened with extinction if FPI continues to take a larger share of the shrinking defense budget for apparel every year.
AAMA has long maintained that FPI's current authorizing statute should be sufficient to ensure peaceful coexistence between FPI and private industry, and we believe this would be the case but for the lack of two things, limitations and oversight.
Congress in 1934 made a critical lapse when it failed to define the terms of FPI's statutory authority, leaving key mandates intended to minimize competition with the private sector open to interpretation. FPI has taken full advantage of these ambiguities in the law to render its statutory limitations meaningless.
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For those reasons, Mr. Chairman, we welcome the leadership you are providing on this issue. Clearly, FPI's authorizing statute is in need of modernization, and we look forward to working with you and all the other interested parties to craft a solution to this problem.
We have reviewed both H.R. 2551, the Federal Prison Industries Competition in Contracting Act, and H.R. 2558, the Prison Industries Reform Act. As you know, we have announced our support for H.R. 2551. We did so for a simple reason. That bill addresses the problems of the apparel industry vis-à-vis FPI by providing specific limitations and oversight.
At the same time, we appreciate the goals you are trying to accomplish through H.R. 2558. While we understand the importance of those goals, we remain concerned that the bill as currently drafted does not eliminate current abuses under the system, nor the adverse pressures that FPI imposes on industry.
Still, we welcome several positive developments in this legislation. Oversight, in particular, is greatly strengthened by the creation of a more accountable Board of Directors and an Independent Review Panel. Also, the provisions capping and rolling back the use of mandatory source are encouraging. These provisions could be better still if production were simultaneously scaled back in those product areas that remain under mandatory source for all or part of the 7-year period.
Although we have reservations about the overall approach taken by H.R. 2558, we would like to point out several provisions that if tightened could provide relief to beleaguered industries within this framework.
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Mandates requiring FPI to minimize adverse impact on the private sector should be strengthened, not weakened.
Mandatory source elimination should be structured to provide immediate relief to affected industries.
Prohibitions on new production and significantly expanded production under mandatory source should be strictly defined.
No product should be designated a foreign-made product if such product is produced anywhere in the United States.
There should be no reinstatement of current law under any circumstances. There is no escape valve to provide relief for private industry in current law. There should be no escape valve for FPI in the bill. If changes to the law become necessary, Congress should revisit the issue as it is doing in the current instance.
In summary, the status quo is unacceptable. FPI has abused the system to take market share in specific products and specific industries well beyond any reasonable reading of the limitations imposed by statute. We are convinced that FPI does not have the institutional will to remedy these shortcomings. The answer is legislation to strictly define FPI's limitations and to impose better oversight that will assure adherence to these limitations. H.R. 2551 ensures limitations and oversight.
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However, we are aware that H.R. 2558 does attempt to address the difficulties of managing a growing Federal prison population. In recognition of those difficulties and of the role that FPI plays in alleviating them, we are committed to working with you, Mr. Chairman, and with all the parties involved in this issue, to reach a reasonable balance between these serious concerns.
Thank you, Mr. Chairman, for providing us this opportunity to present our views. I will be pleased to respond to any questions you may have.
Mr. MCCOLLUM. Thank you very, very much, Mr. Martin, for that constructive statement.
[The prepared statement of Mr. Martin follows:]
PREPARED STATEMENT OF LARRY K. MARTIN, PRESIDENT, AMERICAN APPAREL MANUFACTURERS ASSOCIATION, ARLINGTON, VA
Thank you, Mr. Chairman. I am Larry Martin, President of the American Apparel Manufacturers Association (AAMA). It is a pleasure to be here today and I commend the Committee for its interest in this most important subject.
AAMA is the central trade association for American companies manufacturing clothing. Our members are located in virtually every state, make every kind of garment and are responsible for about 85 percent of the clothing sold at wholesale in the United States. Our Government Contracts committee is comprised of about 50 companies, all of which have vital interests in your deliberations and in the future of Federal Prison Industries (FPI).
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AAMA has long been concerned—and has testified several times before this and other Committees—about the adverse impact FPI has had on private sector apparel manufacturers. FPI has been particularly harmful to the small, but important, group of manufacturers that produce uniforms and personal issue items for the U.S. military. These companies are mostly small businesses. They sell almost exclusively to the Department of Defense. Collectively, they form the critical warm industrial base that ensures a steady stream of supplies to the military in times of national emergency. These companies are also threatened with extinction if FPI continues to take a larger share of the shrinking defense budget for apparel every year.
AAMA has long maintained that FPI's current authorizing statute should be sufficient to ensure a peaceful coexistence between FPI and private industry. And we believe that this would be the case but for the lack of two things limitations and oversight.
Congress, in 1934, made a critical lapse when it failed to define the terms of FPI's statutory authority, leaving key mandates intended to minimize competition with the private sector open to interpretation. FPI has taken full advantage of these ambiguities in the law to render its statutory limitations meaningless.
For most of the past 65 years, Congress has conspicuously failed to provide sufficient oversight to enforce FPI's limitations, conceding much of its oversight role instead to a ''rubber stamp'' board of directors that has singularly failed to hold FPI accountable to its statutory mandates.
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For those reasons, Mr. Chairman, we welcome the leadership you are providing on this issue. Clearly, FPI's authorizing statute is in need of modernization, and we look forward to working with you and other interested parties to craft a solution to this problem.
We have reviewed both H.R. 2551, the Federal Prison Industries Competition in Contracting Act of 1999, and H.R. 2558, the Prison Industries Reform Act of 1999. As you know, we have announced our support for H.R. 2551. We did so for a simple reason—that bill addresses the problems of the apparel industry vis-à-vis FPI by providing specific limitations and oversight.
At the same time, we appreciate the goals you are trying to accomplish through H.R. 2558, especially given the very real prison management problems that you are seeking to address. While we understand the importance of those goals, we remain concerned that the bill as currently drafted does not eliminate current abuses under the system. Nor does it alleviate the adverse pressures that FPI imposes on industry.
Still, we welcome several positive developments in this legislation. Oversight, in particular, is greatly strengthened by the creation of a more accountable Board of Directors and an Independent Review Panel. This oversight could be stronger still if these bodies were subject to Senate confirmation, as are similar panels for other public corporations. Also, the provisions capping and rolling back the use of mandatory source are encouraging. These provisions could be better still if production were simultaneously scaled back in those product areas that remain under mandatory source for all or part of the seven-year period.
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Although we have reservations about the overall approach taken by H.R. 2558, we would like to point out several provisions that if tightened could provide relief to beleaguered industries within this framework:
Mandates requiring FPI to minimize adverse impact on the private sector should be strengthened, not weakened. (Sec. 4121)
— H.R. 2558 eliminates FPI's mandates to diversify among industries and to avoid taking more than a reasonable share of the market for any specific product. Those mandates should be reinstated and strictly defined.
Mandatory source elimination should be structured to provide immediate relief to affected industries. (Sec. 3, §4132)
— The bill should specify that mandatory source is statutorily eliminated at the conclusion of the phaseout period—ideally, that period would be less than seven years.
— Minimum annual reductions should be specified.
— Rollback of mandatory source should be spread over all industries.
— Plans for elimination of mandatory source should be subject to public review and comment.
Prohibitions on new production and significantly expanded production under mandatory source should be strictly defined.
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No product should be designated a ''foreign-made product'' if such product is produced anywhere in the United States. (Sec. 3, §4131(d))
There should be no reinstatement of current law under any circumstances. There is no ''escape valve'' to provide relief for private industry in current law. There should be no escape valve for FPI in the bill. If changes to the law become necessary, Congress should revisit the issue as it is doing in the current instance. (Sec. 4)
Provisions which give FPI residual preferences should be eliminated. They should be required to compete for contracts on the same basis as private sector contractors. (Sec. 3, §4132(c))
The legislation should in no way bar a private right of action against FPI. (Sec. 3, §4134)
In summary, the status quo is unacceptable. FPI has abused the system to take market share in specific products and specific industries well beyond any reasonable reading of the limitations imposed by statute. We are convinced that FPI does not have the institutional will to remedy these shortcomings. The answer is legislation to strictly define FPI's limitations and to impose better oversight that will ensure adherence to those limitations. H.R. 2551 ensures limitations and oversight. H.R. 2558, as currently drafted, does not.
However, we are cognizant that H.R. 2558 does attempt to address the difficulties of managing a federal prison population that has swelled to unmanageable proportions. In recognition of those difficulties, and of the role that FPI plays in alleviating them, we are committed to working with you, Mr. Chairman, and with all the parties involved in this issue, to reach a reasonable balance between these serious concerns.
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Thank you, Mr. Chairman for providing me this opportunity to present our views. I will be happy to respond to any questions you may have.
Mr. MCCOLLUM. Mr. Petersik, you are recognized. Did I pronounce your name right?
Mr. PETERSIK. Yes, you did.
Mr. MCCOLLUM. Good. Thank you.
STATEMENT OF THOMAS W. PETERSIK, REPRESENTING CITIZENS UNITED FOR THE REHABILITATION OF ERRANTS (CURE), WASHINGTON, DC
Mr. PETERSIK. Thank you for the opportunity to testify offering CURE support for the Prison Industries Reform Act of 1999, H.R. 2558. CURE believes the proposed act represents meaningful progress in U.S. Inmate labor policy and an important initial step in updating U.S. Prison industries. My remarks today are as a CURE representative, speaking for the interests and the responsibilities of incarcerated persons and their families, but I also speak as a business economist, and point today's recommendations to the overall economic health of the Nation, including for American consumers and taxpayers, for private businesses, for labor interests and for corrections. CURE sees this legislation as only a first step to more substantial updating of Federal and national prison labor policies.
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Fundamental flaws of current inmate labor policies. In CURE's view two basic economic flaws underpin current unsatisfactory prison industry policies. The first fundamental flaw is public policy noncompetitively favoring government-owned firms over private industries. Noncompetitive preferences include exclusive rights to government markets; taxpayer-provided land, buildings, equipment and utilities; exemptions from taxes and regulation; noncompetitive access and sizeable market power over a part of the labor force; and elimination of virtually all protections for that part of the labor force.
The consequences of these subsidies are not widespread inmate employment, as preferred by the public policies, but instead are inefficiency, high taxpayer costs, high inmate unemployment, abuse of the incarcerated labor force, and widespread and possibly insurmountable public opposition. We concur with private business and organized labor objections to such noncompetitive and self-defeating policies.
The second fundamental flaw is the mistaken view that employment discrimination against inmates is either harmless or even helpful to the economy. Our view is that inmate unemployment is a part of normal State or national unemployment and should be dealt with as such. Experience shows that employment discrimination against any group undermines the entire economy.
Denial of employment opportunities is de facto denial of victim compensation.
Inmate unemployment at all levels, Federal, State and local, harms about 2.2 million unsupported minor children of inmates. Any national policy ignoring the economic consequences of inmate employment policies on children is almost certainly wrong.
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Inmate unemployment is devastating for about 1 million mostly low-income female heads of households bearing the financial burdens of supporting inmates and their children.
Altogether then, inmate unemployment directly harms crime victims and about 5 million persons, shoving a population roughly equal to that of one entire State to the edge of poverty.
The Federal, State and local taxpayer costs of offsetting inmate unemployment may approach $500 a year for the average American family.
And inmate impoverishment probably costs the economy some hundreds of thousands of civilian jobs.
Inmate unemployment particularly harms low-income, inner-city and minority communities from which significant proportions of inmates come.
I have two broad classes of recommendations, the first for this or future legislation, and the second specific to this legislation. CURE believes that the American public and stakeholders will welcome an environment in which prison inmates can succeed in a legal economy, so long as they and the firms for which they work compete fairly. Overall, for this legislation or in subsequent steps, CURE recommends that Federal Prison Industries and the inmate labor force be fully integrated into the normal competitive American economy, and specifically recommends, first, that subsidies and exemptions for Federal Prison Industries be fazed out over a reasonable, say, 10-year period; second, that all economic discrimination against incarcerated persons cease and be replaced with universal inclusion in normal protections afforded American workers; third, in order to respect higher social priorities, that deductions from after-tax inmate wages be restructured, favoring victims compensation, child and family support, health insurance and deductions for board and room tied to the level of the wage rate.
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Specific comments regarding the terms of H.R. 2558. We recommend at least the following modifications: First, in order to ensure FPI developing both higher-wage jobs as well as much lower-paid repatriated employment opportunities, the legislation should explicitly tie below minimum wage and above employment. For example, the legislation might say, numbers of Federal prison inmates engaged in repatriated employment may not exceed numbers of Federal inmates engaged at the Federal minimum wage or above.
Second, we believe it is absolutely imperative that both the priority and the shares of deductions for victims and inmates' children and family be increased. Further, wherever children are involved, we believe priorities should at least be given to deductions for purchase of open market health insurance for dependents and family. We believe deductions for board and room should be tied to FPI's success in developing minimum wage and higher employment. In effect, we endorse a form of progressive taxation for board and room, becoming significant only above the minimum wage.
Third, there is nothing in the proposed legislation that offers inmates the opportunity to participate in the process, nor does it change FPI monopoly on the inmate labor force. At the barest minimum, H.R. 2558 should, one, separate corrections and economic spheres, granting some competitive economic voice to the inmate labor force, including permitting some form of representation on economic issues separate from corrections matters; second, granting inmates some access to recruiting alternative employers and granting to prospective employers some independent, with specified conditions, access to that labor force; and third, to motivate and compel FPI actions to improve both employment and wage and benefit rates.
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In conclusion, CURE believes that there should be only one standard for every American with economic responsibilities, and that standard is success. Not only will inmates, their children, their families and their communities succeed if we can move inmates into the fullest possible success, all Americans and all American interests will succeed at the same time.
CURE endorses H.R. 2558 because it is a step moving inmates toward that economic success. We applaud you for developing a legislation, and we encourage you to build a great deal more with it and from it. Thank you for the opportunity to testify.
[The prepared statement of Mr. Petersik follows:]
PREPARED STATEMENT OF THOMAS W. PETERSIK, REPRESENTING CITIZENS UNITED FOR THE REHABILITATION OF ERRANTS (CURE), WASHINGTON, DC
Mr. Chairman, thank you for the opportunity to testify offering Citizens United for the Rehabilitation Errants-CURE—support for the Prison Industries Reform Act of 1999 (HR 2558). We believe the proposed Act represents bold, meaningful, and substantial progress in U.S. inmate labor policy. The elimination of Federal mandatory preference, the prospects of open market participation and minimum wages for some working inmates, and additional protection from displacement represent important advances.
Thank you, Mr. Chairman and your staff for taking on so challenging a subject and for your persistent openness to new insights and views. Thanks to all of you on all sides of the issue for teaching me your perspectives and for your patience, endurance, and humor over a long time despite heavy, heartfelt, and passionate debate.
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Having been a part of the debate for more than two years now, I have concluded that there is no one party to blame. While my recommendations will likely be especially challenging to Federal Prison Industries, I am not sure they have other reasonable choices, at least historically. If there is a guilty party on this issue, it is all of us who frame inmate opportunities and stand in the way of better alternatives.
Following initial clarifications, my remarks this morning will fall in two parts, the first being broad directions for fundamental change in U.S. economic policies for prison industries and inmate labor force participation, and the second being specific recommendations for improving this legislation. We do believe the existing proposal should be much more explicit in some areas.
My remarks today are first as a CURE representative, speaking for the legitimate interests—and also the responsibilities of incarcerated persons and their families. But my remarks also have two additional characteristics. First, most of my work is as a business economist, and I intend all my recommendations to be in full consideration of, and useful to, much broader economic interests, including the well being of all Americans as consumers, taxpayers, and employees, of private businesses, of labor interests, and of corrections.
And second, my remarks may differ from others in that I will treat prison industries and inmate labor strictly as economic issues, leaving aside criminal justice features. Too often, I believe, we disguise inefficient economic behaviors and actions done for convenience in the mistaken cloak of criminal justice necessity. By ignoring the justice aspects altogether, let me pose to you today that either many of these behaviors are, in fact, not a criminal justice necessity, or, if they are necessary, that we need better understand the costs we are incurring for their sake.
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I will make some criminal justice remarks, but they should be clearly distinguishable in the presentation.
Third, I need to make clear, as a Federal employee in an unrelated part of the Federal government, that my remarks this morning are my own, represent efforts undertaken independently of my position and on my personal time, and in no way reflect the Federal agency for which I am employed.
A. The Fundamental Flaws of Current Inmate Labor Policies
Two basic economic flaws underpin current unsatisfactory Federal and other prison industry policies. The first fundamental flaw—presumably tolerated out of economic and correctional necessity—is a public policy noncompetitively favoring government-owned firms over private industries, tolerating large inefficiencies and granting huge subsidies in exchange for working a relatively few incarcerated persons. Noncompetitive preferences granted government firms include (1) exclusive rights to sales in government markets, (2) taxpayer-provided land, buildings, equipment, utilities, and civilian staff, (3) exemption from taxes and regulation, (4) noncompetitive access and sizeable market power over the incarcerated labor force, and (5) elimination of virtually all protections for the inmate labor force—both in law and in the marketplace. The consequences of these subsidies are not widespread inmate employment as preferred by public policies, but instead are inefficiency, high cost, high unemployment, abuse of the incarcerated labor force—and widespread public anger, resentment, and opposition to inmate work.
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The most important objections to current policies—incorrectly but commonly touted as arguments against inmates working—are in fact objections to these noncompetitive policies of these government owned firms. These policies were not begun by, nor do they serve, inmates. In fact, we believe these government firms, under the guise of correctional necessity, exercise traditional monopoly behaviors abusive to the labor force, including underemployment, drastic underpayment, and denial of normal benefits and protections. Finally, we believe the structure has been self-defeating, engendering such opposition as to undermine the inmate employment goals of corrections.
The second fundamental flaw—and at the root of public tolerance for the first—is the mistaken public and policy maker view that employment discrimination against incarcerated persons—that is, refusing them employment for reasons other than their ability to produce—is either harmless or actually helpful to the economy. Many erroneously argue that barring inmates from participation in the economy preserves civilian jobs. In fact, overwhelming evidence, clearly and repeatedly demonstrated in 20th century American experience, shows that employment discrimination against any group undermines the entire economy; discrimination grievously harms the discriminated groups and all people associated with them and their communities. Further, the broader economic consequences of job discrimination are reduced national output, reduced civilian well-being, reduced demands for goods and services with consequent reduction in civilian jobs growth, increased individual and business taxation, increased social division and poverty, and exacerbation of the conditions nurturing crime growth. The actual economic consequences of bans on inmate participation are the exact opposite of intended objectives.
We need to reject the idea that inmate unemployment is harmless:
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Denial of inmate employment is de facto denial of both the opportunity and the responsibility of offenders for compensating victims.
Nationwide, including Federal, state, and local jurisdictions, about 1.8 million persons are incarcerated. The economic consequences of their unemployment are exactly the same as the economic consequences of any other unemployment.
It is absolutely incorrect to act as if only inmates are harmed. In fact, estimates are about 2.2 million unsupported minor children of inmates; there are more minor children of inmates than inmates. Any National policy ignoring the economic consequences of inmate employment policies on children is almost certainly wrong.
The economic burdens of caring for inmates and their children fall most heavily on about 1 million mostly low-income female heads of households, the mothers of inmates and of the inmates' children.
Altogether then, inmate unemployment directly harms crime victims and about 5 million persons, shoving a population roughly equal to that of one state to the edge of the economy.
American taxpayers assume a major part of the financial burden of inmate unemployment. Including the costs of incarceration and the additional costs of welfare and other burdens, the Federal, state, and local bill for the average American family may approach $500 a year.
Far from preserving civilian employment, the absence of additional demand for goods and services resulting from inmate impoverishment probably costs the economy hundreds of thousands of additional civilian jobs.
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Inmate unemployment particularly harms low-income and inner city communities, from which significant proportions of inmate populations come. In the District of Columbia, for example, inmate unemployment alone may represent near Depression-era unemployment levels in very low income neighborhoods.
CURE believes that current National policies in prison industries and inmate labor are, in fact, counterproductive U.S. economic development policies. We believe current inmate work policies have the unintended effects of undoing other agencies' positive Federal, state, and local efforts in economic development and community recovery, in education, health, substance abuse, violence, and in child support, fathering, family support efforts. We believe the destruction of these policies is most destructive in minority and poor communities, for which prison unemployment policies spell personal, family, and widespread community poverty.
On the other hand, we can rejoice in the gains America has made struggling to overcome past discrimination and see in those victories the seeds of further gains for all Americans overcoming economic discrimination against incarcerated populations. As recently reported by the Pew Research Center, the Civil Rights Movement and women in the workforce topped the list of major social changes improving American life in the 20th century.(see footnote 1) Yet only a few decades ago, the same objections popularly levied against inmates today were even more emphatically directed at American minorities and women. In smaller but also significant fashion, victory over inmate discrimination will redound to the benefit of all Americans. Our challenge today is to see the victory and change Federal inmate employment policies to achieve it.
B. Broad-Based Recommendations for Reconsideration of The Act
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CURE strongly supports the Prison Industries Reform Act of 1999. However, we also believe the proposal is but a beginning step in truly effective prison industries reform. We encourage, including within this legislation, even more fundamental and useful changes in National policies on correctional industries and inmate labor force participation. We concur with recently stated economists views that wider inmate labor force participation and reduced protections for government-owned prison industries would be good for the U.S. economy.
CURE recommends even bolder Federal action: that Federal legislation phase Federal Prison Industries and the inmate labor force fully into the normal competitive American economy. Competitive, market-based policies proven successful for the overall economy—and now reaching further and further into Federal, state, and local public services—can prove equally successful in improving Federal inmate labor practices. Better yet, when implemented, the reforms should—
Reduce taxpayer burdens
Increase National Income and product
Increase net civilian employment
Increase compensation to crime victims
Contribute to increased incomes for some of America's poorest families, children, and communities
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Contribute to increased financial responsibility by offenders
We also believe that the American public and stakeholders will welcome an environment in which prison inmates can succeed in the legal economy, so long as they and the firms for which they work compete fairly.
Therefore, CURE specifically recommends—
First, that subsidies and exemptions for Federal Prison Industries be phased out over a reasonable (10 year?) period, including elimination of—
All direct and indirect tax exemptions
Any relief from licensing and business regulation imposed on private firms
Exclusive rights to allocation of the incarcerated labor force
Further, that accounting methods be devised and enforced estimating the dollar value of annual direct and indirect subsidies to Federal Prison Industries during the transition period; an important application of these estimates appears below.
Second, that all economic discrimination against incarcerated persons cease and be replaced with universal inclusion in normal protections afforded American workers' limited only by necessary requirements of security and safety, and including for all prison industries serving government or open markets,
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Inclusion of working inmates as employees under the Fair Labor Standards Act, and for purposes of workman's compensation, Social Security and Medicare, excepting from minimum wage provisions only (a) repatriated jobs or (b) housekeeping duties less than 10 hours per week.
Held separate from correctional involvement, granting inmates the right to participate in economic decision making, including in recruiting and retaining firms, setting terms of employment, and including substantial membership in advisory boards, the right join or form a union affecting economic issues, and including the right to strike;
Opportunities for advancement as in the normal labor force, including for wage increases and increased responsibility, benefits (including annual leave and health care), to join management, for stock and company ownership, and for establishing, owning, and managing firms.
Third, in order to respect higher social priorities serving victims and building economic responsibilities for family, that deductions from inmate wages be restructured to the following priorities:
First, for all normal Federal, state, and local taxes and deductions (FICA)
Second, for compensating individually identified victims
Third, a significant share for child and family support;
Fourth, for inmate's open-market purchase of self, family, or dependent health insurance;
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— Fifth, an increasing (progressive) fraction of after-tax income for board and room,
— No deduction for the first $2.00 of any hourly wage (The inmate is assumed compensating in kind offsetting prison industry inefficiencies);
— Not to exceed a very small percentage of net hourly wages above $2.00 but below the Federal minimum wage;
— Increasing proportions of marginal wages above the Federal minimum, never to exceed 50 percent.
Inmates will have full and unfettered access to civilian savings, banking, and investment services for placement of earnings, including, but not limited to, membership in corrections credit unions on equivalent terms.
Fourth, to encourage public and private investment in the incarcerated labor force and in correctional locations (within the bounds of necessary safety and security)
Federal correctional locations are eligible for all Federal training, education, and economic development programs, including, but not limited to, Federal Enterprise Zones.
Other Federal agencies are authorized and directed to include corrections locations and incarcerated persons in the full purview of their missions; the U.S. Bureau of Prisons will facilitate agencies' successful operation within Federal correctional locations.
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Private firms, educational and training firms, non-profits (including religious organizations), and others, including organizations of Federal Inmates, may devise, participate in, and recruit public, private, or self-financed programs for education, training, or investment in businesses employing Federal inmates.
The U.S. Bureau of Prisons is authorized to develop terms reducing risk and encouraging private investment in corrections locations, including for the lease or purchase of land, buildings, and equipment.
The U.S. Bureau of Prisons is authorized to competitively auction the use of Federally owned correctional lands, buildings, and equipment for industrial development employing significant numbers of incarcerated persons. Ninety percent of returns from such auctions return to the U.S. Treasury to reduce corrections costs to U.S. taxpayers; ten percent accrue to the source Federal Correctional facility for discretionary spending or investment, not to be deducted from annual appropriations for the facility.
The U.S. Bureau of Prisons is authorized and directed to develop and utilize correctional locations and circumstances maximizing inmate access to civilian job sites for purposes of open-market employment, including but not limited to, minimum security housing near employment, restricted in-community residences, provision of on-site security, and transportation services.
Fifth, to encourage economically efficient use of existing public subsidies to Federal Prison Industries—
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During the transition period (10 years?), the estimated taxpayer subsidy to Federal Prison Industries will be offered for competitive bidding by the FPI and other corrections, private, and non-profit sectors. Within the bounds of necessary safety and security, winning (least subsidy) bidders (including FPI) will replace current FPI industrial units. Ninety percent of monetary savings will revert to the U.S. Treasury; ten percent will accrue to the source Federal Correctional facility for discretionary spending or investment, not to be deducted from annual appropriations for the facility.
Sixth, to encourage FPI success in open-market employment of SAincarcerated Federal Prison Inmates, inmate employment success becomes a required component of Federal Facility Director and Facility Industries' Director performance agreements, including
Annual and five-year goals for inmate populations (a) employed, (b) employed at the Federal minimum wage or above, along with (c) average hourly wages, (d) distribution of wage rates, (e) quantity and distribution of deductions, (f) distributions of benefits, and (g) distributions of industries and employed inmate occupations will be published for each Federal Correctional Facility. For example, a five-year goal of not less than 10 percent of each facility's able-bodied inmate population will be employed at the Federal minimum wage or above, increasing to 20 percent in 10 years, 30 percent in 15, and 50 percent in twenty years.
Each facility will publish an annual summary of prior year efforts in expanding inmate open market employment, including, but not limited to, successful efforts, lessons learned, and plans for successive years. The summary will welcome brief summary observations and criticism from observer groups, including, but not limited to, business and organized labor, inmate and inmate family advisory groups, victims representatives, academics, analysts, and any others.
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Proportions of inmate populations (a) employed, (b) employed at the Federal minimum wage or above, along with (c) average hourly wages, (d) distribution of wage rates, (e) quantity and distribution of deductions, (f) distributions of benefits, and (g) distributions of industries and employed inmate occupations, will be published annually for each Federal Correctional Facility.
Annual performance ratings, including for purposes of job retention, promotion, and performance bonuses, will reflect accomplishment of inmate employment goals.
Seventh, to assist Federal Corrections decision and policy makers, observers, and stakeholders in successfully developing inmate employment programs, $250,000 per year is authorized for Federal expenditure for research, analysis, and guidance in informing and improving National Policies and Federal Correctional practices in maximizing inmate employment opportunities.
Eighth, in order to encourage maximally successful offender labor force participation at all stages of the Federal criminal justice process and avoiding incarceration, $150,000 per year is authorized for research, analysis, proposals, and testing of programs retaining and maximizing offenders' open market labor force participation outside correctional facilities during arrest and pretrial periods, in alternative settings and arrangements during incarceration periods, and during post-incarceration probation or parole. Sentenced offenders successfully employed in nonincarceration diversion programs will be included and earn double credits toward FPI overall employment goals. It is CURE's broader view that offenders should remain in the open-market labor force to the greatest extent possible; in the longer run, policies should emphasize keeping offenders employed and responsible within and not separated from the community, within the bounds of community safety, of course.
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Ninth, in order to encourage business, organized labor, inmate family, and other stakeholder involvement, $20,000 per year is authorized for an annual conference on Federal inmate labor force participation issues, wherein representatives of major stakeholders share information and views on progress and issues in Federal inmate employment. No funds are authorized for payments to stakeholders.
Tenth, to inform and educate the public, $50,000 per year is authorized for the first ten years for Federal education and public outreach programs.
C. Specific Comments Regarding Terms of Currently Proposed Provisions
Despite support for the Prison Industries Reform Act, CURE recommends specific improvements insuring that implementation actually improves the economic circumstances of inmates and their families:
First, as currently constructed, the legislation provides no incentives for FPI developing open market jobs at Federal minimum or higher wages. In fact, the appropriate reading of The Act is to expect aggressive repatriation efforts but minimal or nonexistent efforts for open-market jobs. Therefore, in order to ensure FPI developing both higher wage and repatriated employment opportunities, the legislation should explicitly tie below minimum wage employment levels to successful minimum wage and above employment. For example, ''Numbers of Federal Prison inmates engaged in repatriated employment may not exceed numbers engaged at the Federal minimum wage or above.''
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Second, as constructed, the legislation compels almost nothing to improve the economic fortunes of inmates or to increase the financial responsibility of inmates (and FPI) to victims, children, and families. Moreover, there is nothing in the proposed legislation that weakens or breaks FPI monopoly (monopsony) on the inmate labor force, virtually guaranteeing continued neglect and abuse. If the legislation is to win support of business, organized labor, and inmate and family groups, at the barest minimum, it should—
1. Raise the priority of deductions for victims, children, and families
2. Encourage investment in health care for inmates and inmate families
3. Separate Corrections and Economic spheres, granting some competitive economic participation to the inmate labor force—
— to be meaningfully involved in firm recruiting and terms of employment
— to have some reasonable avenue of economic grievance and redress distinct from the criminal justices processes
— to belong to or permit the involvement of labor unions on the inmates' economic behalf
4. Motivate and compel FPI actions to improve both employment and wage and benefit rates
5. Meaningfully attack and reduce the broad range of subsidies currently supporting FPI inefficiency and undermining American taxpaying private industries and labor.
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D. Conclusion
CURE believes that current discouragement regarding prison industries and inmate employment are the simple result of poorly chosen and reversible public policy choices.
Thank you again for the opportunity to testify and to support your excellent work. I would be happy to answer questions.
Mr. MCCOLLUM. Thank you very much, Mr. Petersik, and thank all of you. I am going to yield myself 5 minutes to start the questions, and then we will go to other Members.
First, Mr. Glover, I wasn't able to be here for all of your testimony, but I had read it, and I want to clarify something to make sure that I am correct about what I read in your testimony versus what, with all due respect, I believe that Mr. Hoekstra mischaracterized as his anticipation of your testimony.
On the second paragraph of the second page of the written testimony I have, you have stated, ''I would like to briefly comment on H.R. 2551, which eliminates mandatory source for FPI without giving prisons any other work opportunity. As a correctional officer and union leader in our organization, we can't sign on to this piece of legislation.''
Do you stand by that statement? Mr. Hoekstra seemed to imply that that was not the position of the union or yourself, and I want to be sure I am reading that as straightforwardly as it says.
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Mr. GLOVER. Mr. Chairman, that is my statement, and that is what I stand by. Additionally, I have testified on the Senate side when they had the defense authorization bill come up and they tried to eliminate mandatory source entirely for Department of Defense, and I testified adamantly opposed to that. Until we have this debate, I mean, frankly, until we start to decide what we are going to do with the inmate populations, we have to maintain what we have to keep prison workers safe inside the fences and walls, and that is our position.
Mr. MCCOLLUM. In other words, until we get some of the proposals like we are trying to do in H.R. 2558 to provide alternative options and opportunities, you are against eliminating mandatory source preference, which is what the Hoekstra bill does?
Mr. GLOVER. Correct.
Mr. MCCOLLUM. Thank you.
Mr. Martin, I am very pleased and encouraged by your statement today because I know we have worked a great deal trying to work together with you and your industry, as well as Mr. Felt's, and I do think that we can make some progress in the areas that you have indicated.
One of the things I wanted to ask both of you about, because you represent the two industries most negatively affected by mandatory source preferences, is the apparent opposition at least of Mr. Felt, and I am not sure about you, to allowing the the private sector to partner with a prison industry program if they choose to do so and if the business is required to pay at least the minimum wage. Of course, that is not the current law. If that is indeed your view, I am curious as to why that is the view. I am honest about that curiosity because it is a central part of the concern here as we try to craft something to provide new opportunities for inmates to work if we do eliminate mandatory source preference. Maybe I am misreading it. Maybe that isn't true to you.
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Mr. MARTIN. Currently, Mr. Chairman, we have no view on that subject. It is a subject that is much broader than our normal government contracts committee deliberations, and it would have to go to our broader membership, which we will do. So I cannot take a position on that at this point.
I would like to point out that there may be a problem with World Trade Organization agreements in that regard in that the WTO requires all companies be treated equally whether they are offshore or onshore, and it is illegal to import products made in the United States with prison labor, which I think would create a WTO conflict that might have to be resolved.
Mr. MCCOLLUM. That is a very fair point.
Now, Mr. Felt, am I interpreting your statement correctly? I think your were a little more explicit. Does your organization oppose allowing the private sector to partner with prison industry programs if the minimum wage is required to be paid? I am trying to move something in that direction, but I am not sure whether that opposition is there or not, and I hope that it isn't, but I am reading in your statement that it is.
Mr. FELT. I don't think that our organization speaks to whether minimum wage is at issue or not, particularly in this thing. The elements of the furniture industry are large suppliers to FPI, and we have always allowed that there are those of us who participate in those areas. Most of us express our concerns for the impact to many other businesses that are impacted by some of FPI's endeavors and their ability to take over large parts of the Federal segment.
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Mr. MCCOLLUM. When I said partnering, I probably didn't make that clear. It is partnering in the sense of being able to have the private industry, like your industry, be able to use inmate labor as long as that inmate labor is paid the minimum wage, so that the product that is produced won't be unfairly priced in competition with anybody else's product that might be produced with noninmate labor. That is the idea, and I had the idea or the impression from your testimony that your organization was reluctant to embrace that concept, or perhaps it just hasn't been adequately discussed. I didn't know, but that is why I asked the question.
Mr. FELT. From what I gather in our industry, most of us are reluctant to partner with FPI simply because FPI does not have a realistic perspective of the needs and requirements of our industry in terms of partnering. They often continue to use what might be thought of as the sort of old-school government approach to contracting, wherein their idea of partnering, you know, does not involve the shared exchange between the partners, but rather sort of a dictatorial approach to what you, the supplier, will do.
Mr. MCCOLLUM. Well, let us change the playing field. Let us assume we can do something really radically different here. Let us assume for a minute that by a force of legislation—and maybe there is something we can do that is stronger than in either of these two bills—Congress forces the FPI to actually allow your companies to come in and take the prison inmate labor and run the manufacturing, operate the manufacturing operation inside the prison.
Now, obviously you have got to have the guards there. Mr. Glover's group has got to be around. We can't just let it go unguarded, but you would control the manufacturing, you would control the vendors who supply the parts and the equipment or whatever, you would control the marketing, you sell the product, it is your product, it is your plant, if you will, and there is a minimum wage that has to be paid so that it is not unfair to somebody else who is not employing prison labor.
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Would that raise the comfort level, because we would be then, in essence, changing the entire relationship? You have a long history of negative relationship with FPI on a lot of things, but they wouldn't be able to control much of anything. You may still be apprehensive whether you get a good contract with them, but it seems to me if we write this legislation correctly, and we may not have, but if we do, then you would be able to do that. Would there be something worth exploring in that regard?
Mr. FELT. Am I understanding that you think we would be interested in running a plant that competes against ourselves?
Mr. MCCOLLUM. Not running a plant that competes against yourselves, but running a plant where you use inmate labor, which would, in fact, be a part of your system, and others could be free to get that same inmate labor in some other prison. There would be a lot of prisons around the country where you could utilize the inmate labor just as you would outside labor without affecting the price or the competition factor.
Mr. FELT. FPI carefully points out how unskilled and untenable their labor conditions are. I don't see that that is going to be of much interest to those of us whose—for example, our production turnaround time frame for hundreds and hundreds of applications is a day and a half. There is just a completely——
Mr. MCCOLLUM. You don't think you would ever be able to utilize it? You don't think you would want to utilize it?
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I am about to yield to Mr. Scott, but I would like Mr. Braun who is sitting next to you to comment on that concern because he obviously is utilizing inmate labor, and I think the concern you are expressing, and it is an important concern, is one of not being——
Mr. FELT. Only if you were structured completely for it. That is the point. You would have to set up a completely separate organization that does nothing but utilize that sort of labor, and that is not what most of us are structured for.
Mr. MCCOLLUM. Because you are not structured for it, you don't think you could structure for it without costing too much?
Mr. FELT. Well, with respect to the company that I work for, we are a member-controlled organization. Everyone owns stock, and everybody participates that way and has the ability to so-called stop the line. That philosophy is inconsistent with the kind of philosophy that it takes to run a separate organization that caters to the FPI supply chain, which is not to say that we couldn't do it, and we entertained it. In fact, one of my responsibilities is to keep that option open.
Mr. MCCOLLUM. I just want to remind you, my view of it is you would be running the supply chain. The old FPI rules wouldn't be there anymore. Government purchasing rules wouldn't be there anymore. You would be running it, and you follow me, you would be doing it the way you want to do it. The only question is the efficiency of the labor in terms of the inmate labor supply, and I realize that is always a question, but I just want to be sure you are aware that is my intent, whether we are accomplishing that or not, and I think Mr. Scott's intent and mine is to provide that with you.
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So anyway, I would like to get Mr. Braun' response, but I am going to yield Mr. Scott whatever time he wants here, but if I could, I would like to. Any other Members can comment on it if they would like to. We are in area where I think there is constructive discussion here. I am trying to learn. If there is a real problem here, I want to know it.
Mr. BRAUN. The HON Company's a super company, well managed. I believe they will be quickly in line or have someone that they are in bed with that will be in line to make a deal with the FPI to have Federal industries make one of their product lines, a portion of their product line. It may be a line that doesn't require the skill or the turnaround, but I believe that the people who are resisting will be the first ones in line to try to make a deal because they will conclude it is in their benefit to do it economically. And I believe that companies in their industry are already doing this. They don't talk about it. They are being done perhaps through another name. I think it is just a matter of time until they jump on the bandwagon and decide that inmates can make good quality things.
There are extra problems with inmates. There are extra costs, hidden costs, but these can be overcome. It takes a lot of work with the management of the companies and the prison administration people to resolve these problems, but manufacturing companies and independent business people working together with government, with the Federal prison group or State prisons, can work, and the PIE programs are an indication that it does work.
Mr. MCCOLLUM. Anybody else want to comment on this particular issue?
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Mr. Linder.
Mr. LINDER. Yes, I would like to, Congressman McCollum.
I agree with Mr. Braun's observation about organizations lining up at the gates to the prison to try to subcontract work. What I wanted to note is in the concept that you are referring to in this type of partnering, are the products and services that the private industry would be engaging in business with UNICOR, would they be limited to Federal sales?
Mr. MCCOLLUM. No. What we envisage in this bill is they would not be limited to Federal sales. You meet the conditions, the minimum wage is being paid, and domestic markets or repatriation—of course, it is a different story on that score—but either one, what Congressman Scott and I contemplate allows the open market sale of those goods.
Mr. LINDER. I think that would be an exceptionally positive development, if that were permitted, and I also would like to address an important issue. You have mentioned a few time about minimum wages, and as Mr. Braun just mentioned, there are hidden costs in any organization that are not immediately made aware of when you talk about minimum wage because in a prison system there are very high overheads because of intensified supervision that is required and other controls, and I think that any sort of approach in this area has to start having some sort of formula and evaluating factors to take into consideration these other areas, because if you were to state that any type of work in this area had to be done at minimum wage, I think you are almost dooming it to failure.
Mr. MCCOLLUM. If I might suggest this, one of the thoughts we had in drafting this is that there are going to be most industries paying higher than minimum wage for noninmate employees. In other words, there are very few people outside of flipping hamburgers where minimum wage is actually paid. So the assumption, maybe the wrong assumption here, is that you would actually have industries interested in this, even though they would have to pay minimum wage, because they would be able to do this with only paying minimum wage, if you would look at it that way.
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Mr. LINDER. Thank you.
Mr. MCCOLLUM. Thank you.
Anybody else want to comment? If not, I yield to—Mr. Petersik.
Mr. PETERSIK. Just for a moment. One thing that I think would be critical in any of these sorts of schemes, we have seen in the past in other industries that firms which have monopolies, for example, AT&T in years past, just wasn't able to do a lot of things until the market changed suddenly and they had no choice but to do other things, and there were incentives for them to change their behavior dramatically. And I think we will see that kind of change with the right kind of legislation, both at the Federal and State level, but I am concerned that possibly—and I am sorry I can't go far into—I am not sure what I could really offer—but I don't think there are many incentives for correctional industries to change, and that those kinds of incentives are going to have to be there, and if they are there, I suspect we can do tremendous things that we don't think we can do today.
Mr. MCCOLLUM. Thank you very much.
Mr. Scott.
Mr. SCOTT. Thank you, Mr. Chairman. I wanted to follow up a little bit on some of the points you were making.
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Mr. Felt, in terms of the impact the prison industry program has, what is the total market share that prison industries have in the furniture industry?
Mr. FELT. It is difficult to project that total market share, okay. Of the Federal segment, they are currently operating on something of the order of 20 percent of the office furniture segment. You need to appreciate that people in the office furniture industry operate under essentially one classification code, FSC code, and most of us operate——
Mr. SCOTT. So you are talking about 20 percent of the Federal?
Mr. FELT. Of the Federal business.
Mr. SCOTT. That is not the only people you sell to.
Mr. FELT. No, that is true.
Mr. SCOTT. Of the total furniture industry, what impact does the prison industry program have on the furniture industry?
Mr. FELT. On the furniture industry? Relatively insignificant, since the furniture industry is probably 10 billion against 250 million or so in the furniture segment.
Mr. SCOTT. Okay.
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Mr. FELT. However, UNICOR is the largest single supplier of office furniture to the Federal Government, well exceeding any of the others, out of the people who operate in that arena.
Mr. SCOTT. Thank you.
Mr. Martin, of the apparel industry, how much of an impact does the prison industry program have on the apparel industry?
Mr. MARTIN. On the apparel industry at large, it has not much impact because of the very large commercial marketplace. However, there are only 50 companies which manufacture for the Federal Government. Those companies manufacture for nobody else, they have no other customers, and $135 million that the prisons do in textiles and apparel with the Federal Government is very significant to them. FPI would be our 21st largest member were it a member of AAMA. Our largest government contractor is our 51st largest member.
Mr. SCOTT. I don't mean to cut you off, but, I mean, you are talking about jobs lost in the industry, and then you say that the prison industry program—I mean, it is easy to identify a single contract if it didn't have mandatory source, I could have gotten that individual contract. But in terms of the apparel industry, did I understand your testimony to be that the prison industry program has an insignificant impact on the apparel industry?
Mr. MARTIN. As a whole.
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Mr. SCOTT. As a whole, okay.
Mr. Linder, in terms of the overall impact on the private business community, did I understand your testimony to say that the prison industry program was, in fact, positive?
Mr. LINDER. I believe it is extremely positive, yes, Mr. Scott.
Mr. SCOTT. Mr. Braun, in your testimony, did you indicate what chance an inmate would have in getting a job after he got out if he worked with you?
Mr. BRAUN. One hundred percent. They are standing in line. If they can work for me in a private enterprise, profit-driven company with a production push and a scheduling and the work they got to do, they are going to be a good employee for anybody after they finish working for my latest company, Henke Manufacturing. The other people are waiting in line and calling, when does your next inmate get released so we can hire him. They are all employed.
Mr. SCOTT. Mr. Glover, how would you be able to manage inmates if you didn't know from time to time how many jobs you would need? Would that create a problem?
Mr. GLOVER. That would create a major problem inside the facility, Mr. Scott. Currently, as it runs, we have about 20 to 25 percent of our inmates are daily going down to the job site, except for any other emergency situation that might come up where we keep the inmates in the housing units. They go down, they work all day, they come back to the housing unit. They are tired at night. They don't give the officers trouble. It is a pretty decent system as systems go.
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Mr. SCOTT. Thank you.
Mr. Petersik, you indicated that things like FICA deductions ought to be a high priority out of the inmate's wages. Maybe this could go to someone—maybe you know or someone else knows. Is FICA taken out of inmate paychecks now?
Mr. PETERSIK. My understanding that in PIE programs it is, but not in anything else.
Mr. SCOTT. Is that your understanding?
Mr. BRAUN. It is out of ours.
Mr. SCOTT. It is taken out of yours.
Mr. PETERSIK. Inmates are not considered employees by law, and so the standard kinds of deductions are simply not taken.
Mr. SCOTT. Generally speaking, what impact does the prison industry program have on the families of inmates?
Mr. PETERSIK. I don't know a direct numeric answer to that, although I think there are folks who could have those numbers for you. For persons who are not involved in industries, the number is pretty clearly zero, and it appears that for most inmates the flow of funds is not from the inmate to the family, but from the family to the inmate. So that for PIE is what, less than 1 percent of the inmate population. So for 99 percent of inmates, the probable net flow is into the prison, not out of the prison for funds, but I am sorry I don't have a direct number for PIE.
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Mr. SCOTT. Do families benefit by the inmate working?
Mr. PETERSIK. Absolutely.
Mr. SCOTT. How does the family benefit?
Mr. PETERSIK. The most obvious way, of course, is income to the family. A very high proportion of inmate families appear to be at or near the poverty level, so you have got funds going to the family. This is a guess, not a measured family, but probably $100 to $200 a month is of tremendous assistance to the family. About 50 percent of inmates have children, a little less than 50 percent, but the average number of children is 2.2 per household, so that for families with children that can make a tremendous difference.
Also, I think in addition to the money, there is the tie of the father or the mother to her or his children, and I will say I guess for a ma, but I am sure it is the same for a woman, if you are not able to be a provider, and you are taking funds from your children and from your family, that makes for a entirely different relationship oftentimes with that family than if you are able to be a provider for that family. So it certainly can change the relationship and the stability and hope for that family as a whole.
Mr. SCOTT. Thank you, Mr. Chairman.
Mr. MCCOLLUM. Thank you, Mr. Scott.
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Ms. Jackson Lee, you are recognized.
Ms. JACKSON LEE. Thank you very much, Mr. Chairman. I thank both the Chairman and the Ranking Member for holding this hearing. I believe we had the occasion to have such a hearing in the past sessions that I have participated in. I think I have one question that I may pose, but I think I would be remiss if I did not at least talk about the sins of our ways, recognizing that people who do perpetrate crimes do have to serve time, but I think one of the sins of this Nation is the enormous numbers of people that we have incarcerated who have tragically, for whatever reason, are now incarcerated in the Nation's Federal and State prisons. Particularly devastating is the number of minority and the increasing number of women.
So I am sympathetic to the issue of rehabilitation, and I think it is extremely important that we alter the attitudes of Americans that, in fact, prisoners can be rehabilitated and can take their rightful place back in society. So I am sympathetic to the idea of what prison industries do. I like them more from the training and self-worth position because I am not sure, because of the amount of moneys paid, whether or not we can count that as an infusion into the economy.
I would like to say that, in keeping that in mind, in addition to the impact on the prisoner, and you noted the family impact, I have been reading statistics that cite that the number of children experiencing dysfunctional behavior is heightened if their parent is incarcerated. So we know that there is a trickle-down effect, and I believe that 2558 strikes the correct balance in at least trying to answer the concerns of our small and medium-sized businesses and the responsibility I think we have to give dignity to those who will go back into society.
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So, Mr. Martin, let me ask you about the removal of the sole source. Does that help to aid your economic circumstance and also provide for a competitive opportunity, if you will?
Mr. MARTIN. The answer is yes. We believe that if the sole source is eliminated, and FPI has to compete on the basis of price, quality and delivery, that's more power to them. We think that we can survive, and it will be an incentive, I think, to FPI to improve the quality of its garments. We don't want to deny FPI any business that they earn by going through the same sort of rigors that we in the private sector have to go through.
Ms. JACKSON LEE. Mr. Braun, you spoke passionately about what happens to human beings when they have worth and work. What would you wish for us to do in grappling with this difficult question of realizing the concern that our businesses have in the competition area and then the commitment to incarcerated persons who may ultimately at some point in their lives be released into society?
Mr. BRAUN. I think open the opportunities for more cooperation between the private sector and the prisons, the Federal prison industry or the State prison, more opportunities for contracting for the private sector to get involved, and I think everybody will benefit from that kind of cooperation, and I believe that 2558 is a step in the right direction toward that.
Ms. JACKSON LEE. So you are talking about collaboration, joint ventures, to prison and the other industry getting together, sort of bidding together, if I understand that?
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Mr. BRAUN. I am for contracting, the contracting, where the Federal prison would contract to me or HON or somebody else widgets or desk pedestals or whatever it might be. But I believe turning the inmate into an employee, going another step, so that they are sharing the profits of the company. We have ESOPs, employee stock ownership plans, in all the inmate companies that I have been involved in, and the inmates begin to think like owners of the business. They take on the responsibility. Once you are an owner, you start thinking about making a good plow, making a good whatever it is. You start working harder. You start taking responsibility. You are proud of the fact that you are paying taxes and room and board in the prison. You are proud of the fact that you are paying child support, and often the child support is paid before. The companies must pay directly to the county a paycheck every month or every week for child support. So a lot of that doesn't even flow in through the prison and out. So I think this cooperation that we are talking about can benefit everybody.
Ms. JACKSON LEE. Does any other business person just want to respond to that? Would you be able to see some opportunities for collaboration, maybe not in the context of which he has mentioned? Can I get any gentleman to respond?
Mr. LINDER. Yes, Congresswoman Jackson Lee, I agree again with Mr. Braun. I think that it would present many opportunities, and I think that it would also have significant contribution to repatriating sales and work to this country and also creating a larger work force with the same type of improved personal lives that Mr. Braun is describing to us today.
Ms. JACKSON LEE. Thank you, and thank you, Mr. Chairman.
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Mr. MCCOLLUM. Thank you, Ms. Jackson Lee.
I just have a couple of quick follow ups. You have been very patient as a panel. We all probably have to catch planes or go to some meetings, so I won't keep you very long.
Mr. Linder, I really wanted to make sure I nail one thing down. In your testimony you had indicated that 25 percent of your labor force is attributable to the Federal Prison Industries. I presume we are talking about 25 percent of your noninmate labor force. These are Americans that are not in prisons that are attributable to FPI; is that not correct?
Mr. LINDER. That is correct. These are full-time employees on our payroll.
Mr. MCCOLLUM. Right. Do you think that average is true across almost all of the vendors association members, that 25 percent would be accurate perhaps projected out for almost all vendors?
Mr. LINDER. It is very hard for me to say. I think Kate Leonard of the CVA would probably be better qualified to comment on that than myself.
Mr. MCCOLLUM. I would be curious to know how many workers we are talking about whose jobs are dependent upon FPI, that is, noninmate employees in the United States overall, and I will ask Kate about that. I think that is an interesting data statistic that is there.
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Mr. Petersik, you indicated one change you would like to see us do would be to put some provision in that would require the number of Federal inmates that are repatriated—that is, the number of jobs that are created for Federal inmates that are repatriated not exceed the number of jobs that are contracted out in the private marketplace in the United States. What was your rationale for that? Why would you think that would be a good idea?
Mr. PETERSIK. Thank you for asking. My reading of 2558 is that the incentives for expansion are most attractive for the repatriation and least attractive for the minimum wage, private industries portion, and that we are likely to see dramatic expansion on the repatriation side and far less on the minimum wage side. And obviously, we have a great interest in inmates earning the most they can earn, so I think in order to make sure there is, again, an incentive for FPI to nurture the higher wage sector, that we tie the two.
Mr. MCCOLLUM. Well, I think your goal is a noble goal because I think both are important. I think we put preferences on the repatriation to the extent that that comes first; not that it has to supersede the other, just that you look out there first because there are so many jobs to be brought back. But I certainly think with the clause that Mr. Glover pointed out so well in your testimony that has a nonlayoff provision, that if we can get newly created jobs in America that pay the minimum wage, and not displace any American workers, which is why the nonlayoff clause is there in 2558, so if you are a company, you come in there, then certainly this is going to be very productive for everybody, and that is why I hope that the industry groups reexamine this a little bit.
For example, Mr. Felt, I think I can understand why furniture might not want—maybe HON wouldn't want to come in, because you are probably not in the position to take advantage of this, but if you have got a nonlayoff clause, and there are new jobs they are creating, and not in the furniture industry, but in, I don't know, some other business, whatever it is, pencils or something, I can't see why the furniture industry would have a problem, if it isn't in the furniture industry, and it is new jobs being created, completely new jobs, not taking anybody else's away, and with this nonlayoff provision so you can't substitute workers, and paying the minimum wage, why the industry would be opposed.
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So just let me conclude by saying that I am looking forward to working with everybody here. Neither of these bills is perfect, but we are going to produce a bill in the subcommittee and in the full Judiciary Committee this fall. It will be done, and I suspect that that bill will be on the floor of the House this fall. So we want you all to participate. Mr. Scott and I want to perfect our legislation, and we want to do this with as much comity as possible, hopefully finding common grounds with everyone, and we want to thank everybody for being here today. We really appreciate your attendance. Thank you. This hearing is adjourned.
[Whereupon, at 1 p.m., the subcommittee was adjourned.]
(Footnote 1 return)
As reported in The Washington Post, July 11, 1999.