Federal Prison Industries
Prepared for Members and Committees of Congress
UNICOR, the trade name for Federal Prison Industries, Inc. (FPI), is a government-owned
corporation that employs offenders incarcerated in correctional facilities under the Federal Bureau
of Prisons (BOP). UNICOR manufactures products and provides services that are sold to
executive agencies in the federal government. 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. The question of whether UNICOR is unfairly competing with private businesses,
particularly small businesses, in the federal market has been and continues to be an issue of
debate. The debate has been affected by tensions between competing interests that represent two
social goods—the employment and rehabilitation of offenders and the need to protect jobs of law
abiding citizens. At the core of the debate is UNICOR’s preferential treatment over the private
sector. UNICOR’s enabling legislation and the Federal Acquisition Regulation require federal
agencies, with the exception of the Department of Defense (DOD), to procure products offered by
UNICOR, unless authorized by UNICOR to solicit bids from the private sector. While federal
agencies are not required to procure services provided by UNICOR they are encouraged to do so.
It is this “mandatory source clause” that has drawn controversy over the years and is the subject
of current legislation.
Of the eligible inmates held in federal prisons, 21,836 or 17% are employed by UNICOR. By
statute, UNICOR must be economically self-sustaining, thus it does not receive funding through
congressional appropriations. In FY2008, FPI generated $854.3 million in sales. UNICOR uses
the revenue it generates to purchase raw material and equipment; pay wages to inmates and staff;
and invest in expansion of its facilities. Of the revenues generated by FPI’s products and services,
approximately 80% go toward the purchase of raw material and equipment; 16% go toward staff
salaries; and 4% go toward inmate salaries.
The Bush Administration has made several efforts to mitigate the competitive advantage
UNICOR has over the private sector. Going beyond the Bush Administration’s efforts, Congress
has taken legislative action to lessen the adverse impact FPI has caused on small businesses. For
example, in 2002, 2003, and 2004, Congress passed legislation that modified FPI’s mandatory
source clause with respect to procurements made by the Department of Defense and the Central
Intelligence Agency (CIA); in 2004, Congress passed legislation limiting funds appropriated for
FY2004 to be used by federal agencies for the purchase of products or services manufactured by th
FPI under certain circumstances. In the 110 Congress, the National Defense Authorization Act
for Fiscal Year 2008 (P.L. 110-181) modified the way in which DOD procures products from FPI. th
Legislation in the 111 Congress (S. 41) would, among other things, require FPI to employ
inmates in manufacturing positions by subcontracting with private sector employers; would
require the Attorney General to establish the Foreign Labor Substitute Panel that would have
review pilot projects by United States companies for using federal inmate labor to produce goods
that would otherwise be produced by foreign labor; and would amended current law to restate the
mission, operating objectives, performance standards, and contracting requirements for FPI. This
report will be updated as warranted.
Introduc tion ..................................................................................................................................... 1
Backgr ound ..................................................................................................................................... 1
Authority ............................................................................................................................. 2
Activities ............................................................................................................................. 2
Impact of UNICOR on the Federal Prison System and Society......................................................3
Characteristics of Federal Inmates............................................................................................5
Effects of FPI on Recidivism Rates..........................................................................................6
Costs and Benefits of FPI..........................................................................................................8
Recent Administration Efforts to Reform FPI.................................................................................8
The Anti-Drug Abuse Act of 1988....................................................................................10
The National Defense Authorization Act for FY2002......................................................10
The Bob Stump National Defense Authorization Act for FY2003...................................10
The Consolidated Appropriations Act of 2004.................................................................10
Intelligence Authorization Act for FY2004.......................................................................11
The National Defense Authorization Act for FY2008.......................................................11
Legislation in the 111th Congress....................................................................................................11
Issues for Congress........................................................................................................................12
FPI’s Mandatory Source Clause..............................................................................................13
Questions Facing Congress.....................................................................................................15
Conclusion ..................................................................................................................................... 15
Figure 1. Federal Inmates Employed in FPI for Selected Years......................................................4
Figure 2. Federal Prison Population in Selected Years....................................................................5
Figure 3. Percentage of Federal Inmates By Drug-Related and Violent Offenses..........................6
Appendix. Legislation in the 110th Congress.................................................................................16
Author Contact Information..........................................................................................................18
UNICOR,1 the trade name for Federal Prison Industries, Inc. (FPI), is a government-owned
corporation that employs offenders incarcerated in correctional facilities under the Department of 2
Justice’s (DOJ’s) Federal Bureau of Prisons (BOP). UNICOR manufactures products and
provides services that are sold to executive agencies in the federal government. Although
UNICOR industries are located within various federal prisons, they operate independently from
the prison. 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 eight industries.
UNICOR’s enabling legislation3 and the Federal Acquisition Regulation (FAR)4 require federal
agencies, with the exception of the Department of Defense (DOD) and the Central Intelligence
Agency (CIA), to procure products offered by UNICOR, unless authorized by UNICOR to solicit 5
bids from the private sector. (See discussion below, under the “Legislative History” section.)
Such waivers can be granted by UNICOR to executive agencies if its price exceeds the current 6
market price for comparable products. Federal agencies, however, are not required to procure 7
services provided by UNICOR but are encouraged to do so pursuant to FAR. It is this 8
“mandatory source clause” that has drawn controversy over the years and is the subject of
This report opens with a discussion of FPI’s background and its impact on the federal prison
system as well as society. It then summarizes the statutory history of FPI and other laws affecting th
the industry. It also discusses legislative activity in the 111 Congress. The report concludes with
an examination of some of the policy issues surrounding the debate with respect to the
elimination of FPI’s mandatory source clause. This report does not address the related debates on
inmate labor, criminal rehabilitation, or competitive versus noncompetitive federal government
As the federal prison system was established in the first decade of the 20th century, factories were
constructed within the prisons to manufacture products needed by the federal government. Labor
1 UNICOR and the FPI are used interchangeably throughout this report.
2 This report does not cover industries in state prison, often referred to as the Private Sector/ Prison Industry
Enhancement Certification (PIE) program. The PIE program was authorized by Congress in 1979 in the Justice System
Improvement Act (P.L. 96-157).
3 See 18 USC §4121 et seq.
4 FAR was developed in accordance with the requirements of the Office of Federal Procurement Policy Act of 1974
5 Under current law (18 USC §4124(a)) and regulations (48 C.F.R.), federal agencies, with the exception of the DOD
and the CIA, must procure products from FPI, unless granted a waiver by FPI (48 CFR 8.604), that are listed as being
manufactured by UNICOR in the corporation’s catalog or schedule of products.
6 See Bureau of Prisons Program Statement 8224.02, FPI Pricing Procedures.
7 FAR encourages federal agencies to treat UNICOR as a “preferential source” in the procurement of services. See 41
CFR §101-26, 107; 48 CFR §302-5, 8.002, 8.602, 8.603, 8.605(f), and 8.704.
8 Also referred to as “superpreference,” “sole source,” or “preferential status.”
organizations had been making arguments against prison industries since the late 1800s due to the
poor conditions in which inmates were working and their perception that the industries were
taking jobs away from law abiding citizens. The Depression of the 1930s and the resulting high
levels of unemployment crystalized the debate. UNICOR was established in 1934 under an 9
executive order issued by President Franklin Delano Roosevelt. The purpose of UNICOR was to
consolidate the operations of all federal prison industries in order to provide training
opportunities for inmates and “diversify the production of prison shops so that no individual 10
industry would be substantially affected.”
FPI is administered by a six-person Board of Directors that is appointed by the President. Its 11
enabling act requires that representatives of industries, agriculture, labor, and retailers and 12
consumers serve as board members. The board’s decision-making regarding products to be
manufactured and areas of expansion are driven by a goal of employing the greatest possible 13
number of inmates.
Of the eligible inmates held in federal prisons, 21,836 or 17% are employed by UNICOR.14 15
UNICOR has 109 factories in federal prisons representing seven different industrial operations.
UNICOR’s seven industrial operations are comprised of roughly 175 different types of products 16
and services. UNICOR’s industrial operations include the following:
• clothing and textiles;
• fleet management and vehicular components;
• industrial products;
• office furniture;
9 See Executive Order 6917.
10 Franklin Delano Roosevelt, The Public Papers and Addresses of Franklin D. Roosevelt, vol. 3 (New York: Random
House, 1938), p. 497. These principles are reflected in the current statutory authority for FPI, see 18 USC §4122(b).
11 See 18 USC §4121.
12 In addition to the five board members who must be from the aforementioned groups, the Attorney General and the
Secretary of Defense (or their designee) also serve as board members.
13 Under 18 USC §4122(b)(1), this goal is explicit, along with other goals to “diversify, so far as practicable, prison
industrial operations,” and to “so operate the prison shops that no single private industry shall be forced to bear an
undue burden of competition from the products of the prison workshops, and to reduce to a minimum competition with
private industry or free labor.”
14 UNICOR’s 2008 Annual Report athttp://www.unicor.gov/information/publications/pdfs/corporate/catar2008.pdf,
hereafter, “UNICOR 2008 Annual Report.”
15 There are currently 114 federal institutions in the United States. U.S Department of Justice, Bureau of Prisons,
FY2009 Performance Budget, Congressional Submission, Federal Prison System, Buildings and Facilities.
16 UNICOR 2008 Annual Report.
• recycling activities; and
• services (which includes data entry and encoding).17
UNICOR is economically self-sustaining and does not receive funding through congressional 18
appropriations. In FY2008, FPI generated $854.3 million in sales. UNICOR uses the revenue it
generates to purchase raw material and equipment; pay wages to inmates and staff; and invest in
expansion of its facilities. Of the revenues generated by FPI’s products and services,
approximately 80% go toward the purchase of raw material and equipment; 16% go toward staff 19
salaries; and 4% go toward inmate salaries. Inmates earn from $0.23 per hour up to a maximum
of $1.15 per hour, depending on their proficiency and educational level, among other things.
Under BOP’s Inmate Financial Responsibility Program, all inmates who have court ordered
financial obligations must use at least 50% of their FPI income to satisfy those debts, which 20
accounted for $2.7 million in FY2005; the rest may be retained by the inmate.
Under current law, all physically able inmates who are not a security risk are required to work.21
Those inmates who are not employed by UNICOR have other labor assignments in the prison.
Until FY2003, UNICOR had seen an increase in the number of inmates working in its industries,
primarily due to the increase in the federal prison population, as discussed below. For example, in
FY1951, UNICOR employed 3,803 federal inmates, which represented 22% of the total inmate
population. In FY2002, however, the percentage of all inmates employed by UNICOR dropped to 22
17 UNICOR 2008 Annual Report.
20 Ibid; John W. Roberts, Work, Education, and Public Safety: A Brief History of Federal Prison Industries, at
21 Title XXIX, §2905 of the Crime Control Act of 1990 (P.L. 101-647) required that all offenders in federal prisons
must work (the act permitted limitations to this rule on security and health-related grounds).
22 According to BOP Congressional Affairs office, the number of eligible inmates (as opposed to total inmate
population as discussed above) employed in FPI has decreased in recent years (FY2001-22,650 [25%]; FY2002-21,778
[22%]; FY2003-20,274 [19%]; FY2004-19,337 [18%]; FY2005-19,720 [18%], FY2006-21,205 [18%]; FY2007-23,152
[18%]; and FY2008-21,836 [17%]).
Figure 1. Federal Inmates Employed in FPI for Selected Years
ber of I
1951 1988 1998 2000 2002 2005 2008
Source: CRS presentation of UNICOR’s Annual Reports (FY1951, FY1988, FY1988, FY2000, FY2002, FY2005,
The increase in federal inmates working at a UNICOR industry can be attributed in part to the
increase in the federal inmate population, which has led to FPI expanding its industries. As
Figure 2 depicts, the federal inmate population has increased nearly 700% since 1980, ranging 23
from about 24,000 in 1980 to approximately 189,000 in 2007.
23 Ann L. Pastore and Kathleen Maguire, eds. Sourcebook of Criminal Justice Statistics (Online), Table 6.13.2007, at
http://www.albany.edu/sourcebook/; Bureau of Justice Statistics, Prisoners in 1994, NCJ 151654, August 1995, at
Figure 2. Federal Prison Population in Selected Years
1980 1985 1990 1995 2000 2002 2004 2005 2007
Source: CRS presentation of Table 6.13.2007 from The Sourcebook of Criminal Justice Statistics and DOJ’s Bureau
of Justice Statistics Bulletin, Prisoners in 1994.
As Congress began to define and expand crimes eligible for federal penalties in the late 19th
century, such perpetrators were being prosecuted at an increasing rate, which contributed to the
overcrowding in state and local correctional facilities. As a result, Congress authorized the
establishment of the first federal prisons in 1891.
Federal inmates in the 19th and the first part of the 20th centuries tended to be nonviolent offenders
who committed property or public order-related offenses. Such offenders stand in contrast to th
federal offenders in the latter part of the 20 century and currently whose crimes are increasingly
more violent and/or are often incarcerated for drug-related offenses. For example, in 1980, 34%
of the federal prison population consisted of violent offenders and 25% consisted of offenders 24
who committed drug-related crimes. While the number of federal inmates incarcerated for
violent offenses has consistently declined since 1980, the number of federal inmates incarcerated
for a drug-related offense has consistently risen since 1980 (see Figure 3). Correctional
authorities had to accommodate to a more frequent history of violence in the inmate population
under their jurisdiction.
24 See Bureau of Justice Statistics, Bulletin, Prisoners in 1994, and U.S. Department of Justice, Federal Bureau of
Prisons, Sourcebook of Criminal Justice Statistics 2002, p. 516.
Figure 3. Percentage of Federal Inmates By Drug-Related and Violent Offenses
34%53%56%55%53% of In
1980 1985 1990 1995 2000 2003 2006
Percentage of inmates incarcerated for violent offenses in federal prisons during 1980, 1985, 1990,
1995, 2000, 2003, and 2006
Percentage of inmates incarcerated for drug-related offenses in federal prisons during 1980, 1985,
1990, 1995, 2000, 2003, and 2006
Source: CRS presentation of DOJ’s Bureau of Justice Statistics Bulletins, Prisoners in 1994, Prisoners in 2005,
and Prisoners in 2006.
The majority of incarcerated individuals will be released back into society. According to
testimony at a Senate hearing, “during the three-year period from 2000 to 2002, the Bureau
[Federal Bureau of Prisons] released back to local communities an average of approximately 25
successfully reintegrate into society and the recidivism rate is widely used to measure such
Although there have been many studies on the recidivism rate27 and societal factors that may
contribute to it, there have not been many studies on the impact of inmates who participate in
prison industries work on recidivism. Several studies conducted at the state level found that, on 28
average, 47% of inmates recidivate within one year of being released from prison. Some of the
25 Testimony of Harley G. Lappin, in U.S. Congress, Senate Committee on Governmental Affairs, Subcommittee on
Financial Management, the Budget, and International Security, Making Federal Prison Industries Subject to thnd
Competitive Bidding, hearing on S. 346, 108 Cong., 2 sess., April 7, 2004 (Washington: GPO, 2004).
26 Recidivism used in this section is defined as a new conviction (due to a new crime being committed) for a person
who had been previously convicted and released.
27 Recidivism used in the section refers to an individual returning to prison after either a violation of the terms of his
conditional release (parole) or being convicted for a new offense.
28 Arizona Department of Corrections, ACI’s Impact on Recidivism, see http://www.adc.state.az.us/FACTSHEETS/
Fact%20Sheet%2003-01.htm; Criminal Justice Policy Council Report to Senate Criminal Justice Interim Committee,
Recidivism Rates and Issues Related to TDCJ Substance Abuse Treatment Programs, March 13, 2003; the Metropolitan
Crime Commission, The Project Return Program, Measuring Recidivism in the Reintegration Program for Ex-
Offenders, May 2000; and the Massachusetts Sentencing Commission, Comprehensive Recidivism Study, June 1, 2002.
studies also found that the rate of inmates who recidivate goes up each subsequent year.29 While
these studies did not control for inmates who held a prison industry job, other studies did control
for such a variable and found that inmates who did participate in a prison industry job were less
likely to recidivate than non-participating counterparts, as discussed below.
A recent study compared the post-release employment and recidivism rates of inmates that were 30
employed in state prison industries, those employed in traditional prison industries, and those 31
who were not employed at all while they were incarcerated. The study found that inmates that
participated in state prison industries were able to find post-release employment quicker than
inmates that were employed in traditional prison industries or those that were not employed at all.
In addition, inmates that were employed in state prison industries retained their first job longer
than inmates that were not employed in state prison industries. State prison industries participants
also earned higher wages than those inmates that did not participate. Inmates that were employed
in state prison industries were also arrested, convicted and incarcerated at slower rates than
inmates who were employed in traditional prison industries, or inmates who were not employed
while they were incarcerated.
Those proponents of FPI who contend that prison industries improve public safety by reducing
crime cite studies that have examined the recidivism rate for inmates who worked in prison
industry jobs prior to their release. According to some scholars, on average, inmates who
participate in FPI are 24% less likely to return to criminal behavior than those who do not, and
Opponents contend, however, that prison industries do not have an effect on whether inmates
recidivate. According to some critics, other factors such as the inmate’s readiness to return to
society; the community’s acceptance of the inmate; the inmate’s participation in rehabilitation
programs; the inmate’s educational level; the inmate’s work experience; and job availability are 33
all critical in determining if an inmate will successfully reintegrate into society.
30 Under current federal law, most prisoners are not allowed to work in jobs that produce goods that are sold in open
markets. However, the Prison Industries Enhancement Certification Program (PIECP) (P.L. 96-157), makes limited
exceptions to the law. Under PIECP, the Bureau of Justice Assistance (BJA) certifies that state and local prison
industries meet all of the necessary requirements to be exempt from restrictions place on prison-made goods under
federal law. For more information on PIECP, see Bureau of Justice Assistance, Program Brief: Prison Industries
Enhancement Certification Program, March 2004, at http://www.ncjrs.gov/pdffiles1/bja/203483.pdf.
31 Cindy J. Smith, Jennifer Bechtel, Angie Patrick, Richard R. Smith and LauraWilson-Gentry, Correctional Industries
Preparing Inmates for Re-entry: Recidivism and Post-release Employment, June 2006, at http://www.ncjrs.gov/
32 William G. Saylor and Gerald G. Gaes, PREP: Training Inmates Through Industrial Work Participation, and
Vocational and Apprenticeship Instruction, U.S. Federal Bureau of Prisons, September 24, 1996; Maguire, Kathleen E.,
Flanagan, Timothy J. and Terrence P. Thornberry, “Prison Labor and Recidivism,” Journal of Quantitative
Criminology, vol. 4, no. 1 (1998), p. 3; Ohio Department of Rehabilitation and Correction, Office of Management
Information Systems Bureau of Planning and Evaluation, Evaluation of the Impact of Participation in Ohio Penal
Industries on Recidivism, November 1995; and the State of New York, Department of Correctional Services, Follow-up
Study of Industry Training Program Participants 1993.
33 Kathleen E. Maguire, Timothy J. Flanagan, and Terrence P. Thornberry, “Prison Labor and Recidivism,” Journal of
Quantitative Criminology, vol. 4, no. 1 (1998), p. 3; the Metropolitan Crime Commission, The Project Return
Program: Measuring Recidivism in the Reintegration Program for Ex-Offenders, May 2000.
It is heavily debated whether correctional industries programs (both FPI and state and local
correctional industries programs) are beneficial or costly to society. For example, proponents
contend that it is more costly to run a prison where the inmates are idle, which could lead to
disruptive behavior. They assert that prison industries can lower expenditures on day-to-day
prison operations and decrease the likelihood of having to expend resources to thwart
With respect to societal benefits, proponents argue that prison labor leads to increased production
of goods and services, which provides an increase in the overall national economic output.
Additionally, some assert that prison industries must purchase raw materials and equipment from
businesses, thus creating and maintaining jobs in communities (see discussion below).
Opponents, on the other hand, contend that FPI levies extensive costs on society by taking jobs
away from law abiding citizens. They argue that industries such as furniture and textile continue
to lose jobs, which could be attributed, in part, to lost contracts to FPI.
Opponents also assert that FPI does not reduce the cost to taxpayers of housing prisoners. It costs,
on average, $40 billion annually, to incarcerate prisoners at the local, state and federal levels; and,
at least at the federal level, none of the wages earned by inmates or FPI’s profits goes towards the 34
actual cost of incarcerating inmates.
In recent years, UNICOR has made several efforts to lessen the impact of its industries on small
businesses by leveling the playing field with respect to its mandatory preference over the private 35
sector. Efforts have also been taken to reduce FPI’s reliance on its mandatory source preference.
For example, in May 2003 UNICOR’s Board of Directors adopted a resolution that raises the
threshold for mandatory use of FPI from $25 to $2,500. By raising the threshold, FPI’s Board of
Directors in essence eliminated FPI’s mandatory source clause for purchases up to $2,500 and is
now allowing federal agencies to go directly to the private sector for any purchase under $2,500.
On a related matter, FPI’s Board of Directors adopted a resolution that now requires that FPI
approve requests for waivers in all cases where the private sector provides a lower cost. Prior to
the board’s decision regarding waivers, FPI, on average, granted 87% of waivers that were 36
requested. Its Board of Directors also directed FPI to waive its mandatory source status for
products where the FPI’s share of the federal market is in excess of 20%. Finally, the Board of
34 With respect to earnings made by federal inmates who work in FPI, opponents contend that the amount of money
they earn is low (anywhere between $0.23 and $1.15 per hour) and that under current UNICOR policy 50% of inmates’
wages must go towards court ordered obligations.
35 A previous effort to eliminate FPI’s mandatory source clause came during the Clinton Administration in 1993 when
Vice President Al Gore recommended that the mandatory source provision be eliminated and that UNICOR be exempt
from the FAR in order to better compete with the private sector in terms of delivery schedules and costs.
36 CRS analysis of FPI waiver data from FY1994 to the first six months in FY2004.
Directors requires prison-made products sold by FPI to have at least 20% of its value contributed 37
by inmate labor.
In addition to FPI’s Board of Director’s decisions, federal agencies began to evaluate FPI’s
contract performance. According to testimony at a Senate hearing on FPI, “while this [the
evaluation of FPI’s contract performance] did not change FPI’s mandatory preference status, it
was an important first step in helping FPI better monitor and improve its own performance ...
[which would assist] FPI as they move toward being more competitive in the federal 38
While UNICOR was originally authorized in 1934 through P.L. 73-461 and Executive Order
“Crimes and Criminal procedure” statutes. The only amendments to the statute were relatively 40
recent provisions added in 1988, 1990, 1992, and 2002.
The question of whether UNICOR is unfairly competing with private businesses, particularly
small businesses, in the federal market has been and continues to be an issue of debate. In 1989,
Congress considered a proposal that would have provided the private sector with greater
opportunity to compete for DOD contracts. In 2002, Congress passed legislation that modified 41
FPI’s mandatory source clause with respect to the DOD, see discussion below.
The absence of legislative activity on this issue for over a half century (from 1934 to 1988) is
notable. The following developments in recent decades, however, have increased congressional
interest in FPI:
• the erosion of the nation’s manufacturing sector, which has resulted in lower
levels of employment in that sector;
• the increase in the federal inmate population at the same time the federal
government was downsizing, resulting in a reduction of UNICOR’s federal
• the need to develop more aggressive inmate management techniques in federal
prisons as the profile of the federal offender population changed from non-violent
offenders to those convicted of violent crimes.
37 Some critics contend that FPI is purchasing products that have already been assembled, which requires very little
labor on the part of inmates.
38 Testimony of Jack R. Williams, Jr., in U.S. Congress, Senate Committee on Governmental Affairs, Subcommittee on
Financial Management, the Budget, and International Security, Making Federal Prison Industries Subject to thnd
Competitive Bidding, hearing on S. 346, 108 Cong., 2 sess., April 7, 2004 (Washington: GPO, 2004).
39 P.L. 80-772, codified at 18 USC §4121 et seq.
40 The 1988 Anti-Drug Abuse Act (P.L. 100-690) authorized UNICOR to borrow from and invest in the U.S. Treasury
and added the “reasonable share” language regarding market capture. The 1990 Crime Control Act (P.L. 101-647)
required federal agencies to report information on the purchase of UNICOR products and services. The Small Business
Research and Development Enhancement Act of 1992 (P.L. 102-564) modified the reporting requirements so that
federal agencies provide separate reports of UNICOR purchases to the Federal Procurement Data System.
41 See 10 USC §2410n.
Only those laws that made substantial changes to the operation of FPI will be discussed below.
The Anti-Drug Abuse Act of 1988 (P.L. 100-690) required that UNICOR meet specific
requirements to ease the impact of its activities upon the private sector. Before approving the
expansion of an existing product or the creation of a new product, the act required UNICOR to
• prepare a written analysis of the likely impact of UNICOR’s expansion on
industry and free labor;
• announce in an appropriate publication the plans for expansion and invite
comments on the plan;
• advise affected trade associations;
• provide the UNICOR board of directors with the plans for expansion prior to the
board making a decision on the expansion;
• provide opportunity to affected trade associations or relevant business
representatives to comment to the Board of Director on the proposal; and
• publish final decisions made by the Board of Directors.
The National Defense Authorization Act for FY2002 (P.L. 107-107) required the Secretary of
Defense to use competitive procedures for the procurement of the product if it is determined that
the product is not comparable in price, quality and time of delivery to products available from the
private sector. In doing so, the act required the Secretary of Defense to conduct research and
market analysis with respect to the price, quality and time of delivery of FPI products prior to
purchasing the product from FPI to determine whether the products are comparable to products
from the private sector.
Similar to P.L. 107-107, the Bob Stump National Defense Authorization Act for Fiscal Year 2003
(P.L. 107-314) also required the Secretary of Defense to use competitive procedures for the
procurement of the product if it is determined that the product is not comparable in price, quality
and time of delivery to products available from the private sector. With respect to the market
research determination, the act made such determinations final and not subject to review. The act
required that FPI perform its contractual obligations to the same extent as any other contractor for
the DOD. It prohibits a DOD contractor or potential contractor from using FPI as a subcontractor
and it also prohibits the Secretary of Defense from entering into a contract with FPI under which
an inmate worker would have access to sensitive information.
The Consolidated Appropriations Act of 2004 (P.L. 108-199) eliminated FPI’s mandatory source
clause during FY2004 by prohibiting funds appropriated by Congress for FY2004 to be used by
any federal executive agency for the purchase of products or services manufactured by FPI unless
the agency making the purchase determines that the products or services are being provided at the
best value, which are in line with government-wide procurement regulations.
The Intelligence Authorization Act for FY2004 (P.L. 108-177) required the Director of the
Central Intelligence Agency to only make purchases from FPI if he determines that the product or
service best meets the agency’s needs.
The National Defense Authorization Act for Fiscal Year 2008 (P.L. 110-181) amended current law
to require the Secretary of Defense to do market research to determine whether an FPI product is
comparable to products available from the private sector that best meet the needs of Department
of Defense (DOD) in terms of price, quality, and time of delivery before purchasing a product that
FPI produces in which FPI does not have a significant market share. If the Secretary determines
that an FPI product is not comparable to private sector products in terms of price, quality, or time
of delivery, the Secretary must then use competitive procedures for the procurement of the
product, or make an individual purchase under a multiple award contract in accordance with the
competition requirements applicable to such a contract. In cases where FPI is determined to have
a significant market share, the Secretary of Defense can purchase a product from FPI only if the
Secretary uses competitive procedures for procuring the product, or makes an individual purchase
under a multiple award contract in accordance with the competition requirements applicable to
such a contract.
S. 41, the Prisoner Opportunity, Work, and Education Requirement (POWER) Act, was
introduced on January 6, 2009, and referred to the Senate Judiciary Committee. The bill would
amend the current law regulating FPI’s operations and how other executive branch agencies
procure FPI goods and services. The bill would require all eligible federal inmates to spend 50
hours per week either working, engaging in job training, or participating in education or life skills
programs. The bill would expand work opportunities for eligible inmates by requiring FPI to
utilize inmates in labor-intensive, light manufacturing activities through contracting with the
private sector. Inmates participating in such a program would have to be paid wages that
complied with the requirements of 18 U.S.C. §1761(c), which requires that inmate workers are
paid wages that are not less than those paid to workers doing work of a similar nature in the some
locality. The bill would also require contracts with private sector companies to contain provisions
stating that all work will be conducted in an FPI facility; prohibit the company from displacing
any of that company’s existing domestic workers as a direct result of the contract with FPI; and
require the contractor to terminate inmate laborers before terminating other employees
performing the same work if the company has to reduce its workforce. The bill would also
expand the ability of FPI to produce goods and services and for executive agencies to procure
those goods and services by (1) repealing provisions in previous appropriations bills that prohibit
federal agencies from using appropriated funding to purchase goods or services from FPI unless
the agency determines that the good or service is the best value;42 (2) repealing a provision that
prohibits appropriated funds for being used to conduct a public-private competition under the 43
Office of Management and Budget Circular A-76 for work performed by FPI employees; and
(3) repealing the provision in current law that requires the Secretary of Defense to use, among
other things, competitive procedures for the procurement of the product if it is determined that the
product is not comparable in price, quality, and time of delivery to products available from the 44
private sector. S. 41 would require the Attorney General to establish the Foreign Labor
Substitute Panel that would review pilot projects by United States companies for using federal
inmate labor to produce goods that would be produced by foreign labor. The bill would amend
current law to exempt goods and services produced by FPI employees under a subcontract with
the private sector or who are participating in a foreign labor substitute program from the 45
prohibition of selling prisoner-made goods in the private market. The bill would also amend
current law to restate the mission, operating objectives, performance standards, and contracting
requirements for FPI. Finally, the bill would require the Comptroller General to conduct an
annual evaluation of the operations of FPI and report the findings to Congress.
Over the past decade, congressional awareness of FPI and its unique status has increased. FPI has
maintained that its objective “is to prepare as many inmates as practical for a successful transition 46
into mainstream society ... without jeopardizing the job security of the American taxpayer.”
Critics contend, however, that FPI’s mandatory source clause has chipped away at the growth of
small businesses. While many view FPI as being necessary in the management and rehabilitation
of federal inmates, and its mandatory source clause as paramount to keeping FPI operating, others
view it as having monopoly-like powers that usurp and supplant the bidding process for federal
Of equal significance is the contention that the FPI operation is based on a manufacturing, mass-
production, low-skilled labor economy of the 1930s, which is not efficacious training in today’s
market. Inmates employed in FPI are working in “a labor-intensive manner” where the emphasis 47
is on employing as many inmates as possible with each inmate producing little output. While
proponents maintain that inmates learn critical skills such as good workplace habits,
accountability and the importance of being dependable, some critics contend that some of the
42 Section 637 of division F of the Consolidated Appropriations Act of 2004 (P.L. 108-199) and section 637 of division
H of the Consolidated Appropriations Act of 2005 (P.L. 108-447).
43 Section 214 of division B of the Consolidated Appropriations Act of 2008 (P.L. 110-161).
44 10 U.S.C. §2410n.
45 See 18 U.S.C. §1761. Generally, it is illegal for an individual to transport prisoner-made goods in interstate
commerce or from a foreign country. Exemptions are delineated for certain individuals on parole, probation, or
supervised release. In addition, the prohibition on interstate commerce of prisoner-made goods does not apply to
agricultural commodities or parts for the repair of farm machinery, nor to commodities manufactured in a federal,
District of Columbia, or state institution for use by the federal government, or by the District of Columbia, or by any
state or political subdivision of a state or not-for-profit organizations. 18 U.S.C. §1761 effectively prevents most jail
and prison inmates in the United States from producing goods for sale in open markets.
46 UNICOR’s 2002 Annual Report, p. 5 at http://www.unicor.gov.
47 Statement of BOP Director Kathleen Hawk Sawyer, in U.S. Congress, House Committee on the Judiciary, Federal
Prison Industries, hearings, 106th Cong., 2nd sess., October 5, 2000.
industries FPI inmates work in are shrinking and the chances of them obtaining employment in
that industry once they are released from prison are low.
The debate on UNICOR’s impact on the free market has been affected by tensions between
competing interests that represent two social goods—the employment and rehabilitation of
offenders and the need to protect jobs of law abiding citizens. At the center of the debate is FPI’s
mandatory source status, which many argue has deprived small businesses from competing
effectively for government contracts.
Opponents of FPI’s mandatory source clause assert that it prohibits full and open competition,
preventing federal agencies from purchasing products in a free enterprise market. They argue that
FPI’s mandatory source clause has contributed to U.S. workers being displaced from their jobs.
Opponents also argue that FPI’s mandatory source clause allows the industry to set prices for its
goods and services (FPI’s mandatory source clause only requires FPI to deliver products at 49
market price), which are often higher than the prices set by private companies for comparable
products and services. They also contend that the mandatory source clause does not require FPI to
compete using the same quality and delivery standards as private businesses.
Opponents of FPI’s mandatory source clause also argue that, by law, FPI regulates itself and is
not subject to federal laws (and in some cases state laws) that restrict businesses’ operations with
respect to occupational, safety, health and employment discrimination. On a related issue,
opponents contend that through the mandatory source clause, FPI has expanded its authority with
respect to its product and service lines without congressional approval.
Proponents for FPI argue that the federal prison population has grown significantly (see Figure
2), and that FPI is a necessary component in federal correctional facilities that prevents inmate
idleness and contributes to the management of inmates. They also contend that FPI provides
inmates with job skills, job readiness, responsibility and accountability, which are critical for a
successful reintegration into society. Proponents contend that by eliminating FPI’s mandatory
source clause, inmate idleness would set in, which would undermine the safety and security of
Proponents also contend that an unintended benefit of FPI is that it keeps work in the United
States that would otherwise go overseas. They argue that in today’s climate of outsourcing low-
skill, low-wage jobs, FPI’s mandatory source clause has become increasingly more important to
keeping jobs in the United States. Proponents credit FPI with creating jobs for private companies.
They argue that on average, 74% of FPI’s revenues are poured back into the economy through the 50
private sector with the purchasing of raw material and equipment from the private sector.
48 FPI mandatory source clause only applies to products it manufactures. In 1999, FPI announced plans to start selling
services and while FPI is not a mandatory source for services as it is for products, it is a preferential source and federal
agencies may purchase services from FPI without going through a competitive procurement process.
49 FPI’s authorizing statute and FAR require that the price FPI charges cannot exceed the “current market price.”
Critics contend, however, that the statute and FAR do not define “current market price.”
50 According to FPI data, in FY2003 FPI spent 75% of its revenue in purchasing raw material and equipment from the
private sector; in FY2002 the percentage was 74%; in FY2001, 73%; in FY2000, 72%; and in FY1999, 75%. April 29,
2004 telephone conversation with the DOJ’s BOP Congressional Affairs Office.
Moreover, they contend that UNICOR’s sales represent less than 2% of federal government
Proponents cite a study that was mandated by Congress as further support that FPI’s impact on
the private sector is negligible. Deloitte and Touche, an independent accounting firm, was
commissioned by Congress in 1990 to conduct a market analysis of UNICOR. The study found
that UNICOR’s sales amounted to only two percent of the federal market for the types of products
and services it provided. While the study found that UNICOR’s operations were concentrated in
labor-intensive industries, it also found that UNICOR’s employees (federal inmates) accounted
for only one-quarter of the output of workers in the private sector. The study’s finding also found 51
that UNICOR’s mandatory source advantage was offset by its competitive disadvantages.
Opponents maintain that studies conducted by the General Accounting Office (GAO) prove that
FPI’s customers are not satisfied with the corporation’s business. For example, a 1988 GAO study
that examined customer satisfaction with respect to FPI’s delivery performance found that “...
customer agency officials showed wide variation in FPI delivery performance, customer agency 52
officials ... had mixed views on FPI’s delivery performance.... ”
Another study conducted in 1985 by GAO concluded that “overall, UNICOR customers appeared
satisfied with its prices,” quality of the products and services, and waivers granted by UNICOR.
While GAO found UNICOR’s customers generally satisfied with the corporation, it also found
that UNICOR does not complete required market checks “... to ensure compliance with the law 53
that its prices not exceed market prices.... ”
Opponents, on the other hand, turn to the study that was commissioned by Congress in 1990 as
evidence of their assertion of UNICOR’s poor customer service record. As discussed above,
Deloitte and Touche conducted a market analysis of UNICOR and found, among other things,
that UNICOR’S customer service and delivery ratings were below average in some of its product
lines in comparison with the private sector. In one particular industry where FPI’s largest
customer is DOD (the apparel industry), FPI had a contract delinquency rate of 21% in the first 54
six months of 2000; between 1992 and 1999, FPI had an average delinquency rate of 31%.
However, Deloitte and Touche did not report comparable data for private sector contractors.
51 Deloitte and Touche, Independent Market Study of UNICOR, Federal Prison Industries, Inc., Executive Summary,
August 7, 1991.
52 U.S. General Accounting Office, Federal Prison Industries: Delivery Performance Is Improving But Problems
Remain, GAO/GGD-98-118, June 1998.
53 U.S. General Accounting Office, UNICOR Products: Federal Prison Industries Can Further Ensure Customer
Satisfaction, GAO/GGD86-6, November 1, 1985.
54 Statement of George H. Allen, Deputy Commander, Defense Supply Center Philadelphia, Defense Logistics Agency,
in U.S. Congress, House Committee on Education and the Workforce, Federal Prison Industries: Proposed Military
Clothing Production Expansion—Assessing Existing Protections for Workers, Business, and FPI’s Federal Agency thnd
Customers, hearings, 106 Cong., 2 sess., October 5, 2000.
As the debate continues with respect to the proper role of FPI in training and rehabilitating federal
offenders and its role in providing products and services to federal agencies, Congress is faced
with several questions.
• In general, should the mandatory source requirement be maintained, stricken, or
• How can UNICOR expand product and service lines to keep an increasing
number of inmates productive without adversely affecting the private sector?
• How can UNICOR expand its product line, which is primarily in old economy
sectors that have seen employment declines, into new economy sectors without
impacting private businesses?
• Do the benefits of rehabilitating offenders and providing them with useful skills
balance with the economic hardship imposed on law abiding workers who may
lose job opportunities because the employer cannot compete for federal
Since UNICOR’s establishment in 1934, business and labor interests have consistently argued
that UNICOR undercuts the free enterprise system. Due to the mandatory source requirement,
corporations that wish to do business with the federal government are restricted in the areas in
which they can submit bids. Opponents contend that citizens who have not committed crimes
may lose their jobs due to their employers not being able to secure federal contracts. Furthermore,
FPI opponents contend that some of the industries in federal prisons such as the domestic apparel
industry are shrinking, thus leaving very little demand for inmates once they are released from
prison. These critics argue that inmates should be trained in a growing industry that can afford to
lose volume and is able to employ inmates upon their release from prison.
Proponents contend that FPI has taken significant precautions to avoid harm to the private sector.
They argue that the majority of the sales generated from FPI go towards the purchase of raw
materials from small businesses, which generates business for those companies. Proponents also
maintain that FPI’s enabling legislation and policy is such that it is limited to one market—the
federal government; and within that market, FPI can never sell more than a certain percentage of 55
merchandise in any product area. As further evidence that FPI does not harm private businesses,
proponents assert that UNICOR’s Board of Directors is constantly assessing its impact on the
private sector. For example, on June 26, 2003, the Board of Directors adopted resolutions that
require FPI to limit the application of the mandatory source clause to products for which FPI’s 56
share of the federal market is less than 20%.
55 See UNICOR, Factories with Fences, at http://www.unicor.gov/history_of_success.htm.
56 See http://www.unicor.gov/information/purchasing_made_simple/resolutions.cfm#res06.
One piece of legislation in the 110th Congress, H.R. 4986, the National Defense Authorization Act
for Fiscal Year 2008, enacted into law on January 28, 2008 (P.L. 110-181), modified the way in th
which DOD procures products from FPI. Another bill introduced in the 110 Congress, S. 705,
would have further modified FPI’s mandatory source clause by requiring all government agencies
to use competitive procedures when procuring products from FPI.
Section 827 of the National Defense Authorization Act for Fiscal Year 2008 (P.L. 110-181)
amended current law to require the Secretary of Defense to do market research to determine
whether an FPI product is comparable to products available from the private sector that best meet
the needs of DOD in terms of price, quality, and time of delivery before purchasing a product that
FPI produces in which FPI does not have a significant market share. If the Secretary of Defense
determines that an FPI product is not comparable to private sector products in terms of price,
quality, or time of delivery, the Secretary of Defense must then use competitive procedures for the
procurement of the product, or make an individual purchase under a multiple award contract in
accordance with the competition requirements applicable to such a contract. The Secretary of
Defense is required to consider a timely offer from FPI when conducting a competition for
procurement of the product. In cases where FPI is determined to have a significant market share,
the Secretary of Defense can purchase a product from FPI only if the Secretary uses competitive
procedures for procuring the product, or makes an individual purchase under a multiple award
contract in accordance with the competition requirements applicable to such a contract. In
conducting a competition for procurement of a product, the Secretary of Defense is required to
consider a timely offer from FPI. Under section 827 of P.L. 110-181, FPI is treated as having a
significant market share for a product if the Secretary of Defense, in consultation with the
Administrator of Federal Procurement Policy, determines that FPI’s share of the DOD market for
a product is greater than 5%. Section 827 of P.L. 110-181 requires the Secretary of Defense to
publish a list of product categories for which FPI’s share of the DOD market is greater than 5%,
based on the most recent fiscal year for which data are available. The list of product categories
can be modified at any time if the Secretary of Defense determines that newly available data
require adding or removing a product category from the list.
S. 705 would have amended the Office of Federal Procurement Policy Act (41 U.S.C. §403 et
seq.) to establish a government-wide requirement that government agencies use competitive
procedures when procuring products that are authorized to be sold by FPI. The bill would have
required the head of an executive agency to notify FPI of the procurement at the same time as
other possible bidders and to consider an offer from FPI in the same manner as other offers. The
bill would not have allowed an executive agency to purchase products or services from FPI unless
it is determined that the product or service is comparable to products or services offered by the
private sector. The head of the executive agency would have had to ensure that FPI performs its
contractual obligations to the same extent as any other contractor.
S. 705 would have provided for some exceptions to the government-wide requirement for using
competitive procurement procedures. It would have allowed an executive agency to use non-
competitive procedures to enter into a contract with FPI only if:
• The Attorney General determines within 30 days after FPI has been notified of
the procurement opportunity that (1) FPI cannot reasonably expect fair
consideration in a competitive competition for the contract, and (2) the award of
the contract to FPI is necessary to maintain work opportunities not otherwise
available at a correctional facility, and the loss of such work opportunities could
create circumstances that would significantly endanger the safe and effective
administration of the facility.
• The product is only available from FPI.
• The head of the executive agency determines that the product would be
produced, in whole or in significant part, by prison labor outside the U.S.
The determination made by the Attorney General must be supported by specific findings by the
warden of the correctional facility with the FPI workshop that would perform the contract, or
supported by specific findings by FPI regarding the reasons why it does not expect to be selected
for the contract if a competitive process is used. The bill would have ensured that contractors are
not required to use FPI as a subcontractor or a supplier of products or provider of services. The
bill would have prohibited executive agencies from (1) including provisions in the solicitation for
offers that requires a contractor to use or specify products or services of FPI in the performance
of the contract; (2) inserting clauses in the contract that requires the contractor to use specific
products or services offered by FPI in the performance of the contract; or (3) modifying the
contract to require the use of products or services of FPI in the performance of the contract. The
bill would have also required a contractor that uses FPI as a subcontractor or supplier in providing
a commercial product pursuant to a contract to implement management procedures to prevent the
introduction of an inmate-made product into the commercial market.
The bill would have prevented executive agencies from entering into contracts with FPI in cases
where inmate workers would have access to (1) data that is classified, or would become classified
if merged with other data; (2) any geographic data regarding the location of infrastructure
providing communications or water or electrical power distribution; (3) any geographic data
regarding the location of pipelines for the distribution of natural gas, bulk petroleum products, or
other commodities or other utilities; or (4) any personal or financial information about any
citizen, including information relating to the person’s real property, without the prior consent of
The bill would have allowed any prison or jail work program that is providing services for sale in
the commercial market through inmate labor on October 1, 2007, to continue to provide
commercial services until either (1) the expiration date specified in the contract or other
agreement, or (2) September 30, 2011, if the work program is providing services directly to the
commercial market. The bill would have allowed prison or jail work programs to continue to use
inmate labor to provide services for the commercial market beyond the two dates specified above
if the program has been certified pursuant to 18 U.S.C. §1761(c)(1), and is in compliance with the
requirements of the law and the accompanying regulations. The bill would have allowed a for-
profit business that has an agreement with FPI on the enactment date, whereby federal inmates
are providing services for the commercial market, to continue to provide services for the duration
of the agreement.
Analyst in Crime Policy