HJR 606

Joint Subcommittee to Study Prison Industries

August 4, 1999, Richmond

During its organizational meeting, the joint subcommittee considered its charge under HJR 606, and staff presented an overview of the statutory provisions relating to Virginia Correctional Enterprises (VCE). In addition, the director of VCE made a presentation to the joint subcommittee.


The director of the Department of Corrections has a duty under § 53.1-41 of the Code of Virginia to provide the state's inmates with opportunities to work. Virginia Correctional Enterprises (VCE) was established to address this mandate. A statewide conglomerate, VCE manages 22 production facilities in 14 correctional institutions which employ approximately 1,400 inmates producing such goods as clothing and wood and metal furniture and providing such services as laundry and printing.

Goods produced or manufactured by and services provided by inmates are required to be purchased by all departments, institutions and agencies of the Commonwealth supported in whole or in part by state funds. The director of the Division of Purchases and Supply within the Department of General Services may exempt a state government entity from this mandatory procurement provision where (i) the VCE product, in the division director's opinion, does not meet the reasonable requirements of the state entity or (ii) the requisition cannot be met because of an insufficient supply of the requested item. In addition, VCE may grant a waiver if it does not offer the desired product, it has nothing compatible with the state entity's requirements, or the delivery requirement cannot be met. State entities are prohibited from evading the mandatory purchase requirement by slightly varying their specifications for the items, and an individual may be removed from office where there has been an intentional violation of the mandatory procurement requirements.

While VCE has a mandate to be self-sufficient by offsetting all operating costs through the sale of inmate-produced goods and services, there are restrictions on the customers to whom it may offer its goods and services. Pursuant to § 53.1-45, VCE may sell its products, in most instances, only to governmental and nonprofit entities. VCE may not offer for resale any manufactured goods to state entities unless such goods (i) have been incorporated into a finished product produced or manufactured by prisoners, (ii) are necessary for use with a product produced or manufactured by prisoners, or (iii) are a component part of a product system, a portion of which comprises goods produced or manufactured by prisoners.

In 1996, VCE was authorized under § 53.1-45.1 to engage in joint ventures with private sector entities. Using this authority, VCE entered into several joint ventures. Goods or services provided by prisoners participating in an approved joint venture program are subject to mandatory procurement by state agencies and may be purchased by local governments and nonprofit entities. In addition, such goods and services may be bought, sold or acquired by exchange on the open market through the entity participating in the joint venture with VCE.

Virginia Correctional Enterprises

The director of VCE provided the joint subcommittee with an overview of its operations and financial status. Total VCE sales for fiscal year 1999 were $35 million. In addition, VCE has cash on hand to meet its payroll obligations for four months and inventory and raw materials for approximately 90 days. VCE employs 165 "civilian" (non-inmate population) employees with a payroll of $6.5 million and 1,400 inmates who receive a total compensation of $1.1 million. The jobs employ 5.4 percent of the inmate population, and an anticipated apprenticeship program could double that number.

VCE manufactures or produces diverse products and services, including clothing, license tags, office systems, wood products, printing, metal products and laundry services. The clothing operation accounts for the largest volume of sales at 26 percent. While the wood products operation accounts for 12 percent of the total sales volume, it employs the largest percentage of inmate workers.

VCE is also certified under the Prison Industry Enhancement (PIE) Certification Program administered by the Bureau of Justice Assistance in the United States Department of Justice. The PIE program was created by Congress in 1979 to encourage states and units of local government to establish employment opportunities for prisoners that approximate private sector work opportunities. The program allows private industry to establish joint ventures with state and local correctional agencies to produce goods using prison labor and frees these agencies from the normal restrictions on the sale of prisoner-made goods in interstate commerce.

The director also discussed the difficulty caused by the dual objectives of VCE operations--the need to work efficiently verses the need to employ more inmates. Though acknowledging past problems in the area of customer satisfaction, the director reported that recent customer surveys indicated significant improvement in customer satisfaction. The joint subcommittee was also briefed on recent changes to improve operations at VCE, including hiring a chief operating officer and implementing a strategic business plan.

There was significant discussion by the joint subcommittee regarding VCE operations, the effect of the mandatory procurement provisions on private sector businesses, and joint venture agreements made by VCE. The subject of the next meeting will be to further discuss these issues. In addition, the joint subcommittee will receive public comment on VCE operations. The next meeting of the joint subcommittee has tentatively been set for September 22, 1999, at 10 a.m. in Richmond.

The Honorable Glenn R. Croshaw, Chairman
Legislative Services contact: Amigo R. Wade