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Behind the fences: UNICOR's affect on private business.

To a variety of companies that have to compete with UNICOR, they may believe it is Goliath versus David, and they are losing. UNICOR is a division of Federal Prison Industries, Inc. (FPI), which is a self-supporting government corporation. UNICOR even has its own FAR (Federal Acquisition Regulation) ruling: FAR Part 8.6. The FAR translates that UNICOR must provide training and employment for prisoners in federal prisons through the sale of its supplies and services to the U.S. Government. Supplies and services include clothing and textiles, electronics and plastics, recycling activities, fleet management, industrial products, office furniture and business related services within their 74 factories in the United States.

An even larger concern for government contractors trying to compete with UNICOR is FAR Part 8.602(1), which states, "Before purchasing an item of supply listed in the FPI Schedule, conduct market research to determine whether the FPI item is comparable to supplies available from the private sector that best meet the Government's needs in terms of price, quality and time of delivery. This is a unilateral determination made at the discretion of the contracting officer. The arbitration provisions of 18 U.S.C. 4124(b) do not apply."

UNICOR would only have to inform the contracting officer that they could produce or provide service at a comparable price, quality and delivery schedule to be awarded the contract. Is this fair? Not if you ask non-government-owned vendors that have to fight with UNICOR to win a contract. And how many other vendors are non-government owned? Everyone but UNICOR!

UNICOR is able to undercut their competitors most of all by offering the government a lower price on goods and services. According to the United States Department of Justice, inmate pay is between $.23/hour to $1.15/hour. This places UNICOR well below the average pay of private businesses.

Not everything is coming up roses for FPI, however. The General Services Administration (GSA) reminds its government customers about Public Law 108-447, Section 637 that states FPI is no longer mandatory and if it does not meet the requirements of best value, then the buying agency may purchase from other sources. This includes more than just price. Quality and time are also factored into the equation. According to FPI's 2009 Annual Report, it reported a net loss of $35.9 million compared to the 2008 fiscal year earnings of $3.1 million. In addition to Public Law 108-447, Section 637, private companies always have the Contract Disputes Act of 1978.


Wish it was that uncomplicated? According to the FAR 8.602:

"d) Disputes regarding price, quality, character or suitability of supplies produced by FPI, except for determinations under paragraph (a)(1) of this section, are subject to arbitration as specified in 18 U.S.C. 4124. The statute provides that the arbitration shall be conducted by a board consisting of the Comptroller General of the United States, the Administrator of General Services and the President, or their representatives. The decisions of the board are final and binding on all parties."

This regulation makes some FPI awards not subject to the Contract Disputes Act of 1978. The decision in Core Concepts of Florida, Inc. v. United States, which was brought before the Department of Justice, reinforced the regulation. The Department of Justice also argues that the Civilian Board of Contract Appeals--which was established by Section 847 of the National Defense Authorization Act for Fiscal Year 2006 to hear and decide contract disputes between government contractors and executive agencies under the provisions of the Contract Disputes Act of 1978--lacks jurisdiction in most UNICOR disputes.

At the same time, UNICOR can also protest a federal agency's decision to purchase from another vendor under requirement. 18 (FAR) [sections] 8.602(a). You can read about such a protest on the United States Department of Justice's website where Federal Prison Industries, Inc. (UNICOR) protests the U.S. Marine Corps' award of contracts to four Federal Supply Schedule (FSS) vendors for furniture to be installed at the Amphibious Warfare School (AWS), Quantico Marine Corps Base, Virginia. The General Counsels decision included:

"We agree with UNICOR that issues related to the Corps' compliance with the statute--as opposed to its comparability determination--appear to fall outside the board's dispute resolution authority under 18 U.S.C. [sections] 4124(b). However, because the initial step in the process is determining comparability, those issues become relevant only after the agency has made a proper comparability determination. In this regard, if the board made a binding determination that, contrary to the Corps's finding, UNICOR's products were comparable, the agency would be required to purchase UNICOR's products, and the statutory compliance issues would be academic. Thus, until the issue of comparability is resolved by the arbitration board, it would be premature for us to consider the merits of these additional issues."

The protest was dismissed.

Is UNICOR the Big Bad Wolf?. That is a question that can be easily argued on both sides. FPI does a lot of good within communities. They train federal inmates in a trade, which allows them to become self-sufficient when they get out. On its website, FPI states that they are first about inmate release preparation and second about business. It may be a cliche but there is data to back up the claims that FPI helps inmates transition outside fences and into society. The inmates also use their earnings to pay court-ordered fines, child support and/or restitution. As a tax-paying citizen, UNICOR looks like great competition, but to the private business, UNICOR is the sheep in wolves clothing.

Deb Carroll is the director of NACM's Government Business Group (GBG). She may be reached at
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Title Annotation:SELECTED TOPIC
Author:Carroll, Deb
Publication:Business Credit
Date:Mar 1, 2010
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