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Private Prison Monopolies

As the late business historian Alfred Chandler, Jr. once said, the visible hand of the corporation has been of far greater importance to capitalism than has Adam Smith’s so-called invisible hand of the market.

Although modern forms of capitalism are justified, and often sanitized, by rhetorical appeals to competition, competition contradictorily tends toward monopoly by eliminating “weaker” firms in any given market. Competition is integral to the rationalizing logic of capitalism writ large, but anathema to individual capitalist firms.
The essential inconsistencies of modern capitalism, however, often serve as the fault lines from which social movements can emerge.

And what better place to begin than with the Tennessee-based private prison firm, Corrections Corporation of America (CCA). CCA, in its own words, “is the nation’s largest owner and operator of partnership correction and detention facilities and one of the largest prison operators in the United States, behind only the federal government and three states. [The company] currently operate[s] 67 facilities, including 47
company-owned facilities, with a total design capacity of approximately 92,000 beds in 20 states and the District of Columbia.”

Very few corporations are more notoriously devoted to Chandler’s “visible hand” theory than Corrections Corporation of America. With less than one month remaining in FY 2012, CCA has thus far been “awarded” $373,355,264 in contracts with the federal government. Eighty-eight percent of federal contracts “won” by CCA this year have originated with the U.S. Department of Justice. The Department of Homeland Security accounts for the remaining 12 percent of allotments. During FY 2012, CCA competed for only 45 percent of its total federal procurement dollars. The remaining 55 percent of CCA’s FY 2012 federal contracts – worth close to $205 million – were provisioned on a non-compete basis. So much for free-market competition....

Fundamentally, non-compete contracts are forms of monopoly. In recent years the subject has gained considerable public attention, in part because of the burgeoning rates of federal noncompetitive contracts awarded during the George W. Bush years.

But doesn’t Congress have some law on the books to prevent the abuse of noncompetitive procurements? Well, sort of.

Passed in 1984, the Competition in Contracting Act (CICA) governs competition in federal procurement contracting. CICA requires that contracts be entered into after “full and open competition through the use of competitive procedures” unless certain circumstances exist that would permit agencies to use noncompetitive procedures. So what happened in the case of CCA?

Well, to begin, CCA spent $1.6 million lobbying appropriations officials over the last year and a half. And secondly, CCA, along with the Department of Defense (DOD), is exploiting a yawning loophole in CICA. Not all contracts – or even all procurement contracts – that agencies lawfully enter into are the result of full and open competition under CICA. Some contracting agencies may circumvent CICA regulations by assuming an “other transaction authority” status (OTA) not subject to the ordinary rules of full and open competition. Only a few agencies, most notably the Departments of Defense, Transportation, Homeland Security, Health and Human Services, and Energy, “have been granted OTA on a permanent or temporary basis so that they can contract for research and development (R&D) or prototypes of promising new technologies without full and open competition.”

Although the permanent OTA exemption enjoyed by the Departments of Defense and Homeland Security, among others, is intended to encourage promising new technologies and innovations that may be compromised vis-à-vis competition, CCA is in no position to benefit from such an exception. Corrections Corporation of America is not in the business of research and development or prototype creation. They are in the business of incarcerating people for the sake of turning a profit.

CCA also fails to meet any other criteria for exemption. Corrections Corporation of America, for example, is not a “single source for goods or services” in that there are many other private corrections companies as well as state departments of corrections up to the task. Additionally, CCA does not reflect a “necessary public interest.” Why? Well, the U.S. incarceration rate was far, far lower before the introduction of private prisons in 1983 [when the company was founded].

In many ways there is an ever-widening chasm between the ideological underpinnings of competitive capitalism and the reality of its monopoly composition. In an industry wherein three companies – Corrections Corporation of America, the GEO Group and MTC – control nearly 90 percent of the private corrections market the word “competition” is no more than a courtesy, an imaginary resolution to a very real capital contradiction.

This article was originally published by Nation of Change ( on August 31, 2012, and is reprinted with permission.

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