UNITED STATES DEPARTMENT OF JUSTICE

FEDERAL PRISON INDUSTRIES UNICOR

BOARD OF DIRECTORS HEARING ON

ENGINE ELECTRICAL COMPONENTS

Tuesday, May 25, 1999

1:06 p.m.

Federal Prison Industries

400 First Street

Washington, D.C. 20001

PARTICIPANTS:

Board Members:

Joseph M. Aragon, Chairman
Todd A. Weiler, Director
Richard G. Womack, Director

Witnesses:

Thomas Tyson
Southern Automotive Wholesalers, Inc.
Pontiac, Michigan

Audie Zimmerman
Vice President, Government Sales
Prestolite Electric, Inc.
Ann Arbor, Michigan

Representative Peter Hoekstra
(R-Michigan)

Introduction
Joseph Aragon

Witnesses:
Thomas Tyson
Audie Zimmerman
Peter Hoekstra 45

MR. ARAGON: Good afternoon, everyone. I would like to welcome you all on behalf of the Federal
Prison Industries and now I'll refer to Federal Prison Industries throughout the day, you'll hear it referred to as FPI.

I would like to welcome you all on behalf of the FPI board of directors to a special meeting of the board to hear oral arguments on a proposal to produce a new product, engine electrical components.

The proceedings are quite informal. There are a few ground rules I would like to go over with you and I'll take a few minutes to explain those, as well as introduce the other members of the board who are here.

Federal Prison Industries is six-person presidentially-appointed board and there are three board members here today. This constitutes a quorum under FPI rules and the members who are not here are Arthur White, who is a partner with Yankelvitch Partners, who was appointed to the board in December 1997. Additionally, Steve Colgate is Assistant Attorney General for Administration, he represents the Attorney General. Mr. Colgate has been on the board since 1994. And Ms. Susan Lowenberg, who is the managing producer of L.A. Theater Works, was also appointed to the board in 1994.

Board members who are in attendance are on my right Mr. Todd Weiler, who is the Principal Deputy Assistant Secretary of the Army for Manpower and Reserve Affairs, and represents the Secretary of Defense. Mr. Weiler has been on the board since 1996. And on my left is Richard Womack, who is the Director of the Office of Civil Rights for the AFL-CIO. Richard represents labor on our board and has been a board member since 1996.

My name is Joseph Aragon. I am the chairman of the board. I am a businessman in private life. I represent retailers and consumers and was appointed to the board in 1994.

FPI was created in 1934 with a mission to employ Bureau of Prisons inmates by making diversified products for sale exclusively to the Federal Government. It is our responsibility to see that we do that, perform our mission, without undue burden on any single private industry.

In the early years of the corporation, when the number of inmates was relatively small and the Federal Government was growing, it was a relatively easy job for us to create enough jobs for our inmates. This has become a much more difficult situation due to the continual dramatic rise of inmate population in the Bureau of Prisons, as well as the constriction of the federal marketplace.

Federal Prison Industries serves several purposes which further the work of the criminal justice system. It keeps the inmates occupied in the institution and teaches them work habits which researchers show increases their likelihood of successful reintegration upon release.

The process that we are going through today called the guidelines process was established in 1989. It was a culmination of a cooperative effort between industry, labor, Federal Prison Industries and Congress. It was created so that whenever the corporation proposes to make a new product or significantly expand production in an existing
product, a market study is conducted to measure the impact that decision will have on a private sector following a hearing, and that's what we are doing today, to gather public comments on the proposal-before the board.

Upon closing this hearing, the board will then deliberate and issue our decision. In this process, an initial impact study was prepared by FPI as required by law and released to the public for comments. The board takes notes that, in this particular case, upon receipt and review of public comments are used in an effort to analyze whether or not potential adverse impact on industry is going to occur if the board follows the recommendation of staff.

FPI revised its original impact study in this particular case and reduced its request to include only engine electrical components work currently performed by non-U.S. labor offshore. The decisionmaking process for the board is a tough one to go through because we certainly recognize how important our decisions are in the community and the private sector.

The decision that the board makes will be made on the administrative record and the record consists of several items: the impact study, which I have already described. This was prepared by FPI staff based on publicly available information as well as information that was provided to us by interested parties as a result of a request by UNICOR.

It also consists of comments by industry and other interested parties on the impact study, the responses by UNICOR to the comments and then any final written comments by the parties provided two weeks before the hearing.

You can assume that we're familiar with the record. It will be helpful to hear from you as we consider this request from the UNICOR staff, but let me emphasize that the written record is now closed. As provided by the rules in the guidelines process, no new information should be presented at this hearing.

All information should have already been presented and that is what we will use in addition to your oral comments here today. This will give you an opportunity to expound upon your previous written submissions as we deliberate to make our decision. If there is an item which you feel is compelling and that you feel needs to be entered into the record, you can request that the board grant an exception and we will give such requests due consideration.

Should any new information be offered in the course of today's testimony, it will be up to the board to decide to what extent that information will be considered before the final deliberations and decision.

Typically, the board tries to issue its decision in an expeditious manner. The time frame may vary depending upon the circumstances and complexity of the issues related to its decision. In any case, you can be sure that once a final decision is made, all parties testifying here will be notified via fax as soon as possible and public notice will be made in the CBD within ten days.

This is not a formal process where people are sworn in, but it is being recorded verbatim by ourcourt reporter, Ms. Cindy Fryer, I would encourage you, please, if there is an occasion, as I said earlier, Ms. Fryer, if you need to adjust your equipment or pause the proceedings, just let me know.

And to those of you who are going to speak to the board today, would you please do so from the podium so that we can get you captured on the recording system and identify yourself, if you would, please, before you begin your testimony.

The record that is produced from the hearing will be available from the court reporter directly. I believe this is what we would recommend if you would like to talk to UNICOR staff to get a copy of that recording or the transcript, then please direct your request to the same place that you did with any written comments that you had throughout this process.

Are there any comments from other members of the board before we get started?

(No response.)

MR. ARAGON: Approximately two hours have been allocated for this hearing. We would ask the witnesses to respect each others' time needs. According to the sign-in sheet and the advance notices of intent to appear at the hearing, there are three witnesses, I believe: Thomas Tyson, Audie Zimmerman and -- let's see - - Brad Noller -- Brad, were you going to testif

MR. NOLLER: No.

MR. ARAGON: And any other people who show up before we close and would like to make comments for the record, we'll certainly entertain that testimony. Well, you may proceed, gentlemen. what we typically do is if you have a particular order you would like to proceed with your testimony, then you can drive that, if you would like.
Why don't we start we start with you, then, Mr. Tyson?

MR. TYSON: Thank you, Mr. Chairman, and members of the board. For the record, I am Thomas M. Tyson. I'm the president of Southern Automotive Wholesalers.
While the immediate threat to my business has been reduced as a result of the changes in the impact study, I have come here today to personally address the board regarding several issues. I am sure that this board has read the correspondence submitted by my company in response to the impact study. Today, I would like to address several topics mentioned therein.

First, the original impact study contained a number of inaccuracies, including the percentage of government business that my company does and how the expansion would affect us.

Second, the industry's largest trade association, the Automotive Parts Rebuilders Association, was never contacted, as required by statute.
Third, important documents such as the request for data and impact study are sent without confirmation of receipt. We did not receive a request for data and I have spoken with another company involved in the proposal expansion that also never received a copy of the impact study,
Fourthly, it as never mentioned that we are located in a labor surplus area or an SEA hub zone.

And, finally, in the case of Sielman S.A. of Greece, if it was not for the letter to Mr. Grieser dated May 7th the topic of international trade issues and the Defense Industrial Cooperation Agreement never would have been brought to the attention of the board.
Why would this board concern itself with using repatriation as a pretext for further expansion into 2920 FSC? It seems acceptable to me as a taxpayer that the benefit of several billion dollars of defense spending from a foreign government is desirable. Large purchases by the Greek government through American defense contractors are maintaining thousands of jobs in America.
World trade is a two-way street. FPI should allow unfettered competition to continue. The value of open trade with foreign countries outweighs the benefit of occupying the time of a few felons. Therefore, I feel the board should deny this request for expansion.
The errors identified in this study would lead one to believe the board is making decisions based on questionable material. I have suggested that perhaps an outside agency could prepare impact studies to offer credibility and eliminate the conflict of interest issue.

The final report on the methodology review panel confirms my statement. Also, I believe an appeal process monitored by a mediator should be established for businesses threatened by expansions.
Regarding FPI's limiting themselves to only two NSNs is noted in the final study, it states these are only repatriated items that would not affect American companies. For the record, Southern Automotive can currently produce both alternators listed. Based on a letter of record Niehoff has produced the 200 amp generator in the past and are planning on producing the same item in the future.
Southern Automotive, or any company for that matter, should have the option of quoting this or any items directly. Therefore, I feel the board should deny this request for expansion.
Finally, I would ask the board if they want to be associated with another outdated government program that doesn't work. The business community has changed since 1934 when this program was established. The mandatory source of Supply status FPI holds is no longer necessary.

The obvious financial advantages that FPI receives such as paying lower wages, having no payroll liabilities, paying no taxes, no insurance, no rent, paying no utilities, et cetera, should offset any unique costs they have and enable them to be competitive. FPI has made themselves an adversary to the business community instead of a partner.
I urge this board to act now to take positive action to change its negative image and join the business community. I believe FPI can compete in fair markets and receive the benefits of cooperation and be equitable to private sector businesses who create the jobs, opportunity and tax revenue for the treasury.
I would like to thank the board for their time and for giving me this opportunity to address this important issue.

I also have copies if you need them.

MR. ARAGON: Thank you very much, Mr. Tyson.

Questions from the board?

MR. WOMACK: Not right now,

MR. ARAGON: I think, Mr. Tyson, we'll wait and hear what Mr. Zimmerman has to say and then I'm sure we'll have questions for both of you.

MR. ZIMMERMAN: Thank you for the opportunity to appear before the board today. My name is Audie Zimmerman. I am the Director of Government Sales and Marketing for Prestolite Electric, Incorporated. We do a great deal of business with the military on automotive electrical systems.
I would also tell you another part of me that is here today is a retired part, retired from the Army. I spent my most of life in and around the Army as a motor officer, as a program manager for the Army recently retired, and I would like to address some comments along those lines as well.
From a personalized perspective, I would just add that we bring to the table here a great deal of engineering effort, a great deal of quality assurance support for the item in question here. One of the things we do as a large business, in addition to supporting small business, we do have an aggressive small business plan ourselves, is that we bring a lot of stability to the end product.

We have capital equipment investments in the product. We've got a proven quality record of producing this item in the past. In our capacity right now we're talking about a supplier to UNICOR, not as the manufacturer of the item itself, but it would give us great opportunity to use the capital equipment we've currently got in place and bring back on some people that have been laid off in the past due to outsourcing of the program overseas. So we've also got some economical impact on the local business community in Arcade, New York.
We also bring a competitive volume advantage, economy of scales. We do a lot of business with similar items, both for the civilian sector and for the military. Don't get me wrong, most of our business is commercial business, but we do have quite a bit of military business as well, and we are dedicated to that business in the facilities we currently have and in other facilities that are located around the world.
Another couple of things that we bring is a warranty. We can provide a warranty that most other businesses cannot, especially if they're located overseas. If you've got a warranty issue and you're in the military, it's hard to get that warranty source overseas and anything to support you on that regard.
Another thing we'd like to bring to your attention is the ability to produce on a level field. You know, we have certain laws that we need to produce by, environmental laws, green laws, however you want to call them. These laws are not always enforced overseas and there's a lot of economical practices that one can put in place overseas that leads to a competitive disadvantage for people here in the United States that have to follow the green laws. So why should we encourage sending offshore to another country practices that they won't let us do here in the United States?
The other part of me, as I stated is here today, is from an Army perspective. You know, having been a program manager, one of the things I look for from a support vendor is its ability to meet surge capacity. If contingencies come up and I've got to go fight a war in Bosnia or whatever, I need somebody that's going to be able to ramp up quickly to support that. We have the facilities to support our piece of that kind of an operation. I think UNICOR, from what I've seen, has the ability to surge by putting this into other markets, into other UNICOR facilities, I mean. As a military man, I wouldn't want to rely on offshore support for any of my vehicle systems.

The Army today is stretched thin on readiness. I have not personally in my 20 - plus years in the Army seen the Army in this much of a lowered state of readiness, to be quite honest with you. Many of the dollars are going to support contingency operations and taken out of the MA funds and your playing catch - up. This is a good way to get the readiness dollars stretched a little bit further for the units.

If you're operating on a constrained command operating budget down at the battalion level and you've got the opportunity to buy a piece of equipment or a component at half the price that you would typically pay, that makes your readiness go up significantly. Again, with the warranty, we provide a comprehensive warranty for all of our products.
And I would just leave with you one last thought of having spent 41 years in and around the military. I think the big responsibility here is to the ultimate customer and that's to the soldier in the field. Give them the product they need, maintain the quality, but you've got to give them the product at the right price or you're going to impact the readiness even more. Than you for your time.

MR. ARAGON: Thank you, Mr. Zimmerman.

Questions?

MR. WOMACK: I have a question. My question goes to the heart of the industry itself. Do you consider this a healthy industry? In other words, is there a downward trend as far as employment or do you see employment rising?

MR. TYSON: I see it as a downward trend currently because you may notice in your own automobiles, used to be a car went 60,000 miles you started looking for a new one. Now it's not uncommon to hear your neighbors driving around in cars with 150,000 miles, they're not rusted out, they still drive, the components are better than they used to be. They are lasting longer. The need for the overhauled and rebuilt product has diminished. I'm not an expert in it, I mean, that's really more my association's -they would have more of a response than I would.
The military end, of course, the same way and that's where we're really -- we're really in, that's 90 percent of my company's sales, is sales to the military, both new and overhauled components.
The stock levels are down, they're going more with quick ship, Impact cards, nobody wants to wait, they want it yesterday. It's changing. The market's changing. It's not like it used to be. They're not stockpiling like they used to.

MR. WOMACK: Let me ask you a more direct question. In terms of your company, how do you view your employment outlook?

MR. TYSON: Currently, it's stable. We're not -- we have no plans to add anyone the current year. We're really holding on to what we have, we're going after some new products, but this takes time.
There's a lot of testing involved, first articles, pre-approvals, pre-qualifications, that type of thing, which really slow us down from going up. And, as we get a new product, the older ones are becoming less in demand. So it's a constant battle to keep it.

MR. WOMACK: I've got two other questions. one of those questions goes to the heart of it. These are jobs that are currently out of reach, so to speak, because the company is offshore. Do you see any -- I'm trying to put this in a good light. Do you see any chances of those dollars being offshore that your company would have a chance to retain or get those jobs -- see them coming back here and you would have a likelihood -- have a chance of retaining those jobs or someone here in the same industry would get those jobs?

MR. TYSON: Yes, I do. Currently, we produce both of those items. One of them is in testing right now. The two jobs I believe you're speaking of, there's a 200 amp generator that was taken over by Sielman. That contract's been completed, that's now waiting for its next solicitation to come out. The 60 amp I think is a four-year requirements type contract. 'I believe that the 60 amp, though, some of the orders are being split between UNICOR and Sielman, the company in Greece. They have received orders, delivery orders, from what the ASTAT reports show me.

MR. WOMACK: Okay. My final question goes to the heart of offshore jobs, per se. Are there any circumstances that you could foresee that would make it worthwhile for a company that goes offshore to bring those jobs back here and compete in the same markets? And let me just make it a little bit more clear.
I know there is competition between you and several other companies, so is there an unfair advantage to you when a company that's in the same line of business you're in decides that it's not going to do business in the U.S. any more but is going to go offshore and make its product and send them back here? What effect does this have on your company per se? Wait a minute. And also are there any circumstances where you view this as healthy competition or under what conditions do you see this as healthy competition, if so?

MR. TYSON: I believe I understand your question. We have no problem competing with that other company. Many of the components are obtained in the United States anyway. on the larger scale, I mentioned in my speech, most of that -- the small amount of business that that man is getting, and I'm not here to defend him and I don't even know him, really, but they're buying the frigates, they're buying the fighters, they could go to France.
I think the small amount of work that's being done by that one company, my opinion is, let them have the work because there's more jobs -- you're talking General Dynamics on one contract where they're going to get a little bit of business for providing some electrical component. You know, the trade off that they do when they sell overseas, more jobs are coming in than what are going out.

We can compete on those other two items. We don't consider the prices charged to be excessively low, outrageous. They're within the range of what it costs to make the product and we don't see any problem with competing with that company at all. I mean, we -
the prices are actually in line with what they should be.

If anything, they've been a benefit to the taxpayer because now they've forced the cost down, maybe a little more realistic. Before, that 200 amp was a sole source item. I believe Prestolite may have made it. Niehoff took it over, had it. The price got down. This other guy took it. Now the price is down. most likely it's going to go down again. Everybody really wins.

I think UNICOR is at a place in order to -they'll be in the service end of it, repairing them, overhauling them, they can do that part of it, but we have no quarrel with competing with the Greek company.

MR. WOMACK: I just need to do a follow-up to
that, if you don't mind. Are you saying in essence that as longas this company in Greece is producing or making this product, you have no problem with it?

MR. TYSON: If they win it through legitimate means. I mean, there's -- as long as they're -dealing with the military, it's basically' a level playing field. There are specifications, there are
standards, there are requirements that are necessary to produce a product. If you meet them, you can play. Not many companies can do that.

Whenever there's competition, it seems to lower the cost, usually, until it hits a certain bottom and then it's usually fought out for a number of years between companies. We've seen it. We reverse engineer. That's our line of work. We see sole sources have their costs reduced.

I know we can compete with them. We've analyzed the costs, we see no problem we couldn't beat them. I've read a letter from Niehoff. They have every intention of winning that job back next time.

MR. WOMACK: Thank you.

MR. TYSON: Okay. Thanks.

MR. ARAGON: Mr. Tyson, could we continue? Because I'm trying to understand if these jobs remain in Greece, how does that benefit the U.S. economy, rather than bringing those jobs back to the United States where the materials -- the raw materials and small businesses such as yours, such as mine, will be the people who provide components to build these alternators?

MR. TYSON: You're probably getting into an area that's better dealt with by the State Department, but from the way I look at it, I mean, I plan on going after those jobs when it comes up again and we don't see why we can't get them. But how does it benefit the country as a whole? The way I understand it is there's billions of dollars worth of sales that are going to the Greek military and the only thing in return is that they be allowed to have a few jobs in some kind of defense cooperation agreement that was created.

There's more jobs that are maintained by allowing that to go on. I mean, if I was them, I would look at it and say if you're going to cut us out of $2 million worth of business, why do we need to buy our F16's from you? We'll go get the Mirage, they're on sale this week, we'll go there. Why do we need to buy M-1's ? We can buy them from Germany. You know, there's -- the offsets are much higher at our end.

I'm not defending them. I'd rather they didn't get any of the business, it would all go to American companies, but in the larger scale, the big picture of things, we really -- it's not that much. It's not that much business to be concerned about. There's no unfair competition that I see, there's not any subsidies involved that I've been able to see.

The price is in line with where anybody in this country could compete with it. It's not excessively low. I mean, it's a reasonable price. They just happened to get it. I don't believe they'll get it again.

MR. WEILER: I'll make a statement and you can choose to respond to it or not. If that's the case, then why would there be a major difference if it were brought back onshore?
If it's insignificant, are they going to make M1 purchases based on that or F - 16's ? Probably not, but if it's insignificant in one direction, it may be insignificant in the other.

MR. TYSON: That may be a question really posed more to people at the higher end that are the ambassadors and such that do this for a living. if they lose it on a level playing field, I don't think anybody would care.

MR. WEILER: You had mentioned early on that your association, the Automotive Parts -

MR. TYSON: Rebuilders Association.

MR. WEILER: -- Rebuilders Association was not informed of this?

MR. TYSON: No, they were not. We informed them and then they wrote a letter.

MR. WEILER: Do they have a congressional affairs section?

MR. TYSON: I believe they do, but they would have to answer that. They are located in Fairfax, Virginia. I believe they do because they're involved in a lot of issues here in Washington.

MR. WEILER: Because I would just like to note that it is in fact published and I don't know what the standard is, maybe somebody from the staff can tell me how far before these hearings occur that this is published, does the announcement go out.

MR. GRIESER: Approximately six months in the Commerce Business Daily.

MR> WEILER: Okay. Approximatley six months in the CBD. Just for your
clarification, I don't want you to think that somebody intentionally didn't inform the organization, it was something that occurred.

MR. TYSON: No.

MR. ARAGON: And I would like to note that that was Mr. Robert Grieser on FPI's staff who made that comment.
So, again, if we have responses from the audience, if we could approach the microphone at the podium.

MR. WEILER: The second question I have is regarding your call for a mediary -

MR. TYSON: A mediator. Yes.

MR. WEILER: A neutral body. Okay. Is that something that you see as the beginnings of such a process like this or are you saying that you don't believe that this board is a neutral body?

MR. TYSON: Well, I -- I believe you have the best intentions and try to do what's right. I think most people do. But you haven't I think there's more -- you are under a lot of pressure, probably more from the inside, to give these inmates work.
The impression is -- you are given the impression, I believe, that they do need work, that it keeps the prison safer. I've read a lot of articles pro and con. I mean, you can make a case on both sides of it.

I think that most important would be is if we could have an independent board that would not answer to anyone, that has no reason to go one way or another. I think it would give a better impression, people wouldn't suspect it, they wouldn't say, well, that's just a point by FPI, what would you expect. I mean, that's the first thing that would come out.

If they just had an independent board and at the end, something for mediation that says, hey, you know, we still don't agree with the board, somebody looks at it and says that's the way it is and it's over with.

MR. WEILER: I think -- and maybe you want to say something to that -- we're making a step that I think you will be encouraged by, but before I yield back to the chairman, let me tell you about that, the new body that's being formed. Let me just reassure you a little bit about the board here.

The board does not answer to UNICOR or the Bureau of Prisons; it is an independent body appointed by the President. And I don't feel any personal pressure and I don't think any of my colleagues here do. I think it is fair on your side to say that we are given a lot of material about UNICOR and we seek material from the other side as well. But as best as you could be reassured, I would reassure you that we are a neutral body and just to take it one step further, we have -- I forget what the official title of the new appeal body is --
Do you know what I'm talking about? The appellate committee -- arbitration board? Okay.
Arbitration board, which is made up of individuals that will represent a neutral position that will give you an opportunity and the process that you may be unhappy with the way deliberations go.

MR. ARAGON: And-this effort is specific to our waiver process and how we handle waivers in the federal government. That group is composed of a key individual from several agencies appointed by the agency chief who will arbitrate any disputes between
agencies. That group will not -- does not have oversight authority over the UNICOR board.
But you did put your finger on a very difficult dilemma for the board or a conundrum and that is the fact that we do need to wear two hats. We have to direct the corporation as well as to use our best efforts not to cause undue influence on the private sector.

I struggle with that, just as my fellow members do, all the time. Mr. Womack represents labor and his responsibilities are to protect jobs in the private sector that are affected by UNICOR's work. However, part of his constituency, and speaking for you, Mr. Womack, part of his constituency is the union members who work in federal prisons, whose lives are protected or kept safer because of UNICOR's existence.

And in my own case, I am a business owner, as you are, Mr. Tyson, and I know that the landscape changes all the time and we perform services in several areas that UNICOR performs and we're basically locked out, as it were, no pun intended, but for the better good, I think it's an important program I support.

But you have very well said -- put your finger on the problem that we face.

MR. WEILER: Thank you for clarifying that. Maybe I didn't make that clear. I guess what that presents to you hopefully is that in every major decision making process involving UNICOR there is a body, be it one side or the other, that has an independent role to review this.

MR. TYSON: Well, I believe that. The major problem I see are these impact studies and how they're conducted and just a simple question would have been -in one of the impact studies would have been, what is your trade association that represents your industry?

That one question would have brought out, you know, the APARA, you know, it would have said -- it would have pointed you in the right direction. It went off to two other people, organizations, I don't recall who they were, American Motor Company or something, and they said they didn't represent that industry and that's as far as it went. Just posing that one question would have brought, you know, an answer.
But it just appears that these studies need to be done by someone on the outside, some kind of an outside group, that can collect it, because you have a difficult job, you are wearing two hats, and you're trying to do what's right, but you're getting information that's all skewed, where it's -- you know, twisted a little here, twisted a little there, you know, and it's half completed, not everyone responds, you know, some people don't get them like we didn't get it, it didn't come in the mail.
And, you know, after you respond, you get a FedEx the next day. If you don't, if you never got it, it came third class, it could have gone in with the magazines and tossed out. Nobody knows.

MR. WEILER: That was another point that you made. I think you were referring specifically to faxes, there was no receipt of

MR. TYSON: No confirmation of receipt. I mean, if they could have just spent the extra $1.75 when they sent them out to everyone that they wanted to, we would have gotten it and you could have said you did get it, you just failed to respond, you know, and then that would have been -- we would have nothing to
come back with because we did, we failed to respond, you know, we're liable for the consequences. But sending it third class mail or however it was sent, it just never showed up.

MR. ARAGON: Those points are well taken in terms of process and we'll certainly pursue those. We have just a couple more questions for you, Mr. Tyson.

MR. TYSON: Sure.

MR. ARAGON: Congressman Hoekstra, welcome. I appreciate you probably have a very tight calendar and if we could just finish with this gentleman and certainly allow you to make a presentation if you would like to?

MR. HOEKSTRA: I do.

MR. ARAGON:. Mr. Tyson, you said your company is producing these items at this point?

MR. TYSON: Yes, we are. We are tooled on them. We sell them mostly for overseas sales. It's about 10 percent of our market, those foreign government sales.

MR. ARAGON: I was particularly taken by your comments about another government program that's
outdated and doesn't work. You know, part of, as I said before, the problem that the board has is that we are operating under the authority granted in 1934 and the board's charge is doing just exactly what it's doing and that is wearing both hats. But I was taken by your comment on competition.
You said level the playing field, let's compete like businessmen. So are you saying that you would support Federal Prison Industries competing in the open market?

MR. TYSON: If it was reviewed, I believe -I have no problem with competition. I mean, I'm a capitalist. You know, making money is what I do. I try to, anyway. I don't necessarily have a problem with it, as long as it's fair.
Now, to come out and -- but I believe there has to be some sort of a formula worked out. You can't say I'm going to sell this pair of blue jeans to K-Mart and my labor is 25 cents an hour so I'm going to sell it for $9 a set. No.
I think you'd have to do something -- and this is really outside -- you know, it's not union, I don't
understand all the ins and outs, but you would have to factor in comparable wages that are out there. I mean, you can't be selling shirts, you know, for $2 that are being produced for $9 in North Carolina, for instance. You'd have to put in the same industry standards and then basically let marketing take over and go for it. I wouldn't have a problem with that. But an unlevel playing field, I would be against because, you know, from the way I understand it, you're not paying unemployment, you're not paying workman's comp, utilities, overhead, any of that. It's really not factored in. It's an education program, I believe, is what this, for training people.

You're not figuring the real costs of the real world. You would have to put those into the formula and say, all right, our labor comes out to $12.97 an hour, our overhead is 21.5 percent, my GNA is 6 percent and you put it in and you can compete. I don't think anybody would have a problem with that. But it's unfair competition, like the Chinese dumping stuff in here.
I mean, they have, the way I understand it, prison labor producing goods sold in this country and we're upset about that. We're saying this is not fair, these guys are making socks for two and a half cents apiece, you know, getting paid, basically, their food. That wouldn't be right. But if we leveled it by factoring in all the other figures, you guys may have more business possibly and there wouldn't be any problem with the private sector that I see. I don't represent them, that's my own personal opinion.

MR. WEILER: I'm sorry. I've got to jump in here. What you just articulated is a very interesting dilemma that we have been speaking about for a period of time now which is how do you do the mission of reducing recidivism, employing as many inmates as possible, and balance that with a business that is competitive, if you're going to do that. You're talking about the pieces that need to be factored in on the UNICOR side, wages, the inclusion of any federally-funded facilities or whatever.

MR. TYSON: Sure.

MR. WEILER: Your overhead and whatever. on the other side, however, is the fact that you can't
have machines do this because then you're destroying the whole point of the mission of UNICOR.
We can't replace inmate labor with machines because then we're just a business and we're not doing the mission that we're supposed to be doing out there. So that's the balancing and it's very tough.
I mean, there are very strong arguments on both sides of it and I think achieving that balance is where UNICOR is trying to go now.

MR. TYSON: I'm sure there are, but if these inmates are being trained to be put back in to be useful citizens, the methods that they're being trained in, let's say they're sewing army jackets, it's not being done by hand in the private sector, I believe it's all being done by machine, so the ability to do a stitch in nine is not going to matter because no one's going to use the skill.
I mean, I would think if you want them to be productive, number one, they could spend some time in education to learn because a lot of these people come in, they're not college grads going into prison, these are people who for whatever reason don't have the
educational background or the skills.
They could be taught these skills and I think making things labor intensive, I mean, it's akin to picking trash up on the highway. You can get really accurate with that little nail on a stick, but, you know, what's the private sector job going to be? There won't be one.
And so I think that's where the emphasis may be on education and doing things like they do it in the private sector so the guy -- you know, not using an abacus but using a computer. You know, it eats up labor to move them little balls back and forth on that rod, but if you walk into the office and say I can run a six-row abacus, the guy's going to say what's that, we use 486s or Pentium 3's here.

MR. WEILER: Right. And as long as you're not paying for your -- well -- as long as that's an appropriated fund activity, that's taxpayer dollars -

MR. TYSON: Yes.

MR. ARAGON: A last question, Mr. Tyson, and then we'll move to the congressman.

MR. WOMACK: Well, I think you made an interesting comment. I'd just like to follow up on it just for a minute. You talked about unfair competition and also about a limited playing field.
Do you feel that if FPI forms a partnership with a company to produce a product, is that unfair competition or is that -- how do you see that?

MR. TYSON: Where are the sales going? To the private sector or to the government?

MR. WOMACK: well, I guess --

MR. TYSON: We've talked about both here.

MR. WOMACK: Let's leave it with the government.

MR. TYSON: The government. Okay. I would say, yes, it would be unfair.

MR. WOMACK: It would be unfair? Even if it was your company?

MR. TYSON: Even if it was my company.

MR. WOMACK: It would be okay, then.

MR. TYSON: Would it be okay?

MR. WOMACK: Yes.

MR. TYSON: It would be wrong.

MR. WOMACK: It would be wrong? You wouldn't do it?

MR. TYSON: Probably not. No. No, I know I wouldn't. It's just black and white. It's right or it's wrong, there's no gray in my mind.

MR. WOMACK: okay.

MR. ARAGON: You haven't had FPI perform subcontracting work for you firm before?

MR. TYSON: Oh, yes, we have. We have on a couple of occasions.

MR. ARAGON: Well, help me with that, then. If it's wrong, then --

MR. TYSON: We did, I think, about five years ago, we had them produce one job for us, one job or two jobs. It was all for the same customer. But the -- we had -- at the time, I didn't understand really what FPI was until -- this has only be a new revelation in the last couple of years, but when we found out that they -- one of your salesmen or people in your organization contacted me and said we have this available, because we have sold in the past to UNICOR supplies --

MR. ARAGON: You didn't know it was inmates doing the work?

MR. TYSON: Oh, I knew it was inmates doing the work. At the time, I'm a little cloudy, do you have the year or -

MR. ARAGON: '95, '96, '97 ? Looks like to me.

MR. TYSON: Yes. We had -- yes, it was on a U.S. Government contract for a sale to the Taiwanese army, I believe, or something to that effect. It was an FMS shipment.

MR. ARAGON: I don't know what that is. I don't have any more details than the fact that FPI's been a subcontractor for you in the past.

MR. TYSON: Yes, we've used them, I believe, like I say, twice. On two different occasions. At the time. But I knew that was inmates doing it, they contacted us and said that the rules in your contract allow you to do it and I said, oh, really? And they said all we need is a copy of the contract so we sent it to them and they said okay and we said, okay, go ahead.
At the time, I wasn't involved in UNICOR to the point I am now, knowing what it was about, that it
was threatening jobs. If it was allowed by the contract, we accepted it. I mean, just like I would not disallow a tax deduction. I may not agree with it, but I will take it. You know what I mean? If I can deduct a charitable contribution, I'm going to take it.

MR. ARAGON: Well, thank you, Mr. Tyson.

MR. TYSON: Thank you.

MR. ARAGON: We appreciate it. Congressman Hoekstra, if you would like to take the podium. Might I ask as a bit of housekeeping here, we also have members of your staff, I believe.

MR. HOEKSTRA: Yes, we do. We have Bill Montalto and Chris LeGrande.

MR. ARAGON: Chris LeGrande was nice enough to ask me to coordinate schedules at our hearing yesterday for the senator to see if he may want to continue with the work of your committee, so we'll certainly work with Chris on that.
And I cannot read your name, it looks like Gail -

MS. CHADDOCK: Chaddock.

MR. ARAGON: Chaddock

MS. CHADDOCK: From the Christian Science Monitor.

MR. ARAGON: Did you have any comments for us or are you here just observing?

MS. CHADDOCK: I'm here to learn.

MR. ARAGON: Thank you very much. Welcome.

MR. HOEKSTRA: Thank you. Thank you.

It is good to be here. It's good to follow up on Mr. Tyson.
You're going to decide whether you're going to approve FPI's production of a new class of items, electrical engine components.

I asked to appear before the board because this expansion case and other experiences that I've had over the last few months, and I'll talk about those later in my testimony, are yet further confirmation from my perspective of the board's inability, or worse, unwillingness, to effectively oversee the actions of FPI's career management staff.

While I speak today only for myself, these views are not unique to me. They are shared by many members of Congress and on both sides of the aisle and
on both sides of the Capitol dome. They are also held by many in the business community, they are also held by many in organized labor, despite the voice for working men and women provided by Mr. Womack.

Something must be done now by the board to make the board a more effective restraint on FPI's career staff. Otherwise, they will take any action, I believe they will take any action, to maximize their goal of expanding inmate work opportunities. Minimizing the adverse impact on law abiding workers and the firms that employ them will only be passing thoughts, without board vigilance.

Actions by Congress to restructure the board also seems warranted. The outline isn't clear as to what that will be. First and foremost, I fully recognize that your service on the FPI board is a part-time responsibility. You all have demanding full-time day jobs that command most of your attention.

Further, you lack some of the fundamental powers that could be exercised by a corporate board of directors. For example, you don't hire and you can't fire FPI senior management. FPI's CEO is always the
current director of the Federal Bureau of Prisons. FPI's Chief Operating Officer is the Assistant Director for Industries, Education and Vocational Training. They are chosen by someone else.

In the interests of brevity, that's what my statement will be, but I don't think it's all that brief. I want to pose to you rhetorically my observations about the flaws in the handling of the expansion proposal before you. Then I want you to directly hear at least some of my outrage about the matters that arose at the April 21st hearing.

I had intended to offer today an invitation to the private sector members of the board to appear before a scheduled hearing of the Oversight and Investigations Subcommittee. Unfortunately, the invitation will have to wait until subcommittee staff have the opportunity to review the board materials which Representative Tim Roemer, the subcommittee's ranking democrat, and I requested in our May 6th letter to Chairman Aragon.

As mentioned to you yesterday, I would like to receive the dates for the planned board meetings for
the remainder of 1999 because then I think we can schedule -- hopefully, we can schedule a subcommittee hearing that matches your schedule and our schedule.

Now, with respect to the expansion proposal before the board today.

To me, this case demonstrates a litany of examples of how FPI's career staff failed to effectively conduct the statutorily-required analyses or outreach to those businesses or workers likely to be affected. It also reeks of the FPI staff trying to manipulate the process to justify their proposed expansion. This case demonstrates how thoroughly captive this board can be to the informational cocoon which the FPI staff can so easily spin around you.

Let me cite a few of the examples already before you. The preliminary staff analysis completely misrepresented the adverse impact on Southern Automotive. Rather than having a "minimum impact on this firm," the initial proposal to expand broadly into the array of components within the Federal Supply Classification 2920 would have put this firm potentially out of business.

As Mr. Tyson, president of Southern Automotive, said at our April 21st hearing, he had to expend substantial amounts of management time to save his business and the jobs of his mainly inner city workers. Running a small business is tough enough without having to worry about what the federal government is going to do to you.

Even after having been mentioned in the staff's preliminary analysis, he had to make a specific request to obtain a copy. I know that FPI staff claims to have mailed him a copy, but the fact is he didn't receive it. Since his firm was identified as one that would suffer an adverse impact, why wasn't a single follow-up telephone call made?

The statute calls for outreach to trade associations likely to have members that could be affected by the proposed expansion, yet no contact was made with the Automotive Parts Rebuilders Association. Why not? This one is obvious from the name of the organization.

No contact was made with any labor union whose members might be affected. Why wasn't the UAW
contacted? Again, it's too obvious to be missed, other than by design. It is my understanding that the UAW plans to submit a statement for today's record. The board has received a letter from the president of Sielman, S.A., the Greek firm that is currently producing the two truck components that are now the focus of the revised expansion proposal. According to that letter, the production of these two U.S. Army spare parts was actually arranged by the Department of Defense under a Defense Industrial Cooperation Agreement with our NATO ally, Greece.

While the Defense Department is using Greek bases to prosecute NATO's operation, Allied Force, FPI is trying to take contracts from a small Greek business.

I am not here to protect small foreign businesses in Greece or elsewhere, but FPI's new focus on repatriation of both products and services does raise trade implications that cannot be ignored. The board may wish to direct the FPI career staff to establish some contacts with the Defense Department, the State Department and the Commerce Department.
These are enough examples to make my point about the thoroughness of these analyses. And, as you know, this is not an isolated incident. The staff analysis supporting the proposed expansion of the production of military gloves was similarly criticized by business and organized labor and prompted my last appearance before the board.

I have written to you regarding the continuing validity of the market analyses that supported your last production expansion into the federal market for office systems furniture. The unauthorized expansions in the dormitory and quarters furniture market was the subject of a less than complementary decision by the U.S. District Court for the District of Columbia.

All of these events led me to request copies of the minutes of the board's deliberations on recent production expansion decisions and the full record upon which each of these decisions was made. You assert that you provide independent review. Given that you are informational captives, I have my doubts.
I have my doubts about the effectiveness of such independent review, assuming you have the will to provide vigorous oversight.

Most of the independent regulatory agencies conduct their deliberations in public. For example, the Federal Communications Commission. Why doesn't the FPI board conduct its deliberations in public? Certainly you don't consider yourselves more important than the FCC commissioners, presidential appointees who are subject to Senate confirmation.

The simple answer is that you are not as yet required to do so by the FPI's authorizing statutes. You could, however, take this action yourselves. I challenge you to do so before we in Congress mandate a dose of sunshine.

Next, FPI's staff often selectively quotes from the September 1997 report of the so-called independent "FPI Methodology Review Panel." However, they never quote the one recommendation that seems to make perfect sense to me as well as many in the business community and organized labor; that is, that the statutorily-required market impact analysis not be conducted by FPI's career staff. Rather, the report urges that the analysis be conducted by the independent
source.
For example, the analysis could be undertaken
on a cost reimbursement basis by an interagency team
that includes the Office of Federal Procurement
Policy's Federal Procurement Data Center, the
Department of Labor and the Small Business
Administration, to name just three potential
participants.

I would like to have the board's thoughts regarding this recommendation by the Methodology Review Panel. Specifically, I would like the board to promptly consider and formally state whether it is disposed to implementing this change unilaterally and, if so, when.

Next, I would like to present another suggestion that is prompted by FPI's announced intentions to expand the volume of inmate-furnished services, both to the federal government and to the private sector. Why not unilaterally extend the statutorilymandated market impact analysis process with its opportunities for public participation to proposed expansions in the services market? I challenge you to do so. Again, I would like to have the board promptly consider this proposal and state its position.

Next, I would like to present to the board a summary of the testimony received at the April 21st hearing. Basically, the statements from both organized labor and the business community expressed opposition in the strongest terms to FPI's intention to begin selling inmate-furnished services in the commercial market. They see it as a unilateral expansion of FPI's authority without bothering to obtain congressional approval.

I agree, and want to put you on notice, that the forces of FPI reform will be working hard to put a halt to this expansion until it is expressly authorized by Congress.
Similar comments were received from organized labor and the business community regarding FPI's proposed comprehensive regulation, published for public comment on January 7, 1999.
Now, I work in Washington. I've got staff in Washington which is very different than what Mr. Tyson has. We are conditioned to look for FPI announcements in the Commerce Business Daily. I don't believe that's part of your daily operating procedure, to read Commerce Business Daily as part of the Federal Register notice. we almost missed it. I must commend FPI's chief operating officer for at least extending the public comment period for 60 days. I'm sure he's not pleased by the comments being received, but it is clearly the right thing to do.

While characterized as a codification of existing standards and procedures utilized to accomplish FPI's mission, it is viewed by organized labor and the business community as an attempt to use the rulemaking process to give the force and effect of law to various policy pronouncements of the FPI board and the career staff.

While you may not agree, that is how the FPI reform forces are viewing these proposed regulations - broad expansion without bothering to obtain congressional approval. Since I am uncertain as to whether the board will ever have direct access to the actual public comments, I would also like to furnish you today with the comments submitted by Representative Frank, Representative Collins, Representative Maloney and myself.

Finally, I could not close without mentioning the revelation at the April 21st hearing of the ultimate outrage thus far by FPI's career staff. The Quarters Furniture Manufacturers Association was required, not asked, was required by FPI to cede its constitutional right to seek congressional redress to its grievances regarding the FPI operations. As a pre-condition to entering into the pilot program regarding federal agency purchases of dormitory and quarters furniture, FPI career staff required that QFMA quit the coalition -- quit the coalition -- supporting the Hoekstra-Frank-Collins-Maloney Federal Prison Industries Competition in Contracting Act and cease to advocate for any legislative changes to FPI's mandatory source status.

Representative Roemer and I have written to Attorney General Reno to express our outrage and to request remedial action. An open question is still what did the board know and when did they know it?

This will certainly be covered during our forthcoming hearing, which will focus on how the board exercises its statutory responsibilities to "reduce to a minimum competition with private industry or free labor."

Thus far, the effectiveness from my perspective of your oversight of FPI's career staff gets a failing grade from this member of Congress.

That is the end of my statement. I'll take any questions or comments that you may have.

MR. WOMACK: Let me first thank you for your comments and your remarks and also for your support in speaking on behalf of organized labor.

I want to just take a minute just to address just part of your comments. The words inability, unwillingness and being a captive of FPI, this board; this board is not vigilant, the board needs restructure. Those are some very key words in my vocabulary.

MR. HOEKSTRA: They are intended to be. I'm glad you took them as such.

MR. WOMACK: Well, they are. I always look at it this way. I think when one takes on responsibility, one looks at it from a perspective in terms of his or her own condition, from what they have been exposed to and where they have been in life itself. And they try to address that in terms of dealing with day-to-day life issues.

It's sometimes very difficult to wrestle with what I call real human problems, problems of employment, problems of incarceration, problems that deal with day-to-day inner workings of human beings - I just want to say human beings, people.

I notice that Mr. Tyson, in your remarks, you said that his workers come from the inner city, which makes me -- paints a picture in my book, inner city workers. There are certain key phrases I think that tell me or at least it states to me, it says this is who his employees are.
I don't want to assume this, I would like to know for a fact, does his workers come from the inner city? I would like to know that.

MR. TYSON: Yes, in Pontiac. About 70 percent, 75 percent of them.

MR. WOMACK: About 75 percent?

MR. TYSON: Yes. Most of them walk to work.

MR. WOMACK: Okay. And I raise that point for a particular reason. These are issues that are dear to me, dear to me in the sense that I understand what the unemployment rates look like and I would like to see all workers employed.
And I think I have a certain respect for a certain condition as it relates to inner city workers because sometimes they get left out of the equation, to know that there is an employer who is willing to hire inner city workers and put resources into it and make them productive individuals.
So I guess I'm going a long way just to say that I think there are a lot of issues that we need to address, we need to look at, even as a board.
I will say this here, sometimes in my own job which I get paid for, I have differences of opinions in terms of how things should operate and how they should not be, and I know there are always rules and regulations. Sometimes you have to live with them, sometimes you wish you didn't have to live with them. I know there are times when decisions are made that I do not agree with, even here, even in my own job, but I think that's life itself. It puts us in that state.
And I look in terms of -- and I look to Congress, a Congress that is put there by the people, Conqress, a Congress that is put there by the people,
because they feel like they have become a captive of Washington, D.C., that they're not willing or do not have the stamina to deal with the issues that affect their lives and they react to this. Sometimes people get voted out of office and sometimes they get returned to office.

So I think what you have said has really struck a real chord, a chord to the fact that you know we have to listen to these things, we have to address these issues. And sometimes what we do does not set
well with everyone. And I know you can attest to it, sometimes people get elected by 70 percent or 80 percent, sometimes they get 50 plus 1, but they get elected.
So it goes to the whole thing and all I'm trying to say is I understand where you're coming from. I think there's some things that as a board we will work on and try to do better on, things we can do better.
I think in life itself everybody can improve. And when I reach the point that I feel like I cannot make improvement, I think I have lost the concept of what life is really all about. So thank you for your comments.

MR. HOEKSTRA: Thank you.

MR. ARAGON: Congressman, I understand you have to leave directly, but if we could have some comments by Mr. Weiler and myself.

MR. HOEKSTRA: Absolutely. Yes.

MR. WEILER: Mr. Congressman, this is my last board meeting.

MR. HOEKSTRA: We're going to miss you.

MR. WEILER: You're kind. I actually have enjoyed working with you and your staff. If I was like some people in the city, your comments would have a huge effect on my vote because I think that we do strive to make improvements and I think that we have worked very hard to break out of that box. And because we are professionals that have other lives and to come here and do this, we're going to look at it on the merits of the case.

We've got to break out of it, though. I just -- I hear from one side I don't like that, I don't like that, I don't like that, but I keep wondering what do you like? And then I can appreciate where you're coming from with what appears to be expansion here and expansion there and if you're standing on the outside, maybe that's exactly what it looks like.

And it comes back to my earlier comment, I think you had just come in, when I was talking about how do you strike that balance? And this has really been one of the most frustrating things for me here, because I hear it as to building as well, from the Corps of Engineers and so forth. There's a frustration but there's also an understanding, I think, if you dig deep enough on both sides. So I think you've given us some tasks that we need to answer for you.

MR. HOEKSTRA: Right.

MR. WEILER: And I would ask you to take one on, a rock in your rucksack, if you will, to break out -- see if there's not a way that we can break out of this box and come up with something new, come up with something different, some new initiatives that everyone might be able to sign up for.

MR. HOEKSTRA: I'd love to do that. My trouble is right now I'm just trying to fight and to slow down the train that's going down and it's picking up speed. I mean, this whole expansion into services, expansion into services without opportunity for public comment, expansion into an area that from a congressional standpoint the law is silent on. And we think that the board should have exercised some restraint into that kind of -- you know, if the law is silent, rather than viewing it as a big wide open opportunity, which appears what has happened, you know, and saying, hey -- I mean, Prison Industries has not come to us and said, we have a problem, all right, we need to put these people to work.
We have to go to the Federal Register and find out how they're solving these problems and the way that they're solving it is by aggressive expansion and my experience in having worked with Prison Industries is they -- you know, either the career people or the board has made up their mind that they're going to continue going down this track because they haven't -- you know, you're maybe one of the first that has come back and said, hey, help us take a look at this in a new and a different way, which we would be willing to do if we saw some kind of an indication that the board was at least willing to slow down on this track of where they're going, where they're headed today.

MR. ARAGON: Congressman, you know, I take some of those comments very personally, as I'm sure the other board members do, because we believe we do reflect diligence in performing the work, but your comments -your comments aren't jiving with what I think the record is, in my mind, given the issues that you've just talked about. For instance, services as an arena. We're not looking services as a wide opportunity to go after new markets, we're looking at services as an opportunity to take the pressure off of these kinds of circumstances where we have to go through the guidelines process and continue to nip away at our current market where we're locked up, you know, literally where we -- you know what the marketplace is like. So services is an area where there are many jobs, including offshore performed services, where jobs aren't performed by U.S. citizens, where our economy demands -- is crying for people to provide services such as answering telephones and ADP and this kind of tedious grunge work that inmates are perfectly happy with and keep our institutions safe, but we additionally are able to stop, as I say, taking bites out of the traditional markets such as furniture in dorm and quarters.

And as to furniture in dorm and quarters, that's an area where we have taken the initiative. Dorm and quarters, it was this board that three years ago proposed the Dorm and Quarters Pilot Project at the request of the dorm and quarters industry. This board is the first board that took up that request and said, sure, let's do it, and for three years we tried to get it done and couldn't get it done and then when we had it done where there was an agreement between dorm and quarters and this board and this organization to work the pilot project, now -- and this board was aware or this chairman certainly was as he worked with the COO and the CEO on a daily basis, aware of the negotiations that went on with dorm and quarters and the fact that dorm and quarters now has taken a different position than was bargained in good faith is of great concern to me. And, for that reason, I look very much forward to participating in whatever forum, whatever hearing that you have because I want to hear the other side of the story.

Dorm and quarters in good faith negotiated an agreement that was put in a pilot that they proposed, that this board agreed to, and then this -- this was a complete shock, this information that you provided on
OFMA maintaining now that we have forced them to cede their constitutional rights. It was certainly not a part of the process that went along that road.
And had I been or somebody else from FPI, another board member, been invited to your hearing on April 7th or April 21st, perhaps we would have been able to offer some insight there and give you some information, but I don't recall receiving an invitation to your hearing, Congressman.

MR. HOEKSTRA: No, you're right. You did not. There will be a series of hearings and probably one of the next hearings will be an oversight hearing as we have talked about where Federal Prison Industries, FPI, and the board and the career people will be the primary focus of that hearing where we won't have industry people. So it was always planned to be a series of hearings.

MR. ARAGON: And as I told Mr. LeGrande yesterday when he asked me about schedules, in coordinating schedules, I think he would agree that I was very interested in doing that, coordinating schedules.

Lastly, Congressman, because I don't want to take any more of your valuable time, I really take personal offense and offense for the organization to the concept that this board and this organization hasn't been reaching out to all of our constituencies, saying one thing: Help us solve these problems. Those inner city workers that you employ, I presume some of them are people who have been incarcerated.

MR. TYSON: Oh, yes.

MR. ARAGON: I presume you would want them to come out and have work skills and while they're inside that they wouldn't be killing employees who are also your constituents, Congressman, and that's what this program is all about, keeping those institutions safe and trying to stop this cycle.
But the most recent case in point is April 7th, when this board, beginning with the national forum last year where we convened a broad group of people to study prison industries and said, you know, let's look at it from a different angle, with all our agendas tucked away, and let's try and solve these problems for the common good, consider the inmate workforce as a national asset. Well, from there, we planned meetings and we planned meetings with all of the constituent groups, with OFMA and BIFMA and we had a meeting with the same groups you just recommended, different agencies, et cetera, set up to meet on April 7th, but that meeting was stopped and I think it was stopped by you, Congressman, because you believed -- or I can't say what you believed, but those members of those agencies and those other organizations that we had involved in longstanding negotiations with to try and bring people together

MR. HOEKSTRA: The meeting was held.

MR. ARAGON: Well, it was held, but the participants that had initially committed to attend that meeting didn't. And that was a problem. Nor was the agenda as broad as we think -- as constructive as it could have been. I'm sorry, misspoke. But, Congressman, I really wish, you know, we could be speaking constructively instead of the kind of comments -- like you say you want to stop the train, the train is moving, it's a projection of 191,000
federal inmates in six or eight years. We have to create jobs, we have to keep our employees safe, we have to keep these inmates from recycling.

MR. HOEKSTRA: Just in closing, we know the train is moving. That's why I used the pointed words that I did today. And I would expect that within the next week or the week that we're back from recess I think you're going to get a clear signal from the House of Representatives how frustrated we are with where Federal Prison Industries is going, all right?
And that this is a major issue in that we don't agree that the train should be moving in that direction and that that appears to be the only way we can capture the attention of this board and FPI's career civil servants. That is the frustration that we have. We have communicated that. I've been here before, I've communicated it here. We have communicated it to the professional staff at FPI.
And it appears the only way that we can get attention is -- I mean, you take a look at -- I mean, people in Washington marvel at this coalition, Pete Hoekstra and Barney Frank? Carolyn Maloney and Matt Collins? Van Hilleary and Bill Clay? I mean, Bill Clay -we had a great time over the last year and a half debating the Teamsters, all right? Those were not always the most -- those were not always the prettiest hearings.
But when I told Bill Clay what we were working on with Federal Prison Industries and called him, he said, "I'm there with you." All right?
And when you get that kind of coalition together, you've got the majority of the AFL-CIO unions supporting where we are at, you have the Chamber of Commerce supporting where we are at, it tells me that you have at this point in time assumed and are working on an issue and have moved in a direction that is well beyond the range and the bounds of where Congress intended you to go and the end result is that there is a level of discomfort, frustration within the House of Representatives which means that in some cases, in some way now these decisions are going to be moved away from the career people at FPI, away from the board and they are going to be made over on Capitol Hill.
And that's -- you know, I think that's actually where we're moving to, okay?

MR. ARAGON: Well, Congressman, I appreciate your coming. I certainly hope, earnestly hope, that we can participate in that process and we certainly want to.
When I say the train is moving, I wasn't speaking of the train of FPI's board and the organization going off and just scarfing up jobs every place we can look. The train I was speaking of is that population.

MR. HOEKSTRA: I know that.

MR. ARAGON: That we can't avoid.

MR. HOEKSTRA: That's the train you're looking at and I think there are a number of us, and this is why you've got the interest on Capitol Hill, there are a number of us on Capitol Hill that are perceiving it as the train that is scarfing up jobs and that's a :problem.

MR. ARAGON: Well taken.

MR. HOEKSTRA: Yes.

MR. ARAGON: Well taken.

MR. HOEKSTRA: Thank you.

MR. ARAGON: And as are your comments, Congressman, all of your comments about the processes and the recommendations contained in your statement.

MR. HOEKSTRA: Right. Good. Thanks.

MR. ARAGON: Thank you very much. Are there any other comments? Mr. Zimmerman?

MR. ZIMMERMAN: I'd like to say I apologize for not being better prepared for this, this has been a real eye opening experience for me, not having written comments to read from like other folks have had here. I've been getting a little bit of an idea of what goes on in one of these meetings now and, quite frankly, if I attend again, I'll be a little bit better prepared. But I would like to go back to some of the comments that Mr. Womack made on the industry at large.
Yes, the industry is reducing in size. My company has reduced quite a few jobs, both in Arcade, down in Decatur, Alabama, in other places throughout the nation, from offshore. And I'm here to tell you that in a heartbeat, that we have lost jobs offshore. And having been in the military, dealing in military sales as I have in the past, I'm very familiar with Greece. I'm very familiar with the military sales process and how those jobs are bandied back and forth.
The Greeks, as are any other nation, are interested in bringing in jobs to their country as much as we are interested in keeping jobs. This 60 amp alternator is not going to even be on the radar screen when it comes to talking about tanks and jets and stuff like that. It's not even an issue, really. You can talk about it all you want to and, of course, if you talk about the guy from Sielman sending in a letter, he's going to make it sound like it's the end of the earth coming and it's not.
Fine. If they want to have these kind of jobs and set up a manufacturing facility in their country to support their equipment, more power to them. But when we're giving them the jobs to support our own military structure, and for all the reasons I've cited before about the focus that we ought to have here on the soldier, I don't buy it.

You know, it's not big business versus small business, either. I think the whole issue is offshore versus onshore. Southern Automotive is one of our military distributors and we have a significant small business plan put in place, but when it comes to the offshore competition, we lose in the green laws, practices we can't do here in the United States they do overseas, so now let's encourage them to do it more overseas what we won't allow our own people in the United States to do. And, two, the labor rate. We can't compete with that labor rate in a lot of different countries, so let's take the labor intensive practices that we use and reduce the labor. That's a good place to do that. And I would also add that there's probably two customers that are not here that should be here today. In all deference to Mr. Weiler, the soldier isn't represented here today. The Department of Defense represented here today. The Department of Defense
they are receiving out there. And the taxpayer. You know, you have congress people that are interested in their individual constituency, what about the taxpayer in general? That's another witness that should be up here. I'll answer any other questions that you'd like to throw at me.

MR. WEILER: I actually understood everything you said there. Brings back a little of my old job, so thank you.

MR. ARAGON: Thank you, Mr. Zimmerman. Any closing remarks, Mr. Womack?

MR. WOMACK: No.

MR. ARAGON: Mr. Tyson, closing comments?

MR. TYSON: I have none.

MR. ARAGON: Thank you very much. I appreciate all of you coming and providing this information to us. I can tell you that any information we can possibly bring to bear on this very significant social issue we will consider and try and make the best decisions we can.
And as to the immediate matter at hand, as I said, we will deliberate and then announce our decision and it will be announced in the Commerce Business Daily as soon as that's available.
Thank you all for being here. We appreciate it very much.

This hearing is closed.

(Whereupon, at 2:29 p.m., the hearing was concluded.)