7 July 1998
Source: http://www.access.gpo.gov/su_docs/aces/aaces002.html

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[Federal Register: July 7, 1998 (Volume 63, Number 129)]
[Notices]
[Page 36710-36719]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07jy98-108]

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DEPARTMENT OF JUSTICE

Office of Justice Programs
Bureau of Justice Assistance
[OJP(BJA)-1150]


Prison Industry Enhancement Certification Program Guideline

AGENCY: Office of Justice Programs, Bureau of Justice Assistance (BJA),
Justice.

ACTION: Proposed Guideline for public comment.

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SUMMARY: The Office of Justice Programs, Bureau of Justice Assistance
(BJA), is issuing this proposed revision to the Prison Industry
Enhancement Certification Program (PIECP) Guideline, 50 FR 12661-64
(March 29, 1985). Under Title 18 U.S.C. 1761(c), BJA certification
excepts participating agencies from certain Federal restraints placed
on the marketability of prison-made goods by permitting the transport
of such goods in interstate commerce and the sale of such goods to the
Federal government. This guideline reflects efforts by the Bureau of
Justice Assistance to enhance guidance to the field through amendments
proposed to the initial guideline published in March 1985. Since that
time, there have been amendments to the statutory authority governing
the administration of the PIECP and operations issues emerging at cost
accounting centers. As a result, BJA seeks to clarify for the field the
applicable statutes and guidelines. This revision provides a more
comprehensive and responsive document to promote compliance with and
direction for PIECP.
    The publication of this proposed guideline is considered to be a
Federal action that will not significantly affect the quality of the
human environment. Therefore, the preparation of an environmental
impact statement is not necessary.

DATES: All comments received on or before September 8, 1998 will be
considered in drafting the Final Guideline.

ADDRESSES: Bureau of Justice Assistance, Office of Justice Programs,
U.S. Department of Justice, 810 Seventh Street, N.W., Washington, D.C.
20531.

FOR FURTHER INFORMATION CONTACT: J.A. Marshall, Acting Chief,
Corrections Branch, Bureau of Justice Assistance (202) 616-3215.

SUPPLEMENTARY INFORMATION:

Scope of Program Announcement

I. Introduction: Program Purposes and Objectives

II. Background of the Prison Industry Enhancement Certification Program
(PIECP)

a. The Legislative History
    1. Unregulated Prison Labor
    2. Prisoner Idleness and Prisoners' Need for Job Skills Training
b. The PIECP Program
    1. Current State of the Program
    2. Future Challenges
c. Request for Comments

III. Program Guidance

a. PIECP Purposes
b. Definitions
c. BJA's Initial Considerations for Determining Propriety of Work
Pilot Project Certification
    1. BJA's Exercise of Discretionary Authority to Define and
Certify 50 Work Pilot Projects
    2. Threshold Inquiry for Determining Applicability of PIECP
Exception Status
d. Mandatory Program Criteria for PIECP Participation
    1. Eligibility
    2. Prevailing Wages
    3. Non-Inmate Worker Displacement
    4. Benefits
    5. Deductions
    6. Voluntary PIECP Inmate Worker Participation
    7. Consultation with Organized Labor
    8. Consultation with Local Private Industry
    9. Compliance with NEPA

IV. PIECP Administration

a. Certificate Holders
    1. Project Structure
    2. Application Content
    3. BJA Review
    4. Standard or Provisional Certification
    5. Certificate Holder Designation Authority
    6. Certificate Holder Monitoring Responsibilities
b. Cost Accounting Centers' PIECP Exception Status
c. Compliance Reviews
    1. Performance Reports
    2. On-Site Monitoring Reviews
d. BJA's PIECP Administration
e. Exception Status Suspension/Termination
    1. Notice of Possible Compliance Violation
    2. Voluntary Compliance Agreements
    3. Failure to Achieve Compliance and Effect of Non-Compliance
    4. PIECP Exception Status Suspension and Termination

I. Introduction: Program Purposes and Objectives

    The Prison Industry Enhancement Certification Program (PIECP),
codified at 18 U.S.C. 1761(c), was first

[[Page 36711]]

authorized by the Justice System Improvement Act of 1979, Pub. L. 96-
157, 93 Stat. 1215. The PIECP was expanded from 7 to 20 pilot projects
under the Justice Assistance Act of 1984, Pub. L. 98-473
Sec. 609k(a)(1), 98 Stat. 2077, 2102. In 1990, The Crime Control Act of
1990, Pub.L. 101-647 Sec. 2906, 104 Stat. 4789, 4914, raised to 50 the
number of PIECP projects that may be excepted by the Bureau of Justice
Assistance (BJA) from certain Federal restrictions on the marketability
of prison-made goods, including the Ashurst-Sumners Act (18 U.S.C.
1761(a)) and the Walsh-Healey Act (41 U.S.C. 35).
    PIECP has grown since its inception in 1979, with 38 prison work
pilot projects now certified throughout the country. Prison
administrators find PIECP participation an effective way to address
idleness among ever-increasing prison populations and as a cost-
efficient method for providing inmates with marketable job skills.
Taxpayers benefit because PIECP inmate wage deductions result in
reductions in incarceration costs. Inmate wages benefit society,
generally, in that deduction amounts are authorized to address victim
compensation, inmate family support needs, and taxes. Lastly, PIECP
industries obtain broad market access for their products because they
are excepted from the Ashurst-Sumners Act prohibition against the
interstate transport of prison-made goods and from the Walsh-Healey Act
prohibition against certain contract sales of prison-made goods to the
Federal government.
    BJA issued a Guideline to implement this program (50 FR 12661-64)
on March 29, 1985 and now publishes revisions in this Proposed
Guideline to provide programmatic clarification based on experience
gained over the past 13 years. The legislative underpinnings of
relevant laws are examined to ensure that program administration
practices are consistent with Congressional intent and that the scope
of their applicability is clearly defined. Refined administrative
practices are set forth for comment.

II. Background of the Prison Industry Enhancement Certification
Program (PIECP)

a. Legislative History

1. Unregulated Prison Labor
    The 19th Century evolution of industrial capitalism and private
sector use of prisoner labor spawned a number of conditions that
adversely affected several major segments of society. By the turn of
the 20th Century, these segments joined in an organized appeal to
Congress and state legislatures nationwide. They collectively asserted
that the production and distribution of unregulated prisoner-made goods
in interstate commerce needed to be eliminated or, at a minimum,
controlled.
    Human rights activists turned the public's attention to poor prison
work conditions and inmate exploitation. Organized labor argued that
the demand for prison-made products, anywhere, necessarily displaced a
possible demand for the product of free labor. Free enterprise
manufacturers were disturbed because manufacturers of prison-made goods
did not bear the burden of overhead costs borne by private industry
competitors, such goods were being sold at below market prices. The
viability of private industry competition was thereby undercut. In
December 1924, Herbert Hoover, as Secretary of Commerce, held a
conference on the subject of the ``ruinous and unfair competition
between prison-made products and free industry and labor.'' 70 Cong.
Rec. S656 (1928).
    Then-Secretary Hoover authorized an advisory committee to study the
problem. This committee issued a report in 1928 wherein Arthur
Davenport, Chairman of the Advisory Committee on Prison Industries,
submitted the following report conclusions to Congress:

    (1) Certain major factors in the normal cost of production which
must be met by all manufacturers are entirely absent in the case of
prison industries. If anything approaching normal efficiencies of
operation can be attained with the use of prison facilities and
labor, the total costs of production are obviously below those of
the manufacturer who must meet large overhead expenses as well as
employ free labor.
    (2) It is the universal belief that prisoners should be usefully
occupied whether as a part of their punishment or as a means of
rehabilitation by teaching them the habits of industry. To this end
nearly every State * * * provid[es] productive work for their
prisoners * * *
    (3) The volume of goods produced by prison labor is already very
large in some lines, but as more prisoners are put to work, and the
industries become more efficient, the output of our prisons will be
greatly increased.
    (4) The effect of placing on the open market a volume of goods
which have been produced below normal costs, is to lower prices and
disorganize the market * * *. The increase in prison production
which is predicted will exaggerate this evil and make it difficult
if not impossible for manufacturers employing free labor to exist in
trade where the prison output becomes heavy.
    (5) The solution of this problem, if prison production is to
continue * * *. would seem to be the elimination, in one way or
another, of the direct price competition of the prison products with
so called ``free products'' * * *. 70 Cong. Rec. S656 (1928).

    In closing, Chairman Davenport urged that solutions be found,
``[o]therwise either prison industries must cease and prisoners kept in
idleness or the manufacture of products competing with prison output
will become impossible. Either of these developments would be
disastrous * * *.'' See S. Rep. No. 344, 70th Cong., 1st Sess., re-
printed, Cong. Rec. S656 (Dec.15, 1928), ``Statement of Prison Labor
Problems as Shown by Report of Senate Committee.''
    Even if a state prohibited its own correctional institutions from
producing and marketing prison-made goods, that same state had no
jurisdiction to control such goods produced in other states,
transported in interstate commerce and sold within its boundaries. As
an initial solution to this problem, Congress enacted the Hawes-Cooper
Act in 1929, Pub. L. 70-669, 45 Stat. 1084, re-codified by Pub. L. 95-
473, 92 Stat. 1449 (1978) [formerly codified at 49 U.S.C. 11507,
omitted in the revision of Title 49 by Pub. L. 104-88, Title I
Sec. 102(a), 109 Stat. 804 (effective January 1, 1996); See S. Rep. No.
104-176]. This law divested prison-made products of their interstate
character upon their arrival in the state of their destination and
permitted the laws of that state to become operative with respect to
the sale and distribution of such products. It was described, at the
time of enactment, as an enabling act because it did not prohibit the
transportation of convict-made goods or force the enactment of state
legislation.
    In 1935, Congress enacted the Ashurst-Sumners Act, Pub. L. 74-215,
49 Stat. 494 (1935), which authorized Federal criminal prosecutions of
violations of state laws enacted pursuant to the Hawes-Cooper Act.
Subsequent amendments to this law, including Pub. L. 76-851, 54 Stat.
1134 (1940), strengthened Federal enforcement authority by making any
transport of prison-made goods in interstate commerce a Federal
criminal offense. As amended, 18 U.S.C. 1761(a) now provides:

    Whoever knowingly transports in interstate commerce or from any
foreign country into the United States any goods, wares, or
merchandise manufactured, produced, or mined, wholly or in part by
convicts or prisoners, except convicts or prisoners on parole,
supervised release, or probation, or in any penal or reformatory
institution, shall be fined [under this title] or imprisoned not
more than two years, or both. [herein referred to as the Ashurst-
Sumners Act].

[[Page 36712]]

    Certain prison-made products were excepted by statute from the
Ashurst-Sumners Act prohibition, including ``agricultural commodities
or parts for the repair of farm machinery'' as well as ``commodities
manufactured in a Federal, District of Columbia or State institution
for use by the Federal Government, or by the District of Columbia, or
by any State or Political subdivision of a State or not-for-profit
organizations.'' Title 18 U.S.C. 1761(b).
    The Walsh-Healey Act, 49 Stat. 2036 (1936), as amended in 1979 by
Pub. L. 90-351, Sec. 827(b) and codified at 41 U.S.C. 35, also controls
the production of prison-made goods. This statute prohibits the use of
prison labor to fulfill general government contracts which exceed
$10,000. BJA certification pursuant to Sec. 1761(c) excepts prison-made
goods produced by PIECP work pilot projects from the Walsh-Healey Act
contracting restrictions, as well as the Ashurst-Sumners Act interstate
transportation restrictions.
2. Prisoner Idleness and Prisoners' Need for Job Skills Training
    The PIECP exception to the Ashurst-Sumners and the Walsh-Healey Act
restrictions was introduced in the Senate in 1979 after the 1978
Pontiac, Illinois prison riot. In the wake of that uprising, Senator
Charles Percy (R-IL) stated:

    [L]ast summer in Pontiac, Illinois, our worst fears about the
conditions in the Nation's prisons erupted into a nightmarish
reality. The Pontiac prison riot of 1978 ended with three guards
dead, three others seriously wounded, and $4 million in property
damage * * *
    The shopping list of problems and deficiencies in our prison
system is long and well known. Overcrowding, old and obsolete
facilities, lack of training or educational programs, crime within
prison walls, frustration on the part of guards and inmates are all
a part of the dreary picture * * *. Recidivism is now a substantial
element in our overall crime rate, and prisons are often accurately
characterized as a ``school for crime,'' rather than a deterrent to
crime * * *. 125 Cong. Rec. S11834 (1979).

    These concerns caused Congress to take measures to encourage prison
industries, provided that they not engage in unfair competition with
private sector businesses and labor. Senator Percy's bill, now referred
to as the Prison Industries Enhancement Act, Section 827 of the Justice
System Improvement Act of 1979, Pub. L. 96-157, Sec. 827(a), 93 Stat.
1215, was enacted on December 27, 1979. As amended, it now offers 50
Federally certified projects an opportunity to participate in the
interstate market, provided certain safeguards to free-world labor and
industry, and to prisoner-workers themselves, are met. See The Crime
Control Act of 1990, Pub. L. 101-647, Sec. 2906, 104 Stat. at 4914.
    In describing the purpose of his introduced legislation, Senator
Percy explained (125 Cong. Rec. S11834 (1979)):

    My amendment would do two basic things: First, it would
authorize the [BJA] to encourage development of pilot demonstration
projects for prison industry at the State level, involving private
sector industry * * *. Under this approach, prison programs benefit
from the private business, develop access to new markets, and
attract needed capital. The goal of these pilot projects would be to
create as realistic a working environment as possible within the
prison walls, while enabling an inmate to become more self-
sufficient to the benefit of himself, the prison system, and the
taxpayer.
    Secondly, my amendment creates a partial exemption to two
Federal laws which severely restrict the ability of State prison
industries to market their goods * * *. When these laws were enacted
decades ago, they represented significant reforms against
exploitation of prison labor. Over the years, however, they have
developed into heavy-handed roadblocks to growth among * * * prison
industry programs * * *.
    My amendment would provide limited exemptions to these
restrictions where inmates have been paid a wage comparable to that
paid for similar work in the private sector in the locality * * *.

    The statutory exception that was enacted to establish PIECP is
codified at 18 U.S.C. Section 1761(c):

    * * * [the Federal marketability prohibitions] shall also not
apply to goods, wares, or merchandise manufactured, produced, or
mined by convicts or prisoners who--
    (1) Are participating in one of not more than 50 non-Federal
prison work pilot projects designated by the Director of the Bureau
of Justice Assistance; * * *

    To become eligible for Bureau of Justice Assistance (BJA)
certification, an applicant state or local department of corrections
must comply with specified statutory requirements. It must pay
participating prisoners ``wages not less than that paid for work of a
similar nature in the locality in which the work was performed'' and
cannot take more than 80 percent in deductions from gross wages for
specified purposes including taxes, reasonable charges for room and
board, family support and victims' compensation. 18 U.S.C. 1761(c)(2).
    Certain other conditions of employment must also be met. An
eligible applicant cannot deprive participating offenders, solely
because of their status as offenders, of the right to participate in
benefits made available by the Federal or state government to other
individuals on the basis of their employment, such as workmen's
compensation. Title 18 U.S.C. 1761(c)(3). PIECP inmates must also
participate on a voluntary basis and must have agreed to the specific
deductions made from gross wages pursuant to 18 U.S.C. 1761(c)(2), and
all other financial arrangements resulting from participation in such
employment. Title 18 U.S.C. 1761(c)(4).
    The note following 18 U.S.C. 1761, although not codified, is public
law and adds two additional requirements on certified prison
industries. The note requires participating prison industries to
consult with local union organizations prior to initiating any project
qualifying for a Sec. 1761(c) exemption. Also, the qualifying applicant
must ensure that paid inmate employment under the program will not
result in the ``displacement of employed workers, or be applied in
skills, crafts, or trades in which there is a surplus of available
gainful labor in the locality, or impair existing contracts for
services.'' The Justice System Improvement Act of 1979 added these
provisions, which became Sec. 827(c) of the Omnibus Crime Control and
Safe Streets Act of 1968. See Pub. L. 96-157, 93 Stat. 1215, reprinted
in 1979 U.S.C.C.A.N. 2471. In 1984, Sec. 827(c) was redesignated
Sec. 819 of the Omnibus Crime Control and Safe Streets Act of 1968, as
amended. See Pub. L. 98-473, 98 Stat. 2093.
    If all eligibility requirements are met and an applicant agency
acquires BJA certification, that agency is thereafter authorized to
operate irrespective of Federal prohibitions on the marketing of state
prison-made goods. Conversely, non-compliance with these statutory
eligibility requirements could expose an industry to criminal
prosecution under the Ashurst-Sumners Act. Title 18 U.S.C. 1761(a).

b. The PIECP Program

1. Current State of the Program
    Currently, 38 departments of correction or umbrella authorities are
PIECP Certificate Holders. Under the Justice System Improvement Act of
1979, Arizona, California, Idaho, Kansas, Minnesota, Nevada and Utah
were certified. In 1984, under the Justice Assistance Act of 1984, 13
prison work pilot projects were certified in: Alaska, Belnap County
(NH), Connecticut, Iowa, Maine, Missouri, Nebraska, New Mexico,
Oklahoma, Oregon, South Carolina, Strafford County (NH) and Washington
State. Under the Crime Control Act of 1990, the following additional
state and local departments of corrections have been certified:

[[Page 36713]]

Colorado, Delaware, Florida, Hawaii, Indiana, Louisiana, Maryland,
Montana, North Carolina, Ohio, Red River County (TX), South Dakota,
Tennessee, Texas, the Texas Youth Commission, Vermont, Virginia and
Wisconsin.
    Over 125 private sector businesses now work in partnership with
these PIECP certified correctional agencies to employ a total of about
2,500 inmates. Either the correctional agency or the private sector
enterprise retains project authority to direct and control inmate
labor, depending on the management model used. Project implementation
has resulted in the production of myriad products, including such items
as furniture, sheet metal, video equipment, clothing, food products,
office products, mattresses, drapery, crutches, and road signs. In
addition, although service industries were not a threat to the private
sector in 1935 and, thus, were not included within the scope of the
Ashurst-Sumners prohibition, a number of service industries have
elected to comply with the PIECP requirements.
    Between January 1979 and December 1996, PIECP projects generated
approximately $75 million in gross wages for inmates. Nearly half of
this amount was diverted to non-inmate recipients: $5.5 million was
deducted for victims of crime, $16 million was deducted for room and
board payments, $4.4 million was deducted for family support and about
$8.9 million was withheld in local, State and Federal taxes.
    BJA monitors the performance of PIECP work pilot projects to ensure
that they operate in full compliance with all legislative and
administrative program requirements. Under a grant to the Correctional
Industries Association (CIA), prison industry professionals conduct
regular, on-site reviews of all PIECP projects. BJA responds to matters
involving possible non-compliance by taking appropriate remedial action
such as providing technical assistance or proposing a corrective action
plan.
2. Future Challenges
    PIECP is utilized nationwide as a cost-efficient way to provide
inmates with work experience and training in marketable job skills, as
well as to reduce idleness among growing prison populations.
    Over time, the limit on the authorized number of pilot projects has
been raised to meet the demands of interested applicants. When Congress
last increased the project ceiling to 50, the House took into
consideration a waiting list of states and counties that had wanted to
participate and noted that ``the demand for certification by state and
local governments indicates a need for this amendment which will enable
the program to expand and other jurisdictions to apply.'' H.R. 681(I),
101st Cong. 202 (1990).
    BJA administers PIECP with the objective of making participation
available to as many qualified applicants as possible, within the limit
imposed by statutory ceiling. This Guideline provides applicants with
clarity as to Federal participation requirements, as well as
programmatic flexibility to allow for PIECP Project growth in ways that
are responsive to local needs. The Federal requirements are intended to
ensure that the interests of the private sector and organized labor are
protected. In this way, BJA's administrative practices are intended to
address the concerns reflected in the legislative history antecedent to
the enactment of earlier Federal regulation of prison-made goods, the
Hawes-Cooper Act.
    Finally, this revised Guideline addresses novel issues presented by
new PIECP participants, the private sector prisons. These entities are
unique in that they render an essential service traditionally
undertaken by public agencies and they do so for a profit. Thus, BJA
has altered some PIECP program requirements to insure program
implementation remains consistent with Congressional intent. Congress
enacted PIECP to introduce public departments of correction to private
sector profit-making enterprises. Therefore, private prison industries
are invited to participate in PIECP only as Cost Accounting Centers
designated under the authority of certified public departments of
correction.

c. Request for Comments

    Comments on revisions described in this Proposed Guideline must be
submitted to BJA no later than 60 days following the date of
publication and will be considered in the drafting of the Final
Guideline. Existing Certificate Holders and designated Cost Accounting
Centers will be provided with a time period of one year, after the
publication date of the Final Guideline, to make whatever program
adjustments are necessary to come into full compliance.

III. Program Guidance

a. PIECP Purposes

    <bullet> To provide a cost-efficient means to address inmate
idleness and to provide inmates with work experience and training in
marketable job skills. BJA encourages private sector PIECP partners to
consider post-incarceration employment to PIECP inmate workers.
    <bullet> Through inmate wage deductions, to increase advantages to
the public by providing departments of correction with a means for
collecting taxes and partially recovering for inmate room and board
costs, by providing crime victims with a greater opportunity to obtain
compensation, as well as by promoting inmate family support.
    <bullet> Through PIECP participation conditions, to prevent unfair
competition between prison-made goods and private sector goods.
    <bullet> To prevent the exploitation of prison labor.

b. Definitions

    Benefits refers to inmate benefit coverage required by 18 U.S.C.
1761(c)(3). PIECP projects must provide inmate workers appropriate
benefits comparable to those made available by the Federal or state
government to private sector employees. The scope of appropriate
benefits coverage is impacted by whether management of the Cost
Accounting Center is structured as an employer or customer model and
whether the inmate labor work force is controlled by a public agency or
the private sector.
    BJA refers to the Bureau of Justice Assistance within the Office of
Justice Programs, U.S. Department of Justice.
    Certificate Holder refers to a public department of corrections, or
an alternate umbrella authority, which is approved by BJA for PIECP
Project certification. Certificate Holders assume monitoring and
designation responsibilities with respect to their designated Cost
Accounting Centers. All PIECP prison-made goods are produced within
Cost Accounting Centers that a Certificate Holder designates within
itself, its private prison agents or, in the case or an umbrella
authority, within its membership agencies.
    Certification refers to an exercise of BJA's discretionary
authority to designate a Prison Work Pilot Project pursuant to Title 18
U.S.C. 1761(c). BJA may issue either standard or a provisional
certifications to applicant projects. BJA certified projects are
excepted from certain Federal marketability restraints on the transport
of prison-made goods in interstate commerce, including 18 U.S.C.
1761(a), and sales to the Federal government in excess of $10,000, 41
U.S.C. 35.
    Cost Accounting Center (CAC) refers to a distinct PIECP goods
production unit of the industries system that is managed as a separate
accounting entity under the authority of a Certificate Holder. All
PIECP production activities

[[Page 36714]]

are conducted within the context of a designated CAC which, generally,
is structured either as a Customer or Employer Model. All designated
CACs must operate in compliance with the provisions set forth in 18
U.S.C. 1761(c) and this Guideline.
    Customer Model is a form of a PIECP Cost Accounting Center
management structure. In this model, the private sector is engaged in a
CAC enterprise only to the extent that it purchases all or a
significant portion of the output of a prison-based business owned and
operated by the CAC agency. A customer model private sector partner
assumes no major role in industry operations, does not direct
production and has no control over inmate labor. These functions are
performed, rather, by a department of corrections.
    Deductions. CACs may elect to take deductions from a PIECP inmate
worker's wages for certain authorized items. Deductions from PIECP
inmate gross wages, if taken, may be made only for those items
specified in 18 U.S.C. 1761(c)(2), including: Payment of taxes,
reasonable charges for room and board, allocations for family support
and contributions to any funds established by law to compensate victims
of crime (no less than 5 percent and no more than 20 percent). In no
event may a PIECP inmate worker's total deductions exceed 80 percent of
gross wages and each and every PIECP inmate worker must agree, in
advance, to all deductions from gross wages.
    Designation is an exercise of a Certificate Holder's discretionary
authority to bring a CAC within its certified PIECP Project. This
exercise of authority results in an extension of PIECP exception status
and an imposition of compliance requirements on an identified CAC
operating within the certified PIECP Project.
    Employer Model is a form of a PIECP management structure. In this
model, the private sector owns and operates the CAC by controlling the
hiring, firing, training, supervision, and payment of the inmate work
force. The department of corrections assumes no major role in industry
operations, does not direct production, and exercises minimum control
over inmate labor performance. These functions are performed, rather,
by the private sector.
    Goods include tangible items, wares, and merchandise.
    Locality means the geographic area impacted by the presence of a
PIECP CAC operation. For PIECP CACs, it is relevant with regard to:
determining prevailing wage, providing consultation to appropriate
labor and private sector organizations, and determining whether a PIECP
CAC operation will displace the private sector labor force. All
locality determinations must be documented as part of a Notice of
Designation. As used in the calculation of CAC wage rates, locality is
usually a matter for definition by the appropriate state agency which
normally determines wage rates (i.e., the State Department of Economic
Security).
    Minimum wage means the Federal minimum wage which is the lowest
possible wage that can be paid to private sector employees under the
Fair Labor Standards Act, 29 U.S.C. 206. Any special wage program,
excepted by law from the minimum wage requirement in the private
sector, may be utilized by a PIECP CAC as long as the CAC meets the
same program participation conditions as private sector participants.
    Monitoring refers to the process of examining Prison Work Pilot
Project activities to ensure continuing compliance with 18 U.S.C.
1761(c) and this Guideline. It includes, at a minimum, BJA's receipt
and analysis of performance reports and on-site CAC monitoring visits
by BJA, BJA contractors and Certificate Holders.
    NEPA means the National Environmental Policy Act, Pub. L. 91-190,
83 Stat. 852 (1970) (codified as amended at 42 U.S.C. 4321-4347;
implemented under 40 C.F.R. pt. 1500).
    Participation means engaging in the activities and operations of an
18 U.S.C. 1761(c) excepted PIECP Project.
    PIECP means the Prison Industry Enhancement Certification Program
as authorized by 18 U.S.C. 1761(c).
    PIECP Exception Status. Any PIECP Project which produces prison-
made goods pursuant to and under the conditions set forth in 18 U.S.C.
1761(c) is excepted from certain Federal restraints imposed on the
marketability of prison-made goods, including 18 U.S.C. 1761(a) and 41
U.S.C. 35.
    PIECP Inmate Worker is a convict or prisoner who provides labor for
a Prison Work Pilot Project certified under 18 U.S.C. 1761(c); the
prisoner benefits from PIECP by receiving training and work experience.
    Prevailing wage is a wage rate which is not less than that paid for
work of a similar nature in the locality in which the work is to be
performed, 18 U.S.C. 1761(c)(2).
    Prison-made goods include all goods, wares, and merchandise
manufactured, produced, or mined, wholly or in part, by convicts or
prisoners (except convicts or prisoners on parole or probation), or in
any penal or reformatory institution.
    Prison Industry means an organized utilization of inmate labor to
produce goods or render services.
    Prison Work Pilot Project (PIECP Project) refers to one of 50
possible projects which may be designated by the Director of BJA under
18 U.S.C. 1761(c). This term encompasses the operations of the
Certificate Holder's designated Cost Accounting Centers (CACs). Any
Prison Work Pilot Project may consist of one or more CACs.
    Prisoner includes prison and jail inmates, convicts and
incarcerated juvenile offenders, and does not include prisoners on
parole, probation, or supervised release. Title 18 U.S.C. 1761(a) does
not regulate the transport of goods produced by prisoners on parole,
supervised release, or probation.
    Production is the forming anew or transforming of marketable goods.
The term includes mining and manufacture and excludes services.
    Provisional Certification is issued by BJA in instances where an
applicant has not yet come into full compliance with all PIECP
requirements, but such compliance appears imminent. It entitles the
holder to PIECP exception status for an identified period of time, may
be made contingent upon the occurrence of identified conditions, and
may or may not be renewed by BJA.
    Statutory Exception Status refers to a prison industry which meets
the statutory requirements set forth in 18 U.S.C. 1761(b), and is
thereby entitled to an exception from the prohibition set forth in 18
U.S.C. 1761(a).
    Supervised Release. 18 U.S.C. 1761(a) states that the Ashurst-
Sumners Act prohibition does not apply to ``convicts on parole,
supervised release, or probation.'' The reference to ``supervised
release'' was added to Sec. 1761(a) in 1984, Pub. L. 98-473, Sec. 223,
and is responsive to changes made at that same time in state and
Federal Sentencing Guidelines. Policy statements issued by the U.S.
Sentencing Commission explain that supervised release is a ``new form
of post-imprisonment supervision created by the Sentencing Reform
Act.'' See Federal Sentencing Guidelines, 18 U.S.C.A. ch. 7, pt. A
(1997).
    Umbrella Authority refers to a type of Certificate Holder which is
authorized by law to administer a PIECP Project and which consists of
state and/or local correctional agencies located within the same state.
A certified umbrella authority may designate CACs within its membership
agencies, as well as within members' private prisons, and assumes
responsibility for monitoring compliance with respect to those same
centers.

[[Page 36715]]

c. BJA's Initial Considerations for Determining Propriety of Work Pilot
Project Certification

1. BJA's Exercise of Discretionary Authority To Define and Certify 50
Prison Work Pilot Projects
    (A) BJA may exercise discretionary authority to designate up to 50
PIECP Pilot Projects, 18 U.S.C. 1761(c).
    (B) BJA may define PIECP eligibility qualifications and, in
accordance with its own definitions, may exercise agency discretion to
extend or withdraw certification privileges, as it deems appropriate.
2. Threshold Inquiry for Determining Applicability of PIECP Exception
Status
    Appropriate PIECP participants include prison industries whose
activities would likely violate the 18 U.S.C. 1761(a) prohibition and
would likely not fit within an 18 U.S.C. 1761(b) exception. BJA has
devised an administrative approach for identifying such industries.
This approach incorporates relevant Sec. 1761 (a) and (b)
considerations, including whether a given prison-made item qualifies as
an excepted agricultural product, whether a given prison industry
activity qualifies as an unregulated service, and whether a product
distribution activity qualifies as an intrastate distribution of goods.
These considerations are reflected in the following threshold inquiry,
which BJA will use to determine whether a prison industry should be
encouraged to apply for PIECP exception status:
    (A) Is a statutory exception applicable under 18 U.S.C. 1761(b)?
The following prison-made items are excepted from the prohibition set
forth in Sec. 1761(a):
    <bullet> Parts for the repair of farm machinery; or
    <bullet> Commodities manufactured in a Federal, District of
Columbia, or state institution for use by the Federal Government, or by
the District of Columbia or by any state or political subdivision of a
state or not-for-profit organizations. This exception is intended to
inure to the benefit of the Federal Government, the District of
Columbia, the states (or political subdivisions thereof) and not-for-
profit organizations and is not intended to benefit private prisons; or
    <bullet> Agricultural commodities grown or cultivated on a farm
which retain continuing substantial identity through processing stages,
if any. In making the determination as to whether a processing stage
changes a product from an agricultural commodity to a manufactured
commodity, a relevant consideration is whether the processing is
incidental or ancillary to agricultural commodity growth and or
cultivation. If the processing is incidental or ancillary in nature and
is commonly undertaken by agricultural enterprises, then it would
likely fall within the scope of the statutory exception.
    (B) Could the contemplated activity trigger 18 U.S.C. Sec. 1761(a)
by resulting in a production of goods by inmates in any penal or
reformatory institution? The production of goods, which is regulated by
18 U.S.C. 1761(a), must be distinguished from inmate services which are
not regulated by the criminal prohibition. The following factors are
relevant in determining whether a given activity results in the
production of prison-made goods:
    <bullet> Has a tangible item been produced, manufactured or mined?
    <bullet> Has a tangible item been formed or transformed?
    <bullet> Has the activity resulted the creation of property or in a
new, marketable item?
    (C) Could the contemplated activity trigger 18 U.S.C. 1761(a) by
resulting in a post-production, interstate transportation of prison-
made goods?
    <bullet> Will there be transportation of prison-made goods into the
flow of interstate commerce, i.e., across state lines or from a foreign
country into the United States?
    <bullet> Is there a commercial economic enterprise present?
    BJA will use this preliminary threshold inquiry to instill greater
consistency in PIECP eligibility decision-making. If a prison industry
activity falls within the scope of the Sec. 1761(b) statutory
exception, the involved industry need not seek Sec. 1761(c) exception
status to avoid Sec. 1761(a) criminal sanctions. Additionally, if a
prison industry activity would not result in the production of goods,
interstate transport of prison-made goods, or would not in any other
way trigger Sec. 1761(a), the involved industry need not seek
compliance with the requirements set forth in Sec. 1761(c) or this
Guideline.
    This threshold inquiry was devised only for 18 U.S.C. 1761(c)
programmatic purposes and does not reflect the Department of Justice's
18 U.S.C. 1761(a) prosecution guidelines. Thus, reliance on this
Guideline, or any BJA determination based thereon, is not a complete
defense to any civil or criminal action, but would depend on other
factors as well.

d. Mandatory Program Criteria for PIECP Participation

    1. Eligibility. All public departments of correction and juvenile
justice agencies authorized by law to administer prison industry
programs are eligible to apply for PIECP certification; such public
agencies are also eligible members of umbrella authorities, authorized
by law to administer prison industry programs, that are seeking
certification. PIECP Certificate Holders may designate CACs within
themselves, as well as within private prisons with which they contract
for incarceration services and which are located in the same state.
Private prison industries may participate in PIECP only as designated
CACs and as part of certified PIECP Projects located within their
respective states. Non-compliance by any one designated CAC may result
in PIECP exception status suspension and/or termination as to that CAC,
and if warranted, its respective Certificate Holder. Also, within a
reasonable period of time after certification, each Certificate Holder
must have at least one CAC producing goods and operating pursuant to
its authority or risk losing certification.
    2. Prevailing Wage. PIECP inmate workers must receive wages at a
rate which is not less than that paid for work of a similar nature in
the locality in which the work is to be performed. This requirement
benefits society by allowing for the development of prison industries
while protecting private businesses from unfair competition that would
otherwise stem from the flow of low-cost, prison-made goods into the
marketplace. PIECP participants must, therefore, implement the
prevailing wage requirements under like conditions experienced by
private sector competition. In this regard, the following requirements
are applicable:
    (A) Section 1761(c) requires that the PIECP wage amount be set
exclusively in relation to the amount of pay received by similarly
situated non-inmate workers. The statute does not allow other cost
variables to be taken into consideration, such as unique expenses
incurred as a result of undertaking production within the prison
environment.
    (B) Prevailing wage verification must be obtained by the
appropriate state agency which determines wage rates (usually the
Department of Economic Security).
    (C) When making PIECP prevailing wage verifications and re-
verifications, the responsible state agency should recommend the
utilization of a non-inmate wage scale which will not result in the
displacement of non-inmate workers performing similar work in the
relevant locality.
    (D) The PIECP prevailing wage must be received by those inmate
workers performing notable tasks necessary to produce and / or
transport goods in

[[Page 36716]]

interstate commerce. If a similarly situated, private sector company is
paying wages to obtain services that are necessary to production, e.g.
refuse pickup, then the PIECP CAC must also pay such wages to the
inmate provider of like services. In determining which tasks are
covered, the following considerations are relevant: the amount of
inmate time involved, effort and skill necessary to accomplish the
task, the regularity of task performance, and whether the task would
have been performed by the inmate absent PIECP production.
    (E) The prevailing wage must be verified prior to the initiation of
PIECP participation. Annually, thereafter, the PIECP participant must
re-verify the adopted wage to ensure that it continues to be comparable
to wages paid for work of a similar nature in the locality in which the
project is located.
    (F) If no such verification can be obtained from the State
Department of Economic Security, or other similar department, the PIECP
participant is responsible for establishing a reasonable prevailing
wage. In such instances, the participant should retain on file, for
BJA's review:
    (1) relevant wage data from a sufficient number of competitors in
the locality;
    (2) data analyses for determining a reasonable prevailing wage
result; and
    (3) if possible, a written assessment of the reasonableness of the
resulting prevailing wage determination by an appropriate state agency
which normally determines wage rates.
    (G) The PIECP prevailing wage can not be set below the Federal
minimum wage, as defined in the Fair Labor Standards Act (FLSA), 29
U.S.C. 201 et seq. Payment of the Federal minimum wage, however, does
not automatically achieve compliance with the prevailing wage
requirement unless the prevailing wage for the comparable private
sector industries is, in fact, the Federal minimum wage.
    (H) Overtime, at one and a half times the rate of regular or
prevailing wage, must be paid for prisoner hours worked in excess of 40
hours per week. See 29 U.S.C. 207(a) (a payment standard imposed on
private sector competition).
    (I) If a CAC pays a wage based on piece work, the project must
apply a calculation to convert regular wages paid into a comparable
hourly wage. The calculation should be used as a routine check to
ensure that inmate workers, paid according to piece rate work, do not
receive less than the Federal minimum wage. In instances where the CAC
is paying Federal minimum wage and such a wage is less than the
industry standard for the prevailing wage, the CAC must be able to
identify inmate worker performance variances as justification for the
wage rate.
    (J) BJA strongly encourages the use of wage plans that take into
consideration a PIECP worker's experience, seniority, and performance.
    3. Non-Inmate Worker Displacement. PIECP CAC operations must not
result in displacement of employed workers; be applied in skills,
crafts, or trades in which there is a surplus of available gainful
labor in the locality; or significantly impair existing contracts. The
term ``displacement,'' as used in this provision, includes all such
prohibited activities, as well as the transfer of private sector jobs
to PIECP inmates. This prohibition is intended to protect the private
sector partner's non-inmate employees, as well as all other non-inmate
workers who perform work of a similar nature in the same locality in
which the CAC is located.
    (A) Regarding the possibility of displacement among non-inmate
employees of private sector partners in the same locality as the CAC:
    (1) BJA will presume non-compliance where there is a non-inmate
worker's job replacement by a PIECP inmate worker or where a non-inmate
worker's job function is eliminated or adversely impacted, to a
significant degree, and there is a concomitant assumption of a similar
job function by a PIECP inmate worker. When evaluating such
circumstances, BJA will not consider the private sector partner's
intent or economic viability.
    (2) Prior to CAC initiation, the CAC applicant must provide BJA
with written documentation reflecting the private sector partner's
agreement not to displace its non-inmate employees with PIECP inmate
labor in violation of the 18 U.S.C. 1761(c) statutory note.
    (B) Prior to project initiation, all CAC applicants must show
through written verification by the State Department of Economic
Security (or other appropriate state agency) that the PIECP project
will not result in displacement of non-inmate workers performing the
same work, regardless of wage rate. In cases where an appropriate state
agency cannot provide this service, the applicant CAC should propose to
and confer with BJA as to alternative measures to address this
requirement.
    (C) In instances where BJA finds that CAC implementation results in
private sector worker displacement, the CAC must either cease its
operations or comply with a BJA-approved corrective action plan, if BJA
proposes such a plan under Section IV. f. of this Guideline, infra.
    (D) BJA strongly recommends that CAC job development be oriented
toward the creation of new jobs within the locality.
    4. Benefits. PIECP projects must provide inmate workers appropriate
benefits comparable to those made available by the Federal or State
Government to private sector employees, including workers' compensation
and, under certain circumstances, Social Security.
    (A) By statute, in some states, inmates are not eligible to
participate in workers' compensation programs. Provision of comparable
workers' compensation benefits is acceptable as long as the CAC can
demonstrate comparability of such benefits with those secured by the
Federal or state Government for private sector employees.
    (B) The PIECP CAC management model impacts whether the CAC must
provide Social Security benefits to PIECP inmate workers. Where the
employer model is utilized and the private sector directs and controls
the PIECP inmate worker, the PIECP participant must provide PIECP
inmate workers with Social Security benefits. Where a customer model is
utilized and the state directs or controls the PIECP inmate worker, BJA
recognizes the applicability of other provisions of Federal law which
may operate to preclude the provision of PIECP inmates with certain
benefits, including Social Security.
    5. Deductions. Participating CAC's are not required to take
deductions from PIECP inmate wages. However, if a CAC exercises its
discretion to take deductions from a PIECP inmates' gross wages, such
deductions can be taken only under the following conditions:
    (A) Deductions from gross wages, if made, may be withheld only for
the following authorized purposes:
    (1) taxes (Federal, state, local);
    (2) in the case of a state prisoner, reasonable charges for room
and board as determined by regulations issued by the Chief State
Correctional Officer;
    (3) allocations for support of family pursuant to state statute,
court order, or agreement by the offender; and
    (4) contributions of not more than 20 percent, but not less than 5
percent of gross wages to any fund established by law to compensate the
victims of crime.
    Such deductions, in aggregate, cannot exceed 80 percent of gross
wages.
    (B) PIECP inmate workers must be paid, credited with, or otherwise
benefit legally from, the 20 percent gross remainder. In this regard,
the CAC may direct the 20 percent gross remainder to

[[Page 36717]]

a PIECP inmate worker's expense accounts, savings accounts, or toward
the settling of the worker's legal obligations, including the payment
of fines and restitution.
    (C) Each Certificate Holder, through its respective Chief State
Correctional Officer, retains flexibility with respect to determining
appropriate room and board charges that may be deducted from PIECP
inmate workers' gross wages.
    (1) Consistent with 18 U.S.C. Sec. 1761(c)(2)(B), BJA requires only
that such charges be reasonable as determined by regulations issued by
the Chief State Correctional Officer, in the case of state prisoners.
In the case of non-state prisoners, this determination shall be made in
accordance with regulations issued by the Chief Correctional Officer of
the state in which the PIECP inmate is incarcerated.
    (2) The legislative history of 18 U.S.C. Sec. 1761(c) reflects a
congressional intent to permit the use of the room and board deduction
to lower costs otherwise incurred by the public for inmate
incarceration. Thus, prior to making room and board deductions, private
prison CACs must obtain written approval of such a proposed deduction
from the Chief State Correctional Officers for the states in which the
PIECP inmate workers were convicted.
    (D) A PIECP inmate's gross wages may be subjected to a deduction
for the purpose compensating crime victims if the deducted amount is
deposited into a fund established by law for the purpose of providing
crime victim compensation. State crime victim compensation funds
typically qualify as authorized recipients of such deducted amounts.
Amounts deducted by private prison CACs should be deposited in the
crime victim compensation funds established in those states in which
the PIECP inmates were convicted.
    6. Voluntary PIECP Inmate Worker Participation. The Inmate Worker
must indicate, in writing, that he or she:
    (A) agrees voluntarily to participate in the PIECP project, and
    (B) agrees voluntarily, and in advance, to specific deductions made
from gross wages, as well as all other financial arrangements made as
to earned PIECP wages.
    7. Consultation with Organized Labor. PIECP CACs must:
    (A) consult with representatives of local union central bodies or
similar labor union organizations prior to the initiation of any
certified or designated CAC project. CACs should consult with as many
of such organizations as have members which may be affected by the
types of work to be performed by the PIECP inmates. If there are no
local union bodies or labor organizations, consultation must be made
with state union bodies or similar state-wide labor organizations.
    (B) provide adequate information about the contemplated PIECP
participation such as, at a minimum, an identification of the scope of
the intended CAC and projected initiation date, as well as an
explanation of the fact that statutory consultation is required and
comments are invited. CACs should retain documentation reflecting
provision of adequate consultation.
    8. Consultation with Local Private Industry. PIECP CACs must:
    (A) consult with representatives of local businesses that may be
economically impacted by CAC production prior to beginning operations,
and
    (B) provide adequate information about the contemplated PIECP
participation such as, at a minimum, an identification of the scope of
the intended CAC and projected initiation date as well as an
explanation of the fact that statutory consultation is required and
comments are invited. CACs should retain documentation reflecting
provision of adequate consultation.
    9. Compliance with the National Environmental Policy Act (NEPA).
The review and approval of PIECP certification applications as well as
the designation of PIECP CACs must comply with NEPA and other related
Federal environmental review requirements. See NEPA, 42 U.S.C. 4321-
4347 and 40 C.F.R. pt. 1500. See also 28 C.F.R. pt. 61 (Department of
Justice procedures for implementing NEPA); 28 C.F.R. pt. 61 app. D
(procedures specific to Federal actions undertaken by the Office of
Justice Programs).
    (A) A BJA PIECP certification, or a CAC designation under an issued
certification, constitutes a ``Federal action,'' as defined by 40
C.F.R. Sec. 1508.18 of the Council on Environmental Quality's (CEQ)
regulations for implementing NEPA. Consistent with the CEQ regulations,
PIECP applicants and CACs are required to submit for BJA review
environmental data and information regarding their proposed activities
and, if necessary, environmental assessments. Applicants and CACs must
also assist BJA in the preparation of any required environmental impact
statements.
    (B) Title 28 C.F.R. Part 61 App. D provides NEPA compliance
guidance to PIECP applicants and CACs, including the following:
    (1) Actions entailing minor renovation projects or remodeling do
not normally require an environment impact statement or an
environmental assessment, unless, for example the actions would be
located in or potentially affect a floodplain; a wetland; a listed
species or critical habitat for an endangered species; or a property
that is listed on or may be eligible for listing on the National
Register of Historic Places.
    (2) Actions that normally require an environmental assessment, but
not necessarily an environmental impact statement include: renovations
and expansions that change the basic prior use of a facility or
substantially change its size; change in use of an existing facility
that results in the increased production of liquid, gaseous, or solid
wastes; new construction; research and technology whose anticipated and
future application could be expected to have an effect on the
environment; and new operations involving the use of hazardous, toxic,
radioactive, or odorous materials. Assessments of such activities which
result in BJA ``findings of significant impact'' will necessitate the
preparation of environmental impact statements in compliance with NEPA
and its implementing regulations.
    (3) Additionally, no certification will be approved nor can any
designation be provided or maintained if the application or designation
includes a facility in non-compliance with any Federal, state, or local
environmental law or regulation.

IV. PIECP Administration

    a. Certificate Holders. BJA may exercise its discretionary
authority to certify up to 50 PIECP Projects. Eligible applicants may
seek certification by submitting an application to BJA in accordance
with the requirements set forth in BJA's PIECP Certification
Application, which will be provided upon request, and subpart IV.a.2,
infra. BJA's review of submitted applications will be conducted as
outlined in subparts IV.a.3 and a.4, infra. Once a certificate is
issued, the holder assumes the authority and responsibilities set forth
in subparts IV.a.5 and a.6, infra.
    1. Project Structure. All public departments of correction,
authorized by law to administer prison industry programs, are eligible
to apply for BJA certification. Certified applicants may designate one
or a number of Cost Accounting Centers (CACs) under their authority.
Certificate Holders may also designate CACs within private prisons with
which they contract for incarceration services and which are located in
their respective states. BJA

[[Page 36718]]

will consider alternative program structures suggested by certification
applicants, including, but not limited to, applicant umbrella
authorities, as described in subpart III. D. 1, supra.
    2. Application Content. All applications for PIECP Project
Certification shall include the following:
    (A) Assurances of Authority. The Certificate Holder must provide
written assurance to BJA that it has in place appropriate statutory and
administrative authority to meet all mandatory program criteria and, in
particular, to monitor CAC compliance throughout the proposed PIECP
Project.
    (B) Documentation to Show Compliance with Mandatory Program
Criteria. The applicant must submit all documentation necessary to show
CAC compliance with the nine mandatory program criteria outlined in
Section III. d., supra.
    (C) Project Description. The applicant must describe key project
elements, including the process to be used to designate and monitor
compliance of CACs with 18 U.S.C. Sec. 1761(c) and this Guideline.
    3. BJA Review. PIECP applications will be reviewed by BJA on a
first-come, first-served basis. Awards of certification are
discretionary exercises of authority by BJA under 18 U.S.C. 1761(c). No
certification will be awarded, however, unless there is a determination
that the applicant has met the mandatory participation criteria
outlined in this Guideline. Applicants will be notified in writing of
BJA's award or denial of certification. The hearing and appeal
procedures set forth in 28 C.F.R. Part 18 do not apply to denied PIECP
applicants. Certified applicants will be informed of the effective date
of BJA's certification.
    4. Standard or Provisional Certification. A standard certification
may be issued by BJA to an approved Certificate Holder applicant when
all mandatory program criteria have been met. When one or more
mandatory program criteria have not been met, but when steps have been
taken to ensure that those criteria will be met within a reasonable
period of time, then a provisional certification may be issued by BJA
in instances where the withholding of certification would significantly
impair the applicant's ability to further develop its project. The
terms of the provisional certification will be made specific to the
nature of the unmet mandatory criteria and may be made contingent upon
the occurrence of identified conditions. Provisional certifications may
be issued for no longer than one year from the date of issuance and may
be subject to renewal, at BJA's discretion.
    5. Certificate Holder Designation Authority:
    (A) The Certificate Holder may exercise CAC designation authority
with respect to CACs operating under its authority, including in
private prisons with which it contracts for incarceration services and
which are located in its respective state. To exercise this authority,
a Certificate Holder must first determine that a proposed CAC has
complied with the requirements set forth in this Guideline and in 18
U.S.C. 1761(c). Whenever the Certificate Holder elects to exercise this
authority after certification application approval, it must submit a
Notice of Designation Form to BJA that provides the following
information and documentation:
    (1) Cost Accounting Center Name and Location;
    (2) Proposed number of workers;
    (3) Item(s) to be produced;
    (4) Proposed consumer market (including anticipated geographic
distribution);
    (5) Description of private sector involvement, including models
that will be used in working with private enterprise;
    (6) Locality determination, and supporting justification;
    (7) Description of inmate compensation plans;
    (8) Documentation of prevailing verification;
    (9) Identification of deductions to be taken and percentage of each
from PIECP inmate's gross wages;
    (10) Documentation of private sector partner's agreement not to
displace its non-inmate employees with PIECP inmate labor
determination;
    (11) Documentation of non-displacement verification;
    (12) As to any CACs within private prisons, written state approval
of a proposed room and board deduction, in compliance with Section
III.d.5.(D) of this Guideline, supra; and
    (13) Documentation of the environmental impacts of the CAC's
existing and proposed activities.
    (B) The Certificate Holder may, in its own discretion, undesignate
any previously designated CAC. In such instances, the Certificate
Holder must submit to BJA an Undesignation Form providing the following
information:
    (1) Cost Accounting Center Name and Location;
    (2) Reasons for Undesignation; and
    (3) Effective Date of Undesignation.
    (C) BJA may, at any time deemed necessary to resolve compliance
concerns and upon the issuance of written notice, suspend a Certificate
Holder's authority to designate additional Cost Accounting Centers.
    6. Certificate Holder Monitoring Responsibilities: As to all
designated CACs, the Certificate Holder must assume the following
monitoring responsibilities:
    (A) Undertake all reporting and evaluation activities deemed
necessary to ensure continuing designated CAC compliance; and
    (B) Respond to all BJA requests for information and cooperation
aimed at ensuring Project compliance.
    b. Cost Accounting Centers' PIECP Exception Status. A CAC is
entitled to operate under PIECP exception status.
    1. To retain this status, the CAC must comply with all PIECP
participation obligations to its Certificate Holder and to BJA,
including:
    (A) Maintaining continuous compliance with the requirements set
forth in 18 U.S.C. 1761(c) and in III.d), supra, of this Guideline; and
    (B) Responding to all monitoring requests for information and
cooperation aimed at maintaining continued compliance with this
Guideline.
    2. The CAC must promptly report to the Certificate Holder any
contemplated change in operations which may affect its ability to
maintain statutory and regulatory compliance.
    c. Compliance Reviews:
    1. Performance Reports. Within 30 days following the close of each
calendar quarter, each CAC must submit a quarterly performance report
to its Certificate Holder in a form prescribed by BJA. The performance
report describes activities undertaken during the prescribed period. A
consolidated report of all CAC activity must be submitted to BJA by the
Certificate Holder within 45 days following the close of each calendar
quarter.
    2. Monitoring Reviews. BJA and BJA technical assistance contractors
are authorized to perform desk and on-site reviews of all PIECP
participants, including all CACs, as deemed necessary. On-site
reviewers may request access to any and all documentation necessary to
assist in determining compliance with the requirements of this
guideline and 18 U.S.C. 1761. Monitored participants will be advised in
writing of the results of any such reviews. Immediate corrective action
must be taken to address determinations of non-compliance and/or to
respond to issues that raise compliance related concerns for BJA.
    d. BJA's PIECP Administration. BJA's PIECP responsibilities include
the following:

[[Page 36719]]

    1. Review and approval of Certificate Holder PIECP applications;
    2. Monitoring to determine compliance status of operations within
all CACs;
    3. PIECP exception status termination or suspension for cause
related to substantial non-compliance;
    4. Liaison with other Federal agencies that may affect PIECP
operations;
    5. Provision of compliance-related technical assistance; and
    6. Any and all other functions necessary to administer the program
in compliance with 18 U.S.C. 1761(c).
    e. PIECP Exception Status Suspension/Termination
    1. Notice of Possible Compliance Violation. Alleged facts
indicative of non-compliance shall be communicated in writing by BJA to
the involved Certificate Holder and the involved designated CAC. These
parties must respond to the allegations, in writing, within 15 days
after receipt of the notice of non-compliance determination. Immediate
corrective action must be taken to address determinations of non-
compliance.
    2. Voluntary Compliance Agreements. If BJA determines that
noncompliant practices persist, BJA may, in its discretion, propose a
voluntary compliance agreement to the involved Certificate Holder.
    3. Failure to Achieve Compliance and Effect of Non-Compliance. If a
voluntary compliance agreement is not presented by BJA or is not
accepted or adequately implemented by the Certificate Holder within 30
days after receipt of such an agreement, BJA may suspend the
Certificate Holder's certification and/or CAC exception status.
    4. PIECP Exception Status Suspension and Termination. A
certification may be terminated by BJA if it has been inactive (no
production within a designated CAC) or suspended for six consecutive
months. A certification and/or designation may be suspended, and six
months thereafter, terminated upon: (1) Issuance of a notice of a
determination that the Certificate Holder and/or designated CAC is not
acting in compliance with the requirements of 18 U.S.C. 1761, this
Guideline or the conditions set forth in its certificate; or (2) in the
discretion of the Director of BJA and upon a re-definition of a PIECP
Project authorized under 18 U.S.C. 1761(c). Termination or suspension
of the exception status of one designated CAC will not automatically
impact the PIECP exception status of other CACs under the same
certification unless the PIECP Project certification is suspended or
terminated. The hearing and appeal procedures set forth in 28 C.F.R.
Part 18 do not apply to PIECP applicants or participants who have had
PIECP exception status suspended or terminated under this provision.

    Dated: June 26, 1998.
Nancy Gist,
Director, Bureau of Justice Assistance.
[FR Doc. 98-17757 Filed 7-6-98; 8:45 am]
BILLING CODE 4410-18-P
