FEDERAL PRISON INDUSTRIES, INC. (FPI) PART 1 OF 2 POC: Federal Prison Industries, Inc., 320 First Street, NW, Washington, DC 20534 Attention: Manager, Planning, Research and Activation. FEDERAL PRISON INDUSTRIES, INC. (FPI) announces revised definitions of two key terms: new product and specific product. These revised definitions were originally published in the FEDERAL REGISTER on August 7, 1996. To insure that all interested parties are aware of these revisions, this notice is now being printed in the COMMERCE BUSINESS DAILY. Comments are requested on these two revised definitions and should be provided within 45 days of the publication of this notice to Manager, Planning, Research, & Activation, Federal Prison Industries, Inc., 320 First Street, N.W., Washington, D.C. 20534. In 1988, Congress enacted legislation, codified at 18 U.S.C. 4122(b), requiring that whenever FPI proposed to produce a new product, or significantly expand an existing product, it was necessary to conduct a market study, seek industry comment, and refer the matter to the Board of Directors for a final decision. This process has come to be known as the Industry Involvement Guidelines process. A lengthy negotiation period ensued in which FPI, labor and private industry met to develop definitions of ``new product'', ``specific product'' and ``significant expansion of an existing product,'' the key terms that were necessary to implement the legislation.1. These definitions are based primarily on the SIC code of the Department of Commerce. FPI has now had six years experience with the definitions of these key terms. On the positive side, the market studies using these definitions have supplied the Board with more and better information on impact of FPI's activities on the private sector than it had before the passage of the guidelines process. At the same time, it has become apparent that in some ways these definitions are unclear, suffer for unavailability of data, and draw upon indicators which are hard to keep track of and not always directly relevant. In addition, the government is moving away from the collection of data based on the narrowly defined SIC categories, which lie at the heart of the current definitions of new product and specific product. To redress these problems we propose basing the definitions of ``new product'' and ``specific product'' on the 4-digit FSC categories, rather than the SIC categories, and developing market studies using the FSC approach as the basis for these studies.2 Two immediate benefits would stem from this change in approach: first, sales information by FSC category is readily available; and second, the information applies directly to the federal market, which is the primary focus of the market impact study. (SIC information pertains to the total market, including the private sector market.) A preliminary discussion paper recommending the use of the FSC system, and a new method of determining what constitutes a significant expansion of an existing product, was circulated to the members of FPI's Implementation Committee.3 The Committee members agreed that revisions to the existing definitions were called for, and that the new approach described herein looks promising. Yet one comment expressed that 4-digit FSC categories are in certain instances too broad. FPI recognizes that in certain instances the 4-digit FSC categories may be too broad to serve as a definition for a new product, without further refinement. At the same time, we note that a particular 4-digit category may also be too narrow, given the fact that related items may appear in several categories. Therefore categories may occasionally be combined in a market study for purposes of measurement of the market. To date we have not been able to develop a simple, single principle that can be applied in every situation to determine when to delete unrelated items from a 4-digit FSC category or categories and when to combine 4-digit FSC categories. Therefore, we propose the following process in lieu of an abstract definition. FPI will adjust for the fact that in some cases the 4-digit FSC categories contain dissimilar items in the following manner: FPI will announce in the CBD its intent to produce any item that could reasonably be construed to be a new product, regardless of the fact that such an item falls in the same 4-digit category as an item that FPI is currently making, or has made within the recent past, and is not considered by FPI to be sufficiently different from an existing item to be considered a new product. Moreover, FPI will commit to ``over-report.'' That is, borderline cases will be announced in the CBD in order to allow for the full public scrutiny. Of course, items which are located in 4-digit FSC codes in which FPI does not currently produce, will be treated as proposals which go through the guidelines process, and a market study will be conducted and made available for comment. The market impact study will measure the market based on the 4-digit FSC categories. In measuring the size of the federal market, we will make best efforts to delete unrelated items from the FSC category or categories. Commenters will have input into, and may comment on, the size of the market in the market study exactly as they do now. Also, for reasons explained above, we have developed a new definition of ``significant expansion of an existing product'' which we believe is an improvement, in that the indicators of expansion which are clearer and directly relevant to the determination of impact on private industry. We now publish the following definitions of ``specific product'', ``new product'', and ``significant expansion of an existing product'' for comment. REVISED DEFINITIONS: 1. SPECIFIC PRODUCT - A specific product refers to the aggregate of items which are similar in function (e.g., bags and sacks), or which are frequently purchased for use in groupings (e.g., dormitory and quarters furniture) to the extent provided by the most current Federal Supply Classification (FSC) Code. There are currently 685 federal supply classes designated within the Federal Procurement Data System. FPI currently produces within 74 of these classes. Specific products will equate to the most current 4-digit FSC Code, published by the General Services Administration, Federal Procurement Data Center (FPDC). As a general rule, products will be deemed to be different specific products if they are identified by a distinct 4-digit FSC code. The following means will be used to determine how items should be treated: - Items classified within the same 4-digit FSC code will be presumed to comprise a single specific product (unless otherwise determined by FPI, or with input from the relevant industry). - The predominant material of manufacture (e.g., nylon vs. canvas) will not ordinarily be a factor in defining an item as a separate specific product. In certain instances, with approval of its Board of Directors, FPI may combine FSC codes where multiple FSC's comprise a particular industry. In requesting the Board to combine FSC's, FPI will give careful consideration, and be especially sensitive to, companies that manufacture products (such as various items of apparel) in multiple FSC codes. Moreover, situations should be avoided by FPI where it would have to request Board approval of production and/or expansion in several ``specific products'' (e.g., office seating, case goods, and systems furniture), each of which often involves many of the same companies within a single potentially affected industry (e.g., office furniture). The rationale for any proposed combining of FSC's will be set forth in the market study. In all cases, FPI will seek input from the potentially affected industry, early in the stages of industry notification, and include all input received in its submission to the Board of Directors. In some instances, an item may be considered separate from another product in the same 4-digit FSC category, if its function differs substantially. In such cases, the 4-digit Standard Industrial Classification (SIC) code may be used as a back-up measure to more accurately define the product. SIC codes will continue to be used at the 4-digit level to determine the size of the domestic market for a particular product. For purposes of product definition in the domestic market, FPI will combine 4-digit SIC codes when the data suggests the product under examination may encompass several different 4-digit SIC codes, with no substantial difference in the product (e.g., men's vs. women's apparel).

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