Testimony of Thomas Tyson

President of Southern Automotive Wholesalers Inc..

Before the Subcommittee on Oversight and Investigation

Committee on Education and the Workforce

U.S. House of Representatives

April 21, 1999

Mr. Chairman, distinguished members of the committee, thank you for this opportunity to address the committee, and to relate to you the attack perpetrated on my business at the hands of Federal Prison Industries.

Southern Automotive Wholesalers Inc. is a small business located in Pontiac Michigan with 16 employees. We manufacture and remanufacture engine electrical accessories such as starters, generators, and regulators primarily for the U.S. Government. We have been a government contractor in good standing for fourteen years, supplying the government with quality parts. We also reverse engineer and develop replacement parts that may be hard to find, require long lead tunes, or that are no longer produced by the original manufacturers.

We are located in a historically underutilized business zone, in an area of critically high unemployment. This area has been designated a SBA HUB-Zone Empowerment area. We employ local residents, many who walk to work (City of Pontiac Jan. 1999 unemployment rate is 8.60/6), veterans through the Vet100 program, and disadvantaged workers through the Michigan Unemployment agency.

On February 23, 1999, we received a copy of a "Competitive Impact Study of F11Ts Proposed Production of Engine Electrical Components". We were shocked by FPI's intentions, the results of which would put our small company out of business. Furthermore, we were amazed at the inaccuracy of the information the study contained regarding our company and the how these actions would affect us. FPI's intent was to petition their Board of Directors to allow them "mandatory source of supply status" for Federal Supply Classification (FSC) code 2920. 2920 refers to engine electrical accessories, non-aircraft parts. In a brief paragraph regarding Southern Automotive, the Impact Study stated that this action would have "a minimal impact on this firm." The fact is this action would put our company out of business. The report states that 32% of our company's sales were FSC 2920 related products. In fact, 40% of our sales from 1995 - 1999 were FSC 2920 related sales. These sales accounted for an average of 74.69% of revenues from government sales and constituted 52.35% of Southern Automotive Wholesalers total revenues.

Conveniently the financial impact of this proposal was omitted from the Impact Study to be brought before the Board. We also wondered why our firm, having the most to lose by FPI's own account, was not included in the original fact finding "request for data"'? When questioned, FPI spokesperson stated that a copy was mailed to us, not by any traceable means, including registered mail. Again, how convenient for them.

It is very hard to believe that the fate of my 16 workers and my business could hang on such vague broad sweeping statistics, compiled by persons that were employed by the same organization that was making the proposal. The conflict of interest here is unbelievable. I was even more astounded when I found that the Board of Directors took no initiative of their own to verify the accuracy of the Impact Study. They merely accept the information in the impact study as truth, without challenge. There appears to be no system of checks and balances in place for this government agency. We have the potential here for a Federal Agency run amuck. Is it that easy to put honest, hardworking Americans out of work? FPI answers to no one, except a Board of Directors comprised of their own. How many times has the board of Directors denied an expansion of market share or new product development? I suggest that Congress put in place an outside agency to audit FPI Also, that FPI's impact studies be performed by an outside agency so that we can be sure the data is not tainted by conflict of interest. And that an appeal process be put in place for businesses that are threatened when the FPI Board of Directors approves an expansion or increase of market share. I am grateful to Congressman Hoekstra and his supporters for their ability to recognize that the rules governing FPI have become obsolete in today's marketplace, and for taking the initiative to do something about it.

FPI does not play by the rules or operate under the same code of ethics as the rest of the business world. How can they expect the business community to welcome them? Southern Automotive employees are team players that understand quality and on time delivery is important. We sell parts to support equipment all over the world and believe our Aimed Forces deserve the best in quality support. As a government contractor we follow the thousands of pages of Federal Acquisition Regulations (FAR), as well as drawings and specifications put in place to maintain quality standards. Does FPI have to adhere to the same specifications? Published reports that I have read show a general dissatisfaction in FPI's quality and delivery time. I have tried through the Freedom of Information Act to find out FPI's Government quality and delivery time rating (which all contractors have), apparently FPI does not have to make their rating available since I have received no response from them. I can imagine why.

I am not opposed to prisoners performing useful work or being educated while incarcerated. But I feel that the "mandatory source of supply" status enjoyed by FPI is not necessary. The obvious financial advantages that FPI receives such as; paying lower wages, having no payroll liabilities, paying no taxes, paying no insurance, paying no rent, paying no utilities, etc. should offset any unique costs they may have, and enable them to be competitive. I should be able to enter a competitive quote on government contracts, as should FPI. We should both have to adhere to quality and delivery standards.

On April 14, 1999, 1 received written notification that FPI was amending their "Competitive Impact Study of Proposed Production of Engine Electrical components" to include only two, (2) NSN's under FSC code 2920. This study also contains conflicting information, which I will address on May 25, 1999 at the hearing before the FPI Board of Directors. I realize that this concession, made in my favor makes me one of the few lucky ones, but I wonder if this was done in light of this upcoming hearing? How can I be assured that they will not reintroduce this expansion again next year? And who will police FPI to see to it that they do not expand beyond those two NSN's? It is time that Congress allow the "sunshine" of outside scrutiny to shine on FPI as with most federal agencies.

I resent having to spend vast amounts of time and money that t as a small business owner cannot afford, defending my company against this enormous government agency. However, I do thank you for listening and I would like to thank Congressman Hoekstra, Congressman Kildee, the NFIB and the SBA for their help.