Federal Prison Industries: UNICOR

Federal Prison Industries: UNICOR

Order Code 96-892 GOV
Updated July 17, 2003
CRS Report for Congress
Received through the CRS Web
Federal Prison Industries: UNICOR
JoAnne O’Bryant
Domestic Social Policy Division
Summary
UNICOR, the trade name for Federal Prison Industries, Inc. (FPI), is the
government corporation that employs offenders incarcerated in federal prisons.1
Established in 1934, UNICOR provides job training opportunities to federal inmates by
producing goods and services for federal agencies. By statute, UNICOR products and
services must be purchased by federal agencies (a requirement often referred to as
“superpreference,” “mandatory source,” or “sole source”) and are not available for sale
in interstate commerce or to non-federal entities. Federal agencies can obtain products
from the private sector through a waiver issued by UNICOR if the corporation is unable
to make the needed product or provide the required service.
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. FPI
legislation introduced in the 108th Congress with provision on these issues include: S.
346 (Levin), H.R. 1829 (Hoekstra), H. R. 1982 (Maloney), and H.R. 2417 (Goss). On
December 28, 2001, the President signed the National Defense Authorization Act for
FY2002 (P.L. 107-107) which contains a provision requiring FPI to compete for work
projects for the Department of Defense (DOD) if their products are not comparable in
price, quality, and time of delivery as the private sector. H.R. 1982 and S. 346 were
introduced in the 108th Congress to establish similar policy on competing for
government-wide procurement. Updates on this report will be made as legislative action
occurs.
Most Recent Developments
Federal Prison Industries (FPI) has continued to receive attention in the 108th
Congress. Like legislation introduced in the previous Congress, H.R. 1829 proposes to
gradually eliminate a requirement for federal agencies to purchase products and services
obtained from FPI. At the end of first session of the 107th Congress, the enactment of the
1 State prison industry programs are administered by the states, are not associated with UNICOR,
and are not discussed in this report.
Congressional Research Service ˜ The Library of Congress

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National Defense Authorization Act for 2002 (P.L. 107-107) made provision for the DOD
to conduct research and market analysis prior to the purchase of FPI products to determine
whether FPI products are comparable in price, quality, and time of delivery as the private
sector. If it is determined that FPI is not comparable in the areas stated above, FPI must
compete with other entities for procurement of the product. Similar provision is made in
H.R. 1982 and S. 346, introduced in the 108th Congress to provide governmentwide policy
requiring competition for the procurement of products. H.R. 2417 includes similar
provisions as it pertains to product procurement for the Central Intelligence Agency.
History of UNICOR
UNICOR, the trade name for Federal Prison Industries, Inc. (FPI), is the government
corporation that employs offenders incarcerated in federal prisons.2 As the federal prison
system was established in the first decades of the 20th century, factories were constructed
within the prisons to manufacture products needed by the federal government. Congress
approved legislation in 1930 giving general authority for “employment for all physically
fit inmates in the United States penal and correctional institutions.” The legislation
specified, however, that the work of prisoners should not compete with that of the private
sector.3
Labor organizations had been making arguments against prison industries since the
late 1800s. The depression of the 1930s and the resulting high levels of unemployment
crystallized the debate.
Congress and President Franklin Roosevelt responded by
establishing UNICOR. The purpose 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 industry would be substantially
affected.”4 Originally authorized in 1934 through P.L. 73-461 and Executive Order 6917,
the current statutory authority for UNICOR was first codified in the 1948 revision of the
“Crimes and Criminal Procedure” statutes. The only amendments to the statute since the
1948 codification were relatively recent provisions added in 1988, 1990, and 1992.5
The absence of legislative action on this issue for the half century from 1934 to 1988
is notable. Developments in recent decades that have increased congressional interest in
prison industries include:
2 State prison industry programs are administered by the states, are not associated with UNICOR,
and are not discussed in this report.
3 46 Stat. 391, P.L. 71-271.
4 Franklin Delano Roosevelt. The Public Papers and Addresses of Franklin D. Roosevelt. New
York, Random House, 1938. Vol. Three, p. 497.
5 The 1988 Anti-Drug Abuse Act (P.L. 100-690) authorized UNICOR to borrow from and invest
in the U.S. Treasury (18 U.S.C. 4129), added the “reasonable share” language regarding market
capture (18 U.S.C. 4122), and made other changes to the law. The 1990 Crime Control Act (P.L.
101-647) required federal agencies to report information on the purchase of UNICOR products
and services (18 U.S.C. 4124(c) and (d)). 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
(18 U.S.C. 4124(c)).

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! the erosion of the nation’s manufacturing sector over the past 10 or 20 years, resulting
in higher levels of unemployment among members of the workforce with marginal
skills;
! the rapid and dramatic increase in the federal inmate population (from roughly 30,000
in the early 1980s to three times that amount today) at the same time that the federal
government was downsizing, resulting in a reduction of UNICOR’s federal market; and,
! the need to develop more aggressive inmate management techniques in federal prisons
as the profile of the federal offender population changed from primarily non-violent
offenders to those convicted of violent crimes and drug trafficking.
Authority and Activities
Federal Prison Industries, Inc., is administered by a six-person board of directors
appointed by the President.6 Its enabling act requires that representatives of agricultural
producers, labor, and retailers serve as board members. The board’s decisions regarding
products to be manufactured and areas of expansion are driven by a goal of employing the
greatest possible number of inmates. UNICOR is required to diversify its product line and
operate so that “no single private industry” bears “an undue burden;” it is also charged
with reducing “to a minimum competition with private industry or free labor.”7
Of the roughly 125,000 inmates held in federal prisons, about 17,000 (18%) are
employed by UNICOR in 100 factories scattered in half of the states. Goods and services
provided by inmates employed by UNICOR include: metal products (lockers, storage
cabinets, shelving), clothing and textile products (draperies, canvas goods, military
clothing), graphics and services (data entry, text editing, road signs), plastics, and
electronics (cable assemblies, connectors, power distribution systems), and furniture
products and accessories.
UNICOR is a self-supporting government corporation that may borrow funds from
the U.S. Treasury8 and use the proceeds to purchase equipment, pay wages to inmates and
staff (over 1,600 staffers who are not inmates are employed), and invest in expansion of
facilities. No funds are appropriated for UNICOR operations. Inmates earn from $.25 per
hour up to a maximum of $1.15 per hour, rates considerably below the minimum wage.
Issues of Debate
Since UNICOR’s establishment in 1934, business and labor interests have argued
that UNICOR undercuts the free enterprise system. Due to the sole source requirement,
corporations that wish to do business with the federal government are restricted in the
areas in which they can submit bids. Citizens who have not committed crimes may lose
their jobs in free society because their employers are not allowed to compete for federal
contracts. Also, it is argued that UNICOR is expanding into new business fields that will
result in further job losses, particularly in the manufacturing industries that must struggle
to survive.
6 18 U.S.C. 4121
7 18 U.S.C. 4122
8 18 U.S.C. 4129

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UNICOR advocates argue that prison labor projects help offenders learn discipline
and work skills and are effective rehabilitation tools that lessen the likelihood that
offenders will return to crime upon release. Prison administrators view the prison work
programs as indispensable inmate management tools. Also, UNICOR often purchases
raw materials and services from small businesses; in 1994, 57% of UNICOR’s
procurement expenditures were awarded to small businesses.9 In summary, all federal
prison inmates are required to work; those not employed by UNICOR have institutional
labor assignments (to the extent that they are physically able to work or are not security
risks).10
The growth of the federal inmate population has raised congressional awareness of
the significant policy issues involved. Should the sole source requirement be maintained
or stricken? How can UNICOR expand product and service lines to keep an increasing
number of inmates busy without adversely affecting the private sector? Do the benefits
of rehabilitation for offenders balance the economic hardship imposed on law abiding
workers who may lose job opportunities because they cannot compete for federal
contracts? Which employment opportunities pose the minimum security risk?
UNICOR and Private Competitors
The current statutory authority for Federal Prison Industries, Inc., stipulates that its
products may only be sold to the federal government and not to the public “in competition
with private enterprise.”11 The UNICOR board of directors must take steps to ensure that
the private sector has access to the federal market.12
In addition to these longstanding limitations, the 1988 Anti-Drug Abuse Act (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, UNICOR must:
! prepare a “detailed written analysis” of the likely impact of the expansion upon industry
and free labor. The analysis must identify the number of vendors currently providing
the product to the federal government, the proportion of the federal market met by small
businesses, small disadvantaged businesses, or businesses operating in labor surplus
areas, the size of the federal and non-federal markets, projected growth of federal
demand, and a projection of the strength of the market for both UNICOR and private
vendors;
9 U.S. Congress. House. Committee on Small Business. Small Business Competition for Federal
Contracts: The Impact of Federal Prison Industries. Hearing, June 27, 1996, 104th Congress, 2nd
Session. 104th Cong., 2nd Sess., 1996. 296 p. (Hereafter cited as Small Business Committee
hearing.)
10 The 1990 Omnibus Crime Control Act (P.L. 101-647, 104 Stat. 4914, 18 U.S.C. 4121 Notes)
required that all offenders in federal prisons and other detention facilities must work, with
consideration given to security and health limitations.
11 18 U.S.C. 4122(a). In addition to the statutory preference for material or services from
UNICOR, federal regulations require that contracting officers next investigate whether an item
is available from a non-profit agency serving the blind and severely handicapped before other
businesses may bid on the contract. See: 488 CFR 508.705-70 (Oct. 1, 1995 edition).
12 See 18 U.S.C. 4122(b)(1) and (2).

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! announce in an appropriate publication (Commerce Business Daily is used) the plans
for expansion and invite comments on the plans;
! advise affected trade associations of the plans and invite comments;
! provide all of the above information to the UNICOR board of directors prior to the
board’s decision on expansion;
! through the board of directors, provide opportunity to affected trade associations or
relevant business representatives to comment to the board on the proposal; and
! publish the final decision of the board of directors.13
In addition to the requirements above, a list of sales made by UNICOR is generally
made available to interested parties semi-annually.
Congressional Actions on the Expansion of UNICOR
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 the summer of 1989 the Senate considered a proposal to provide the private
sector with greater opportunity to compete for Department of Defense contracts.
Introduced as an amendment to the National Defense Authorization Act of 1990-1991 (S.
1352), the proposal would have curtailed, according to the sponsor, “the preference that
FPI currently enjoys over small and small disadvantaged business concerns, and make
certain that FPI sell its products to the Defense Department at a ‘fair market price,’ the
standard demanded of all who furnish supplies or services to the Government.” The
Senate adopted the amendment, but the conference committee deleted the provision.14
Also in the 101st Congress, an amendment was approved by the House during floor
debate on the Comprehensive Crime Control Act of 1990 (H.R. 5269). The amendment
would have prohibited UNICOR from expanding production in the footwear, apparel,
textile, or furniture industries until a report was submitted to Congress.15 Instead of
restricting UNICOR activities, conferees agreed to require that federal agencies report on
products and services purchased from UNICOR.16 Finally, the 101st Congress mandated
that UNICOR contract out for an independent study to make recommendations regarding
the impact of UNICOR on the private sector (see “Issues of Debate,” above).17
13 These procedures are set forth at 18 U.S.C. 4122(b)(3)-(6); they are carried out in accordance
with the document “Final Procedures for Soliciting and Evaluating Comments on Proposals to
Produce a New Product or to Significantly Expand Production of an Existing Product,” available
from the UNICOR Market Research Division (202-508-8554).
14 Dixon, Alan J. Remarks in the Senate. Congressional Record, daily edition, v. 135, July 31,
1989. P. S16895. A statement in opposition to the amendment appears at: Thurmond, Strom.
Remarks in the Senate. Congressional Record, daily edition, v. 135, Sept. 18, 1989. P. S20658-
59. See also Dixon, Alan J. Remarks in the Senate. (Statement in the consideration of
Conference Rept. 101-331), Congressional Record, daily edition, v. 135, Nov. 15, 1989. P.
S29112-29143.
15 Consideration of Amendment # 16 to H.R. 5269 in the House. Congressional Record, daily
edition, v. 135, Oct. 4, 1990. P. H8882-H8886.
16 18 U.S.C. 4124(c) and (d).
17 Appropriations for fiscal year 1991 for the Department of Justice and other agencies, P.L. 101-
515, 104 Stat. 2115. See: Deloitte & Touche, Executive Summary, p. 2.

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Little discussion of UNICOR and prison industries took place in the 102nd Congress.
During the 103rd Congress, legislation was considered in the Senate regarding the
payment of minimum wages to prisoners.18
Of some significance, the National
Performance Review recommended in September 1993 that the mandatory source
provision be eliminated and that UNICOR be exempt from the Federal Acquisition
Regulation in order to better compete with the private sector in terms of delivery
schedules and costs.19
More significant activity on this issue took place in the 104th Congress. In the first
session, the Senate-passed version of the fiscal year 1997 appropriations legislation for
the Department of Justice (H.R. 2076) would have excluded UNICOR from the general
prohibition in interstate commerce of prison-made goods and services.20 Also, in the first
session of the 104th Congress, the chairman of the House Subcommittee on Crime
introduced legislation (H.R. 2360) authorizing federal prisoners to engage in community
service projects; another bill (H.R. 2553) would have established pilot programs for
federal prisoners to produce for sale items that currently are produced solely by foreign
labor.
Perhaps the most far-reaching legislation was introduced in the second session of the
104th Congress. H.R. 3206, introduced March 29, 1996, would have removed the
standing penalty for U.S. government officials who contract for the hire of any prisoners
(18 U.S.C. 436) and would have deleted the prohibition in interstate commerce of prison-
made goods (18 U.S.C. Chapter 85). By the close of the 104th Congress, none of the
legislative proposals had advanced. Legislation on FPI was reintroduced but not passed
in the 105th Congress (S. 339, H.R. 2758, H.R. 4100) to revise the requirements for
procurement of products of FPI, and to minimize unfair competition for federal
contracting opportunities.
In the 106th and the 107th Congresses, bills were introduced and hearings were held
on FPI reform bills to continue the debate to eliminate the sole source requirement for the
procurement of FPI products by federal agencies.
18 U.S. Congress. Senate. Committee on Labor and Human Resources. Prison Labor. Hearing
on S. 1115, 103rd Congress, 1st Session, Oct. 28, 1993. Washington, U.S. Govt. Print. Off., 1993.
And U.S. Congress. House. Committee on Education and Labor. Subcommittee on Labor
Standards. Fair Labor Standards Act Amendment. Hearing on H.R. 3705, 103rd Congress, 2nd
session, July 14, 1994. Washington, U.S. Govt. Print. Off., 1994.
The issue of paying minimum wages to inmates was raised by one U.S. court of appeals ruling
(Hale v. Arizona, 990 F. 2d 131) that was subsequently overturned (Hale v. Arizona, 993 F. 2d
1387, 9th Cir. 1993, en banc).
19 Office of the Vice President. Report of the National Performance Review. Reinventing
Support Services. Washington, U.S. Govt. Print. Off., 1993. P. 21-23.
20 Section 117, H.R. 2076, Oct. 10, 1995 version. This provision was deleted in the conference
agreement. The President vetoed H.R. 2076.