Private Businesses Fight Federal Prisons for Contracts

Stephen Marks | The Images Bank | Getty ImagesAs chief financial officer of a military clothing manufacturer, Steven W. Eisen was accustomed to winning contracts to make garments for the Defense Department.

But in December, Mr. Eisen received surprising news. 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 sector competitor, but to a corporation owned by the federal government, Federal Prison Industries.

Federal Prison Industries, also known as Unicor, does not have to worry much about its overhead. It uses prisoners for labor, paying them 23 cents to $1.15 an hour. Although 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 out on the new 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.

Although Federal Prison Industries has been around for decades, its critics are gaining more sympathy this year as jobs, competition and the role of government have become potent political issues. Recently, a clothing company complained that the government company had expressed interest in making Air Force windbreakers like one worn by the president. Last month, amid negative news reports and pressure from the Senate minority leader, Mitch McConnell, F.P.I. said it would stop competing for the contract because it could damage the private company that makes the jackets, Ashland Sales and Service.

In addition, a bipartisan coalition of lawmakers is resuscitating a bill to overhaul the way the prison manufacturing company does business, proposing to eliminate its preferential status.

Under current practice — governed by intricate laws, regulations and policies — an agency must buy prisoner-made goods if the company offers an item that is comparable in price, quality and time of delivery to that of the private sector, with certain exceptions. The company’s prices are not always the lowest, but it frequently has been able to underbid private companies, Congressional aides say.

The bill seeks to limit those advantages by putting a limit on F.P.I.’s sales to the federal government, opening more product areas to private companies and strengthening requirements that the prices for prisoner-made products be competitive. The legislation would also impose federal work-safety standards and higher wages, starting at $2.50 an hour.

Separately, Senator McConnell has introduced a bill that would subject the Bureau of Prisons, including its manufacturing company, to greater Congressional oversight.

F.P.I. has traditionally relied on office furniture, electronics and clothing manufacturing for the bulk of its business, but it has been moving into new industries like renewable energy. The company already has one factory each in New York and Oregon to build solar panels and is looking into making energy-efficient lighting and small wind turbines.

“This is a threat to not just established industries; it’s a threat to emerging industries,” said Representative Bill Huizenga, a Michigan Republican who is the lead sponsor of the proposed overhaul legislation. “If China did this — having their prisoners work at subpar wages in prisons — we would be screaming bloody murder.”

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PayPal Set To Unveil Payments Platform For Small Businesses

In addition to partnering with large retailers, it looks like PayPal is going to be launching a set of payments offering for small businesses as well. We just received an invitation for an event PayPal is hosting next week, which will unveil what the payments company has in store for a solution for small businesses.We’ve heard that similar to PayPal’s recently introduced in-store payments technology for big box retailers, the company is going to be launching a in-store payments system focused on smaller merchants. It’s unclear what this technology will look like, but we’ll find out more next Thursday.It’s not surprising that PayPal is going after small businesses with an in-store solution. There’s a huge market in providing a payments platform for merchants, as evidenced by the growth and success of Square.It should be interesting to see how similar PayPal’s small business solution is to its in-store platform designed for Home Depot, which is being rolled out nationally. With the Home Depot system, PayPal users are able to pay for items via their PayPal account at Home Depot’s point of sale systems. They can either use a pin code via their mobile phone or a specialized PayPal credit card that can be swiped, the payment amount will be deducted from their PayPal account.PayPal previously tried a test of using the online payments platform at small businesses back in 2009. The company launched a new version of its popular iPhone app that allowed users to find businesses near their immediate location that accept PayPal as a form of payment. The feature rolled out in San Francisco initially, but the initiative never really took off.Like This 1 | 0 Comments

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Mardi Gras Helps Fatten New Orleans Businesses

Revelers on Mardi Gras Day, New OrleansNew Orleans – As Carnival builds toward the out-of-control crescendo of Fat Tuesday, Barry Kern and his team of float-builders and artists are already preparing for next year.

One of the biggest free parties in the world fuels a multimillion-dollar industry for the city of New Orleans and is the lifeblood of businesses like Kern's studio, which has been operating for more than 50 years and makes or repurposes some 400 floats a year, or roughly a float a day, Kern said.

Mardi Gras season, which includes weeks of parades, fancy balls and parties leading up to Fat Tuesday, draws hundreds of thousands of visitors to New Orleans each year, says Kelly Schulz, spokeswoman for the New Orleans Convention and Visitors Bureau. Schulz said a recent study conducted by Tulane University estimated the direct economic impact of Mardi Gras at roughly $144 million.

Some studies estimate the economic impact at more than $500 million, said Arthur Hardy, a Mardi Gras historian.

"There's no way to know for sure because we don't sell tickets," Hardy said. "Mardi Gras started small, in private homes and private balls, and it's evolved into this festival that some estimate produces more than a half-billion dollars a year."

Attendance is also hard to gauge, but hotels are full, or close to it, for every Mardi Gras, Schultz said. "The city will be virtually sold out. Mardi Gras and music, especially on the international scene, are our big sells."

In the weeks leading up to Mardi Gras, more than 100 parades roll through New Orleans and its suburbs. The big parading clubs, like Rex, Zulu, Bacchus, Endymion, Orpheus and Muses, hire Kern's studio to build their floats. Smaller clubs make their own by decorating trailers with paint and crepe paper.

Hardy said more than 100,000 people ride in parades each year, and each rider can spend as much as $2,000 to $3,000 in fees, costumes and throws. Thousands more are spent on king cakes and the grand balls and parties, he said.

"It's a money-maker for the city, but that's not why we do it," Hardy said. "We do it because we like to celebrate. It's a free party we give ourselves and our guests."

Free for some. Major parade krewes often spend hundreds of thousands of dollars to have Kern's studio make their floats. Depending on whether the floats are built from the ground up or repurposed, the price can range from $10,000 to $100,000.

Kern declines to say how much revenue his company takes in annually. But over the years the floats have become larger and more ornate, and more expensive.

They can be as high as 18 feet and up to 50 feet long, carry dozens of riders and be wired with electricity for decorative lights and moving parts. Teams of painters, artists and sculptors make props and decorations that will be attached to the floats. Music-themed floats can include props of Louis Armstrong and local favorite Professor Longhair. Some are modeled after characters in Greek mythology, such as the Muses of dance, poetry, music and other arts.

It takes an entire year to prepare enough floats to roll through the streets of New Orleans and its suburbs, Kern said.

"It's a constant process," Kern said. "It's like an assembly line."

With the revelry of Fat Tuesday at hand, Kern's preparation for Mardi Gras 2013 has already begun.

"We already have all the designs for all our major clients for 2013, and we've already got props and things picked out," Kern said. "Literally, the day after Mardi Gras, we're back to work, and the process gets started almost immediately."

Besides Mardi Gras, Kern's studio has clients in Japan, Korea and theme parks across the country.

"There are a lot of municipalities all over the world that want to copy what we do here in New Orleans because it drives tourism," Kern said.

Besides float-building, Kern's studio is a tourist attraction. Tour guides take visitors through Mardi Gras World's displays and to see sculptors and artists at work.

"I'm awestruck by some of the props," said Debra Sanders, of North Sioux City, S.D., just after her tour of Mardi Gras World recently.

Paul Thompson, of Cheshire, England, said he was surprised by the quality of the work.

"It was very intricate and very colorful, much more professional than what you would surmise from a once-a-year Carnival," Thompson said. "It's quite amazing."

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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