HUNTSVILLE, Tenn. -- As chief financial officer of a military clothing manufacturer, Steven Eisen was accustomed to winning contracts to make garments for the Defense Department.
But in December, Mr. Eisen was told his company, Tennier Industries, which is in a depressed corner of Tennessee, would not receive a new $45 million contract.
Tennier lost the deal not to a private competitor, but to a corporation owned by the federal government, Federal Prison Industries.
Federal Prison Industries does not worry about its overhead much. It uses prisoners for labor, paying them 23 cents to $1.15 an hour. Though the company is not allowed to sell to the private sector, the law generally requires federal agencies to buy its products, even if they are not the cheapest.
Mr. Eisen, who laid off about 100 workers after losing the contract, said the system took sorely needed jobs from law-abiding citizens. "Our government screams, howls, and yells how the rest of the world is using prisoners or slave labor to manufacture items, and here we take the items right out of the mouths of people who need it," he said.
Though Federal Prison Industries has been around for decades, its critics are gaining sympathy this year as jobs, competition, and the role of government have become potent political issues. Recently, a clothing company complained the government company had expressed interest in making Air Force windbreakers such as one worn by President Obama. Last month, amid negative news reports and pressure from the Senate minority leader, Mitch McConnell (R., Ky.), Federal Prison Industries said it would stop competing for the contract because it could damage the private firm that makes the jackets.
Chris Reynolds, president of Campbellsville Apparel in Kentucky, said he had contacted Mr. McConnell to express concern about possible competition for his military T-shirt contract. "My employees just cannot believe the fact that a prisoner who should be paying a debt to society is being promoted through the federal government to take a job from an American taxpaying citizen," he said.
In addition to Mr. McConnell's bill, a bipartisan group of lawmakers is resuscitating a bill to overhaul the way the prison manufacturing firm operates, trying to eliminate its preferential status and impose federal work-study standards and higher wages.
Federal Prison Industries traditionally has relied on office furniture, electronics, and clothing manufacturing for the bulk of its business, but it has been moving into new industries.
"This is a threat to not just established industries, it's a threat to emerging industries," said Rep. Bill Huizenga (R., Mich.), who is the lead sponsor of the proposed legislation. "If China did this -- having their prisoners work at subpar wages in prisons -- we would be screaming bloody murder."
Begun in 1934 as a way to teach inmates useful skills and help supply federal agencies with needed products, Federal Prison Industries is at root a correctional program that aims to keep inmates busy, reinforce the value of work, and reduce recidivism.
It is inefficient by design, employing as many inmates as possible, which diminishes its advantage of low wages.
According to the Bureau of Prisons, inmates who go through the program are 24 percent less likely to return to jail and 14 percent more likely to find employment upon release.