FEDERAL PRISON INDUSTRIES, INC. FPI (PART 2 OF 2) POC: Federal Prison Industries, Inc., 320 First Street, NW, Washington, DC 20534 Attention: Manager, Planning, Research and Activation. This is a continuation of a notice from Federal Prison Industries, Inc. (FPI) concerning a revisions to definitions of two key terms: new product and specific product. Comments are requested on these two revised definitions and should be provided to Manager, Planning, Research, & Activation, Federal Prison Industries, Inc., 320 First Street, N.W., Washington, D.C. 20534. 2. NEW PRODUCT A new product is a `specific product' which FPI has not manufactured or produced within the past five years. In cases where it has been determined that more than one specific product exists within a 4-digit FSC, the 4-digit SIC code will be used as a secondary indicator to determine whether the product is ``new''. In such cases, a new product will be defined as a `specific product' in the four-digit SIC which FPI has not produced within the past five years. In cases where FPI plans to manufacture products of limited duration or volume, e.g., with sales of less than $1 million in any given year, and where its Federal market share will not exceed 5 percent, FPI will announce such plans in the COMMERCE BUSINESS DAILY (CBD), in lieu of undertaking the Industry Involvement Guidelines process. Barring any objection, FPI will proceed with its production plans. If an objection is raised, FPI will meet with the relevant industry in an effort to reach an acceptable position. If an agreeable outcome cannot be reached, FPI will proceed to initiate the Industry Involvement Guidelines process. Moreover, should FPI's planned sales reach or exceed $1 million, or FPI's market share exceed 5 percent, FPI will go through the Industry Involvement Guidelines process, as it would for any new product. ``GOOD FAITH'' CBD ANNOUNCEMENTS - Items not deemed by FPI to be a New Product. Under current rules, management decisions as to whether production of an item constitutes a new product are made by FPI staff, based on the SIC classification system, without public involvement. Under the proposed new rules, there may be circumstances in which FPI plans to produce items that FPI does not consider to be a new product, but which an affected party may reasonably construe to be a new product. In these circumstances, the items will be announced for comment in the Commerce Business Daily. The purpose of this provision is to give private industry an added level of input into such decisions made by FPI, since it is not possible to anticipate every possible situation or question that could arise within the proposed definition. The parameters for publishing such internal decisions that are made and announced subject to this provision will be as follows: Items that a reasonable person could construe to be a product separate and distinct from another item which FPI is making or recently made would be subject to announcement even through their function is similar. As an example, the production of extreme cold weather trousers would be announced, although FPI already produces bullet resistant fragmentation vests, and both are items of protective clothing. Items that are essentially the same product, or those that are variations of an existing FPI product (e.g., a new style of seating) would not be subject to announcement of any kind. However, FPI will resolve any questions as to whether to announce in favor of announcement. In submitting comments to FPI, the following guidelines will apply: - Comments will be due within 10 days of the date of publication; - Relevant comments will focus on and address why the item should be considered a new product, separate and distinct from a similar item currently being produced by FPI. Comments may include such factors as: the manufacture of the item involves substantially different material AND processes; companies that produce this item specialize in manufacturing only that item; the manufacturing processes are unique and are not easily adaptable to produce other similar items; - Comments related to market share and/or the impact that such a production decision may have on the firm will not ordinarily be considered relevant for purposes of this provision; - All comments received in response to these announcements will be considered by FPI. The commenter will be advised whether FPI decides to go through the guidelines process. As always, any interested party has a right to raise any question at any time with the board of directors (see 28 CFR 301.2), and thus may appeal to FPI's Board of Directors any issue or decision relating to whether a product is a new product. However, pending such review, FPI may proceed with its plans in accordance with the decision as announced in this process described above, unless and until the decision is reversed. 3. SIGNIFICANT EXPANSION OF AN EXISTING PRODUCT Proposed production increases by FPI which may increase its market share will be reviewed during the Corporation's annual planning cycle and be deemed a significant product expansion under the following circumstances: 1) Planned sales (measured in constant dollars) for the specific product will increase by more than 10 percent, or $1 million, in any given year, whichever is greater; or 2) In any case where FPI's market share is greater than 25%, any increase in FPI's market share resulting from an increase in FPI production would be deemed to be significant for purposes of triggering the guidelines process. DISCUSSION: When either criterion is met, an analysis of the federal government market for the specific product will be conducted and an estimate of FPI's current and projected market share will be developed. The production increase will be deemed ``significant'' when FPI's market share position changes in accordance with the following sliding scale. If FPI currently has a 15% or less share of the federal market, any increase in market share would be permissible, provided that the particular increase does not result in FPI exceeding a 15% market share. If FPI has a market share greater than 15%, but less than 20%, FPI could increase its market share to 20%, before the increase would be deemed to be significant. If FPI has a market share of greater than 20%, but less than 25%, FPI could increase its market share to 25%, before the increase would be deemed to be significant. Situations where FPI production remains constant, but market share increases as a result of other factors, including market changes, will not require FPI to initiate the guidelines process. The fact that 25% may ``trigger'' the guidelines does not necessarily mean the Board of Directors cannot approve an FPI production level resulting in a federal market share above 25%. The prior three years' data will be used to determine the share of the federal government market, to ensure that annual fluctuations are taken into account and normalized. FPI may produce at the rate of past year sales levels, adjusted for inflation, without initiating the guidelines process. In cases where FPI sales inadvertently or insubstantially exceed authorized levels, FPI will take steps to adjust its production by a corresponding amount the following year. If FPI plans call for continued growth, it will invoke the guidelines process without delay and seek Board approval of future production levels. Should the Board decide on a production level lower than that which FPI already achieved, FPI will adjust its future plans and, if necessary scale back, to comply with the Board's decision. In cases of extreme public exigency, such as national disaster or national defense emergency, such as during Operation Desert Storm, FPI may exceed guidelines thresholds, provided FPI receives specific orders or requests from senior Department of Defense and/or Executive Branch officials. Increased sales resulting from national exigencies will not be considered a violation of guidelines ceilings in the year which they occurred. Such exceptional events will be subject to approval by FPI's Chief Operating Officer, with concurrence of FPI's Board of Directors. Once these definitions are finalized and proposed revisions implemented, FPI's sales for the current fiscal year will be utilized as the base year for future application. Prior decisions of FPI's Board of Directors will remain unaffected by these changes to the definitions. These proposed rules have been reviewed by FPI's Growth Strategies Implementation Committee. The following officials are represented on the Committee: Executive Vice President, Envelope Manufacturers Association of America; Vice President - Government Affairs, Screen Printing and Graphic Imaging Association International Manager, Break-Out Procurement Center Representative Program, Small Business Administration. Former Senior Staff Member, Brookings Institution Head of Office of Wages and Industrial Relations, AFL-CIO President, State/Federal Correctional Vendors Association. Their comments and suggestions have been incorporated into this proposed rule.4 We now seek comments to these proposed changes. All comments received in response to this proposed rule will be provided to the FPI Board of Directors, which will approve this rule prior to its final publication and implementation. Endnotes: 1. The final definition of ``Specific Product'' and ``New Product'' are published in the Commerce Business Daily (CBD) for December 4, 1989. The final definition of ``Significant Expansion of Production of an Existing Product'' is published in the CBD for January 2, 1991. 2. The legislative history to the guidelines process provides that the definitions shall be reviewed periodically by the corporation and the board to assure continued relevance. 3. This committee was established following the ``Summit Process'' in 1992, to address any new or continuing issues. 4. Of course, these officials and these organizations are not precluded from making further comments at this time.

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