TESTIMONY OF

LEN LOREY

CHAIRPERSON OF

BIFMA INTERNATIONAL'S

GOVERNMENT SALES SUBCOMMITTEE

BEFORE

THE HOUSE SUBCOMMITTEE ON CRIME

ON

JUNE 25, 1998

Thank you for this opportunity to testify on behalf of the office furniture industry. I am Len Lorey of Kimball International and the chairperson of BIFMA International's Government Sales Subcommittee.

I am speaking today not only for office furniture manufacturers and suppliers, but for the U.S. Chamber of Commerce of which my company is a member. The last White House Conference on Small Business ranked unfair competition from government entities as a major concern. BIFMA and the U.S. Chamber of Commerce are both members of the growing Competition in Contracting Act Coalition which seeks elimination of FPI's unfair advantage in the federal marketplace. This coalition now numbers over 300 business and labor organizations from across the country who have found common ground in the need to reform Federal Prison Industries, Inc. (FPI) by ending its monopoly powers.

Today's hearing is on two pieces of legislation that offer distinctly different ideas on what reform is needed and how quickly. FPI was created in the 1930's and is sorely in need of reform but reform of prison industries must start with H.R. 2758, the Hoekstra-Frank-Collins-Maloney "Federal Prison Industries Competition in Contracting Act of 1997". That bill has been pending before this committee for eight months and is similar to legislation introduced in the 104th Congress. It would implement the National Performance Review recommendation to: "take away the Federal Prison Industries status as a mandatory source of federal supplies and require it to compete commercially for federal agencies' business".

Despite the many laudable attempts to have government adopt more businesslike practices, some branches of the federal government are having a hard time making the adjustment. The operation of Federal Prison Industries represents one of the longest running conflicts with government policy that our industry, and many others, have faced. In the office furniture industry alone, FPI (also known as UNICOR) is in the middle of an expansion that essentially doubles the amount of office furniture that they require federal agencies to take.

At the same time that the Justice Department is accusing Microsoft of monopolistic practices, it is harboring over 100 factories within the Bureau of Prisons that operate with monopoly powers. While Microsoft meets only one of the three tests of a monopoly: having an overwhelming market share, FPI has two of the three: the power to set prices, and the power to prevent competition. FPI employs monopolistic tactics within the government purchasing process through its "mandatory source status". It is not required to bid for contracts under the same guidelines enforced for private companies. It can set any price it wants within the range of market prices and has no incentive to charge the lowest price. The only way around buying from the prisons is for an agency to request a waiver but FPI itself controls the waiver and appeals process. Nearly 10,000 waiver requests are made each year and there is no record of how many agencies could not afford the time or resources to challenge the red tape of FPI's bureaucracy.

H.R. 4100 does not appear to end FPI's monopoly powers any time soon. Mr. Chairman, you have fulfilled the promise you made last month to a National Prison Industries Forum to introduce a bill that would be "controversial". You also indicated that it would not be intended to pass this Congress. We urge this committee to do something that can pass this Congress. H.R. 2758 has support from Republicans and Democrats alike and, as incremental reform, would be a clear statement of good government policy.

In our experience, FPI has never seen a reform proposal that it likes. Any change to their operation is labeled "devastating" so it is left to the Congress to reinvent the agency for them. In doing so, we believe the instructions to that program's administrators should be to go out and engage in activities that provide a total good to society. Some prisons build houses and give them to Habitat for Humanity. Some prisons use inmates to help sandbag rivers during floods. Why couldn't prisons around the country become disaster relief training centers where inmates learned everything from CPR to fire fighting? When fires break out, as they are in your home state today Mr. Chairman or might in my home state of Indiana, we would have a team of trained people ready and able to assist local fire departments facing catastrophic challenges. The creative ways that inmate labor could be used to benefit society are limited only by a lack of creative minds within the agency.

In conclusion, complete elimination of mandatory source status at a date certain is needed now. The Justice Department's double standard must end. Our government should not be exempt from the rules and regulations it asks its citizens to obey.

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