The Federal Prison Industries, Inc. (FPI), is a wholly owned government corporation that employs offenders incarcerated in correctional facilities operated by the Department of Justice's (DOJ's) Federal Bureau of Prisons (BOP). The FPI manufactures products and provides services that are primarily sold to executive agencies in the federal government. It was created to serve as a means for managing, training, and rehabilitating inmates through employment in prison industry jobs. The FPI's mandatory source clause has been the focus of congressional scrutiny, in part because some policymakers believe that it has a deleterious effect on private vendors' ability to secure federal contracts. This report provides an analysis of the FPI's sales from FY1993-FY2013. Between FY1993 and FY2013, the FPI sold products and services to 59 different federal departments, agencies, offices, and boards; and, during this time period, the Department of Defense (DOD) was the FPI's biggest customer. Despite the variety of products and services offered by the FPI, a majority of its sales involved seven products (hereinafter, these seven products will be referred to as the "FPI's core products"): 
cable, cord, and wire assemblies (PSC 5995); miscellaneous electrical power/distribution equipment (PSC 6150); household furniture (PSC 7105); office furniture (PSC 7110); cabinets, lockers, bins, and shelving (PSC 7125); household furnishings (PSC 7210); and clothing, special purpose (PSC 8415). Between FY1993 and FY2013, sales in the FPI's core products accounted for, on average, 62% of the FPI's sales of products and services. It is the mandatory source clause, and its effect on private businesses, that has drawn controversy over the years. Since 2001, Congress has made a series of changes to the FPI's mandatory source clause in response to these concerns. The National Defense Authorization Act for FY2002 ( P.L. 108-199 , hereinafter "FY2004 Omnibus") requires all federal agencies to use competitive procedures for the procurement of a product if the agency determines that the FPI's product is not comparable in price, quality, and time of delivery to products available from the private sector. The National Defense Authorization Act for Fiscal Year 2008 ( P.L. For the FPI's sales to DOD, the analysis focuses on three distinct periods: FY1993-FY2001, the period before changes to the way DOD procured products from the FPI; FY2002-FY2007, the period when DOD had to competitively procure products from the FPI if those products did not meet their needs in terms of price, quality, and time of delivery; and FY2008-FY2013, when DOD had to compete contracts for products in which the FPI had more than 5% of the market. The Federal Prison Industries' Sales

The FPI is a self-sustaining wholly government owned corporation, meaning that the FPI's ability to provide work opportunities for federal inmates is contingent on its ability to generate revenue through sales to other federal entities. However, the FPI's total nominal sales in FY2013 were $352 million below the peak of $885 million in nominal sales in FY2009. In general, the FPI generated a profit most of the fiscal years between FY1993 and FY2007 (see Figure 2 ); however, the FPI reported losses each fiscal year between FY2008 and FY2013. Civilian agencies were required to use competitive procedures for procuring products from the FPI if its products did not meet their need in terms of price, quality, and timeliness during the period when the FPI's sales decreased 51% (FY2009-FY2013), but the same requirements were in place for FY2004-FY2009, when the FPI's sales to civilian agencies generally increased. The data in Figure 4 , however, show that competition did not have a uniform effect on the FPI's share of DOD's market for the selected products. The FPI's sales of core products to DOD did start to decrease after FY2009, shortly after Congress required DOD to compete any PSC in which the FPI had more than 5% of the market, but the FPI's sales to DOD in non-core products and services started to decline before this requirement went into effect. Sales of non-core products and services to civilian agencies did decline between FY2003 and FY2004, which roughly coincides with when Congress required civilian agencies to only purchase products from the FPI if they meet their needs in terms of price, quality, and timeliness, but the FY2004 decrease appears to be more of a regression towards the mean after the FPI's sales of non-core products and services to civilian agencies uncharacteristically increased between FY2001 and FY2003. Even though the FPI's market share for core products for both DOD and civilian agencies decreased after Congress made modifications to the FPI's mandatory source clause, it appears that those decreases were the continuation of a long-term trend. In addition to changes in its mandatory source clause, the FPI's declining sales might also be the result of decreased federal spending. Between FY2008 and FY2013, there was a significant decrease (64%) in DOD's total purchases in the PSCs in which the FPI made a sale. The FPI's declining sales to DOD roughly coincide with decreasing DOD purchases, though the FPI's sales to DOD peaked in FY2007 while DOD's purchases peaked one fiscal year later. Also, the FPI's sales did not decrease at a rate commensurate with the decrease in DOD's purchases (the FPI's sales decreased 31% between FY2008 and FY2013), which would be expected given the increase in the FPI's share of DOD's market since FY2008. The FPI's declining sales to civilian agencies coincide with the decrease in civilian agencies' total purchases in PSCs which the FPI made a sale. One possible reason is the federal government began spending less money purchasing products offered by the FPI. It is more difficult to determine what effect legislative changes to the FPI's mandatory source clause had on the FPI's sales. The FPI's share of the federal market, for all of its products and its core products, decreased after Congress made changes to the mandatory source clause, but it appears that this was the continuation of a trend that began before those changes were implemented. It might be that the FPI's sales would have declined even if Congress had not made changes to the mandatory source clause. Even if the FPI's share of the federal market remained consistent year-to-year, the fact that the federal government was spending less purchasing products and services offered by the FPI would have likely resulted in declining sales for the FPI. However, opening the FPI to more competition might have affected the FPI's ability to continue to generate revenue at a time when there were fewer opportunities for the FPI to make sales. The FPI's declining sales, regardless of the reason, might be of interest to policymakers because the FPI is a self-sustaining government corporation. In order for the FPI to provide work opportunities for inmates, it has to generate revenue. Methodology

Section 827 of the FY2008 NDAA requires DOD to use competitive procedures to procure any product for which DOD determines that the FPI's share of the market is greater than 5%.
The Federal Prison Industries (FPI) is a government-owned corporation that employs offenders incarcerated in correctional facilities operated by the Department of Justice's (DOJ's) Federal Bureau of Prisons (BOP). The FPI was created to serve as a means for managing, training, and rehabilitating inmates in the federal prison system through employment in one of its industries.
The FPI manufactures products and provides services that are primarily sold to executive agencies in the federal government. In the past, federal departments and agencies were required to purchase products from the FPI. This requirement is sometimes referred to as the FPI's "mandatory source clause." It is the FPI's mandatory source clause that has been the focus of congressional scrutiny, in part because some policymakers feel that it has a deleterious effect on private vendors' ability to secure federal contracts.
Since 2001, Congress has made a series of changes to the FPI's mandatory source clause in response to concerns about the FPI's effect on private businesses. Congress requires all federal agencies to use competitive procedures for the procurement of a product if the agency determines that the FPI's product is not comparable in price, quality, and time of delivery to products available from the private sector. Congress, through section 827 of the FY2008 National Defense Authorization Act (P.L. 110-181), also requires the Department of Defense (DOD) to use competitive procedures to procure products and services when it determines that the FPI share of DOD's market for a product is greater than 5%.
Between FY1993 and FY2013, the FPI sold products and services to 59 different federal departments, agencies, offices, and boards. During this time period, DOD was the FPI's biggest customer, accounting for, on average, 61% of the FPI's sales to government agencies. Also, over the same time period, the FPI sold products and services in 160 different product and service codes (PSCs); yet, a majority of the FPI's sales were for seven products (hereinafter, the "FPI's core products"). The core products include cable, cord, and wire assemblies; miscellaneous electrical power/distribution equipment; household furniture; office furniture; cabinets, lockers, bins, and shelving; household furnishings; and clothing, special purpose.
This report provides an analysis of the FPI's sales from FY1993 to FY2013 in order to evaluate whether its sales changed following amendments to the mandatory source clause. Findings from the analysis include the following:
There has been a significant decrease in the FPI's sales since FY2009. The FPI's nominal sales in FY2013 were $533 million, which is $352 million below the FPI's peak sales of $885 million in FY2009. The FPI generated a profit most fiscal years between FY1993 and FY2007. The FPI, however, reported losses each fiscal year between FY2008 and FY2013. The FPI's sales to DOD generally increased between FY1993 and FY2007, but they have declined since then. In addition, the FPI's sales to civilian agencies generally increased until FY2008, but they have decreased every fiscal year since. The FPI has experienced significant decreases in its sales of non-core products and services to DOD since FY2007 and in its sales of core products to DOD since FY2009. The FPI's sales of non-core products and services to civilian agencies have decreased since FY2008 and its sales of core products to civilian agencies have decreased since FY2010; these sales have not declined to the same extent as sales of comparable products to DOD. The FPI has experienced a significant decrease in its share of both DOD and civilian agencies' markets for its core products since Congress made changes to the mandatory source clause, but those decreases might be the continuation of a long-term trend. The FPI's declining sales might be the result of federal agencies spending less money on products offered by the FPI. Between FY2008 and FY2013, there was a sizable decrease (64%) in DOD's purchases in the PSCs in which the FPI made a sale in a given fiscal year (this serves a rough estimate of the size of DOD's market for FPI products). The FPI's declining sales to DOD roughly coincides with decreasing DOD purchases. The FPI's sales to civilian agencies decreased 51% between FY2009 and FY2013, which coincides with a 21% decrease in civilian agencies' purchases in PSCs in which the FPI made a sale. Competition pursuant to section 827 of the FY2008 National Defense Authorization Act did not have a uniform effect on the FPI's share of DOD's market for six selected products. For some products, the FPI lost market share when that product was opened to competition and it never recovered. In other instances, the FPI's share of DOD's market for some products increased even though DOD has used competitive procedures to procure the product.
There is not a single cause that explains why the FPI's sales decreased after FY2009. One factor that might have contributed to the FPI's declining sales is that the federal government spent less money on products offered by the FPI. It is harder to determine what effect legislative changes to the FPI's mandatory source clause had on the FPI's sales. It might be that the FPI's sales would have declined even if Congress had not made changes to the mandatory source clause. Even if the FPI's share of the federal market remained consistent year-to-year, the fact that the federal government was spending less on products and services offered by the FPI would likely have resulted in declining sales for the FPI. However, opening the FPI to more competition has probably not made it easier for the FPI to continue to generate revenue at a time when there are fewer opportunities for the FPI to make sales.
The FPI's declining sales, regardless of the reason, might be of interest to policymakers because the FPI is a self-sustaining government corporation. In order for it to provide work opportunities for inmates, it has to generate sufficient revenue. The FPI has been employing a smaller share of the federal prison population since the late 1980s. At the same time, Congress has placed a greater emphasis on preparing inmates for life after prison, and the BOP asserts that the FPI is one of its most effective tools for rehabilitating inmates and managing its prisons. The tension between providing work opportunities to inmates through the sale of goods to federal agencies and the desire to provide contracting opportunities to private vendors continues to fuel the debate about the future of the FPI.