FEDERAL PRISON INDUSTRIES, INC. (FPI) MISCELLANEOUS PRODUCT CATEGORIES FOR CLOTHING AND TEXTILES, ELECTRONICS, GRAPHICS AND SERVICES, AND METALS Urbach, Kahn, and Werlin (UKW), Certified Public Accountants were requested to review and evaluate Federal Prison Industries, Inc. (FPI's) policies and procedures to ensure its compliance with the industry involvement guidelines which were designed to identify and prevent an undue burden on private industry by FPI. The UKW review resulted in a report which included several recommendations for FPI for monitoring and complying with the guidelines that included changes to policy definitions, policies, and procedures. As part of its review, UKW recommended that FPI seek Board of Directors' approval to create an "other miscellaneous products" category because the industry involvement guidelines process is lengthy and can take approximately eight months to complete. In the interim, small insubstantial manufacturing opportunities are lost that do not meet the current definitions of an existing product because FPI cannot manufacture a new product without Board of Directors approval. The creation of miscellaneous products would allow FPI to manufacture small quantity and/or small dollar value items that will not negatively impact the private sector, as well as assist FPI to diversify from traditional industries. Among the items that would fall into this category would include, but not be limited to, items required for one-time, non-recurring requirements (e.g., two years or less); items that FPI might pilot to assess whether it is economically viable to produce; and items that require little or no capital expenditures. FPI concurs with this recommendation and is proposing the establishment of a miscellaneous product category for several of its major program areas (clothing and textiles; electronics; graphics and services; and metals). Items that are classified under a miscellaneous product category for one of these program areas would be considered outside of the current definition of existing product as previously defined by FPI rules. FPI is currently operating under an interim rule which allows FPI to classifyproducts by their Federal Supply Classification (FSC) codes and allows FPI to combine FSC codes with the approval of the Board of Directors. Specifically the definition of specific product, as developed in 1997 by FPI and the private sector, is as follows: "A specific product refers to the aggregate of items which are similar in function (e.g., bags and sacks), or which are frequently purchased for use in groupings (e.g., dormitory and quarters furniture) to the extent provided by the most current Federal Supply Classification (FSC) Code .... Specific products will equate to the most current 4-digit FSC Code, published by the General Services Administration, Federal Procurement Data Center (FPDC). As a general rule, products will be deemed to be different specific products if they are identified by a distinct 4-digit FSC Code." The total miscellaneous category for each product area cannot exceed $2 million. This dollar threshold is established at a level that it will not adversely impact on any single industry. The $2 million can be divided among several items in that product area as long as one individual item's production does not exceed $1 million. Normal adjustments for inflation are allowed each year after the first year of production. If an item's production exceeds the $1 million adjusted for inflation thresholds, the industry involvement guidelines process will be invoked for the item. Items included in the miscellaneous category will be reported in the FPI sales report which is prepared every six months. Comments on this notice will be due within 45 days of the date of publication in the CBD. Relevant comments will focus on and address why FPI should not create miscellaneous product categories and include documentation that such production would negatively impact a firm. All comments received will be considered by FPI and the commenter will be advised whether FPI will proceed. As always, any interested party has a right to raise any question at any time with the Board of Directors (see 28 CFR 301.2), and thus may appeal to FPI's Board of Directors any issue or decision relating to whether an item may be produced by FPI. Posted 09/25/98 (W-SN254623).

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