12/07/2004
CONTACT: Michelle Dimarob, (202) 554-9000
Congressional Action Creates a More Level Playing Field for Fair Competition
NFIB praised Congress today for taking action to ban Federal Prison Industries from locking out small businesses from federal government contracts. The provision, which was included in the fiscal 2005 omnibus spending bill, will allow small businesses to compete for some of the contracts that once were automatically awarded to convicts.
“For too long unfair competition by FPI has essentially amounted to a ‘closed’ sign for those small businesses wanting to do work with the federal government,” said Senior Vice President of Public Policy Dan Danner. “But this action means that small business is now ‘open for business’ when it comes to working for and with the federal government.”
Once a small program focused solely on rehabilitation, FPI has become one of the most blatant examples of unfair government competition. A government-owned corporation operated by the Federal Bureau of Prisons, FPI operates a centrally managed chain of over 100 prison factories and ranks 32 among the top 100 contractors with the federal government. Over 300 products and services are produced by federal prisoners, totaling nearly $680 million in sales to the federal government in 2002.
Since FPI enjoys a preferential status in the government procurement process, federal agencies are typically forced to buy only from FPI even if a small-business owner can provide the service or product cheaper, faster and of better quality. Other “FPI-only” practices allow FPI to pay a sub-minimum wage to its workers ($1.23 per hour or less) and exempt FPI from federal mandates. Those types of practices have stifled fair competition and shut small business out of federal contracts.
Eighty-nine percent of NFIB members do not believe that prisons should have preference over small businesses for federal contracts. Since the 1980s, NFIB members have been actively involved in ending unfair government competition with the private sector.
Bobbie Gentile, president and owner of Q-Mark, Inc., a small, woman-owned business in Dayton, Ohio, testified before Congress about the negative impact of FPI on her business. In her testimony she described the bidding process and noted, “In all cases, my price was lower than the price offered by FPI. FPI received the awards. The government had no option but to award to them.”
In closing, Danner added that the FPI victory would have a residual effect for all taxpayers. “Certainly this is a tremendous victory for Main Street small-business owners who have been working for years to end this unfair practice. But it is a victory for the American taxpayer, too. Now the government won’t be forced to waste taxpayer money paying more for products they can acquire cheaper and with better quality.”
The National Federation of Independent Business is the nation’s largest small-business advocacy group. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its 600,000 members in Washington and all 50 state capitals.
