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Furniture Manufacturers Threatened by UNICOR

Small furniture manufacturers say they could be driven out of business by a rival they simply can't compete with: the government-owned Federal Prison Industries, Inc. (FPI). The corporation uses the trade name UNICOR and "employs" prison labor in federal prisons to manufacture furniture for the military and government agencies.

A trade group representing companies that compete for furniture orders for the Pentagon's dormitories and quarters charges in an administrative complaint and lawsuit that FPI has violated the law by expanding its production without first getting the required approval of its board.

FPI has gone on an expansion binge since 1990, doubling their furniture sales to $20.7 million between 1991 and 1992 and growing another 21% the following year. This expansion has "created an undue burden on small businesses and threatens to force them out of business," says Matt Yanson, secretary treasurer of the Quarters Furniture Manufacturers Association. Yanson is also vice president for federal sales at Interior Elements in Columbia, Md.

Interior Elements is a small furniture manufacturer, employing less than 50 people. Between 1991 and 1995, its government dormitory and quarters sales fell from $3 million to under $1 million, according to Yanson. There is also pressure from state-prison industries, he says.

The smaller, privately-owned furniture makers are not being driven out by "free market forces." FPI does not compete for market share in the traditional sense of the word. It enjoys the right of first refusal with its military customers. Before a private firm can sell furniture to the military, the military must get an FPI waiver.

If FPI were truly competitive, the military might not care who built their furniture. But that is apparently not the case. In a September letter to FPI, Capt. Roland Gorrie, head of the Navy's bachelor-quarters program, said all of the military services want FPI to 'reduce their market share based on documented instances of poor quality and construction, late delivery, and minimum choice and selection of products."

Considering that FPI pays prisoners wages of 23 cents to $1.15 an hour, it should be able to sell UNICOR furniture for far less than private manufacturers. But with the right of first refusal, they don't have to be competitive, and they aren't.

At the FPI Board's December meeting, Capt. Gorrie said that a UNICOR wall unit costs $540 compared with $389 for one from a private company. UNICOR shipping and installation charges are 12% while commercial suppliers charge 6% to 8%, Gorrie said. FPI should have no more than 10% to 15% of the market, he added. "We don't think we receive, in some cases, the best value for the money," he said.

FPI is currently seeking approval to expand its market share to 35% by the year 2000. How many workers employed by small furniture manufacturers may lose their jobs as a result? How will these workers then support themselves and their loved ones? Perhaps they'll be forced to dabble in the illegal drug market. And perhaps that may be a way to get their old jobs back. In a furniture factory. Only this time they'd be making UNICOR products.

Source: Wall Street Journal 2/17/96

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