"The Federal Prison Industries, Inc. (FPI), is a government-owned corporation that employs offenders incarcerated in correctional facilities under 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. Although the FPI's industries are located within various federal prisons, they operate independently from the prison. 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 six industries. The FPI's enabling legislation and the Federal Acquisition Regulation (FAR) require federal agencies to procure products offered by the FPI, unless authorized by the FPI to solicit bids from the private sector. This is commonly referred to as the 'mandatory source clause.' Such waivers can be granted by the FPI to executive agencies if its price exceeds the current market price for comparable products. Federal agencies, however, are not required to procure services provided by the FPI. Instead, agencies are encouraged to do so pursuant to FAR. It is the mandatory source clause, and its effect on private businesses, that has drawn controversy over the years. This report provides background on the FPI's operations and statutory authority; it does not address the related debates on inmate labor, criminal rehabilitation, or competitive versus noncompetitive federal government contracting."
CRS Report for Congress, RL32380