Prison Industries Will Limit Market Share Federal Prison Industries will limit its share of the federal market for any product to 20% and will reduce production of office furniture and textiles, the government corporation’s chief executive said. Testifying Oct. 1 before two subcommittees of the House Small Business Committee, Harley Lappin, director of the Federal Bureau of Prisons and FPI’s CEO, tried to head off attacks on the corporation’s mandatory source status in federal contracting. He called FPI “a crime prevention program” because it teaches prisoners job skills. He said the Bush administration supports “balanced reform” of FPI, emphasizing the need to provide work opportunities for prisoners as well as new opportunities for businesses to sell to the government. But the administration has taken no position on the Federal Prison Industries Competition in Contracting Act, H.R. 1829, which would phase out FPI’s mandatory source status. The bill, which has 135 cosponsors, was approved by the House Judiciary Committee in July. Its backers hope for a House vote before Congress adjourns for the year. Lappin said, “We are not opposed to eliminating mandatory source,” but added that the preference should be phased out over a period longer than the five years specified in the legislation. Some members of Congress said the bill does not go far enough to rein in FPI. The prime sponsor, Rep. Pete Hoekstra (R-MI), said even if the bill passes, FPI would still enjoy “a broad array of competitive advantages.” He said FPI pays prisoners an average of 92 cents an hour for their work and pays nothing for factory space and utilities that are provided by the prisons. Rep. Juanita Millender-McDonald (D-CA) said she favors amending the bill to require FPI to pay the federal minimum wage. Rep. Pat Toomey (R-PA) said FPI would still be allowed to bid on small business set-aside contracts, even though its 2002 sales totaled nearly $679 million. “Why are we letting a company that is this large bid on small business set-asides?” Toomey asked. “It makes no sense.” FPI’s board of directors voted May 28 to waive its mandatory source status for two product lines in which its market share exceeds 20%: floodlights and task lights (Federal Supply Classification code 6230); and U.S. Postal Service hampers (FSC code 7240). FPI’s market share exceeds 20% for mattresses, box springs, towels, sheets, tablecloths and napkins (FSC code 7210). Chief Operating Officer Steve Schwalb told the board that if FPI waives its mandatory source status for those products, it was not likely to be able to compete with large manufacturers. The board voted to postpone a decision on those products until it has information about FPI’s 2003 sales. In addition to capping its market share at 20%, Lappin testified, “We are already working to reduce the FPI program’s reliance on mandatory source, reduce production in office furniture and textiles, and emphasize new areas for inmate jobs, particularly service jobs that are moving overseas.” He said FPI is seeking more contracts with commercial customers in such services as data entry, recycling, packaging and distribution. Some members of Congress contend it is illegal for FPI to work for commercial customers, but Lappin said Justice Department lawyers have approved the initiatives. “I find that surprising and disappointing and rather problematic,” Rep. Toomey said. Rep. Thaddeus McCotter (R-MI) questioned why FPI should be training prisoners for jobs that are mostly performed overseas. “Are you going to pay them to move overseas to get those service jobs?” he asked. Christopher Fay, who runs training programs for ex-offenders for the Milton S. Eisenhower Foundation, also questioned FPI’s job training. “Most of the best work goes to lifers who are not going to come out and look for another job,” he declared. Congress passed legislation in 2001 ending the prison labor corporation’s preference in Defense Department contracting. Lappin said that has led to the closing of 13 prison factories. But he acknowledged that FPI plans to open 18 new factories to accommodate its changing product mix.