Bid Process Has FPI Foes Seething

May 23, 2003
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GRAND RAPIDS — Critics of a federal agency that produces a number of products and competes with the private sector hope their latest example will generate greater urgency for reform.

Steelcase Inc., at a time the company was cutting even more jobs and struggling with profitability, was beaten out of a $6 million federal contract this month when Federal Prison Industries took the job after reviewing the company’s bid.

Rick Yeats, vice president and general sales manager for Steelcase, hopes that shedding light on the process that FPI used to secure the contract will finally result in action in Washington to rein in the agency.

“This is a very visible example of how unfair this process is,” Yeats said. “We’re hopeful this is a lightning rod to get the White House and the Justice Department to move in the right direction to change the process that is set up right now.”

That process, instituted earlier this year, allows FPI to examine private sector bids for government contracts after they are submitted and opened.

The loss of the contract for Steelcase, which has cut 40 percent of its global work force since 2001, to renovate Federal Aviation Administration headquarters in Washington, D.C., has further outraged opponents of FPI’s virtual monopoly over federal contracts.

“We cannot compete under these circumstances,” Steelcase CEO Jim Hackett said in a news release issued last week by the office of U.S. Rep. Peter Hoekstra, the leading critic and reform advocate of FPI.

“After investing hundreds of hours responding to this request for bid, Steelcase was determined to be best value to the FAA. FPI was then handed our completed bid document and they simply matched our pricing and product specifications,” Hackett said. “This is particularly painful when our industry is in the midst of its most severe economic downturn ever. Building projects like this, which we have competed fairly to win, are critical if we are to avoid any further reduction in employment.”

Steelcase getting beat on the FAA contract because of the process used may very well provide the “stark example” Hoekstra needs to get support from the Bush administration to change FPI’s business practices.

“This may be the one where FPI has finally just kind of over reached,” Hoekstra said. “This is the stark example that people have needed.”

Office furniture industry executives have complained bitterly for years that a provision in federal law, known as mandatory source status, unfairly blocks their corporations from competing for federal contracts. The provision requires federal agencies to buy from FPI unless granted a waiver — by FPI.

An arm of the U.S. Justice Department’s Federal Bureau of Prisons that was created under an executive order issued by President Franklin Roosevelt in the 1930s, FPI employs more than 21,700 inmates to produce some 80 products, including textiles, electronic and automotive components, and office furniture, sold under the “Unicor” brand name.

In recent years, FPI has been growing its business and delving into new products and services, competing directly with the private sector. The agency’s 2002 fiscal-year sales totaled $678.6 million, up more than 16 percent from the $583.5 million in the federal government’s previous fiscal year.

Of greatest concern to West Michigan — where thousands of people have lost their jobs in the past two years as furniture makers cut back and industry sales plummeted nearly 40 percent — is the $217.8 million in office furniture that FPI produced and sold to federal agencies. That’s nearly $43 million more than the previous year and a 24 percent growth rate that came even as the office furniture industry continued to suffer from the worst sales downturn ever experienced.

In response to efforts to reform the agency and eliminate mandatory source status, the Federal Prison Industries board of directors on March 10 adopted a resolution that directed the agency to grant waivers to mandatory source status “in all cases where the private sector provides a lower price for a comparable product that FPI does not meet.”

FPI directors later that same day clarified that the resolution “does not constitute a blanket waiver,” and that federal agencies seeking a waiver from mandatory source status so they could buy from the private sector must submit their request to FPI to conduct an “assessment of product ‘comparability,’ price, and disposition,” according to the minutes of the March 10 meeting.

If FPI “meets the lower price, and determines the products are comparable, the mandatory source applies.”

Critics say the clarification gutted what could have been a promising change in FPI’s business practices. The process enables FPI to skirt the intent of the resolution by gaining access to private-sector bids and design specs after they’ve been submitted and opened, Hoekstra said.

Would anyone expect that FPI could not match the best price that the private sector has to offer when FPI does not incur the design and bid costs that all bidders face equally in open competition?” Hoekstra said. “Self-serving bureaucrats at FPI have turned this broad ‘reform’ into another insult to the hard-working and law-abiding people of West Michigan and local firms that cannot even bid on contracts funded by their tax dollars.”

In a speech last week on the House floor, Hoekstra sharply criticized the Bush Administration and U.S. Attorney General John Ashcroft for failing to back efforts to reform FPI.

Reformers expected FPI to try to “subvert” their efforts and the intent of the March 10 resolution, he said, but “never in our wildest dreams did we think that this Justice Department would let Federal Prison Industries go down the direction they have gone.”

“It is absolutely outrageous,” Hoekstra said in his May 20 late-night address on the House floor.

“They steal the creative work, they put together their own bid and guess who wins the bid?” he said. “I have to give them marks for their creativity, but the sad truth is it is one more case where this Justice Department is not interested in American workers. They are interested in one thing: to make sure that Federal Prison Industries never loses a bid.”

The situation involving Steelcase will surely add fuel to the fire for FPI’s critics to push through legislative reforms during the present congressional term.

“They continue to behave in a manner that only reinforces the evidence that this is an institution that has run amok,” said Mark Schurman, a spokesman for Herman Miller Inc.

Both Hoekstra, R-Holland, and U.S. Sen. Carl Levin, D-Michigan, who are part of a unique bipartisan coalition that includes labor and business interests allied against FPI, have reform bills pending in Congress that would effectively end mandatory source status and open the bidding for federal contracts to private-sector competition.

Hoektra this month also managed to push through an amendment in committee on a bill to reform in federal procurement procedures. The amendment would grant federal agencies the authority to decide whether FPI or private-sector products provide the best value.

Hoekstra’s bill, now pending in the House Judiciary Committee, is expected to come up for a vote in June, press secretary Dave Yonkman said.           

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