{ "id": "R43633", "type": "CRS Report", "typeId": "REPORTS", "number": "R43633", "active": true, "source": "EveryCRSReport.com", "versions": [ { "source": "EveryCRSReport.com", "id": 432496, "date": "2014-07-09", "retrieved": "2016-04-06T20:17:23.776120", "title": "The Federal Prison Industries: An Analysis of Sales, FY1993-FY2013", "summary": "The Federal Prison Industries (FPI) is a government-owned corporation that employs offenders incarcerated in correctional facilities operated by the Department of Justice\u2019s (DOJ\u2019s) Federal Bureau of Prisons (BOP). The FPI was created to serve as a means for managing, training, and rehabilitating inmates in the federal prison system through employment in one of its industries.\nThe FPI manufactures products and provides services that are primarily sold to executive agencies in the federal government. In the past, federal departments and agencies were required to purchase products from the FPI. This requirement is sometimes referred to as the FPI\u2019s \u201cmandatory source clause.\u201d It is the FPI\u2019s mandatory source clause that has been the focus of congressional scrutiny, in part because some policymakers feel that it has a deleterious effect on private vendors\u2019 ability to secure federal contracts. \nSince 2001, Congress has made a series of changes to the FPI\u2019s mandatory source clause in response to concerns about the FPI\u2019s effect on private businesses. Congress requires all federal agencies to use competitive procedures for the procurement of a product if the agency determines that the FPI\u2019s product is not comparable in price, quality, and time of delivery to products available from the private sector. Congress, through section 827 of the FY2008 National Defense Authorization Act (P.L. 110-181), also requires the Department of Defense (DOD) to use competitive procedures to procure products and services when it determines that the FPI share of DOD\u2019s market for a product is greater than 5%.\nBetween FY1993 and FY2013, the FPI sold products and services to 59 different federal departments, agencies, offices, and boards. During this time period, DOD was the FPI\u2019s biggest customer, accounting for, on average, 61% of the FPI\u2019s sales to government agencies. Also, over the same time period, the FPI sold products and services in 160 different product and service codes (PSCs); yet, a majority of the FPI\u2019s sales were for seven products (hereinafter, the \u201cFPI\u2019s core products\u201d). The core products include cable, cord, and wire assemblies; miscellaneous electrical power/distribution equipment; household furniture; office furniture; cabinets, lockers, bins, and shelving; household furnishings; and clothing, special purpose.\nThis report provides an analysis of the FPI\u2019s sales from FY1993 to FY2013 in order to evaluate whether its sales changed following amendments to the mandatory source clause. Findings from the analysis include the following:\nThere has been a significant decrease in the FPI\u2019s sales since FY2009. The FPI\u2019s nominal sales in FY2013 were $533 million, which is $352 million below the FPI\u2019s peak sales of $885 million in FY2009.\nThe FPI generated a profit most fiscal years between FY1993 and FY2007. The FPI, however, reported losses each fiscal year between FY2008 and FY2013.\nThe FPI\u2019s sales to DOD generally increased between FY1993 and FY2007, but they have declined since then. In addition, the FPI\u2019s sales to civilian agencies generally increased until FY2008, but they have decreased every fiscal year since.\nThe FPI has experienced significant decreases in its sales of non-core products and services to DOD since FY2007 and in its sales of core products to DOD since FY2009. The FPI\u2019s sales of non-core products and services to civilian agencies have decreased since FY2008 and its sales of core products to civilian agencies have decreased since FY2010; these sales have not declined to the same extent as sales of comparable products to DOD.\nThe FPI has experienced a significant decrease in its share of both DOD and civilian agencies\u2019 markets for its core products since Congress made changes to the mandatory source clause, but those decreases might be the continuation of a long-term trend.\nThe FPI\u2019s declining sales might be the result of federal agencies spending less money on products offered by the FPI. Between FY2008 and FY2013, there was a sizable decrease (64%) in DOD\u2019s purchases in the PSCs in which the FPI made a sale in a given fiscal year (this serves a rough estimate of the size of DOD\u2019s market for FPI products). The FPI\u2019s declining sales to DOD roughly coincides with decreasing DOD purchases. The FPI\u2019s sales to civilian agencies decreased 51% between FY2009 and FY2013, which coincides with a 21% decrease in civilian agencies\u2019 purchases in PSCs in which the FPI made a sale. \nCompetition pursuant to section 827 of the FY2008 National Defense Authorization Act did not have a uniform effect on the FPI\u2019s share of DOD\u2019s market for six selected products. For some products, the FPI lost market share when that product was opened to competition and it never recovered. In other instances, the FPI\u2019s share of DOD\u2019s market for some products increased even though DOD has used competitive procedures to procure the product.\nThere is not a single cause that explains why the FPI\u2019s sales decreased after FY2009. One factor that might have contributed to the FPI\u2019s declining sales is that the federal government spent less money on products offered by the FPI. It is harder to determine what effect legislative changes to the FPI\u2019s mandatory source clause had on the FPI\u2019s sales. It might be that the FPI\u2019s sales would have declined even if Congress had not made changes to the mandatory source clause. Even if the FPI\u2019s share of the federal market remained consistent year-to-year, the fact that the federal government was spending less on products and services offered by the FPI would likely have resulted in declining sales for the FPI. However, opening the FPI to more competition has probably not made it easier for the FPI to continue to generate revenue at a time when there are fewer opportunities for the FPI to make sales.\nThe FPI\u2019s declining sales, regardless of the reason, might be of interest to policymakers because the FPI is a self-sustaining government corporation. In order for it to provide work opportunities for inmates, it has to generate sufficient revenue. The FPI has been employing a smaller share of the federal prison population since the late 1980s. At the same time, Congress has placed a greater emphasis on preparing inmates for life after prison, and the BOP asserts that the FPI is one of its most effective tools for rehabilitating inmates and managing its prisons. The tension between providing work opportunities to inmates through the sale of goods to federal agencies and the desire to provide contracting opportunities to private vendors continues to fuel the debate about the future of the FPI.", "type": "CRS Report", "typeId": "REPORTS", "active": true, "formats": [ { "format": "HTML", "encoding": "utf-8", "url": "http://www.crs.gov/Reports/R43633", "sha1": "e604e20a8772ba5e71aa5724c14ce863324e5dd9", "filename": "files/20140709_R43633_e604e20a8772ba5e71aa5724c14ce863324e5dd9.html", "images": null }, { "format": "PDF", "encoding": null, "url": "http://www.crs.gov/Reports/pdf/R43633", "sha1": "c4191475eef23ec1c9d9e054d356fac4ab232118", "filename": "files/20140709_R43633_c4191475eef23ec1c9d9e054d356fac4ab232118.pdf", "images": null } ], "topics": [] } ], "topics": [ "Intelligence and National Security", "National Defense" ] }