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STATEMENT

Of the Honorable Judy Chu, Ranking Member

Committee on Small Business Subcommittee on Contracting and Workforce

“Unlocking Opportunities: Recidivism versus Fair Competition in Federal Contracting” 

Thursday, June 28, 2012

As a buyer of a half-trillion dollars’ worth of goods and services annually, the federal government is a substantial economic engine for the country.  But it is not only traditional businesses and the communities they are located in that benefit from these purchases.  In fact, Congress established several innovative programs, which enable these procurement dollars to flow to entities with a greater social mission – and one that cannot be measured in dollars and cents alone.  Today, we are going to look at one such initiative – the Federal Prison Industries. 

FPI is a federal-chartered corporation that provides employment to those in federal prison.  Operating 98 factories throughout the nation in seven industries, it produces clothing, electronics, office furniture, among other products services.  As an employer of 13,000 inmates, and with an addition 26,000 on the waiting list to participate, FPI clearly represents a major opportunity for the 218,000 inmates currently incarcerated in Federal prisons. 

There are several notable benefits to this program.  Wages earned through FPI work go in part to satisfy court-ordered obligations, such as fines or restitution.  Last year, inmates contributed nearly $2 million through their FPI work.  In addition, FPI targets prisoners who are at high-risk for recidivism and within two to three years of release.  By teaching them basic skills, work ethic, and trade-specific expertise, they are given a step-up for their eventual release back into society.

While there is a 40 percent recidivism rate among the overall Federal prison population, that rate is reduced by 24 percent among FPI-employed prisoners, thus equating to a recidivism rate of approximately 30 percent among participants. Research conducted by FPI has also concluded that inmates in its work-program are less likely to be involved in misconduct while incarcerated. 

Given FPI’s mission it is reasonable to expect that it has some unique advantages over the private sector.  This is why for certain goods and services, a federal agency must ascertain whether FPI can provide the product.  Of the nearly 300 items that FPI produces, two-thirds of the items are mandatory source items, meaning that FPI is given the right of first refusal to satisfy a contract in these areas.  In addition to these preferences, FPI has numerous other flexibilities in terms of resources, wages, and workforce. 

During today’s hearing, I am looking forward to examining the cost-benefit proposition of FPI.  I am particularly interested in reviewing these costs in light of the many benefits that FPI provides small businesses, both as subcontractors and through innovative public-private partnerships. 

In this regard, FPI has an important role in supporting the private sector and spurring the development and growth of small businesses.  In fact, in 2011, it purchased more than $640 million in raw materials, supplies, equipment, and services with 40 percent of its purchases made from small businesses.   However, unlike with small firms, there is no limit to the amount of a contract that FPI can subcontract to other entities.  This means that FPI is often a catalyst for business development.

Balancing the larger social mission of FPI against the needs of small businesses is no easy task – but I look forward to the testimony we are about to hear and thank all of the witnesses for being here today. 

Thank you and I yield back the balance of my time.