FEDERAL PRISON INDUSTRIES

Since enactment of the Competition in Contracting Act in 1984, the fundamental tenet of the federal procurement system has been competition. Competition means fairness to companies that would like to sell products and services to their government. It also means better products, and better prices, for federal agencies and for the taxpayer.

Unfortunately, there has been a glaring exception to the requirement for competition in government contracting. Under a statute passed long before the enactment of the Competition in Contracting Act, Federal Prison Industries (FPI) has enjoyed a complete exemption from the requirement to compete for federal contracts. Federal Prison Industries is a government-run business employing convicts in federal prisons.

Unlike other sellers, FPI could decide what products it would sell, which contracts it would get, and even what the price would be. Companies in the private sector that sell the same products as FPI were simply out of luck. No matter how good their products, or how low their prices, they were not allowed to sell to a federal agency unless FPI granted a “waiver” to the agency. In fact, FPI’s rules went so far as to prohibit federal agencies from conducting market research to determine whether private industry could offer better products at better prices.

The result was that many federal agencies were forced to purchase products that cost more, and perform less well, than products that are available to the rest of us in the commercial marketplace. Moreover, hundreds of small business from Michigan and around the country have seen FPI take jobs away from their companies and give them to inmates at federal prisons with a guaranteed purchase – regardless of price and quality. Furniture manufacturers in western Michigan have paid a particularly heavy price for the law that awards contracts to FPI without any competition.

Senator Levin took on this problem in 2001 and 2002. Working with representatives of the Michigan furniture companies and others, Senator Levin was able to enact two key amendments permitting private companies to compete against FPI for Department of Defense contracts. Now, for the first time, Michigan furniture manufacturers and other private sector companies will be given a fair chance to compete for contracts that are paid for out of their tax dollars.

In 2004, Senator Levin's legislation was expanded to other federal agencies, requiring for the first time, that private sector companies have a fair opportunity to compete against FPI for the right to sell products and services to their own government.

Unfortunately, despite the enactment of this legislation, FPI continues to claim that it retains the �mandatory source� status that protected it from competition for so long.  Senator Levin has introduced legislation to put this issue to rest and ensure that Michigan furniture manufacturers and other small businesses will continue to have the right to compete for federal government contracts.