U.S. Department of Justice

Federal Bureau of Prisons

Washington, DC 20534

March 4, 1999

Mr. Thomas Tyson, President
Southern Automotive Wholesalers, Inc.
597 North Saginaw Street
Pontiac, Michigan 48342-1468

Dear Mr. Tyson:

This is in response to your recent letter concerning the Federal Prison Industries, Inc. (FPI) proposal to manufacture new engine electrical components. In your letter, you refer to certain inaccuracies. I assure you, our intentions were to be as accurate as possible. FPI mailed a letter on November 25, 1998, to Southern Automotive Wholesalers, Inc. and over 60 other companies that have supplied the U.S. Government with items classified under Federal Supply Classification (FSC) code 2920. That letter notified recipients of the initiation of a public involvement process, as required by FPI's authorizing legislation (18 U.S.C. 4122); explained the public involvement process; and requested any relevant information which the recipients would be willing to share.

The inaccuracies which were mentioned in your letter reflect more on the precision of the data sources than on the overall accuracy of the competitive impact study. Naturally, no other party will have as exact information on a particular firm as resides within that firm. Dun and Bradstreet reported that Southern Automotive Wholesalers, Inc. employs 23 individuals, No indication was made regarding full-time, as opposed to part-time or temporary, employment. Your letter points out that you employ 16 full-time and five to eight temporary workers.

The information source used for contractors' annual sales to the Federal government was the Federal Procurement Data Center, Our search of the database for Fiscal Year 1997, the most recent full year available at the time of the study, indicated Southern Automotive Wholesalers, Inc. had sales of just under $X million within FSC 2920 and over $X million in all FSC codes. In your letter, you indicate that your FY 1997 sales within FSC 2920 were just over $X million and total Federal sales were over $X million. This may partially be explained by the reporting criteria to the Federal Procurement Data Center, which only requires procuring Federal agencies to report contracts which exceed $25,000. It does support FPI's position that the FPDC data is not all inclusive of any specific product market, although it is one of the best single sources for Federal procurement data available.

Our study indicated that Southern Automotive Wholesalers, Inc. derived 32 percent of their total sales from FSC 2920 items during FY 1997. Your letter indicated that over the past five years, FSC 2920 accounted for 52 percent of your firm's total revenue. This difference is the result of our using the best information publicly available at the time the study was originally prepared.

With regard to Prestolite, Inc., it should be emphasized that FPI has done business with them, as well as with many of the original equipment manufacturers of engine electrical components, for many years by purchasing components as part of our existing engine electrical component rebuilding services. The engine electrical component items which we hope to be able to repatriate have in the past been manufactured by various companies in the U.S., with Prestolite having been one of the major suppliers. FPI's options of partnering with any one company, or with multiple companies, are completely open, subject to FPI's Board of Directors approval to produce this product. This includes the potential to work with Southern Automotive Wholesalers, Inc., should you be willing to consider such a possibility. Please keep in mind that our interest is in repatriating work to the U, S. and/or sharing in future industry growth, not in taking any jobs away from the existing domestic civilian workforce.

FPI's mandatory source will not provide any potential partner exclusive domain over an entire product line. FPI's statute requires that FPI's products be based on current market prices. FPI must also meet its customers' delivery and quality requirements. FPI's requested market share, which will be evaluated and determined by the Board of Directors, will limit the amount of the Federal market for engine electrical components that FPI will be able to access. The balance of the Federal market, as well as the entire domestic market, will remain available to those companies willing and able to compete.

You referred to the Federal Labor Surplus Area designation of Pontiac, Michigan. According to the Bureau of Labor Statistics, Pontiac, as part of the Detroit Primary Metropolitan Statistical Area, is experiencing an unemployment rate among the lowest in the country, at 2.9 percent for December 1998; lower than the 3.8 percent for the State of Michigan. Your concern about potential loss of civilian jobs within the domestic industry is certainly understandable. FPI is fully aware that its interest is not served if FPI is the direct cause of the loss of domestic jobs. The whole purpose of the public involvement process and the competitive impact study is to minimize, as much as possible, any adverse impact on the private sector. The information provided in your letter will be incorporated into the final report to the Board of Directors and, along with any other input received by other interested parties, will contribute to the Board's decision.

Forty-five days prior to the Board of Directors hearing, which is now scheduled for May 25th, we will send out the final impact study, along with comments received and our response to those comments, to the Board and all interested parties. Please be assured that FPI will give serious consideration to all comments, and may adjust its recommendations in the final impact study in light of any new information received. A copy of the final study will be sent to you.
Your letter was also copied to various parties. I respectfully request that you inform those parties that we have responded to your letter, and will give due consideration to the information you have provided. Also, I trust that this letter addresses your concerns. If I may be of further assistance, please do not hesitate to call me at (202) 305-3570.

Sincerely,

Robert C. Grieser, Manager
Planning, Research and Activation Branch
Industries, Education and Vocational
Training Division