Captive Market

Companies complain that they can't compete against convict labor

Rockford Business Interiors, a Houston company that designs and installs office cubicles, was the low bidder for a $150,000 job with the Huntsville Police Department.

The company's celebration was short-lived, however. Despite what is set up to be a fair bidding process, one competitor -- known as TCI -- got to resubmit its offer and undercut Rockford's winning bid.

"I just walked away from it," says Angela Peña, who put together Rockford's bid package. "I'm not going to fight them. When I know TCI is involved I usually don't bother."

Peña finds it useless to bid against prison industries.
Daniel Kramer
Peña finds it useless to bid against prison industries.

Alisa Morse tells a similar story. She handles bids and contracts for Morse Wholesale Paper and Chemicals. "It's gotten to where I just hate to bid against TCI," says Morse.

Peña and Morse are among a growing number of businesspeople who say they're getting cheated when they have to compete for government contracts against a few select companies such as TCI -- Texas Correctional Industries. It has a guaranteed workforce -- 5,000 employees who never take vacations or personal days, and are always on time. They are inmates serving somewhere between two years and life in the Texas Department of Criminal Justice.

TCI and other prison industries enjoy the kind of low overhead unheard of in the private sector -- they don't have to pay for insurance, benefits or rent -- and their labor costs average well under $1 an hour.

Companies still have beaten TCI and other prison industries in the bidding wars for government contracts. But that often doesn't matter.

By law, all state agencies are required to buy TCI products unless they can be bought more cheaply elsewhere. Even then, those agencies must get a waiver -- from TCI itself -- which requires more dreaded paperwork. And when TCI doesn't have the low bid on a state job, it is allowed to adjust its figures.

Rockford has won bids on agency contracts, but even then Texas prisoners are often hired to install the cubicles and desks sold by Peña.

"So we lose on the service end, too," she says.

Private companies -- many of them small businesses -- are beginning to crusade against the inequities. As Stephanie Starkey, spokesperson for the United States Chamber of Commerce, explains, reform of prison industries is a top priority. "The government gets worse products at higher costs, and businesses are closing doors."

Texas is hardly unique in laws that guarantee business for TCI, which was started by state legislation 41 years ago. Nationally, most complaints center on UNICOR, the brand name for Federal Prison Industries.

Michigan-based Steelcase, Inc., which makes furniture for Rockford, had the low bid on a $6 million contract with the Federal Aviation Administration last year. UNICOR was allowed to revise its bid for the exact amount as Steelcase's proposal. And ties go to UNICOR.

Only after Michigan Congressman Dennis Hoekstra publicly complained did UNICOR withdraw its bid on the FAA job. That didn't silence the criticism -- Hoekstra co-authored a bill in 2003 that would strip the mandatory purchasing provisions now enjoyed by the federal prison industries. The U.S. Senate has a similar bill to change the practices favoring UNICOR.

One witness at the congressional hearings was Rebecca Boegnik, the CEO of Bryan-based Neutral Posture, which makes ergonomic chairs. Boegnik's chairs cost less than UNICOR's and she says they are of better quality. She told Congress that Neutral Posture had lost an estimated $10 million in business to UNICOR over the last decade.

"We started looking at jobs we weren't getting and found out they had to go to UNICOR."

Not only that, Boegnik says, the chairs aren't really made by UNICOR. It merely assembles pieces that are prefabricated by other companies. And federal prison labor stamps the UNICOR label on the shipping boxes, which virtually guarantees their purchase by the federal government. UNICOR regulations require only that 20 percent of the value of their products be added by prisoners.

Boegnik says agency customers have told her they'd like to buy her chairs but can't without a waiver from UNICOR. She's applied for several but has never been granted one.

Peña has had similar experiences. "I've bid on jobs against UNICOR and have asked for a waiver and they don't ever call back."

Boegnik, who employs about 100 people, says the laws favoring prison industries has cost jobs in the private sector. "If we weren't competing with UNICOR," she says, "I'd guess we'd have about 20 more employees."

One of the few prison industry administrators who oppose mandatory purchasing requirements is John Benestante, who has headed TCI for three years.

"It allows someone to shove a product down someone's throat," he says. "It's very unhealthy." But Benestante defends TCI's competition with businesses by arguing that TCI benefits the public by reducing taxes and convict recidivism.

"If TCI hadn't manufactured and sold goods to the prison system, then last year they would have had to spend another $30 million," he says.

Under another program, TCI profits also enable inmates to rebuild donated computers and give them to Texas schools. Benestante says that keeping inmates active and productive is a major plus in maintaining order in prisons. Convicts who have worked for TCI for more than six months have a recidivism rate of about 20 percent, compared to the 30 percent rate overall for Texas prisoners.

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