Mr. Chairman and members of the Subcommittee:

Throughout my career in elective office, in the Wyoming legislature, the U.S. House of representatives and here in the Senate, I have long recognized that there are instances in which government unfairly competes with, or displaces the competitive, private enterprise system.  That is why, working in a bi-partisan manner with my colleague, Senator Levin, we have introduced S. 346 to establish a government-wide policy requiring competition in procurements from Federal Prison Industries.

I am pleased the subcommittee has agreed to hold this hearing.  The bill before us today represents another step forward not only in injecting competition where we now have a monopoly, but in limiting unfair government competition with the private sector.  This important and timely legislation will eliminate the mandatory contracting requirement that Federal agencies are subject to when it comes to products made by Federal Prison Industries (FPI).  Under current law, all Federal agencies are required to purchase products made by the FPI.  Simply put, this important bill will remove this mandatory sourcing requirement and call for the FPI to compete with the private sector for Federal contracts.  Some progress has been made with procurement by the Department of Defense, via provisions in recent Defense Authorization bills, and through Senator Shelby’s provision in the current fiscal year’s Omnibus appropriations bill.

Currently, FPI employs approximately 21,000  federal prisoners or roughly 12 percent of a Federal prisoner population of 174,000.   These prisoners are responsible for producing a diverse range of products and services for FPI, ranging from office furniture to clothing, from electronics to eyewear, from military gear to call centers and laundry services, to mapping and engineering drafting.  The remaining number of Federal prisoners who work, do so in and around Federal prisons.

While I believe it is important to keep prisoners working, I do not believe this effort should unduly harm or conflict with law-abiding employers, as FPI presently does.  S. 346 not only seeks to minimize the unfair competition that private sector companies face with FPI, but also restores the authority and procurement decisions to where they belong…with agency contracting officials.

We will hear testimony today from representatives of America’s business community who have been hurt by the unfair and monopolistic practices of Federal Prison Industries.  Additionally, we will hear from witnesses involved in the government contracting process regarding the impact that FPI sole source preference has on federal agencies and the procurement decisions they make.

What began in the 1930’s as a program to give inmates jobs skills for their re-entry into society has become a money making enterprise, expanding into a range of products and services offered in the private sector with little Congressional oversight.  FPI has the advantages of paying lower wages from between .25 cents to $1.23 an hour.  FPI is not subject to regulations such as benefits and retirement, health insurance costs, and compliance with OSHA regulations, as businesses are in the private sector.  And, FPI has a guaranteed client base.

FPI's mandatory source requirement not only undercuts private employers throughout America, but its mandatory source preference often costs American taxpayers more money.  I believe taxpayers would be alarmed to learn of the preferential treatment that FPI enjoys when it comes to Federal contracts.

It is ironic that in recent months as we have been debating the issue of off-shoring of American jobs, we continue to lose good paying American jobs to a government sponsored prison labor program.  Frankly, it is alarming that our workers are losing their jobs in this manner.

As I said before, I support the goal of keeping prisoners busy while serving their time in prison, and this legislation is not about ending that.  It is about competition.  If we allow competition in Federal contracts, FPI will be required to focus its efforts in product areas that don't unfairly compete with the private sector.  Clearly, competitive bidding is a reasonable process that will ensure taxpayer's dollars are being spent responsibly.

Of particular note, S. 346 allows contracting officers, within each Federal agency, the ability to use competitive procedures for the procurement of products as opposed to being forced to use FPI on a sole source basis.  Our bill before the committee today allows federal agencies and procurement officials to select the FPI for contracts if they believe FPI can meet that particular agency's requirements.   In addition, the product must be offered at a fair and reasonable price as a result of an open competition.  The focus of our bill seeks to place the control of government procurement in the hands of contracting officers, rather than in the hands of FPI.

Opponents will no doubt argue that the removal of the mandatory sourcing requirement will somehow lead to idle prisoners, resulting in a more dangerous prison environment.  Recognizing this concern, Senator Levin and I have included language that allows the Attorney General to grant a waiver to this process if a particular contract is deemed essential to the safety and effective administration of a particular prison.

Congress has taken steps to provide some relief from FPI’s mandatory sourcing requirement within the Department of Defense, and just recently, for all federal agencies.  In fiscal year 2002, FPI was ranked 72 on the list of top 100 DoD contractors.  In 2003, FPI had moved up to 69.  Clearly, FPI continues to do well in this area, despite new measures which allow the private sector to compete.

I am confident that by allowing competition for government contracts our bill will save tax dollars and restore management decisions to where they belong – with individual buying agency officials, not FPI.  As Congress looks for additional cost saving practices, the elimination of FPI's mandatory source preference will bring about numerous improvements, not just in cost savings, but also a reduction of FPI’s unfair competition with the private sector.

Again, I thank the Chairman and the subcommittee, as well as the Chairman of the full committee, Senator Collins, for recognizing the importance of this legislation.