Federal Prison Industries Reform Introduced in Congress

A bipartisan group of House members has introduced H.R. 3634, the "Federal Prison Industries Competition in Contracting Act of 2011".

Rep. Bill Huizenga (R-MI) offered the bill on December 12 with cosponsors that include Reps. Carolyn Maloney (D-NY), Barney Frank (D-MA), and Jim Sensenbrenner (R-WI).

This bill is virtually identical to H.R. 2965, the bill that passed the House in 2006 by a 362-57 vote (Roll no. 443).  MAPPS supported that bill.  A companion bill was approved by a Senate committee, but was not enacted into law.  However, other piecemeal FPI reforms have been put in place by Congress in recent years.

With unemployment continuing at dangerously high levels, 2012 may be the year Congress enacts a bill that has support from Republicans and Democrats, business and labor.

Like its predecessor, H.R. 3634 includes two provisions significant to MAPPS. 

First, the bill prohibits agencies from specifying Federal Prison Industries (FPI), or its products, as a source in any Federal agency synopsis/solicitation. There have been incidents where architect-engineer (A/E) contracts have required the A/E firm to specify a FPI product, such as a modular furniture system, in its designs.

Most importantly, the bill prohibits FPI and its inmate workers from having access to a variety of geospatial information, about individual citizens’ property or critical infrastructure location.  Specifically, it bans FPI from providing “a service in which an inmate worker has access to personal or financial information about individual private citizens, including information relating to such person’s real property, however described, without giving prior notice to such persons or class of persons to the greatest extent practicable; geographic data regarding the location of surface and subsurface infrastructure providing communications, water and electrical power distribution, pipelines for the distribution of natural gas, bulk petroleum products and other commodities, and other utilities; or data that is classified.” This provision would prohibit FPI from engaging in most, if not all, geospatial activities.

With regard to services, the bill eliminated FPI’s status as a preferred source.  A Federal agency can only contract with FPI for services, such as GIS, CAD, scanning, digitizing, if the buying agency’s contracting officers determines FPI’s services meet the agency’s need in a number of criteria, can perform on time, and provides the service at a fair market price.  This eliminates enormous advantages FPI has enjoyed in providing services.  With regard to products, FPI’s previous mandatory source status is ended in favor of full and open competition.

The bill also prohibits FPI from providing services in the commercial market.  Although FPI’s original 1930’s enabling law prohibited prison-made products from commercial market entry, the organization secured a legal opinion during the Clinton Administration that said since Congress mentioned products in the 1930’s, and not services, then sale of prisoner provided services must be permitted, notwithstanding that the United States did not have a service economy in the 1930s. Several state attorneys general have issued similar opinions with regard to state prisons.

Federal Prison Industries, Inc., which operates under the trade name UNICOR, is a self-supporting, wholly-owned government corporation that employs federal prison inmates.  A program of the Justice Department’s Bureau of Prisons, FPI offers hundreds of products and services, including a number of data conversion activities.

A number of state prison industry operations have extensive GIS capabilities, including Colorado, Florida, and Texas, to name a few.

A recent MAPPS legislative issues poll found 51 percent of members continue to view prison industry reform legislation as a very important or somewhat important issue.

It has been reported that FPI won a contract from the Corps of Engineers to make signs.  The funding came from the American Recovery and Reinvestment Act, ARRA, commonly known as the stimulus bill. While the bill was intended to put law-abiding, unemployed Americans back to work, not to support inmates. The expenditure of Federal ARRA funds on prison industries is being investigated by Congress.

Here is a news story about the bill. 

Under   H.R. 3634, FPI’s Unicor, would be required to submit a detailed analysis of the impact to the private sector before entering into new product markets and would not be able to sell products commercially or internationally; the only customer could be the federal government. It also prohibits agencies from contracting with FPI in which inmates would have access to sensitive or classified information.

"This bill gives the taxpayer the greatest value for their hard-earned money by forcing federal agencies to bid for fair and reasonable prices and for products that best suit their needs. The bill preserves market access for these products or services to the hard-working men and women of our districts. This is simply one more easy, common sense way to preserve jobs and help restore economic security for America," Huizenga said.

"This legislation will protect the jobs of hard-working American taxpayers while providing valuable alternative rehabilitative opportunities to better prepare inmates for a successful return to society.   It is a workable, bipartisan solution to the problem," Maloney said.

"It is time to allow for fair competition for U.S. manufacturers," Frank said.

"We should be looking to make government more efficient and cost-effective, and this bill does that. I support this legislation because it will save taxpayer money and open up the contracting process to competition by allowing businesses to bid for these contracts," Sensenbrenner said.

Other examples of the industries FPI competes in include: clothing and textiles, electronics, vehicular components and fleet management, industrial products, office furniture, electronics recycling, and services such as call center and data and document conversion.

The bill has already gathered interest from a broad coalition of business groups and has a bipartisan list of supporters in Congress from all across America. Original co-sponsors include Reps. Donald Manzullo (R-IL), Edward Royce, (R-CA), Patrick Tiberi (R-OH), and John Olver (D-MA).

In the past, studies by the Government Accountability Office (GAO) found FPI products and services did not meet agency requirements, were not delivered in a timely manner, and were at times more expensive that the private sector.

President Obama Signs 3 Percent Withholding Repeal Bill Into Law

President Obama signed the 3 percent withholding repeal bill into law on November 21.

Passage of the measure by an overwhelming vote in the House and Senate is one of the few bipartisan actions Congress and the President has agreed upon this year.

MAPPS was part of the coalition organized by the US Chamber of Commerce that led the effort to enact the repeal legislation.

U.S. House Votes to Repeal 3% withholding on contracts for goods and services

The U.S. House of Representatives yesterday voted 405-16 in favor of repealing Section 511 of Public Law No. 109-222, which mandates a requirement that federal, sate and local governments withhold 3 percent of their payments on contracts for goods and services.

On several occasions MAPPS has urged the IRS to eliminate the 3 percent withholding.

The bill will now wait for a vote in the Senate before a final approval from President Obama.

Unlike some more controversial bills that have been passed through the House, this bill has had support by both parties. President Obama had included a delay in the effective date of the withholding in his recently unveiled jobs package.

UPDATE:

On Thursday, November 10 the U.S. Senate voted 95-0 to repeal the 3% withholding on federal, state and local contracts as part of an amendment to provide tax credits to companies that hire veterans. The bill must go back to the House for a final vote.

The amendment would offer up tot $5,600 in tax credits to companies that hire veterans who have been searching for work for more than six months and up to $9,600 to those who hire long-unemployed veterans with service-connected disabilities.

The full measure is expected to be taken up by the House next week without much opposition and sent to the President for final signature. Both issues were part of President Obama's jobs plan which provides a bi-partisan agreement. 

MAPPS Opposes 3% Withholding on Federal Contracts at IRS Public Hearing

On September 12 MAPPS Executive Director John Palatiello was one of five witnesses who testified at a public hearing by the Internal Revenue Service (IRS) entitled, “Withholding on Payments by Government Entities to Persons Providing Property or Services.” The hearing was to address legislation enacted by Congress calling for a 3 percent withholding on all federal contracts, including mapping, surveying and geospatial activities, with the IRS in charge of implementing regulations on  section 3402(t) of the Internal Revenue Code.

Palatiello reiterated MAPPS opposition to the 3 percent withholding. He said even with a recent change in the Federal Acquisition Regulation (section 52.232-10), A/E firms, including those in surveying and mapping, still face a potential retainage or withholding of 13 percent on Federal contracts, an amount often in excess of the net profit. He said small business cannot afford to be in the banking business, making interest free loans to the federal government. He also said the withholding will drive firms out of the Federal contracting market at a time when we should be encouraging more competition.

As a means to help business, Palatiello urged that all long-term contracts be grandfathered. In particular, an indefinite delivery/indefinite quantity (ID/IQ) contract should be grandfathered, and the 3%withholding should not apply to any task order entered into or against the ID/IQ contract after the effective date of the IRS regulation.  The same policy should apply to other types of contract vehicles, such as GSA Schedule and Basic Ordering Agreements (BOAs), he told the IRS.

In 2009, MAPPS testified at an IRS oversight hearing opposing 3 percent withholding.

MAPPS is a member of the Government Withholding Coalition (the Coalition), led by the U.S. Chamber of Commerce. The Coalition was formed to seek repeal of Section 511 of Public Law No. 109-222, which mandates the sweeping new requirement that federal, sate and local governments withhold 3% of their payments for goods and services (the government withholding regime).

Currently there is bi-partisan support in Congress to repeal the withholding. H.R. 674 and S. 164 are intended to “amend the Internal Revenue Code of 1986 to repeal the imposition of 3 percent withholding on certain payments made to vendors by government entities.” The bills are cosponsored by a bipartisan group of 250 members of the U.S. House of Representatives and 21 U.S. Senators. This legislation is a priority for the Republican leadership in the House and is scheduled to be debated this fall. President Obama has included a delay in the effective date of the withholding in his recently unveiled jobs package.