One on One: Leveling the Playing Field

Newly adopted and proposed legislation is designed to allow office furniture companies to compete with prisoner-made products for government contracts.

By Karen Koenig

Editor’s note: One on One is a new monthly feature highlighting woodworking issues and trends via question-and-answer format interviews with industry experts. In our second column, Sen. Carl Levin (D-MI), discusses legislation to remove the preferential treatment given to prison industries in relation to government contracts.

U.S. office furniture manufacturers are fighting for sales against a corporation that pays its estimated 6,000 workers less than $2 an hour. Their competition? Not foreign manufacturers from countries such as China — but U.S. penitentiaries.

  "The legislation that we have enacted will not put FPI out of business or eliminate employment opportunities for federal prisoners.... It would simply say that these sales should be made on a competitive, rather than a sole-source, basis."

— Sen. Carl Levin (D-MI)

UNICOR, the trade name of the Federal Prison Industries, posted net sales of $174.9 million for office furniture in 2001. Although this figure represents only 2 percent of the total office furniture sales for that year — $10.975 billion — companies in the private sector, both individually and under the umbrella of the Business and Institutional Manufacturers Assn., have long protested the preferential treatment given to FPI with regards to government contracts. Furthermore, while these U.S. manufacturers have been unable to compete for jobs against the FPI, they have seen foreign companies get U.S. government contracts through a “pass-through” policy, whereby FPI contracts out the manufacture of products.

In a case cited by Rep. Peter Hoekstra (R-MI), a former Herman Miller executive, the FPI entered into a manufacturing partnership with Ontario-based Nightingale Corp. to produce a chair similar to Herman Miller’s Aeron Chair. That chair was then sold to the U.S. government.

Although the FPI board has since agreed to terminate some of FPI’s “pass-through” manufacturing activities, it has said it will not eliminate the one that led to the creation of FPI products such as the abovementioned chair.

That may soon change. Former chairman of the Senate Arms Services Committee and now its ranking member, Sen. Carl Levin (D-MI) has already had legislation passed (S. 1295) which successfully removed FPI’s monopoly on defense contracts. In 2001, the Department of Defense spent $99.6 million on FPI office furniture, making it the top buyer out of 34 government agencies, which also included agencies ranging from the Peace Corps, Environmental Protection Agency and Nuclear Regulatory Commission.

Sen. Levin, a long-time proponent for equal competition in contracting, says he will continue to work with Congress to level the playing field. Responding to questions posed by Wood & Wood Products, Levin gives his thoughts on prison industry and the legislation he supports to remove the barriers that prevent private firms from selling products to government agencies.

What are your thoughts regarding the positive and negative aspects of prison industry as it relates to competition with the private sector? 

I believe that Federal Prison Industries has substantial advantages in competing with the private sector for federal contracts. FPI pays inmates less than $2 an hour, far below the minimum wage and a small fraction of the wage paid to most private sector workers in competing industries. Also, the taxpayers provide a direct subsidy to Federal Prison Industries products by picking up the cost of feeding, clothing, and housing the inmates who provide the labor.

Given those advantages, there is no reason why we should still require federal agencies to purchase products from FPI even when they are more expensive and of a lower quality than competing commercial items. I can think of no reason why private industry should be prohibited from competing for federal agency contracts.

It has been approximately one year since Congress approved your provision to abolish prison industries' monopoly on federal contracts, enabling commercial firms to better compete with products made by prison labor (S. 1295 to amend Title 18, U.S. Code). What, if any, impact have you seen as a result of this?

The Department of Defense is starting to permit private industry competition for its contracts. However, Federal Prison Industries has been resisting every step of the way, so progress has been slow. Late last year, we amended the law a second time, to plug some of the loopholes that FPI had been using in an effort to avoid competition. We should start to see positive results from this new amendment over the next few months. The next step will be to address FPI's monopoly on the contracts of federal agencies other than the Department of Defense.

I am working with (S. 1295 co-sponsor) Sen. Craig Thomas (R-WY) to prepare a similar bill for introduction in the 108th Congress.

Recently, the American Civil Liberties Union and other civil rights organizations urged you, as well as members of the Defense Authorization Conference Committee, to oppose the addition of H.R. 1577 to the Department of Defense Authorization Bills). They claimed it "would cripple the Federal Prison Industries Program and eliminate thousands of employment opportunities for prisoners." How do you respond to their arguments?

The legislation that we have enacted will not put FPI out of business or eliminate employment opportunities for federal prisoners because it does not limit the ability of Federal Prison Industries to sell its products to federal agencies. It would simply say that these sales should be made on a competitive, rather than a sole-source, basis.

FPI has substantial competitive advantages in the wages that it pays and the subsidies that it receives for its activities, so it should be in a position to compete for federal contracts. The difference is that private sector companies will also have an opportunity to compete for these contracts. I believe that competition will be better for federal agencies, better for the taxpayer and, ultimately, more healthy for FPI itself.

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