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Good afternoon Mr. Chairman and members of the Committee. My name is Bryan Rossman. I am President of "C" Construction Company, Incorporated based in Tyler, Texas. We have a range of government clients and build industrial and institutional facilities. I am here representing the Associated General Contractors of America.

The Associated General Contractors of America (AGC) is the nation's largest and oldest construction trade association, founded in 1918. AGC represents more than 33,000 firms, including 7,500 of America's leading general contracting firms. AGC's general contractor members have more than 25,000 industry firms associated with them through a network of 99 AGC chapters. AGC member firms are engaged in the construction of the nation's commercial buildings, factories, warehouses, highways, bridges, airports, waterworks facilities, waste treatment facilities, dams, water conservation projects, defense facilities, multi-family housing projects, site preparation, and utilities installation for housing developments.

AGC understands the need to train prison inmates in order to allow for a more successful transition from incarceration to a law-abiding life. This cannot be done, however, at the expense of law-abiding citizens and their businesses. More importantly, however, this hearing focuses on the Federal Prison Industries' (FPI) disregard for the law governing their government corporation.

AGC is very concerned about the possible expansion of the Federal Prison Industries source mandate and source preference. First, private sector contractors have rarely been required to use prison industry products for federal work. Second, this will adversely impact AGC's supplier members. Finally, AGC has serious questions about the timely delivery and the quality of products contractors would be required to use. For FPI to say that this is a codification of their current practices is incorrect. Section 302.9(g) states that "FPI's status as a mandatory source extends to contractors when they provide products for government use." This is simply not current practice, nor does AGC believe it should be. Our government clients are concerned that FPI will now have to review every procurement before it is placed in the Commerce Business Daily (CBD). This has the potential to slow federal procurement to a grinding halt. FPI does not have the resources to review every federal procurement.

AGC is concerned about FPI's attempt to insert themselves into a fiercely competitive marketplace by putting themselves above the competition. FPI plans to insert itself into the procurement process, but it is unclear how they believe this will improve federal contracting. Will requests for proposals contain all the information a contractor will need to bid work? It is clear that AGC members will be limited or prohibited from purchasing supplies and equipment from AGC supplier members. Construction is a service, not a product. On the whole, AGC believes that FPI should not interfere with federal construction, but AGC is concerned that in this regulation the service/product distinction is not made.

Full and open competition has governed federal procurement since the passage of the Competition in Contracting Act (CICA) in 1984. The Act provides clear rules for federal

procurement that all contractors must subscribe. CICA allows the government to purchase goods and services at the lowest cost with the best quality. The Federal Acquisition Regulation (FAR), created from CICA, governs procurement, allowing contractors and contracting officers clear guidelines for bidding and competing work.

With this proposal FPI is saying that they do not like the current rules of competition and specifically do not wish to operate under the same rules as other contractors. The FPI is already exempt from the guidelines of the FAR. In addition, its existing source mandate preempts any other supplier from attempting to compete for direct federal contracts. The list of items supplied by FPI is extensive, but not competitive. If these products were truly competitive, why would FPI's source mandate exist?

They already have a preference. What they want now is a mandate. Under FPI's proposed regulation, they have essentially allowed themselves to be, pardon the pun, judge, jury, and executioner. FPI will decide if the product needed to fit a request is within their inventory. FPI will decide if a product is "price reasonable." FPI will decide if the department or agency is allowed to seek a product outside the FPI's inventory through a waiver process. The federal government is a captive customer. This is in direct contrast to the recent improvements in federal procurement that gives the contracting officer more discretion to buy the best quality product at the best price on a procurement. It is unfair to current suppliers who supply the federal government with quality goods and services to allow FPI to eliminate their opportunity to compete.

Contracting officers have been given more discretion in decision making in a variety of areas. Contracting officers can choose the type of project delivery system that will be most cost effective to purchase goods or services for the government. In addition, burdensome specifications have been eliminated in order to allow procurement to parallel the private sector, allowing for more cost-effective transactions to occur. FPI has unilaterally stripped the contracting officer of his or her authority through this rule. No longer is FPI asking for a simple transfer of goods between government agencies. Now, FPI is demanding the purchase of their goods by all federal contractors.

FPI's many products do not allow for integrated solutions for procurements. For example, FPI could use its mandatory source selection for plumbing fixtures and accessories. This undermines private sector agreements between contractors and suppliers. What does that plumbing contractor do when the piece of FPI's plumbing equipment does not integrate into the rest of the system? According to FPI's proposed regulation the contractor must wait while FPI considers a waiver. How long must that contractor wait for FPI to determine what the contractor already knows: that the equipment does not work.

This is the real heart of the problem with FPI's regulatory expansion of their government corporation. Under this proposed regulation, a contractor has no control of the supplies being brought to a jobsite. The contractor has no guarantee of their quality. Unlike private sector relationships, the supplier (FPI) in this case has no contract with the contractor and no business reason to keep the contractor happy. In the private sector, businesses works

hard to cultivate relationships in which they know they can depend on the contractors or suppliers with whom they work.

According to the National Furniture Center FPI, fails to deliver on time over 30% of the time. Can you imagine the disruption of the construction timetable? The many phases of a construction project often preclude one from going forward until the previous phase is complete. Is FPI asking thousands of workers on a federal jobsite to sit idle as they wait for FPI to deliver something that could be purchased from traditional vendors in a more timely manner? Is the federal government willing to pay 30% more for construction work simply because contractors are waiting for supplies? Is FPI offering to pay our idle workers?

Once supplies arrive on a jobsite, what guarantee of quality does the industry have that the equipment will work as prescribed? Private sector vendors provide guarantees and warrantees for products. Being in business is in itself a guarantee that the products work. Competition in the private sector guarantees this. FPI's fear of competition leads AGC to wonder about the quality of prison products.

Section 302.9 of the proposed rule states "Since it (the schedule) does not contain all permutations of options and features available for each product, it may not always be clear whether a particular product offered by FPI has the necessary features desired by a Federal customer." The contracting officer must contact FPI to determine if the product is appropriate. Is FPI capable of making these determinations? Is it not better for the contractor on site in cooperation with the contracting officer to determine what is appropriate for a job? If the contracting officer determines the product is inadequate, he must then apply for a waiver from FPI. Why is this discretion being removed from the contracting officer by FPI?

In the same section, FPI states that "neither efficiency, administrative convenience, interchangeability, compatibility, nor uniformity with non-FPI products constitutes a basis for using commercial sources, without first obtaining a waiver." First, this allows FPI full discretion regarding products, unilaterally stripping a contracting officer of his ability to control a procurement timetable or costs. Again, AGC asks the question, is the federal government willing to pay as work crews sit idle as FPI's board considers a waiver. When did FPI become the final source for answers on a federal contract?

FPI states in this proposed regulation in Section F "FPI is the mandatory source for products irrespective of whether they are deemed to be an integral or structural part of a building." The federal government has never advertised a product with the source requirements of FPI in a federal building. Contractors could face a serious disruption of supply lines as a product is shipped from a prison half-way across the country to fit into a building. Furthermore, public works projects do not require one plumbing fixture. Often, they require thousands. This is simply not cost effective.

FPI also states that they are a mandatory source for products that may be used overseas. In the construction industry heavy materials such as concrete block are rarely shipped

further than a fifty-mile radius to a project. It is not cost effective or timely. Only very specialized components are exempt from this rule. How does FPI propose to pay for this? What will the government do if this new procedure drastically increases costs? In addition, this section contradicts the current FPI exemption of overseas purchases in FAR 8.606.

Section 302.8 of the rule states that FPI's board must ensure that FPI's mission and mandates "do not unduly impact the private sector." We have all seen the "60 Minutes" reports showing the blanket manufacturer being driven out of business by FPI's source mandate. Has the board makeup changed to prevent this from happening again?

In addition, FPI can expand its market by using preferences. FPI may choose to operate as a competitive entity in responding to Commerce Business Daily (CBD) solicitations by creating a new product. In these instances, FPI has chosen to operate with its source preference, a set-aside if you will. FPI can easily undermine competition with its incredible discrepancies in labor costs alone. This is truly unfair to the American taxpaying business owner. More importantly, FPI is most likely competing with small businesses with the type of overhead that provides health care benefits to its workers, vacation, and competitive wages in order to have quality employees that produce quality goods and services. FPI does not offer similar benefits to their employees because the federal government is already responsible for the costs of housing prisoners. The overhead built into the price of a product is not represented in FPI's products because the federal government is paying the overhead. This is not a true competition, but an ambush by FPI to justify its existence.

AGC strongly disagrees with FPI's description of this rule as a clarification of current policies. If this rule is made final in its current form, FPI will be allowed to disrupt the federal procurement process with its mandatory source rule and source preference. This will cripple small businesses currently supplying the federal government with the on-time delivery of quality goods and services. For AGC members, this will be a disruption of traditional vendor relationships. It will drastically change federal contracting. FPI can unilaterally hold up work at critical stages should their products be unable to meet specifications. FPI is the only entity that can determine if the product is price reasonable, even if the contractor is able to prove that another, cost-effective source exists. FPI dictates which pieces can be placed into a system even if purchasing a whole system is more effective. Finally, FPI decides when, where and how it will compete, without regard to the small businesses it will hurt. AGC opposes FPI's unilateral expansion of itself through a series of source mandates and price preferences.

In the 105th Congress, AGC supported H.R. 2758, the Federal Prison Industries Competition in Contracting Act, and urges its reintroduction this year. Such legislation would prevent FPI from unfairly competing with private sector entities. AGC thanks Congressman Hoekstra for ensuring that this important issue receives full Congressional attention.