Levin Submits FPI Reform

February 25, 2003
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Re-opening a political battle that has met with partial success in the past, U.S. Sen. Carl Levin has reintroduced legislation in Congress to open up more federal contracts to the private sector.

The goal, as it has been for years, is to erode Federal Prison Industries' mandatory-source status that requires federal agencies to buy products from FPI, an arm of the Federal Bureau of Prisons that uses inmate labor to produce a variety of products.

The effort has taken on heightened importance with the unprecedented downturn the past two years in the office furniture industry that has led to the loss of thousands of jobs, most recently including 255 production positions at Haworth Inc's. plants in Holland, Douglas and Allegan.

"Avoiding competition is the easy way out. But it isn't the right way for FPI, it isn't the right way for the private sector workers whose jobs FPI is taking, and it isn't the right way for federal agencies, which too often get stuck with the bill for inferior products that can't compete with private sector goods," Levin said in reintroducing a bill this month that would allow federal agencies to buy from the private sector if they can secure a better or comparable value.

"Competition will be better for federal agencies, better for the taxpayer, and better for working men and women around the country," said Levin, D-Michigan.

Levin and U.S. Rep. Peter Hoekstra, R-Holland, have fought for years to break FPI's monopoly that they say unfairly blocks the private sector from bidding for government contracts.

An arm of the U.S. Justice Department's Federal Bureau of Prisons that was created in 1934 under an executive order issued by President Franklin Roosevelt, FPI employs more than 22,500 inmates to produce some 80 products, including textiles, electronic components and office furniture sold under the "Unicor" brand name. The agency's 2001 sales, the most recent year for which data is available, totaled $583.5 million, about $174.9 million of which was office furnishings.

Levin and Hoekstra, working with a unique coalition of business and labor interests, have pushed unsuccessfully for years to end FPI's mandatory-source status. Their efforts ended each time with a lack of political support needed to earn final passage, even though reform efforts have the backing of President George W. Bush.

"Each time we come a little bit closer and win a few more hearts and minds. Hopefully it's a go this time," said Brad Miller, manager of government affairs for the trade group Business and Institutional Furniture Manufacturer's Association.

Levin in late 2001 was able to usher through an amendment in an authorization bill for the U.S. Department of Defense that requires the Pentagon to buy products from the seller that provides the best value, whether it's the private sector or FPI.

The bill's passage was seen as a major victory for efforts to change FPI's business practices, since the Department of Defense is the single largest buyer of inmate-produced products. In 2001, Pentagon purchases accounted for 66.4 percent of FPI's sales, or $387.5 million.

But any private-sector benefits of that legislation have yet to materialize. Office furniture industry representatives say the Justice Department and FPI's interpretation of the provision initially caused confusion among Department of Defense procurement officers, essentially preventing any new Pentagon business from going the private sector's way.

Language within the bill has since been clarified and Thomas Walker, manager of government programs at Haworth Inc., expects the Department of Defense to begin steering more business toward the private sector during 2003. Pentagon inquiries have begun to pick up in recent months, Walker said.

He likens the acceptance of the new rules among Pentagon procurers to slowly "turning the Titanic."

"We really haven't seen what we hoped and anticipated we would see, but we're seeing it steadily increase and progress and it should from this point on," Walker said. "We're starting to see the rule applied more and more and accepted more and more."

While breaking mandatory-source status is the primary aim of FPI reformers, there's also deep concern about how the agency has expanded its business for several years, venturing into new industries and competing with the private sector in order to increase work for a burgeoning inmate population.

"That is huge if they keep going in there," said Hoekstra, who also plans to present more legislation.

Hoekstra wants to prevent FPI from expanding into new industries and competing with the private sector.

"We will not let them go into the commercial market," he said.

Beyond the bills he and Levin will push this year, Hoekstra hopes to secure some changes in FPI on the administrative front.

After pushing the FPI board of directors to open its meetings and become more receptive to public comment, Hoekstra and others are offering "three or four good steps" that he says will curtail FPI. Among them is a proposed rule that would lift mandatory-source status for FPI when its share of a market segment goes beyond a set level.      

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