FPI's Political Punch Gives Industry a Black Eye

Bobbin, Oct, 1999

High-level supply chain management and e-commerce initiatives may be the current headlines in the apparel industry -- deemed the most promising competitive advantages for U.S. firms -- but they will do little to help keep many U.S. producers fighting in the ring if the government doesn't resolve some less-publicized -- yet critical -- business issues.

One such matter is Federal Prison Industries' (FPI) "mandatory sourcing" privileges. They wield a powerful political punch that has given the U.S. apparel contracting community a black eye. These rights allow the organization -- which is responsible for employing federal prisoners -- to have unrestricted access to Department of Defense (DOD) contracts without any competitive bidding and regardless of price, quality or speed of delivery.

This situation has been all but a defeat for those government contractors established in the product categories FPI has been gobbling up. As Larry Martin, president of the American Apparel Manufacturers Association (AAMA) put it: "FPI is eating segments alive." In fact, according to AAMA, FPI is the largest supplier of textiles and apparel to the DOD, with apparel sales of approximately $134 million in 1998, and "is now authorized to supply the DOD with up to 100 percent of more than 105 specific products, from trousers to Kevlar helmets."

How was this behemoth created? FPI, which was formed in 1934, operates as a private non-profit company (revenues must be invested hack in the company) that falls under the jurisdiction of the Department of Justice. Under one directive of its enabling legislation, FPI is supposed to limit its impact within specific U.S. markets. It has been able to beat the system in this case by referencing high-level SIC codes, such as work wear, as its market delineators and then monopolizing specific products that fall several levels down, such as battle dress uniforms.

Apparel and textiles now represent about 25 percent of FPI's net sales, and the industry has been a primary growth target for a number of reasons. Just ask Rick Cippele, president of American Apparel Inc., a Selma, AL-based producer of uniforms who counts more than 500 lost jobs to FPI. As he succinctly sums it up: "Apparel is a low-hanging fruit."

For example, the industry is fragmented by nature and represents numerous differing interests. Then there's the attitude shared by many in government and elsewhere that the U.S. apparel industry -- in terms of manufacturing -- is dying, so why bother fighting for it? Moreover, as a manufacturing company, it's a lot easier for FPI to concentrate on one industry (apparel) than it is to diversify into many different industries. And the list could go on.

In the meantime, the government contracting community is eroding as the prison population is exploding. Additionally, more and more of our national defense supplies are becoming dependent on the production capabilities of federal inmates. As AAMA's Martin pointed out: "During the Gulf War, our members doubled their output to keep up with the buildup [of forces]. If FPI drives the private industry companies out of business, there isn't a hope in the world that prisoners could perform like that."

Faced with the gravity of these issues, AAMA, along with member company representatives such as Cippele, are putting on their gloves and stepping into the ring. They are looking to move lawmakers to reform FPI's "mandatory sourcing" privileges through either one of two bills recently introduced by U.S. Reps. Pete Hoekstra (R-MI) and Bill MeCollum (R-FL). (We'll leave the political intricacies for another time.)

In the past few months, AAMA has made repeated trips to Capitol Hill to lobby on behalf of the industry and to make what Cippele calls "middle ground" suggestions for reform, such as having FPI focus on jobs that have gone offshore completely or on industries such as demanufacturing and recycling -- none of which will cost American citizens their jobs.

Nobody here is saying that inmates shouldn't work. The resounding message is: Let's just be reasonable about it.

Lisa C. Rabon is editor in chief of Bobbin.