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, 19,720 or 18% are employed by UNICOR. By statute, UNICOR must be economically self-sustaining, thus it does not receive funding through congressional appropriations. In FY2005, FPI generated $765 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 74% go toward the purchase of raw material and equipment; 20% go toward staff salaries; and 6% go toward inmate salaries.
In recent years, the Administration has made several efforts to mitigate the competitive advantage UNICOR has over the private sector. Going beyond the 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 FPI under certain circumstances. Legislation introduced in the 110th Congress would address many of the same issues as legislation in the 109th Congress. Like legislation in the 109th Congress, legislation introduced in the 110th Congress, S. 1407, S. 1547, and S. 1548, would eliminate the requirement that some or all executive agencies purchase products or services from FPI in most cases. This report will be updated as warranted.