Chairman Fitzgerald and Members of the Subcommittee, I appreciate the opportunity to appear before you today, on behalf of the U.S. General Services Administration (GSA), to discuss your ideas to establish a government-wide policy requiring competition in certain procurements from Federal Prison Industries (FPI).  GSA supports the Subcommittee’s interest in requiring competition to the maximum extent practicable whenever taxpayer dollars are being spent to ensure positive results in government acquisition.  Two fundamental principles need to be satisfied in any legislative or administrative reforms.  Agencies should have the flexibility through competition to purchase quality goods and services at fair and reasonable prices with the expectation of timely performance.  At the same time FPI is an important national program, and the Attorney General must be able to maintain adequate work opportunities at Federal prisons to counter the potentially dangerous affects of inmate idleness and prepare prisoners for reintegration into society.  Finding a results oriented approach to meeting FPI’s national objectives (providing work opportunities for inmates) while obtaining additional competition and transparency in the government procurement process will result in the taxpayer getting better value for their tax dollar and give the Federal agency customer a greater range of choices.

As this Subcommittee knows, the President has called upon the entire Federal Government to improve performance by focusing on results.  Among other things, we have been charged with making our agencies citizen-centered, market-based and results-driven.  Accountability requires that we spend the taxpayers' dollars wisely and provide greater insight into how their money is being spent.  Senate Bill 346 and other Bills are being considered by the Senate with regard to the reform of FPI.  The Administration has taken a neutral position on all bills.  Therefore, I will not be commenting on the specifics of S. 346.

A number of previous actions by Congress and this Administration are promoting competition and helping create a level playing field with the private sector.  GSA, the National Aeronautics and Space Administration, and the Department of Defense (DoD) revised the Federal Acquisition Regulation (FAR) four (4) times over the past year to implement results oriented reforms, namely:

· In May 2003, agencies began evaluating FPI’s contract performance just as they would the performance of any other private sector firm – this is a results driven solution focused on actual contract performance.  While this did not change FPI’s mandatory preference status, it was an important first step in helping FPI better monitor and improve its own performance.  Results oriented feedback has proven to be a critical tool for the private sector over the last two decades in terms of improving both products and services and its bottom-line, and now is being employed by FPI as they move toward being more competitive in the Federal marketplace.

· Second, the threshold for mandatory use of FPI was raised from $25 dollars to $2,500 in May 2003.  This change by the FPI Board of Directors allows agencies to go directly to the private sector  or FPI for any purchase under $2,500.

· Third, Section 811 of the National Defense Authorization Act for Fiscal Year 2002 was implemented by DoD, requiring that, before purchasing a product from FPI, DoD must determine whether the FPI product is comparable in price, quality, and time of delivery to products available from the private sector. 
· Finally, this same requirement was extended to DoD and non-DoD agencies alike in Fiscal Year 2004 based on Section 637 of Division F of the Consolidated Appropriations Act of 2004 (Public Law 108-199).   This statutory provision prohibits all Federal agencies from using their appropriated funds to purchase from FPI unless the agency making the purchase first determines that the FPI service or product provides the best value to the buying agency pursuant to FAR procedures.  If the FPI's product is found to be comparable with private sector offerings that best meet the agency's needs in terms of price, quality and time-of-delivery, agencies should buy from FPI. If not, agencies are free to use competitive procedures, including FPI in the competition. 

GSA supports reform of FPI and looks forward to working with this Subcommittee in making sure our procurement system is based on competitive procedures that are focused on achieving results. This concludes my prepared remarks.  I am happy to answer any questions you may have.