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Wednesday, February 27, 2013

Federal Prison Industries: Overview and Legislative History

Nathan James
Analyst in Crime Policy

The Federal Prison Industries, Inc. (FPI), is a government-owned corporation that employs offenders incarcerated in correctional facilities under the Federal Bureau of Prisons (BOP). The FPI manufactures products and provides services that are sold to executive agencies in the federal government. The FPI was created to serve as a means for managing, training, and rehabilitating inmates in the federal prison system through employment in one of its industries.

The FPI is economically self-sustaining and it does not receive funding through congressional appropriations. In FY2012, the FPI generated $606 million in sales, which is greater than the FPI’s sales in FY1993 ($405 million), but it is below the FPI’s peak sales of $885 million in FY2009. The FPI operated at a $28 million loss for FY2012, the fourth straight fiscal year in which the FPI expenses exceeded revenues. The FPI uses the revenue it generates to purchase raw material and equipment; pay wages to inmates and staff; and invest in expansion of its facilities. Of the revenues generated by the FPI’s products and services, approximately 78% go toward the purchase of raw material and equipment; 19% go toward staff salaries; and 3% go toward inmate salaries.

All physically able inmates who are not a security risk are required to work. Data show that the number of FPI work assignments available to inmates has not kept pace with the growing federal inmate population. Starting in FY1988 the proportion of the federal inmate population employed by the FPI started a steady decease. In FY2012, approximately 8% of all federal inmates had an FPI work assignment.

There are only a handful of rigorous evaluations of the effect that participation in correctional industries (i.e., FPI) has on recidivism. The body of research suggests that inmates who participate in correctional industries are less likely to recidivate than inmates who do not participate. However, questions about the methodology used in most evaluations of correctional industries means that there is no definitive conclusion about the ability of correctional industries to reduce recidivism.

Congress has taken legislative action to lessen any adverse impact the FPI has had on small businesses. For example, in 2002, 2003, and 2004, Congress passed legislation that modified how the Department of Defense (DOD) and the Central Intelligence Agency (CIA) procured products offered by the FPI in its schedule of products. In 2004, Congress passed legislation prohibiting federal agencies from using appropriated funding for FY2004 to purchase products or services offered by the FPI unless the agency determined that the products or services are provided at the best value. This provision was extended permanently in FY2005. In the 110
th Congress, the National Defense Authorization Act for Fiscal Year 2008 (P.L. 110-181) modified the way in which DOD procures products from the FPI. In addition, the Administration of President George W. Bush made several efforts to reduce the consequences the FPI’s mandatory source clause might have on the ability of private businesses to compete for federal contracts.

Date of Report: January 9, 2013
Number of Pages: 13
Order Number: RL32380
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