FPI Reform Nears Victory

December 3, 2004
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If it sticks, language in the massive federal budget bill recently passed in Congress could provide the office furniture the biggest victory yet in the nearly decade-long battle to rein in a competing federal corporation.

The $388 billion appropriations bill Congress passed Nov. 20 includes language that would permanently lift mandatory-source status from Federal Prison Industries, a federal corporation that produces products sold to the federal agencies and, critics claim, competes unfairly with the private sector.

The language could open up millions of dollars annually in federal contracts that office furniture makers say Federal Prison Industries, until this year, has held a virtual monopoly over for decades.

“It’s an early Christmas gift for the industry and a well-deserved one for this battle,” said Paul Miller, director of government affairs for the Washington, D.C.-based Office Furniture Dealers Alliance that’s been part of a private-sector coalition pushing for years to reform Federal Prison Industries.

“This is a historic and a huge victory for this industry. I don’t think it gets any bigger at this point in time,” Miller said.

The pending victory comes through a provision introduced by Sen. Richard Shelby, R-Ala., into the omnibus budget bill. The language would permanently allow all federal agencies to buy products from any vendor that offers the “best value.” Previous measures repealed mandatory-source status over the Treasury and Transportation departments on a yearly basis, as well as permanently for the Department of Defense.

As Congress prepares to end its current session, the provision supplants bills proposed by U.S. Rep. Peter Hoekstra, R-Holland, and U.S. Sen. Carl Levin, D-Michigan, to reform Federal Prison Industries and end mandatory-source status. Hoekstra’s bill passed the House earlier this year, and Levin’s bill, a similar measure that recently cleared committee, has been pending in the full Senate.

The provision Shelby inserted into the budget bill is similar to a measure Levin got attached to a budget bill two years ago that opened up contracts at the Department of Defense — Federal Prison Industries’ largest customer — to private-sector competition. Levin subsequently was able to extend that to cover the Treasury Department and Transportation Department for one year for the federal government’s 2004 fiscal year that ended Sept. 30.

Shelby’s provision would now make it a permanent repeal for all departments.

“The enactment of this provision is the culmination of a 10-year effort to ensure that private sector companies have a fair opportunity to sell their products to their own government,” Levin said. “It may seem incredible that they have been denied this opportunity in the past, but that was the law until now, because if Federal Prison Industries said that it wanted a contract, it got that contract, regardless of whether a company in the private sector may offer to provide the product better, cheaper or faster.”

Created in 1934, Federal Prison Industries is an arm of the U.S. Justice Department’s Federal Bureau of Prisons that employs nearly 21,000 inmates to produce some 300 products, including textiles, electronics, automotive components and office furniture, sold under the Unicor brand name. The corporation has 112 factories operating in 71 federal prisons and pays inmates 23 cents to $1.15 an hour.

Reform efforts, led by the office furniture industry, for years have primarily targeted mandatory-source status that requires federal agencies, when applicable, to buy from Federal Prison Industries unless granted an FPI-approved waiver.

Previous efforts have had some effect on Federal Prison Industries’ business.

The sale of office furniture, at one time the federal corporation’s largest product category, declined 30 percent from $217.8 million to $151.9 million during the federal government’s FY2003, according to Federal Prison Industries’ annual audit report issued last March.

Overall, across all product categories, Federal Prison Industries’ revenue fell 1.7 percent in FY2003, from $678.6 million to $666.7 million, according to the audit, after growing 16.3 percent the previous fiscal year.

FY2003 is the most recent year sales data is available for Federal Prison Industries.

While office furniture makers welcome the provision from Shelby, they are downplaying it until President Bush signs the omnibus budget bill because of concerns that it could get stripped out when Congress reconvenes this week.

The worry is that Federal Prison Industries’ supporters in Congress could still change the language to only a one-year repeal when the House and Senate meet this week to consider removing a widely criticized provision in the budget bill that allows the chairmen of appropriations committees and their staffs to review IRS tax information.

Miller, of the Office Furniture Dealer’s Alliance, believes the Federal Prison Industries provision will stick and that congressional leaders won’t re-open the omnibus budget bill beyond the IRS provision for fear that it could trigger a landslide of other changes proposed by lawmakers unhappy with the overall budget bill.

“It’s going to stay permanent. It doesn’t look like the House or Senate is going to want to open up that can of worms,” Miller said.

That could change, however, if Congress opts to enact a continuing resolution to keep the federal government operating and go back later to address complaints with the budget bill, Miller said.

Even if the Federal Prison Industries provision sticks, some sort of broader reform is still needed, advocates say. Driving that push is the potential for somebody in Congress in the future to undo the provision written in to the FY 2005 budget bill.

“Somebody can come back and change it later,” said David Nelson, the former chairman of the board at Herman Miller Inc. who’s been working with an industry group pushing for Federal Prison Industry reform. “Hopefully we’ll be pleased, but we don’t think the job is done.”    

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