NEW PROCEDURE FOR FPI FOR PRODUCING PRODUCTS ON A COMPETITIVE (NON-MANDATORY) BASIS FEDERAL PRISON INDUSTRIES, INC. (FPI) On October 21, 1997, the Commerce Business Daily published an announcement regarding new procedures for FPI for producing products on a competitive (non-mandatory) basis. FPI's Board of Directors granted approval for FPI to competitively bid on products for which it did not rely on its status as a mandatory source provider. As discussed in the announcement, under this new procedure, FPI would not follow the public involvement guidelines process established by 18 USC 4122(b) which is required for new products FPI offers as a mandatory source. This process includes the preparation of a market study evaluating the potential impact on the private sector of the proposal to produce a new product; an opportunity for the public to comment on that market study; and submission of the study and public comments to the Board of Directors of FPI for a final decision. This guidelines process is not followed when FPI does not rely on its status as a mandatory source as with services or for products which are produced by FPI as a subcontractor to a Government contractor. The October 21, 1997, announcement explained that this new procedure was recommended by FPI's independent auditors, Urbach, Kahn, and Werlin (UKW), to address situations when FPI is unable to be responsive to customer demands because of the time constraints imposed by the lengthy industry involvement guidelines process which takes from six to nine months to complete and to permit FPI to diversify into new areas which would reduce FPI's impact on any single private industry. In the October 21, 1997, announcement, FPI recommended that procedures be established under which the guidelines process would not apply where FPI intends to compete to produce a new product without relying on its status as a mandatory source provider. This procedure would be used in situations such as: responding to a solicitation in the CBD; where FPI is sought out by the customer because the customer has had difficulty identifying sufficient source(s) of supply; etc. FPI will notify the public of its intentions of competitively bidding on a product by placing a notice in the CBD. Once a new product is offered competitively by FPI, it will remain a competitive product and will never be added to FPI's Schedule of Products as a mandatory source product. FPI will not attempt to exercise its mandatory source at some future point in time, nor will it seek Board approval to expand production of the product by invoking the guidelines process at some later date. In addition, the Board of Directors of FPI has determined that as is the case with respect to the services that FPI provides, whatever share of the market FPI acquires on a competitive basis will be deemed to be a reasonable share of the market within the meaning of 18 USC 4122(b)(2). Sales of products manufactured under this procedure will be tracked and recorded separately by FPI as is the case for subcontracting and services, since such sales will not be subject to the market share limitations of the guidelines. For the reasons set forth in the October 21, 1997, announcement, in the absence of any comments in opposition to that announcement, and based upon Board of Directors approval, FPI is announcing the establishment of new procedures that permit FPI to competitively bid on products for which it will not rely on its status as a mandatory source provider. If there are any questions concerning these procedures, they should be addressed to: Manager, Planning, Research, and Activation, Federal Prison Industries, Inc., 320 First Street, NW, Washington, D.C. 20534. Posted 12/17/98 (W-SN281437).

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