STATEMENT OF THE HON. PETE HOEKSTRA, CONGRESSMAN FROM THE STATE OF MICHIGAN *

STATEMENT OF HON. BARNEY FRANK, CONGRESSMAN FROM THE STATE OF MASSACHUSETTS *

STATEMENT OF HON. MAC COLLINS, CONGRESSMAN FROM THE STATE OF GEORGIA *

STATEMENT OF HON. PATRICK J. KENNEDY, CONGRESSMAN FROM THE STATE OF RHODE ISLAND *

STATEMENT OF KENTON H. PATTIE, PRESIDENT, NATIONAL CENTER FOR FAIR COMPETITION, ANNANDALE, VA. *

STATEMENT OF SAMUEL C. BRICKLE, CHIEF EXECUTIVE OFFICER, HYMAN BRICKLE & SON, INC., WOONSOCKET, RHODE ISLAND *

STATEMENT OF PAT NOLAN, PRESIDENT, JUSTICE FELLOWSHIP, WASHINGTON, D.C. *

STATEMENT OF GARY D. MARTIN PH.D, CHANTILLY, VA. *

STATEMENT OF GARY ENGEBRETSON, PRESIDENT, CONTRACT SERVICES ASSOCIATION OF AMERICA, WASHINGTON, D.C. *

STATEMENT OF JOHN M. PALATIELLO, EXECUTIVE DIRECTOR, MANAGEMENT ASSOCIATION FOR PRIVATE PHOTOGRAMMETRIC SURVEYORS, RESTON, VA. *

APPENDIX A – STATEMENT OF THE HONORABLE PETER HOEKSTRA, CHAIRMAN, CONGRESSMAN FROM THE STATE OF MICHIGAN *

APPENDIX B - LETTER FROM KATHLEEN HAWK SAWYER *

APPENDIX C – STATEMENT OF THE HONORABLE MAC COLLINS, CONGRESSMAN FROM THE STATE OF GEORGIA *

Present: Representatives Hoekstra, Norwood, Hilleary, Ballenger, Schaffer, Mink and Scott.

Also Present: Representative Souder.

Staff Present: Leslie Field, Media Assistant; Christopher L. LaGrand, Legislative Counsel to Rep. Hoekstra; Patrick Lyden, Staff Assistant; Bill McCarthy, Press Secretary; William B Montalto, Special Counsel to Rep. Hoekstra; Mark Rodgers, Workforce Policy Coordinator; John Flannery, Project Director, Minority Special Counsel; and Brian Compagnone, Minority Staff Assistant.

Chairman Hoekstra. The subcommittee will come to order. Today, the Subcommittee on Oversight and Investigations will receive testimony on the impact of prison industry programs on workers and the businesses that employ them. Given the growing number of inmates in the Federal and State prison systems, our review must include the extent to which these programs actually help former inmates successfully return to society.

Prison work serves several useful purposes. It helps combat idleness and thus help maintain order. It imparts fundamental work habits, often where such skills are totally lacking. When coupled with vocational training, prison work programs can give an inmate the job skills that will help the person find employment that pays a living wage. Done right, the experience can foster self-esteem.

I have a longer opening statement. Without objection, I will submit this statement for the record so that we can move directly to the first panel of Members. I also move that the record be open for any other Member that would want to submit a statement for the record.

WRITTEN OPENING STATEMENT OF THE HONORABLE PETER HOEKSTRA, CHAIRMAN, REPRESENTATIVE IN CONGRESS FROM MICHIGAN – SEE APPENDIX A

Chairman Hoekstra. Let me begin with the first panel. The first Member who is going to testify today is Representative Frank. Thank you for being here. We have developed a close working relationship on this issue over the last 2 years. Representative Frank, I appreciate the time, the energy, and the work that you have contributed in helping us to craft our bipartisan piece of legislation.

We also expect to see the other two lead cosponsors of the legislation here this morning, Representative Collins and Representative Maloney. And we also have Representative Kennedy, another cosponsor, with us this morning.

Chairman Hoekstra. Representative Frank, we will begin with you. Thank you for being here.

Mr. Frank. Thank you, Mr. Chairman, I appreciate your accommodating me. I have a bill that is going to be marked up shortly down the hall in the Judiciary Committee, so I thank you for taking me right now.

I have appreciated the chance to work with you in a bipartisan way, and I want to say I think this situation cries out for change. We absolutely must change it.

One great paradox that I have never yet been able to get answered is why we ban from the American market goods that are manufactured in prisons overseas, but segregate a part of the market and give them preference here. I don't understand what the basis for that distinction is. And I was glad to hear you say I don't think any of us who are trying to reform this system are seeking to end rehabilitative work in prison.

I think it is a good idea for the prisoners to have this kind of work, but it is not my understanding that marketing is a substantial part of what they are learning. We hope they don't go door to door. And it is not even a good idea for them to be making a lot of phone calls. The physical manufacturing process is relevant.

So one of the things, it seems to me, we should be doing is reaching out to that significant area of American society and maybe internationally where there is a need for the products that prisoners can make, but an inability to pay for them. That current situation sets aside part of the market.

And I am going to submit, if I could, Mr. Chairman, a copy of a letter that I got from the Director of the Bureau of Prison, Kathleen Hawk. It is dated July 16th. It responds to questions I asked her on June 25th, and it includes a chart which gives the market share for 1996.

Mr. Frank. For reasons I don't understand, they don't have the most recent market share data, that is for fiscal year 1997,which ended last October. They haven't compiled it yet.

But there is a very significant market share in the range of 20, and 30 and even 40 percent for some categories in furniture and clothing in the Federal purchases. We are talking about hard-working men and women, people in the furniture and clothing industries. Prisoners are not competing with mutual fund salesmen or people who make large amounts of money, they compete with small business people and, it is a very unfair form of competition.

The answer in part is our proposed changes. One of the things that the Federal Bureau of Prisons people tell us is that under our bill they wouldn't have enough market share. There are charities out there in this society that have a need for some these products, could use them, but can't pay for them. There is this non-market segment out there, and prison industries could be aggressively filling it. I have been arguing that.

I have an article from the Boston Globe of last Friday reporting that the Governor of my State, Governor Cellucci, "vetoed a $104,000 allocation to the Massachusetts Coalition for the Homeless Furniture Program, which supplies furniture to families moving out of shelters into housing." Now, there is a dispute in Massachusetts whether they need the money or not, and I am not going to comment on that.

There is the need, though; there is an agreed-upon need. There are people who are in shelters, and they are moving out. They are not going to buy furniture. They can't buy it. So this is an example, it seems to me, of where we could move prison industry programs into a non-market segment. If the State was buying it, that would be one thing, but in some of these cases there are people that have this need. There are day-care centers, homeless shelters, other entities that could benefit from the products produced in prison. Prison industry programs could find that need and work to meet it.

We are not asking them to stop rehabilitative work programs for inmates, only redirect them. Let me close with this, one of our problems today is how do you accommodate to the international economy? How do we adopt appropriate policies for the International Monetary Fund, for trade? These are difficult issues we are wrestling with. How do you go along with the integration of America to an international economy without an undue burden flowing on people at the lower end of our skill level? How do you prevent exacerbating inequality?

The people who are most threatened by globalization, are the people who tend to do basic manufacturing, without a lot of sophisticated capital equipment and without a lot of high skills. They are the ones who are also being competed with by the Federal Prison Industries, exacerbating a problem we already have.

With a commitment to maintaining the rehabilitative nature of inmate work programs and not unfairly competing with small-business people and workers, this is one of the few issues I can think of where the National Federation of Independent Business and AFL-CIO are in agreement we can develop alternative sources for these inmate products. They can continue to get the rehabilitative benefit, and not have the unfair and negative effects on a lot of hard-working Americans that we now have.

And I thank you, Mr. Chairman.

Chairman Hoekstra. I thank you.

Mr. Frank Thank you, Chairman Hoekstra. That is one of the things we spent a lot of time talking about over the last couple of years, as we have crafted our legislation identifying other markets that are non-markets for the private sector, but could be opportunities for prison labor.

Chairman Hoekstra. Good morning, Representative Collins, welcome, and thank you for your help on this issue.

Mr. Collins. Thank you, Mr. Chairman. And good morning, to you all. As we say, good morning, you all.

Mr. Chairman, I appreciate the opportunity to testify before this subcommittee today, and I also greatly appreciate your work with me over the last 2 years, as well as Representatives Frank and Maloney, to craft legislation to protect American small business and workers from the predatory tactics of the Federal Prison Industries.

I believe that it is critical for Members to be aware of not only the competitive advantages granted under the law to the Federal Prison Industries, but also the many ways in which FPI has abused the powers granted under its authorizing statute. While the rehabilitative goals of the Bureau of Prisons are laudable and universally supported, those goals should never be achieved at the expense of small business and law-abiding American workers.

Just over 2 years ago, the owner of General Engineering Services, Incorporated, a small business that formerly resided in the Third District of Georgia, owned and operated by Mr. Tim Graves, brought to my attention FPI's illegal expansion into the missile shipping container market. Mr. Graves predicted that if left unchecked, FPI illegal expansion into this market would result in the closure of his business and the loss of over 150 jobs in Clayton County, Georgia. Unfortunately, Mr. Graves' predictions proved extremely accurate and General Engineering Services has now shut its doors.

I believe that the behavior of FPI related to this incident demonstrates both the weaknesses of the current law and the anti-business, anti-worker sentiment that has guided FPI to attack the livelihood of law-abiding citizens. In July of 1995, General Engineering Services contacted Air Force contracting officers to obtain bid packages for two types of missile shipping containers. While the contracting officers initially indicated that both contracts were being set-aside for small business contractors, they later informed Mr. Graves that the Air Force was required by law to purchase containers from Federal Prison Industries.

Federal agencies are required by statute to purchase needed products from FPI whenever FPI directs them to do so. This is commonly known as FPI's, "mandatory source status." In the case of missile shipping containers, FPI utilized the statute to eliminate small business contractors from consideration. Many of these contractors, like General Engineering Services, were making these missile containers for many years. Because of FPI mandatory source position, these companies were eliminated without the benefit of the competitive bidding process that protects the government from purchasers' overpriced or low-quality products and that protects companies from unfair competition.

Furthermore, in the case of missile shipping containers, FPI utilizes its legal status as a mandatory source to extract contracts from the government while refusing to comply with the portions of its authorizing statute designed to protect small business from the undue burden of competition from prison workshops. First, the statute requires that before FPI produces a new product or significantly expands its production of an existing product, its board of directors must approve the production after consideration of a "detailed written analysis of the probable impact on industry and free labor."

When FPI claimed the missile shipping containers contract, it had never before produced such containers, yet FPI neither provided an impact study to determine what its effects on the market would be, nor sought the approval of its board for the unauthorized expansion. General Engineering Services was forced to incur over $50,000 in costs in order to force FPI through a court challenge to fulfill its statutory requirements.

Additionally, FPI is charged by the statute to avoid capturing more than a reasonable share of the market among Federal departments, agencies and institutions for any specific product. In 1996, the demand for missile shipping containers was already in a steep decline as a result of reductions in defense appropriations. Even the simplest analysis of this market would have revealed that it was shrinking, and that most missile shipping container manufacturers, about 97 percent, were small businesses that often produced only one of two kinds of containers. And clearly, if FPI had made any attempt to understand the missile shipping container market, it should have been clear that the loss by small businesses of these contracts would represent an unreasonable capture of market share by FPI for the two specific products involved.

Unfortunately, no attempts were made to understand this market until it became clear that a U.S. district court would force the issue. It is outrageous that Federal Prison Industries, a Federal corporation under the oversight of the Department of Justice, would have to be taken to court in order to force its board and administrators to abide by the law. Even more outrageous is the fact that any Federal agency would defend taking the jobs of law-abiding citizens for the benefit of convicted criminals.

While officials at FPI, the Bureau of Prisons, and the Department of Justice will argue that such displacements do not occur, I can tell you from personal experience in the Third District of Georgia that they do.

In closing, I would like to encourage my fellow Members to join me in cosponsoring Federal Prison Industries Competition in Contracting Act, H.R. 2758. This legislation would rein in an out-of-control Federal corporation that is exacting irreparable damage on the workers and small businesses of America. The protections that Chairman Hoekstra has included in the bill will serve not only to defend the livelihoods of hard-working, tax-paying Americans, but also to protect the mission needs of Federal agencies and their responsible expenditures of taxpayers dollars.

And I thank you, Mr. Chairman.

Chairman Hoekstra. Thanks, Mac. I met with the gentleman that you talked about in your statement. That is the problem that we have. FPI is impacting small business employers and employees in each of our districts.

Chairman Hoekstra. Our next witness is Representative Kennedy, and we are glad you are here. We also have one of your constituents who is going to be giving testimony on the next panel, Mr. Samuel Brickle, who is the chief executive officer of Hyman Brickle & Son of Woonsocket, Rhode Island.

Mr. Kennedy. Yes, sir.

Chairman Hoekstra. Mr. Brickle’s situation was featured in "60 Minutes" in 1996.

So thank you very much for you being here and for helping us to have one of your constituents come and testify about his personal experience with FPI.

Mr. Kennedy. Well, thank you, Mr. Chairman, and thank you for sponsoring the bill [H.R. 2758] that is going to hopefully rectify this problem. Thank you for holding these hearings on an important issue that has been outlined by my colleagues as so critical to small business and so critical to our low-wage workers, many of whom are being displaced by the Federal Government. How ironic that they pay taxes, and those taxes go to subsidizing prisons to steal their jobs to me is just incredible. And I salute you and all of those who have been leading the direction on this legislation.

As you mentioned, Sam Brickle in my State of Rhode Island, in Woonsocket, was one that made me aware of this issue. I remember being in the General Assembly in the State of Rhode Island and passing empowerment zone tax credits which would allow businesses to start employment in those areas of our State where there was endemic low employment. The irony here is the State of Rhode Island dipping into its taxpayer dollars to help incentivize businesses to locate themselves in depressed areas like Woonsocket. And Northwest Woolen Mills did come in. Then they have to lay off, 50 employees because one of their contracts were taken out from underneath them by Federal Prison Industries.

I mean, it was just such an irony and the worst kind of paradox that you can see in government. We all know the story of Federal Prison Industries being a government-owned corporation sponsored by the Department of Justice which manages manufacturing at correctional institutions, and the fact there are over 150 products manufactured under this program. We know that while it may sound like a good idea, putting prison inmates to work, in reality it is resulting in convicted criminals taking the jobs away from thousands of workers and small business, such as Northwest Woolen Mills in my State of Rhode Island.

Federal Prison Industries, as you know, has been given preferential treatment in government contracts. They don't even have to compete against private sector companies because the Federal Acquisition Regulation designate them as a mandatory supplier. And, this includes products that are often way, way overpriced. A recent GAO report showed that Federal Prison Industries' prices were up to 15 percent higher than those offered by the private sector furniture vendors studied.

In Rhode Island, Northwest Woolen Mills lost a significant portion of its disaster blanket business to Federal Prison Industries and has suffered irreversible economic damage on that product and can't afford to suffer any more economic layoffs. The mill was forced to lay off over 50 employees and shut down part of its operations.

By no means is this situation unique to Woonsocket, Rhode Island, as you heard from my colleagues, Mr. Collins and Mr. Frank. It is time for this problem to finally be resolved.

And I want to thank you once again, Mr. Chairman, for your sponsorship of H.R. 2758. I hope that more of our colleagues sign on in support of this legislation. It will require, as you know, that Federal Prison Industries enter in a competitive bidding process with other companies. It will eliminate the sole-source preference and will bring fair competition back to the marketplace. And I want to congratulate all of those who have been working hard to make sure that it is enacted.

I want to conclude by just echoing what my colleague, Mr. Frank, said. I think there are a number of market areas where Federal Prison Industries can continue to supply those market sectors without it being a detriment to small business. And I would encourage you to follow the advice of Mr. Frank that we look for those areas in the nonprofit sector, which clearly would be a double bang for our dollar. Not only would we help to rehabilitate inmates through Federal Prison Industries, getting them those jobs skills that they need, but we would be supplying a sector of our marketplace that can't afford these products and certainly could benefit from them. And we could do both without displacing the hard-working, tax-paying constituents that we have.

And, again, I want to highlight the other paradox that Mr. Frank pointed out. We decry buying prison-made products made overseas, but we actually encourage the sale of prison industry products made here in this country. What another irony. It just baffles my mind.

So thank you, Mr. Chairman, for your great work, and I look forward to having my constituent Sam Brickle testify. I know he will make a very compelling case to all of you as to why this legislation needs to pass. And thank you for listening to my testimony.

Chairman Hoekstra. Great. I thank you for being here today. The fun part about having worked on this legislation is what many would describe as the unique coalition that we have put together to work on this bill, Mr. Frank, Mr. Collins, Mrs. Maloney, Mr. Kennedy, Mr. Hoekstra. I am not sure how often this coalition comes together on a significant labor-type issue. Mr. Frank, Mr. Kennedy, and others on your side have been instrumental in bringing along the AFL-CIO and a number of its member unions in supporting this legislation. Legislation that is also supported by NFIB [the National Federation of Independent Business] and the U.S. Chamber of Commerce. So this bill has some legs, and we are going to work at getting it passed.

And it is a good coalition, and we get to know each other in a slightly different way than what we sometimes do.

Mr. Kennedy. Absolutely. Thank you, Mr. Chairman.

Chairman Hoekstra. Thank you very much for being here.

Mr. Collins. Thank you, Mr. Chairman, for the work that you and your staff have done on this. It is on behalf of the American workers that you brought this coalition together. It is on behalf of the American workers that Congress works on these types of issues. We appreciate your efforts. You mentioned our bill’s coalition. As I sat down, I thought to myself, I don't ever recall Mr. Frank sitting to the right of me before. Thank you.

Chairman Hoekstra. Thank you very much.

I ask unanimous consent that any opening statements be submitted for the record.

Chairman Hoekstra. Mrs. Mink, would you like to make an opening statement?

Mrs. Mink. No, I will defer, thank you.

Chairman Hoekstra. All right, thank you.

We will move to the second panel. Mr. Souder, Mr. Ballenger, Mr. Norwood, any comments this morning? Thank you for being here. I ask unanimous consent that we allow Mr. Collins to join us.

Mrs. Mink. Certainly. Welcome.

Chairman Hoekstra. We invite the second panel to come forward. Welcome. It looks like a tight fit there.

Let me introduce this panel. We first have Mr. Kenton Pattie, who serves as the president of the National Center for Fair Competition. He will also be testifying on behalf of Small Business Legislative Council, a coalition of 100 small business groups based in Washington, D.C. Mr. Pattie has been deeply involved in the unfair government competition issue, especially from the small business perspective, since the 1980 White House Conference on Small Business.

Good morning to you.

Our second witness has already gotten a little bit of an introduction. Mr. Samuel Brickle is chief executive officer of Hyman Brickle & Son, Incorporated, Woonsocket, Rhode Island. He was featured on a 1996 "60 Minutes" report on FPI. Mr. Brickle will provide the subcommittee first-hand experience of the effects of FPI's unfair competition on his small firm and its workers.

Good morning to you.

The third witness is Mr. Patrick Nolan, who is president of Justice Fellowship. This is the public policy affiliate of Prison Fellowship Ministries headed by Mr. Chuck Colson. He will provide the perspective of an organization dedicated to fostering the successful return of inmates to society through faith-based rehabilitative programs.

Good morning and welcome to you.

Our next witness is Dr. Gary Martin of Chantilly. He is an economist who conducted a review of FPI for the Fund for Constitutional Government. His testimony will include an analysis of the Post-release Employment Program study. This was a multiyear analysis conducted by the Federal Bureau of Prisons that is frequently cited as showing the value of the FPI work experience in reducing recidivism among former Federal inmates.

Good morning to you.

Our next witness is Gary Engebretson, the president of the Contract Services Association of America. CSA is an association of firms, principally small businesses, that provide a broad array of services to agencies at all levels of government as well as the private sector. Contract Services Association members are concerned about FPI's announced intentions to expand its sales of various types of services, especially in light of proposals to expand FPI's mandatory source status to services, to authorize FPI to sell services to State and local governments as well as private sector customers, and to authorize State prison industry programs to provide services to private sector customers without limitations.

Thank you for being here.

We also have Mr. John Palatiello, who is the executive director of MAPPS, the Management Association for Private Photogrammetric Surveyors, which is headquartered in Vienna, Virginia. Prison industry programs including FPI have identified some of the less technical services provided by MAPPS members as providing a high potential for expansion, especially as governments at various levels transfer performance of these services from government employees. He also has a very long history on the issues of unfair government competition, especially from the small business perspective.

Thank you.

I think we have got a great panel with a lot of different backgrounds and perspectives who can give us some light on this issue.

Chairman Hoekstra. Mr. Pattie.

Mr. Pattie. Thank you very much, Mr. Chairman. I am honored to be here, and I have looked forward to doing this for a long time. You are an inspiration for all of us here. Your leadership and the cosponsors that you have put together have been a great inspiration to us to continue to work on this issue. It has been very perplexing, very frustrating for small business. As you indicated, I am here representing a lot of small business associations today.

It was the delegates of the White House Conference on Small Business not once, not twice, but three times who have urged Congress, who have urged the administration to do something about government competition taking jobs away from small businesses. It spanned over a decade of appeals in Washington. And this committee is listening, and we are very complimented today to have that happening, and inspired by it.

In this particular area, in the area of prison industries, you have become the court of last resort. As you have already heard, businesses have complained to Federal Prison Industries. They have gone through all of the procedures that have been offered, but have failed to get fairness, failed to get the fair competition, failed to get the fair opportunities that they have sought, and consequently we come to you and support the legislation you and your cosponsors have introduced.

It is urgently needed. It is urgently needed because, as the director of the Federal Prison Industries stated, and in my testimony I provided a chart, his goal is to increase the size of sales of these products and services to $600 million. And I have also provided in my testimony a chart indicating what the impact of that will be.

It is a casual thing to talk about this in general terms here, but when you get into the districts of Mr. Collins and Mrs. Maloney and others of you who have had specific businesses that have been directly impacted, you suddenly realize these are real jobs that they are talking about taking away, these are real contracts they are taking away, and this is American business.

It is frustrating to see the prison industries putting a whole new interpretation on "free enterprise", because free enterprise has been turned around to be_to the detriment of small businesses--free opportunity for the criminals and the government to bring the prison industries into markets. But there is no freedom for the small business to have an equal opportunity to be competitors in these markets.

I would like to just briefly describe what happens here. Federal Prison Industries goes out to a business and say: "You know, you are having trouble penetrating the Federal market, we can help you. First of all, you know, you are paying your employees the Federal minimum wage. You don't have to do that if you are_if you have a contract with the Federal Prison Industries."

The last report that I was able to get from FPI showed the average hourly wage in Federal prisons was 92 cents. But you, the Congress, have passed minimum wage that makes it, $5.15. So the Federal Prison Industries says: "You don't have to pay minimum wage."

They also say: "We offer you a firm market, the Federal market. Federal buyers can't say no, or if they do say no, they have got a tremendous amount of bureaucracy and red tape to go through in order to get a waiver. So we offer you a captive market. We are going to be your doorway to get into this market. You don't even have to have top quality."

Thanks to the reports that you, Mr. Chairman, have gotten from the GAO, the quality of the products from the Federal Prison Industries is substandard.

FPI also can say: "You don't even have to have the lowest price. You know, if you have been competing in the Federal Market trying to get sales through the GSA multiple awards schedule--you have had to have very competitive prices."

Your reports through the GAO have indicated that Federal Prison Industries doesn't have to have the best price. They can have higher prices and still get contracts.

There are a number of other advantages that they have. I am sure, that the other witnesses will indicate them. These are huge competitive advantages.

This is what small business resents: that the Government has given an entity the opportunity to go out and to take business away from them and has given them special opportunities and special conditions in the marketplace that make it almost certain that they are going to win. And Federal Prison Industries can say: "We are going to take $600 million worth of your business, and there is really nothing that you can do about it." So we come to you and appeal to you to try to help us stop this from happening.

Then comes Congressman McCollum's bill [H.R. 4100, the "Free Market Prison Industries Reform Act of 1998"], which, in addition to offering the Federal market, says to Federal Prison Industries, hey, how about all of the retail market all across the United States? You can have that as well. And, consequently, this McCollum bill [H.R. 4100] is extremely threatening to small businesses because now Federal Prison Industries would be able to go out to every Congressional district in this country, every city, town and county, and compete for all the work that is available out there that small businesses are doing today.

And I would just like to close with a personal matter. Perhaps I am somewhat unique in this. I am working with youth who were involved in violence in my county, who are being kicked out of school or being expelled. These kids don't need a job. These kids are involved in drugs. They are involved in alcohol abuse. There are plenty of jobs, and many of them get jobs. But they use the money to buy drugs or abuse alcohol. When they get into trouble, they are, within a year or two of getting in the State prison, Federal prison, 80 percent of these kids when they get into prison have had drugs, alcohol abuse and violence. They lack any respect for authority. They have all dropped out of school. They have failed in school, or school has failed them.

What we need to do first is education. I have talked to sheriffs, and I talked to other professional people in the juvenile justice area. I represent the National Association of Police Equipment Distributors. Federal Prison Industries is not working on the educational aspects of their inmate workers, but are just giving them a job. That is not helping them. It is not the solution. I represent a lot of volunteer organizations in my county, and jobs are the lowest priority problem that we are looking to solve.

Literacy is dreadful in the Federal prisons and in the State prisons. We need to get back to ensuring that all prisoners reach literacy. That is where we need to spend the time, not just giving them a job, which takes jobs away in the small business community.

Thank you very much.

Chairman Hoekstra. Thank you very much.

Chairman Hoekstra. Mr. Brickle?

Mr. Brickle. Thank you, Mr. Chairman. My opening statement is quite short, and I thank God for that, because being in front of this group is rather imposing. Talking to Leslie Stahl was much easier.

Chairman Hoekstra. You can relax. We are a friendly group, especially on this issue. There is a degree of consensus on this issue that is not always found on this panel. So relax.

Mr. Brickle. Thank you very much.

Our company, which is family-owned, is in its fourth generation of continuous operation. We are multinational and compete on a daily basis with companies who pay less than $1 a day for labor, who have total disregard for the environment, and who have the right to bribe anyone necessary to get business. By the way, bribery is considered a legitimate business expense in most other places of the world.

We have been able to survive in such market environments because of the total dedication of our people. However, we cannot compete with our own Government when our own Government can take contracts away from us even though we are the lowest price and best quality producer.

Tell me who from our Government will come to my plant and explain to those workers that are being let go for lack of work because it was deemed more necessary that prisoners be given their jobs. Tell me how to deal with their pain.

Thank you.

Chairman Hoekstra. Thank you very much.

Chairman Hoekstra. Mr. Nolan?

Mr. Nolan. Mr. Chairman and Members, thank you for the opportunity to testify before your subcommittee on this very important issue of prison work programs. I am the president of Justice Fellowship. We are the public policy arm of Chuck Colson's Prison Fellowship Ministries. Justice Fellowship works to reform the criminal system based on the principles of restorative justice found in the Bible. We seek to restore peace to our communities by healing the wounds of victims and renewing the hearts of offenders. Establishing work programs in every prison is one of our major policy goals.

We are grateful for today's hearings so that we can give our perspective on the essential elements of a good prison work program and the reforms that are needed to make the current programs better. Prison Fellowship's perspective is based on a quarter century of sharing the life-changing message of the Gospel in prisons. Our staff and volunteers lead Bible studies in prisons in every State in the Union.

Scientific studies by the National Institute of Health Care Research have shown that inmates who participate in just 10 or more of our Bible studies and seminars are two-thirds less likely to recidivate.

Prison Fellowship also ministers to the children of both prisoners and victims through our Angel Tree Project. And our affiliate ministry, Neighbors Who Care, provides practical assistance to victims of crime. In short, we work to bind the wounds of all of those affected directly or indirectly by crime so that peace can be restored in our communities.

I bring a unique background to our ministry. Prior to becoming president of the Justice Fellowship, I served for 15 years in the California State Assembly, 4 of them as Republican leader. I was also a Federal prisoner for 25 months in prison camps with 4 more months in a halfway house. My testimony today on prison work programs reflects my experiences both as a legislator and as a prisoner.

Prison work programs are an essential part of changing prisoners' lives so they leave prison better than they come in. Meaningful jobs teach inmates productive skills that will help them make the transition to leading productive lives when they are released to the free world. And the wages they receive allow them to pay restitution to the victims they have harmed, support their families, pay some of the costs of their incarceration and save a small account towards gate money.

We advocate work programs because they are a benefit to society. Over 95 percent of the inmates who are currently incarcerated will be released back into our communities. Do we want them unskilled and angry after years of forced idleness? Or do we want them capable of contributing to society with skills they have learned during their confinement? How we treat them in prison will determine what type of neighbors they will be.

Idleness is destructive. In prison I had the chance to see firsthand that my mother was right when she warned, "idle hands are the devil's playground." There is nowhere that the devil has a freer hand than in prison. However, to my surprise, the idleness I saw in prison occurred on the prison work sites. I was at two prisons, and both were labor camps. Everyone had an assigned job. The jobs entailed about half an hour of actual work. The rest of the day was spent "looking busy." We were prevented from bringing any writing materials or reading materials or anything that would allow us to use that other 7-1/2 hours of the workday productively.

To say the least, the correctional officers assigned to oversee us were not especially trained in job skills development or building self-esteem. They did not view it as their responsibility to give inmates useful skills, but merely to act as custodians.

While my jobs were not part of UNICOR, the structure of the jobs, other than the pay, was the same. And the training and skills of the corrections officers who supervised us were the same. The inmates who worked in UNICOR bunked in the same dorms with me, and because of my background in government, they were eager to tell me of the problems they saw with the program.

In order to be effective, prison work programs should accomplish these things:

Teach inmates their responsibilities as an employee. Most prisoners have never had a job that resembles anything that we would understand. And in many cases, they have never lived with a parent who has. They don't know what their employer expects of them. They need to be taught it is their responsibility to show up on time, put in a day's work for a day's pay, and let their employer know if they can't come to work.

The jobs should mirror actual jobs in the real world as closely as possible. To prepare inmates for jobs in the private sector, they must develop a sense of responsiveness to their customers' needs and the market mechanisms for determining price. The current system gives UNICOR a captive market. Government programs are forced to purchase UNICOR products at the price UNICOR decides and in the time and manner UNICOR chooses to provide them, without any regard for the need of the customers.

This attitude of non-responsiveness to the customers runs throughout the UNICOR program. Inmates trained in such an atmosphere face a rude awakening when they start work in the private sector where they are expected to satisfy their customers. Will Durant once asked, "What makes Ford a good car?" His answer was "Chevrolet." It is important that managers who understand this discipline of competition are the ones who supervise inmates as we prepare them for jobs in the private sector.

We think the McCollum bill, H.R. 4100, takes the right tack by calling for private sector firms to operate the inmate work programs in prisons. We strongly support Mr. McCollum's objectives in this regard. However, we think H.R. 4100 should go further. In the McCollum bill, this private sector participation is mandated only for new prisons. We think that all prison industry work programs should be converted to private sector operations.

We also endorse the core provisions of Mr. Hoekstra's bill, H.R. 2758, which eliminates UNICOR's captive markets and subjects UNICOR to the discipline of competition and of having to meet its customers' needs.

Inmates should be paid viable wages. An important benefit of having a job is the esteem that comes from knowing that someone else is willing to pay you for your hard work. The wages paid to prisoners should be comparable to what they would earn on the outside. From these wages, the inmate should pay restitutions to their victims, support their families, contribute to the costs of their incarceration, and save some toward their release.

An important skill most prisoners need to develop is learning how to manage their income. Therefore, it is also important that inmates receive their wages directly from which the above listed items would be deducted. H.R. 4100's proposal to pay the wages to the Attorney General teaches inmates nothing about the responsibilities of managing their own income.

Restitution should be paid directly to the victims of the inmate's crime. The purpose of restitution is to help right the wrongs that were done to the victim. The payment of restitution by an offender is an important part of acknowledging their responsibility for their crime and the damage done to the victim. It is also important because it lets victims know the offender is repaying them for the damage they did to them. Programs that take money from the prisoners and put it into a government fund without earmarking it for the particular victims who were harmed aren't truly restitution programs in any sense of the word. Such programs are merely a fine, because they do not require the offender to acknowledge his responsibility to the victim, and they deprive the victims of the satisfaction of knowing that the offender is making things right with them. While victims are grateful for payments from a generic pool of inmate money, these payments are merely another government transfer program instead of restitution.

Teach inmates skills that will be in demand when they are released. The jobs should not be busywork or make-work projects. Too many UNICOR jobs involve merely repackaging or assembling items manufactured on the outside. To the extent this occurs, the program is a sham. Such operations take advantage of the captive customer base and guaranteed profits of the current structure of UNICOR. This creates a paper profit for UNICOR and adds little or no value to the products sold to government agencies, and it increases the costs to the taxpayers. Such jobs teach no useful skill to the inmates. How much skill is involved in shrink-wrapping items manufactured by outside suppliers? The inmates know that this is a scam, and though they appreciate the extra pay for working at UNICOR, they learn to disrespect the system which operates in such a manner.

The McCollum bill, H.R. 4100, repeals the current statutory requirement that inmate jobs should maximize the opportunity to acquire skills that will provide a means of supporting themselves when they are released. An inmate work program is not an end in itself. It is a means of preparing inmates to become productive citizens. Deleting the requirement that the jobs teach the inmates marketable skills would remove the rehabilitative benefits of prison work programs and turn our prisons into gulags. We strongly oppose removing this requirement from the statute. Instead we believe it should be strengthened and enforced.

Teach inmates to be honest. Inmates need to be taught not to steal from their employer and to be honest in their dealings with their supervisors and their coworkers. My own observation is that the current UNICOR program and other Federal inmate work programs don't do this. In fact, they undercut honesty and cause inmates to disrespect those in authority over them.

Just yesterday I received a letter from an inmate who detailed such abuses in the UNICOR program. I have modified portions of his letter to make it difficult to identify who he is. Even with my modifications, the facts he describes are such that he might still be pinpointed, and, if so, he is in serious danger of reprisal from the prison authorities. In spite of that, it is important that you know that misuses of the UNICOR program are occurring. And so I will read this to you.

"Dear Pat, in response to your request, here is what I hear about the UNICOR operation here: It employs 130 inmates. Its primary activities are in the rebuilding and refurbishing of government vehicles, mostly for," and then he lists, "[a branch of the armed services]. This includes, but not limited to, fork lifts, mechanical and electrical components for them such as starters, alternators, and motors. Hydraulic systems are also a major item.

"I should first qualify my sources of information inasmuch as I have never worked there, although I have done some work for some of their facilities. I know at least 20 people employed there of which 3 are very believable and whose knowledge is quite comprehensive; I will limit my remarks to their representations alone.

"To those employees, the whole UNICOR operation is one massive 'racket' designed to feed a bloated, incompetent bureaucracy with 'kickbacks' from the 'select' group of civilian 'middleman dealers' who buy government vehicles cheap, have them 'refurbished' as 'new' and sell them back to the same government agencies at new vehicle prices.

"As if that were not bad enough, within UNICOR itself, the same ripoffs occur between the purchasing schemes between the suppliers and the UNICOR operators in the form of artificial mark-ups on parts and supplies, 'erroneous' orders for parts never needed or used, and 'write-offs' and 'disposals' of 'surplus' items - often ordered again within months of the prior disposals.

"Item: Two months ago, the [branch of the armed services] decided to test operate a large number of forklifts 'totally rebuilt' by UNICOR here. These are part of a large emergency contingent designed for quick deployment for war zones or other emergency purposes. Virtually every machine failed within hours," and this is an exact quote from his letter, my apologies, "and the shit hit the fan. A busload of inmates were shipped immediately to the [city where the equipment was located] with tools and parts to try to put humpty-dumpties back together again. Needless to say the inmates loved every minute of it since they got of this hole for awhile and ate real food for a change. To my knowledge, the issue is still not resolved, but the fact that worn out parts are typically given a coat of paint, reinstalled as new and invoiced to the buyer is the norm and that nothing is ever done about it suggests that the pay-offs go all the way to the top.

"Inmates are now forced into UNICOR jobs against their will and severely punished, or transferred to county jails if they object. The whole subject is very sad and I could write several more pages but this will give you some idea of what goes on here [at the prison]."

That is the end of his letter.

Such abuses are outrageous, and we see them firsthand, anybody who has been in prison. Those in authority over inmates should teach respect for their supervisors and reinforce good behavior, but instead these work programs teach disrespect for supervisors and reinforce bad behavior. These abuses undermine any rehabilitative benefit of incarceration. Before the UNICOR program is expanded, please, please, address these serious deficiencies and what it does.

I want to thank this committee for the chance to share our suggestions on how to improve prison work programs. We applaud Mr. Hoekstra and Mr. McCollum for their leadership in working to bring fundamental reform to FPI and to give prison inmates productive rehabilitative work experiences that prepare them for their release.

Thank you.

Chairman Hoekstra. Thank you very much, Mr. Nolan.

Chairman Hoekstra. Dr. Martin?

Mr. Martin. Thank you very much, Mr. Chairman, distinguished members of the subcommittee. I appreciate this opportunity to present the highlights of my study entitled, "Federal Prison Industries: Occupational Training or Slave Labor?" that I did with the support of the Fund for Constitutional Government. I will present only a part of my written statement, but with your permission, I would like to place the entire statement and the study in the record.

Chairman Hoekstra. Without objection, so ordered.

Mr. Martin. Thank you. I might mention that the study has been published on line by Laissez Faire City Times, and you can find it through a computer search. The study is "Federal Prison Industries: Occupational Training or Slave Labor?"

I have in my study answers to questions that I submitted. One particularly astute prisoner complements this so well. It gives firsthand impressions. During the question and answer period, maybe you can allow me to talk about them.

It is a rare person who does not like the concept of prison industries. As long as we have all those prisoners, the reasoning goes, we ought to put them to work doing something productive. By doing productive labor, the prisoners can help pay some of the expense of their incarceration. The inmates can possibly be rehabilitated by learning valuable skills and the devil's workshop of idle hands can be avoided by keeping inmates busy, and the jailer's thankless job can thus be made easier. That, at least, is the concept, and it is reflected to a degree in the high-minded mission statement of the 64-year-old organization also known as UNICOR. Here's the mission statement, and see how they try to do too much, and they end up doing none of it.

"It is the mission of the Federal Prison Industries to employ and provide skills training to the greatest practicable number of inmates in Federal correctional facilities necessary to ensure the safe and secure operation of such institutions, and in doing so, to produce market priced, quality goods in a self-sustaining manner that minimizes potential impact on private business and labor."

Their annual reports, and they led off with that mission statement.

I am just going to hit some highlights of my study, and then get to the PREP [Port-Release Employment Project] study at the end.

One, UNICOR doesn't lower taxpayer costs, it raises them.

Two, UNICOR goods are not equivalent in price and quality to privately produced goods. You hear that over and over. I don't have to elaborate on that.

Three, UNICOR does not ensure the safe and secure operation of Federal prisons. It is sort of artificially supposed to be the primary idleness-fighting mechanism. There is absolutely no reason why that needs to be so. It is quite convenient to Federal Prison Industries and the Bureau of Prisons that it is.

Only 18-1/2 percent, by our most recent data, of all Federal prisoners worked for UNICOR. You still got the idleness of the other 81-1/2 percent to fight. Of the four largest State prison systems, only a mere 5.4 percent work in their prison industry system. If prison industry programs are so vital to fighting prisoner idleness, a lot of State prison systems haven't caught on to that fact apparently. Certainly, it would appear that as a general rule in America, prison industries programs are not essential for prison control.

Now the fourth point: Providing industrial employment to inmates is not the same thing as providing skills training. It is often at odds with it, and it is also often at odds with UNICOR's other missions. UNICOR officials often argue that in spite of what would appear to be their many cost advantages, they remain high-cost producers and consequently need the mandatory purchasing provision, because they have to "featherbed like crazy" just to put idle hands to work, or seem to put idle hands to work, as we see from Mr. Nolan's testimony.

The idleness-combating function is thus, frankly, stated to be in conflict not just with the need to operate efficiently so as to be self-supporting, but between the lines it can be seen as in conflict with preparation for work outside. UNICOR has a built-in excuse not to modernize with the latest labor-saving techniques or to make products that require little labor for their manufacturer. In other words, it has little incentive to provide the sort of work experience that is transferable to the U.S. industrial sector as it is exists in the 1990’s. More and more prison officials concede the point and agree that they are not really imparting useful skills, only what they call a useful attitude toward regular work.

The efficiency imperative and the order-and-control imperative are at odds with job training and preparation for life outside in another way, as well. UNICOR managers have every reason to exhibit a preference for workers with no immediate prospect, for release. Using prisoners stuck with one of those outrageously long new mandatory minimum drug sentences, that is, prisoners who are a long time away from their release date cuts down on worker turnover. Low worker turnover is better for smooth factory operation and efficiency. The idleness-combating mission would also mandate the use of prisoners who are as far away from their release date as can be found. A worker near his or her release date is least likely to cause trouble, but fulfilling the mission of preparing prisoners for when they are released says UNICOR management should use mainly prisoners who are near release.

Perhaps these many ways prison industries are at odds with preparation for work outside explains why an objective university study of the post-release experience of New York State prisoners found no difference in the recidivism rate of those who had had prison industries experience and those who had not. The fact that one would expect the "cream of the crop" effect alone to have given the prison industry alumni an advantage.

But more recently we have an in-house study called PREP, for Post-Release Employment Project, by a couple of Bureau of Prisons economists which purports to show that the recidivism rate is lower for UNICOR alumni than for their cohorts with a similar offense profile.

In my paper for the Fund for Constitutional Government, finished about this time last year, I observe that the study was thoroughly tainted by the inclusion with the UNICOR group prisoners who had received vocational training or apprenticeship training. A substantial percentage of those included with the UNICOR-alumni group only had the vocational training or apprenticeships and never had even worked for UNICOR. The comparison group, on the other hand, had neither worked for UNICOR nor had any vocational training or apprenticeship, which is kind of a scandal in itself, I think.

Now I find that in a journal article based on the PREP study published last year, the two economists have separated out, maybe because they saw my study, inmates with UNICOR-only experience from those with only vocational training or apprenticeships. The UNICOR-only still fare better than the unfortunate control group [those without vocational training, apprenticeship or UNICOR]. The important new revelation is that although the UNICOR-only prisoners were found to have been 24 percent less likely to return to prison than the control group, those inmates who had experienced only vocational training or apprenticeships were 33 percent less likely to recidivate. This finding, by the authors, as you would expect, do not tout in their introduction or in their conclusion.

I am not at all surprised at this new finding. My sources were unanimous that vocational training in prison is much more important to the prisoner's future than is the UNICOR experience. I had already deduced from the original PREP study data, with no help from the authors, that there is a scandalously low level of vocational training in the Federal prisons, a finding that confirmed what I was told in a prisoner survey and from my reading on the subject. Now the Bureau of Prisons has inadvertently revealed to us with its own study that, if they really care about the prisoner's future once he or she leaves prison, there is no excuse for their great preference for prison industries over vocational training.

Thank you.

Chairman Hoekstra. Thank you very much.

Chairman Hoekstra. Mr. Engebretson?

Mr. Engebretson. Thank you, Mr. Chairman and members of the committee. I represent the Contract Services Association of America [CSA], which is the Nation's oldest and largest association of government service contractors. We represent more than 250 companies and tens of thousands of employees. Our members perform services of every conceivable type, from low tech to high tech, for virtually every agency of the Federal Government and scores of State and local governments.

I greatly appreciate the opportunity to be here today and to share with you our members' views of the issue on the Federal Prison Industries. I have submitted a written statement for the record, so I will summarize that statement.

The issue is becoming important to CSA members because FPI sees services as ripe for aggressive expansion. While the authorizing statute is silent with respect to services, FPI is already involved in numerous service-related activities, including laundry services, distribution and mailing services, data services, and telephone support services. To be more specific, on its Web site FPI states that "medical facilities and VA hospitals that are trying to outsource their laundry functions can turn to UNICOR for their hazardous laundry needs."

The Web site further outlines exactly what FPI will provide. According to FPI, there are currently three sites available for this type of service. Eglin Air Force Base in Florida, Fort Bliss Army Base in El Paso,Texas, and Maxwell Air Force Base in Montgomery, Alabama.

Furthermore, as the Federal Government moves to greater competitive sourcing of its commercial activities, it is my understanding that FPI wants to become the first stop for Federal agencies when outsourcing those commercial-type activities currently performed by Federal employees and proposed for contracting-out. FPI is seeking to obtain this mandatory status either through a statute or a regulation from the Office of Management and Budget.

CSA has actively promoted greater outsourcing and privitization of noninherently governmental functions. There is an ever-increasing appreciation of the many benefits offered by the thoughtful and aggressive efforts to competitively outsource the Federal Government's commercial activities to the private sector.

A number of proposals have been discussed that would require the government to competitively outsource its commercial activities, where doing so represents the best overall value to the taxpayer. These measures also have recognized the importance of providing fair and appropriate soft landing policies to those Federal employees who are impacted by an outsourcing decision by giving the Federal employees a right of first refusal for the jobs for which they are qualified.

Indeed, the percentage of Federal employees offered a position with a private sector firm taking over a commercial activity is high, but there would be no soft landing or right of first refusal for a Federal employee whose job would be going to FPI. For that matter, how does any employer, private or Federal, explain to his or her employees that FPI is taking over the manufacturing of a product or the provision of a service that the employees have been performing in order to give jobs to the criminals? What will happen to the people who lost their jobs to prisoners?

In closing, let me state that any policy concerning FPI must balance two legitimate needs that are defined in the current law: one, the need to train prisoners for gainful employment so they may become productive members of society upon their release from prison; and, two, the need to minimize the effect of FPI's operations on the private sector and its employees.

Mr. Chairman, the bill introduced by you and several other Members is a major step in the right direction and one which we will fully support, and we will oppose H.R. 4100. As the association that represents the broadest sector of service companies, CSA believes that both industry and Government benefits from fair competition based on the price and quality of the product or service in question. We look forward to working with you toward that end.

Mr. Chairman, thank you for this opportunity to appear before your committee, and we will be happy to answer any questions later on.

Chairman Hoekstra. Thank you very much.

Mr. Palatiello.

Mr. Palatiello. Thank you, Mr. Chairman. I want to express my appreciation to you for holding this hearing and extending an invitation to us, and thank you and all of the members of the committee for the attention that you have paid to this important issue.

I do represent the mapping profession, and mapping indeed is a profession, and it is so defined in volumes of Federal and State law. Surely, there are some technical services that support the mapping profession, but ultimately, it does take a professional to take responsibility for mapping data for airports, Superfund sites, FEMA floodplain delineation, environmental monitoring, as well as the charts used by our soldiers, sailors and airmen.

The geographic information systems field is certainly an exploding market, and UNICOR certainly recognizes that. Several years ago, they retained a private geographic information system [GIS] consulting firm to help them to define the market, and advise them on entry into GIS. They then retained a second firm to help them with acquisition and installation of GIS- and computer-aided design and drafting [CADD] systems, do a needs assessment, specify hardware and software, integrate and install those systems, and then begin the training of inmates on CADD and GIS digitizing and imaging skills.

The services that UNICOR provides, while technical in nature, do support professional architecture, engineering, surveying and mapping activities. I should point out that Congress, in 1972, recognized the importance of using the highest quality contractors for these services when it enacted the Brooks Act, which provides for Federal procurement of these services based on the competing firm’s demonstrated competence and qualifications; not awards to the lowest bidder.

Therefore, we believe that this is an entirely inappropriate area for UNICOR to enter. There certainly are public health, welfare and safety considerations for this work. To add to these highly technical and professional services, the drawings, maps, images and other data processed by prison inmates is questionable to the public interest.

We also believe it is unwise to be training inmates on imaging techniques and technologies. The potential for using prison-developed skills in counterfeiting upon their release from incarceration is just too tempting, and we really do not understand why these skills are being taught to prisoners.

We face this competition not only from UNICOR at the Federal level, but increasingly, by a number of State prisons. This activity limits the private sector market, thus reduces the number of available jobs awaiting the inmates upon their release. Nobody wins when prison industries decimate the private sector and release inmates into a field where the only job market is back in the prisons.

Now, let me dispel some of the misconceptions that have been advanced by prison industry advocates and the folks at UNICOR. First of all, the work that the prisons are doing in the mapping area is not going offshore. Certainly there are companies that have subcontract arrangements or have firms outside of the United States, but there are also a great number of firms doing this work in the United States. When we work on government contracts, we are bound by the Service Contract Act to pay not the minimum wage, but the prevailing wage, and we abide by the State equivalents of those laws as well.

In fact, between 1985 and 1995, the Immigration and Naturalization Service data show that an average of 10,000 engineers, surveyors and mapping professionals have immigrated to the United States each year. So our members are not going offshore to perform work, they are going offshore to recruit highly needed workers.

In 1987, MAPPS began a campaign to require increased contracting-out of mapping activities by Federal agencies. When we began, less than 5 percent of the more than $1 billion a year spent by the Federal Government on mapping was contracted to the private sector. Now, given that, one can hardly understand how UNICOR could enter the mapping field and not believe that they were adversely affecting the private sector or compounding an existing problem.

We met with UNICOR officials to express our concern about their activities. We were shocked to hear that they knew exactly what our organization had been doing. They complimented us on our lobbying effort, mentioned several pieces of legislation which Congress enacted and MAPPS supported to increase contracting-out of mapping by Federal agencies. They then said that they believed that their entry into this field would not impact our member companies or our employees because this was work that was being performed by Federal employees, not the private sector. We have long believed in President Kennedy's adage that "a rising tide lifts all boats," but we think this is going a little bit too far.

The Senate last week passed a contracting-out bill and it will be before the full House after the September recess. We have worked long and hard on that. For us to create new markets in the private sector and then to have the prisons enter this market, we think, is nothing more than substituting one form of unfair government competition with another.

We support your bill [H.R. 2758]. We oppose H.R. 4100. We would prefer that prison industries not be engaged in mapping-related services. However, if they must, they should include the private sector, not work against it, and compete on a level playing field, not with unfair advantages.

Thank you again for the opportunity to share our views.

Chairman Hoekstra. Thank you very much to each member of the panel. You have all been helpful in outlining what some of the problems are with prison industries, whether it impacts your specific business today, or whether it might in the future.

The question then becomes, what do we do? We have one approach in our bill; Mr. McCollum has an approach in his bill. Both bills have some support from members of the panel. Most panel members like one versus the other.

The question is, what do we do with the prisoners? I have heard at least four suggestions this morning, and I would like some of you to respond to them and your reactions to them. Mr. Frank indicated that perhaps FPI could produce products for which there currently is not a private market in competition. He talked about furniture for homeless shelters, or for formerly homeless people, markets in which the private sector has not been able to offer products and services, which enable them to make a profit. Then, is the place where we are today, in which FPI is mandatory sourcing in competition with the private sector?

Mr. Nolan, you talked about moving work in prison closer to what would be available in the private sector, with paying wages directly to inmate workers, and skills training, those types of things. Then, I believe, permitting inmate goods and services to be offered to a larger market.

Dr. Martin, you suggested that one of the more fruitful activities would be to engage inmate workers with more vocational training. And then, Mr. Palatiello, you mentioned in your written statement that the word "penitentiary" comes from the Latin word meaning pertaining to punishment. With FPI doing these things, maybe you are saying: Who are we punishing here?

Any comments or reactions, from anybody on the panel, about where you see our options? How you would respond to what’s been said this morning?

Mr. Pattie. Well, again, I feel that the concentration on giving them a job is putting the cart before the horse, because what they need, and I think the panel has well supported and agreed upon this, are job skills. They need education. They need job training to be able to work. Just giving somebody any job doesn't train them for work.

There are many skills they need. When the panelist mentioned vocational education, don't simply give them a job, but assist them with learning skills for specific jobs. Simply learning to do one thing over a period of a year, or 2, or 3 years doesn’t prepare them. There is no likelihood that similar work will be available upon release. I do not know of any prisoners that end up getting to do what they did in prison when they get out and work in the private sector. They need to learn an array of skills.

So the question is, "What work can we have them do?" It is troublesome, for small businesses, because we are wondering, "Aren’t we already doing that?" I understand your question: Are there some things that small business isn't doing today that we could possibly get these prisoners to do? At a previous hearing there was a suggestion to meet needs of underdeveloped countries and countries that are hit by drought and other disasters. Federal prisoners could prepare products and services for people in those countries. That makes sense. But to take on a product or service that is and can be done by the private sector today is something that we would be strongly opposed to.

Chairman Hoekstra. Mr. Nolan, Dr. Martin, how do you respond to the suggestion that we ought to be focusing on vocational, education and literacy? Is that a core problem? Can we move beyond that?

Mr. Nolan. I saw virtually no effort in prison to provide literacy training.

Chairman Hoekstra. Is it necessary?

Mr. Nolan. Oh, absolutely. I met some really talented folks in prison, and if they had had any of the advantages I did coming from the family I did, the good Catholic education I had, they would be presidents of companies. Sharp kids that had had nothing educationally. I mean, they could barely read and they knew how to do drug deals. They were millionaires before they got into prison, but they couldn't read or write. They couldn't fill out a home mortgage application. They got ripped off all the time as they bought new suits every week. They didn't understand the basic skills necessary to lead a responsible life.

But putting them in an atmosphere where the guards don't view it as their job to impart any kind of values, any kind of skills, we need to change the whole ethos of prisons.

But as for inmate jobs, the real rub comes from the competition that Mr. Brickle's and Mr. Pattie's companies face, and what Dr. Martin talked about, slave labor. That wouldn't be there if the companies paid real wages. Teaching inmates to manage their money, paying restitution to their victims, paying support for their families, and paying some of their upkeep. Then, they would learn those skills while in prison. Also, supervision of effective inmate programs need to come not from correctional officers, but from real people that understand the real competitive marketplace.

So the idea of industries within the walls of prisons makes sense to me. Let the private sector come in. You have got a work force that is not going to be absent a lot. Pay them real wages. Those UNICOR jobs are sought after because I was paid 12 cents an hour for my job. UNICOR jobs were premium, because you sometimes got as much as $1.10 an hour. Some of those people, I tell you, worked hard at those jobs for $1.10 an hour, because they sent every dime of that to support their families. How much better it would have been if they had a real job, producing real things that were competitive in the marketplace, and were paid real wages so that they could support their family, pay restitution to their victims, and put aside a little money for when they got out.

So inject real competition in UNICOR; don't try to have this artificial, socialist system we have now. Make the companies that come in really compete, pay real wages, and compete in the marketplace without a captive market.

Mr. Martin. I have several thoughts on that. I think the important first step is your bill [H.R. 2758], to make them compete. It is like Chevrolet and Ford. Inmates will have to produce something the way it is really done. Then they will get a real-world experience. It is going to result in a very large scaling back. It would have to in UNICOR, more than at the State level.

I would restrict work in UNICOR only to people who are fairly near to release. What good is it to a guy who is 30 years away from getting out? His work experience now is not going to do him any good when he gets out.

So the trouble is this confusion of UNICOR goals. They are trying to fight idleness and they are trying to train people. They say they are doing that, but you really can't do both. You have got to do one or the other.

There are many, many ways to fight idleness. Watch prison movies or read the Birdman of Alcatraz or the Shawshank Redemption. There are crafts. There are arts. There are many, many activities to fight idleness with for people who just need to pass time.

Now, I agree completely that those people, who do work in UNICOR, they should be paid at least the minimum wage. This way they can have a running start back into the real world and have a little nest egg so they don't have to grab the first job that comes along. In fact, it is interesting of these UNICOR economists speculate that one of the reasons why they found a little lower recidivism rate among inmates with UNICOR experience is because they have been paid better than other inmates. They didn't have to grab the first job that came along.

The best answers I have seen to this question, and I disguise his identity in my paper because there would be real repercussions to him. I asked him, "If you could change one or two things about UNICOR, what would they be?" And he answered, "Upgrade and maintain the technologies within the factories so that they represent a real job skill resource for those inmates working there. The manufacturing process used is so out of date and primitive that any skills learned are completely nontransferable to the outside industry. Hence, a viable rehabilitative asset is lost.

Notice this fellow is very articulate. Not that the BOP [Bureau of Persons] evidences any designs in that direction.

Question: "Do you believe that UNICOR is essential for maintaining an orderly prison." His answer: "An orderly prison? No. A truly focused and viable education and technologies program could easily or at least realistically challenge and occupy as many minds and bodies as UNICOR does."

Question: "On a scale of 1 to 10, in which 10 is excellent and 1 is miserable, how would you rate Federal prison vocational training and education programs?" His answer: "2 or 3. Only total neglect is a 1."

Question: "Is prison idleness a problem? Why or why not?" His answer: "Yes. This time in prison represents the last and possibly only opportunity the vast majority of inmates will have to educate themselves."

We hear this over and over.

"It is this idleness which is permanently relegating the prison population to the nonproductive fringes of society."

Question: "Are inmate education and vocational training encouraged and/or facilitated?" His answer: "Only superficially. The GED programs generate budget facilitating income and are consequently the only real concern. However, the standards of the program appear to be so low as to be more a paper chase than a functional educational program. Having passed, a GED graduate is still so lacking in the basic skills as to be unqualified for any career field requiring an average high school level of knowledge and performance. I am amazed to see the charade that is passing for a high school equivalency diploma. At least that is what is being presented at all secondary education programs. At this facility, any inmate-supported and -directed programs, such as voluntary Spanish classes, investing classes, literacy programs, et cetera, are blocked by the administration. We are not encouraged to learn outside of the GED program, such as it is."

Chairman Hoekstra. Thank you. My time is up. We are going to get back to you. I would like to hear your comments, because you come directly from the private sector. So we will get back.

I am going to yield to Ms. Mink.

Mrs. Mink. Thank you, Mr. Chairman. I wanted to ask Dr. Martin, one of the first statements you made was that the Federal prison industry doesn't lower taxpayer costs, it raises them. Could you expand on that?

Dr. Martin. Yes. I was surprised to find that.

Right off the bat, I noticed that by law, UNICOR’s profits can't be used for general person facilities. UNICOR’s profits go back into the UNICOR budget. When I looked at UNICORS’s 1996 annual report I found that they had budgeted for the next 3 years $25.9 million for UNICOR industrial facilities, which are taxpayer funded. If inmates didn’t work for UNICOR, those expenses wouldn't have to be taken on by the taxpayers. So, UNICOR absorbs money that way. That is a most obvious way.

The next most obvious way is that the Bureau of Prisons pays for UNICOR’s utilities. It pays for their water. It pays for their electricity. Again, that is an expense they wouldn't have if it weren't for UNICOR.

Of course, the biggest expense is the one we will never be able to nail down. Every time UNICOR sells something to an agency, there are extra expenses. As we have heard in testimony today, UNICOR’s agency customers have to pay more, for lower quality items, which have to be replaced sooner.

And not all costs are dollars-and-cents costs. I mean, at a time of national emergency.

Mrs. Mink. What happens to the money that they receive when they so-called "sell" their commodity to the Federal Government?

Dr. Martin. It simply all goes back into the UNICOR budget. They say that UNICOR helps control prisoners. I found over and over there is a widespread suspicion among prisoners that UNICOR is, and I have heard the word used, a big "scam" for the benefit of some individuals. The inmates can't imagine where all the money is going.

And that was the first thing I looked at. The story, among inmates, is that UNICOR is truly, privately owned. I attended a national meeting of families against mandatory minimums and I told them I was soliciting information about UNICOR. The first thing I heard the people volunteer was that UNICOR is privately owned and a lot of people, judges, legislators, and others, who were responsible for the buildup in the prison population, are lining their pockets.

Obviously I didn't find any evidence of that. UNICOR is owned by the Justice Department, which I think is a scandal in itself. UNICOR’s profits just go back into their budget.

Mrs. Mink. Your statement that it costs more to the taxpayers, that this program costs more is because of real estate?

Dr. Martin. It costs more because the Federal Bureau of Prisons provides UNICOR its buildings and land. They provide UNICOR’s utilities, which don’t come out of their profits, but come out of the Bureau of Prison's budget.

Mrs. Mink. But what about the proceeds from the sales of these things that are produced?

Dr. Martin. They use the proceeds to pay the prisoners and the UNICOR staff. In the last 6 or 8 years there has been a huge run-up in UNICOR staff personnel costs, according to their annual reports.

UNICOR would not supply me with detailed data on civilian employment. I suspect where the real featherbedding is going on is not with the prisoners, but with UNICOR staff employment. It is a massive, bloated bureaucracy that is pretty much out of control. There is no one really controlling it. It is not controlled by the market, as the private sector is. It is not controlled by UNICOR’s Board of Directors.

The Board of Directors does not look at anything but where UNICOR proposed to expand in competition with the private sector, like furniture. They do not review UNICOR overall UNICOR’s statute requires periodic auditing by the GAO.

GAO auditing that has been abdicated in the last 20 years. It has been turned over to private auditing firms, first, to Price Waterhouse, and most recently to URBACH, KAHN, & WERLIN, which I never heard of.

It seems to be, almost, in-house auditing. It is nothing like the audit that the California Bureau of Audits did to their own prison industries program, which is modeled after the Federal Prison Industries. There needs to be thorough audits, which hasn't been done.

Mrs. Mink. Thank you, Mr. Chairman.

Chairman Hoekstra. Mr. Souder.

Mr. Souder. First, in the interest of disclosure, because I had made an earlier statement, I personally have a small business background, and we have a prison industries problem in our district.

I also want to point out that I have known Pat Nolan since I was probably 19, many years ago. And I think God works in mysterious ways, and given your background, hopefully with your exposure now, that He can use you like He used Paul's experiences in prison. At times life seems very tumultuous. You went through all kinds of problems.

But now I think your life can be used in many ways that you wouldn't have had the opportunities for otherwise, and I want to thank you for your leadership in the country, not just testifying today.

I wanted to ask Dr. Martin a very specific question. You said that because Mr. Nolan raised a question, and I think there is a general agreement, that the current system has major flaws, that if we moved to competition, you suggested that, among other things, because of turnover, because of having a captive market so the business doesn't have recruiting costs. These are variables that aren't free market.

I don't know the answer. Mr. Palatiello suggested that, for example, prevailing wage rather than minimum wage was a question.

So my broader question is, do things like OSHA, civil rights laws, minimum wage, Davis-Bacon, clean air, clean water, due process in hiring and firing, how you deal with the handicapped, all of those regulations that impact a small business, do they currently impact Federal Prison Industries? Could you, have anything approximating a competitive market if all of those laws didn't apply, including, and this is very explosive, the right to unionize?

Dr. Martin. In my longer paper, I point out that this is another huge advantage for UNICOR. None of those apply. I asked in my questionnaire if UNICOR hires illegal aliens? This is a big expense to avoid hiring illegal aliens. Question: "Does UNICOR employ illegal aliens?" The answer: "Yes." A memo directing all CEOs to identify and remove all UNICOR workers who were INS detainees by September of 1996 was circulated, but never acted on, at least in the factory I was at. While such a detainer does not necessarily mean that an individual is an illegal alien, several cases I was aware of involved individuals who had not legally entered into the country at the time of their crime and arrest.

To the extent that UNICOR employs illegal aliens, of course, is not providing any work experience that is going to be used in our market. They are supposed to be deported as soon as they get out of prison.

But the answer to your question is that none of those laws currently apply to UNICOR. Another huge advantage. That is why inmates think UNICOR is a scam. T

There are a lot of differences, a big difference from when UNICOR began. UNICOR made more sense when it began in 1934. The type of jobs that inmates were doing, hand labor jobs, was expanding in our economy. America was becoming more competitive in those things. Now, inmates would have to go to China to find those jobs once they get out.

There weren't the myriad rules and regulations burdening down UNICOR’s competitors in the 1930s that exist now.

Mr. Souder. Not a lot of concern about age and sex discrimination either.

Dr. Martin. Yes, or sexual harassment.

Mr. Souder. Another interesting subject.

This has been fascinating this morning, hearing all of the nuances, but there is a broader underlying question that I wanted to talk to Mr. Nolan about.

There is no question that it is not fair for people who haven't violated the law to lose jobs in competition with people who have violated the law. I think in the bigger question of God's justice that we all sin. Some get caught, some don't. Some sins are legal and some sins aren't legal. And we should be doing whatever we can to help individuals, because we could all be there.

Then the broader issues here are the financial and safety questions of the country. There is no question we would all be safer and better off if those who are in prisons come out rehabbed and become productive in society, in addition to those individuals being better.

I asked the first question because your solution would seem to be addressed if, indeed, we could ever get to competition. But then I want to add one other thing. I met a man in Los Angeles, E.G. Guinness, who worked with gang kids in Los Angeles. He said they did a program, for kids in gangs, trying to get them into jobs and into different rehabilitative programs. What he found was that the number of kids joining gangs increased because the kids who weren't in gangs weren't getting that training.

In order to try to reach these goals helping both the prisoners and society in the long run, we inmates give job training, vocational training, some job placement, but not to those who are struggling outside, who aren't getting those opportunities, is that just either? How do we balance this?

Mr. Nolan. First of all, I doubt anybody would choose to go to prison to get job training. I doubt that is a selection most would make.

I have a variety of thoughts on what you have said. This will be controversial because this is a government building and a government hearing, but it is the power of the Cross and Christ's sacrifice for us that is the true changing factor that will change lives. Governor Bush in Texas has allowed Prison Fellowship to take over one wing of a prison and run an explicitly Christian program modeled on prisons we run in Brazil, Ecuador and Peru. The recidivism from those institutions is 4 percent. It is not because of job training in those facilities. There is job training, but more. Although the prisoners are brought in shackles, they are unhandcuffed inside the prison. It is totally run by prisoners; prisoners have the keys to the institution.

They are taken in front of a Crucifix and they are unshackled and told; here, you are not restrained by steel but by the love of Christ. They are taught to rebuild their lives based on faith.

So first of all, let me make it clear that we feel the true way to rehabilitate anybody, and we have all fallen short in the sight of God, is to get straight with Him. Some people do it in prison. Others at other points in their life. But, truly, that is what transforms people, and the rest are, at best, temporal solutions. So I want to make that point first.

Secondly, is it fair to take jobs from those on the outside? No, it is not. That is why I think the more we can try to have inmate jobs be competitive and compete on their own, the better off we are.

Third, I don't know about the legality of whether those laws apply. I do know that even when laws apply, they are ignored. I will give you just one example.

We were rehabbing a building, which had been a medical center at an Army base, rehabbing it into a visitors' room. As the inmates ripped up the tiles from the floor, they said: "This is asbestos, we shouldn't be doing this." They were told by the boss of their construction crew, who was on a deadline: "You either rip up the tile or you go to the hole," administrative segregation, to use the technical term.

So the inmates ripped it up. You don't argue with your boss. You get put on what they call "diesel therapy," if you fight with your boss. After segregation, you are put on a bus and you are driven from prison to prison to prison, your belongings somewhere else, without a dime. You can't make a call from a Federal institution without prepaying. When you get to those institutions, your money isn't transferred with you, so you are incommunicado, sometimes weeks at a time, if you gruff them. So when they were told to rip up the asbestos tile, they did.

Whether OSHA applies or doesn't apply, in reality, in the prison setting, is irrelevant. So that is a significant advantage, if you want to view it that way, to any prison employer. And that would have to be addressed.

But let's put it this way: What we have right now, there is no market mechanism, there is no competitive force, and the people that supervise the inmates don't understand those market or competitive forces, it is irrelevant to them, and they do nothing to pass on an understanding of that to the inmates. So if we are going to have a work program, which I think we need, it should reflect those market forces.

The last thing is, the mistake I made as a legislator was that in my mind I was "Mr. Law and Order" in California. I carried the Death Penalty Restoration Act of 1984 and got the Victim's Advocate Award by Parents of Murdered Children. I was a poster child for the Correctional Peace Officers Association in California, endorsed and supported strongly by them. I turned a blind eye to the bureaucratic aspects of prisons, because they were the "good guys," because they were protecting society. It didn't occur to me that they were just another bureaucracy too.

Take a DMV office, string barbed wire around it, give the clerk’s guns, and that is essentially the attitude of a prison. I didn't realize that as a legislator. So I gave them a free pass on a lot of these issues; because their intentions were good, I allowed them to get by with that.

I also made a mistake of basically, thinking that once somebody went to prison, they just sort of became "non-humans." It was not a conscious thought. The fact of the matter is these are people's sons and daughters and brothers, parents. I will just give you a quick example.

Ed Davis, who is Chief of Police of Los Angeles, then was in the State senate, and a good friend of mine. He had a bill to give Workers' Comp to prison workers. While we were at a dinner, I said: "Ed, that is the stupidest idea in the world. Why should the businesses in my district pay higher premiums so a bunch of convicts can get coverage with Workers' Comp?" He said: "Well, Pat, prisoners have families they have to support. If they are injured while they are in prison, what are they going to do when they get out? How are they going to support their families?"

I said: "Well, they should have thought of that before they committed their crime."

That was a pretty smart-aleck answer, because frankly, if they had thought of a lot of things before, they wouldn't have committed their crime. The fact of the matter is, they did, and how will they support their families.

When I said that, he looked me right in the eye and said: "How can you call yourself a Christian and say that?"

I appreciated that chastisement. At the time, my "Irish" was up and it just blew past me. But sitting in prison, I thought about it. How could I have wanted to deny that coverage to protect those families if their family member got injured while they were in prison? The only way I could have was by thinking of prisoners as "non-humans."

But the fact of the matter is, just for society's sake; they are going to be released. These folks are going to be out on the street; 95 percent of the people in prison currently are going to be released on the street. We had better do all we can to have them leave prison better than they go in. That is why we have to address this somehow, without trying to destroy these gentlemen's family businesses and put their people out of work. That is why it is a struggle.

Mr. Hoekstra, you are right, it is a dilemma. There is not an easy solution. We can't just wave a magic wand, but we have to address it, because we are not doing it. Sixty-six percent of the people entering prison today are still on supervised parole, 66 percent. If you took your car to a mechanic and two-thirds of the time you drove it off the lot you had to come right back and have it repaired again, you would find a new mechanic. This system is broke. It is not working. It is not protecting society.

One last point. Over half the people in prison are there for nonviolent crimes, over half. We are told they are imprisoned to protect society, but over half have never done an act of violence in their life. Jack Cali, who runs the prison wing in Texas, 20 years a warden in the Oklahoma system, so he is no patsy, he says in his drawl: "Pat, we should lock people up because we are afraid of them, not because we are mad at them." It is horribly destructive of the people we send to prisons. We should only do it when we are afraid of them physically, to isolate them so that they can't prey on us. Other than that, there are other ways to punish them. But sending them to prison is horribly costly, not just the cost of keeping them there, but the chances are so much more likely that they will return.

The Rand study shows, that for persons convicted of the same crime are more likely to commit another crime if you send them to prison than if you punish them in the community. Why are earth are we doing that to people we are not afraid of?

So in the mix of what we are doing, we have to look at who we send to prison, what we do with them while they are there, and most important, what we do to allow the healing power.

What Dr. Martin said is so true, I don't speak Spanish well, but I wanted to teach English to the Spanish-speaking folks. I was not allowed to do that in prison. The administrators wouldn't let the prisoners share skills with others, or to do seminars. Now, at some prisons they do, but in most, the wardens will not allow it.

So we have to look at what we do with them and, most important, what are we doing for them before they get out. Because otherwise they are going to commit other crimes, which endangers all of our families, and they are right back in prison again at horrible expense to us.

Mr. Souder. Thank you.

Chairman Hoekstra. The gentleman's time has expired.

Mr. Brickle, do you have any comments or anything that you would like to add? You provided a very unique perspective to this panel.

Mr. Brickle. I am neither a penologist nor a sociologist. I can't tell you how to fix your prison system. All I am here to do today is to give you an example of the predators against our kind of business out there.

There are an awful lot of people in this country that are similar to me, that are working hard to create jobs, create product, and we are having a tough time. I mean, the whole world is beating us down. But somehow we are surviving, and we will continue to survive, but what we resent is when our own Government tells us that we can no longer compete.

I just want to give you one example of a previous experience with UNICOR. UNICOR was manufacturing a blanket for the homeless out in California. They were selling it to the Department of Defense for $11 a unit. Mrs. Mink asked, "How does UNICOR cost the government money?" Well, it is simply that when the Department of Defense has to pay dollars to UNICOR, it is coming out of the Federal budget.

We looked at this blanket and we really thought it was a piece of garbage. It was too pieces of satin cloth, with some junk in the middle, whether it was paper stock or old rags or what not, we couldn't figure it out. We went back and designed a blanket that was made from wool and synthetic fibers; weighed 3-1/2 pounds, and met an exact specification. It was thermally five times better than what UNICOR was furnishing for the homeless. Ours was nontoxic. It wouldn't burn. We convinced the Government that they should try our design.

They gave us an initial order, a noncompetitive order, for a small quantity to test. They agreed our blanket was very good. They said: "Okay, we are coming out with an order for 500,000 of these blankets. They put it out to bid. We were the low bidder, and we competed with other people in our industry.

They were given our specs, they did no R&D [Research and Development]. They did nothing but bid competitively and we were yet the low bidder. Our price, forgive me, this is a few years ago; I can't remember the exact number, was approximately $2 million. We were the low bidder on the contract, and we celebrated because it was a terrible time in our industry. Everybody was very excited. This is going to keep us busy for a few months.

UNICOR notified DPSC [Defense Personnel Supply Center of the Defense Logistics Agency] that they were taking that contract. We were notified by the Defense Department that we were not going to receive the contract because it was being given to Federal Prison Industries. I asked: "Where is their factory?" DASC said: "Up in New York State." I said: "UNICOR doesn't have a factory up there that makes these types of goods." DPSC said: "No, they are going out and buying the machinery and setting up."

Well, they did. We had to accept it. We laid off 50 people. It was very difficult, because we are in a labor surplus area. Our people make $10.50 an hour, which I think is pretty good. The average wage at this prison that manufactured the blanket was 29 cents an hour. UNICOR convinced DPSC that they needed $5.50 to make the blanket that we bid $4 for.

So what you have got is a cost increase, approximately $1 million more, that the taxpayers paid. Nobody else paid, you and I and everyone else that pays taxes, we paid. It cost us $1 million more to fund UNICOR work in this prison in New York, who were paying the prisoners 29 cents an hour.

Now, UNICOR claims that they have certain security problems and everything else. That is garbage. UNICOR will tell you, and they told me to my face on 60 Minutes, "I can't compete." This is crap and that is exactly what I said to him. We compete all around the world every day with dollar-a-day labor, and we win. We don't win all the time.

I want to tell you something, it is really a kick when my own Government tells me I can no longer do business with them.

Mr. Engebretson. Mr. Chairman, as I sit and listen to all of these statements and listening to Mr. Nolan talking about the prisoners that will be turned out onto the street, it would appear to me that what we as a nation must do is to elevate this issue. I grew up in the great State of Iowa, the heartbeat of America, where vocational schools really worked; and it would appear to me that the vocational training program could be something that prisoners could qualify for. If you would look at a system such that

The FPI does not have to meet OSHA requirements and Davis-Bacon requirements and so on and so forth. Maybe what would happen if they had to meet these requirements, put overhead into their bids and make it a real, legitimate competition, we may find that they wouldn't operate as well as they are operating today. But if any funds that come from winning a competition and the projects they get go back into vocational training, then this could put the prisoners again at a level where they could be useful when they return to society.

It appears to me that they are abusing their privileges, and if you ask about what the impact would be on products, I can't answer that. But I can address the service industry; the service industry, in our judgment, represents the Yellow Pages, so everything that is in the Yellow Pages, our members can and will do.

So right there, the FPI is going to compete with us, it is a major problem, therefore, they have to meet requirements like we have to in all other competitions that we are involved in. We deal with the A-76 policy. Some of you may know what that is and some may not. They are requirements that the government has to meet in order to have as close to fair competition as you can get. This has to be in this same system. The FPI should have to compete with industry and on a fair competitive field. Then, maybe we could be training the prisoners; maybe they would have to meet requirements in order to get into the program, the vocational program, in order to work for FPI. And this would elevate FPI’s credibility.

So I think all of those things are going to have to be discussed. I think it is a major problem, no question about it. But if it is going to be fair competition, they have to meet all of the requirements that the companies have to meet, including the overhead costs and not put the money into their coffers, but put it back into a system that could be helpful.

Chairman Hoekstra. Thank you.

Are there any other questions? Mr. Souder? Mr. Scott?

I will ask unanimous consent that the hearing record remain open for any additional statements for the record until August 21, 1998. Without objection, so ordered.

This has been a very stimulating discussion. This has been a great panel. This issue of Federal Prison Industries is just a part of a much larger correctional problem which the panel has brought out.

We appreciate you being here and helping us get a much clearer perspective on this issue. I would hope that each of you personally or the groups that you represent will continue to assist us as we try to address unfair competition from FPI as well as the larger issue.

Thank you very much for being here.

The subcommittee is adjourned.

[Whereupon, at 12:05 p.m., the subcommittee was adjourned.]