NFIB

Fair Competition Victory for Small Business
12/28/2001

On Dec. 28, 2001, President Bush signed legislation that would prevent Federal Prison Industries (FPI) from locking out small business owners from Department of Defense (DOD) contracts. Under the new law, small businesses - those selling linens, office furniture, and many other items - will finally be able to compete for some of the contracts that once were automatically awarded to convicts. A short, routine delay between the actual bill signing and full implementation will occur, but soon small businesses will be on a new and level playing field with Federal Prison Industries. To see if your lawmakers supported small business, check the roll call votes for the National Defense Reauthorization Act for 2002. The small business-friendly government contract provisions were attached to that bill. See how your senators and your representative voted on this bill (which included a number of different provisions dealing with the Department of Defense).

Even as NFIB celebrates its FPI Reform victory, we're still working hard to enact legislation that will allow small businesses the freedom to compete for contracts with every government agency, not just the Department of Defense. Other FPI Reform legislation includes H.R. 1577 and S. 1295, the "Federal Prison Industries Competition in Contracting Act of 2001." On April 24, 2001, Rep. Pete Hoekstra (R-MI) introduced H.R. 1577. The bill was referred to the House Committee on Judiciary on that day and to the House Subcommittee on Crime on April 24, 2001. (See the bill's cosponsors.) The most recent hearing on this bill was held on April 26, 2001. H.R. 1577 would make FPI less predatory to small business government contractors and a more responsible supplier to federal agencies and taxpayers. NFIB fully supports this legislation. In the Senate, similar legislation was introduced by Sen. Carl Levin (D-MI) Aug. 8, 2001. The bill, S. 1295, was referred to the Senate Judiciary Committee on that day, and currently has three cosponsors as of 12.14.2001. No hearings have been held on this bill. Like the House bill, S. 1295 would reform FPI so that small businesses are not competitively disadvantaged. NFIB fully supports this legislation.

On April 4, 2001, Rep. Frank Wolf (D-VA) introduced H.R. 1535, the "Federal Inmate Work Act of 2001." This bill was referred to the House Committee on Judiciary that day, and referred to the House Subcommittee on Crime on May 9, 2001. Although this bill purports to reform FPI, the bill actually grants new exemptions and broader authority to FPI, and allows the entity to self-police its competition practices against private businesses. NFIB strongly opposes this legislation. In the Senate, a companion bill was introduced by Sen. Strom Thurmond (R-SC) on July 24, 2001. The bill, S. 1228, was referred to the Senate Judiciary Committee that day. No hearings have been held on this bill. NFIB strongly opposes this legislation.

NFIB's efforts to seek legislative reform of FPI stem from the fact that FPI (or UNICOR, as it's also known) is not required to compete for placement in the federal agencies market. FPI simply takes its contracts from its captive federal agency "customers." Under FPI's Depression-era statute, FPI is a mandatory source for all federal agencies, meaning that they are not required to compete with private businesses for federal contracts. A federal agency must actually obtain FPI's authorization, a so-called "waiver," before it can even solicit competitive offers from the private sector. FPI, rather than the federal agency, determines whether FPI's product, delivery schedule and non-competitive price meet the agency's need. FPI's advantages don't stop there. FPI pays its workers at hourly rates of $1.25 per hour or less, rather than market-driven wages. FPI's facilities are built as part of a prison. FPI has access to production equipment excess to other government agencies at no cost. Congress even gave FPI direct access to the Treasury with authority to borrow up to $20 million, at rates far below what would be available to even the largest commercial enterprise. Even though FPI products are produced at government subsidized facilities using prison labor that is paid a fraction of the minimum wage and exempt from the array of requirements that are applicable to all other suppliers to the government, FPI's products are frequently overpriced, inferior in quality and delivered later than those produced in the private sector. This leaves taxpayers to foot the bill when government purchasing officers are forced to buy FPI products that do not represent the "best value" for the buying agency. In addition to direct lobbying of lawmakers and grassroots mobilization, NFIB is advocating balanced FPI reform as a member of the Federal Prison Industries Competition in Contracting Act Coalition, a group that includes other like-minded organizations.

To read a real-life example of how FPI's unfair competition negatively affects NFIB members, see the "NFIB Members Speak Out" section at the right hand column of this page. If you have personally experienced unfair competition with FPI or any other government entity, please see the "How Can I Help?" section at the bottom of this page.