March 31, 1999
Mr. Robert C. Grieser
Manager, Planning, Research & Activation
Federal Prison Industries, Inc.
320 First Street, NW
Washington, DC 20534
Dear Mr. Grieser:
The Office of the Chief Counsel for Advocacy of the U.S. Small Business Administration was created in 1976 to represent the views and interests of small business in federal policy making activities.(1) The Chief Counsel participates in rulemakings and other federal agency activities when he deems it necessary to ensure proper representation of small business interests. In addition, the Chief Counsel has a particular interest in ensuring that laws and regulations do not have an adverse impact on competition among businesses of differing sizes. Finally, the Chief Counsel monitors agencies’ compliance with the Regulatory Flexibility Act (RFA) (2) and works with federal agencies to ensure that their rulemakings are supported by analyses, available for public comment of the impact that their decisions will have on small businesses.
In this connection, I am writing the Competitive Impact Study - FCS 2920 and request that the Federal Prison Industry, Inc. (FPI) reconsiders its proposal to increase its share of the Federal market for engine electrical components.
Clearly, congress has set forth goals for FPI, Inc. to rehabilitate prisoners. This office is in full support of this awesome mandate. However, Congress has also enacted other laws with equally compelling mandates. One such law is the Small Business Act. The reason the act is equally compelling is because small businesses are the economic backbone of this nation. They are the largest employers of entry level employees. Many of these businesses will employ your former employees. Yet in the impact study, the significance of small business is dismissed and the impact of your market expansion portrayed as being minimum to small business. This is especially disturbing because the text on pages 18-21 of your impact study recognizes four firms that will be adversely impacted by your proposed plan. Ironically all four of these firms are classified by Dun & Bradstreet as small businesses. These firms rely on the Federal "engine electrical components" market for at least ten percent of their business base. One firm has more than 30 percent of its business coming from this segment of the Federal market.
A market concentration of ten percent or greater by you is significant for a small business. Small businesses do not have financial resources to shift market concentrations rapidly. Conclusively, then, FPI’s expansion will create a major economic hardship on these businesses. As important, however, is the fact that such an expansion proposal will provide a chilling effect on other small businesses trying to enter such market areas.
There is another policy contradiction FPI needs to consider and reconcile. The impact study states the Federal market is all that FPI is interested in. However, on January 7, 1999 FPI issued proposed regulations to revise its Standards and Procedures. In section 302.11 of these proposed rules you seem to expand your services to the commercial market. If this proposed rule becomes final it would appear to contradict statements in the impact study. Either way, expansion will have an adverse impact on small businesses – an issue FPI needs to address with some levels of objective credibility.
Should you have further questions regarding these comments, please feel free to contact Major Clark of my office at (202) 205-7150.
Sincerely yours,
Jere W. Glover
Chief Counsel for Advocacy
ENDNOTES
1. Pub. L. No. 94-305 (codified as amended at 15 U.S.C. §§634a-g, 637.)
2. Pub. L. No. 96-354, 94 Stat. 1164 (1980) (codified as amended at 5 U.S.C. §§601-612.)