Congress is considering a bill that would open more federal contracts to private firms - business worth more than $500 million annually, including millions of dollars' worth of plastics processing.
Rep. Pete Hoekstra, R-Mich., introduced a bill last year seeking to reform Depression-era legislation that requires the government to offer bids first to qualified businesses housed within the federal prison system. President Bush already has signed a bill that could open more bids to the private sector for the Department of Defense.
Federal Prison Industries Inc., operating under the trade name Unicor, puts inmates to work making everything from aramid-fiber bulletproof vests to electronic connectors to polycarbonate safety glasses, office furniture and military uniforms.
Its plastics operations in Beaumont, Texas, and Fairton, N.J., include injection molding, thermoforming, extrusion and compression molding. Unicor can handle both thermoplastics and thermosets.
In 2000, Unicor listed nearly $134 million in sales under its plastics and electronics division.
Hoekstra, along with 122 bipartisan co-sponsors, said Unicor maintains those sales at the expense of struggling private operations, without having to compete for business.
The 1934 legislation that created FPI requires government offices to check first with the prison group before authorizing any spending. If FPI says it can produce the goods, and it wants the work, it gets the contract. Government agencies go to private businesses on an open bidding system only if FPI passes on the work.
That is just wrong, Hoekstra said.
``They're expanding,'' he said in a Jan. 31 telephone interview. ``They've got a growing population and they want to keep them busy, but they're putting more and more people out of business.''
The system simply has grown beyond its original design, said Thomas Walker, manager of government programs for furniture maker Haworth Inc. of Holland, Mich.
``It's basically a good program, with good merit, that went wrong,'' he said. ``They have a complete right to go out into any industry or with any product and start manufacturing that product and take it away from the private-sector marketplace that developed that product.
``The intent and merit of reform of prisoners is well-intended, but it's just gotten loose. You compound that with the fact that private industry has lost, and is losing, so many workers because of the economic situation, and it's hard to justify taxpayer dollars going there.''
FPI involves only federal prisoners, and its purchasing contracts apply only to federal agencies.
Hoekstra's bill is in a subcommittee of the House Judiciary Committee. Committee Chairman James Sensenbrenner, R-Wis., has called for action on it as soon as possible.
Hoekstra has known about Unicor and FPI for years. As an executive for office furniture maker Herman Miller Inc. of Zeeland, Mich., he knew firsthand of business opportunities his company could not chase because the government contracts were headed to Unicor.
``Back then, in the 1970s and '80s, we never paid it that much attention, because those were the heyday years of office furniture,'' he said. ``We were looking at 20, 30 percent annual growth, but as we reached the '90s, the industry started maturing, and everyone was looking for opportunities.''
But it is not just the boom years that changed.
The federal justice system's ramp-up of anti-drug legislation has led to a huge increase in the number of convicts in prison, and FPI must employ 25 percent of the medically able inmates, said FPI spokeswoman Ruth Bracken.
As recently as 1980, the federal prison system held fewer than 25,000 inmates. But now there are 155,000 inmates, and the agency estimates that number could hit 200,000 within five years.
``The biggest challenge the federal prison industries faces is that our legislators have taken a strong stance against crime, so consequently the numbers of individuals entering the prison system has gone up dramatically over time,'' she said. ``We're maintaining a delicate balance.''
So FPI has expanded its offerings.
It turns out wiring harnesses for the Defense Department's guided missiles, bunk beds for military bases, executive desks and chairs, plastic pallets, bedding and blankets. It recently launched an electronics recycling division.
``We're mandated to diversify as much as possible so we don't have an adverse impact on any one industry in particular,'' Bracken said.
While Unicor's workers may be plentiful and cheap - the agency had an average pay and benefits package of less than $2,000 per person for the 21,688 inmates employed in 2000 - they are not the cream of the employment crop.
The average federal inmate is 37 years old, serving a 10-year sentence for a drug-related offense and has never held a steady job. A recent study estimated the typical inmate is only a quarter as productive as his counterpart in private industry.
But gaining real-life job experience and skills in prison does work, Bracken said. A long-term study showed that graduates of FPI were 24 percent less likely to commit another crime.
The agency claims it needs an inside track on government contracts to maintain enough work to keep FPI inmates employed. Unicor passes on 80 percent of the contracts it sees, allowing federal agencies to seek bids from private industry.
Unicor's sales represent less than 2 percent of federal government purchases, according to FPI. In addition, Bracken said, Unicor is a good customer, buying raw materials and parts from the private sector. In 2000, it purchased more than $410 million in goods from independent firms.
But Hoekstra and his bill's backers maintain that 2 percent of federal sales can make a difference to small companies.
While privately held Haworth does not discuss details of its sales, government contracts have a significant impact on its overall production, Walker said. Beyond dollars and cents, though, he said the principle matters - that law-abiding companies are shut out of fair competition, and stand to lose business to felons.
``The position that we're in - that we're prohibited from openly competing for that business - is frustrating,'' he said. ``We see that every day, as an unanswered question as to why this regulation is still in effect.''
Industries are making other attempts to change the system, filing suit in 1999 in federal court in an attempt to break open the bidding process. A judge ruled against the businesses last year, saying Congress should address the situation. An appeal is under way.
And cracks in the system have appeared in Washington, even beyond the House action.
The 2002 spending authorization for the Defense Department allows the department to bypass the FPI for contracts this year.
``That's a huge foot in the door,'' Walker said. ``It's a huge victory.''
The spending bill has not taken effect yet, noted Marianne Cantwell, FPI general counsel, and the agency is not certain yet what kind of an impact it will make on its sales or employment base.
``It will depend on the particular product,'' Bracken added. ``There are things we do with the DOD that they're very, very pleased with, and there are other areas where there is concern. We're really not sure now what the impact is going to be.''
It is not just a question of the business lost to the prison system, critics maintain. Without a true bidding process, federal agencies buying through Unicor end up with higher costs. FPI must deliver products at a going market price, but not the lowest price.
That means, Walker said, that as long as Unicor can show that someone in the private sector charges more, it's safe. It also does not have to compete using the same quality and delivery standards as private companies.
``We hear it from our customers all the time,'' he said. ``They're told that they have to buy this product, and they have to pay what they're told to pay.
``If John Citizen Taxpayer really understood what an Air Force base had to pay for furniture through FPI and the additional costs and poor cost and delivery, there would be another Boston Tea Party.''