School Hardware Doing Hard Time

 

by Jeffrey Benner
February 12, 2001

The U.S. government has sold thousands of computers intended for disadvantaged school children in order to help defray the cost of incarcerating a rising tide of
federal prisoners.

This is not what was supposed to happen. In 1996, President Clinton ordered federal agencies to donate any useful excess computers to schools. About 150,000 computers have been donated under the program, but far more have ended up getting scrapped in prison instead.

Executive Order No. 12999 called excess computers a "vital national resource" and declared that all federal agencies "shall protect and safeguard such equipment ... so that it may be recycled and transferred (to) schools and nonprofit organizations."

But in 2000 alone, the computer recycling program operated through Federal Prison Industries (FPI), the federal agency also known as UNICOR, sold thousands of computers or computer-related items to private citizens, wholesalers, and scrap brokers.

Ironically, 14 states over the past several years have put inmates of state prisons to work fixing up computers to donate to schools. Since 1994, inmates in California have refurbished 80,000 computers for the state's schools. At one time the federal government, which runs its own separate prison system, considered setting up a similar program, but decided it would be too expensive.

The General Services Administration (GSA), which oversees the redistribution of all excess federal property, and the Justice Department have opened a joint investigation of FPI's handling of excess property. These agencies responded to an outcry from nonprofit organizations, the military, congressmen, and state governments.

Last July, The GSA placed a moratorium on the transfer of excess computers to FPI. Longtime FPI critic Rep. Pete Hoekstra (R-Michigan) chaired a congressional hearing about the matter on September 26, 2000.

The GSA reports that FPI, despite being cut short by the moratorium imposed in July, received 61 percent of all the excess computers and related equipment that were transferred from one federal agency to another last fiscal year, which ended October 1, 2000. The government does not appraise excess equipment, but the acquisition value (what it cost new) of the FPI's take was $735 million.

Hoekstra called the agency "out of control."

The GSA totals don't even include shipments made "in lieu of abandonment and destruction," a classification that allows agencies to get rid of equipment they claim has little value. Before the GSA told them to stop, the Department of Agriculture (USDA) says it sent "in lieu of A & D" shipments to FPI all the time, usually about a semitruck-load every week.

Ron Cooper works at the USDA's 120,000-square foot surplus property warehouse, from where those shipments came. He runs a small program of his own, to try to save some of the best systems for donation to schools under Order No. 12999.

"I created this program because they had all these excess machines coming in, and they were busting them up and putting them in the crusher," he said.

The USDA depot takes in about 1,000 computers a week. Of those, Cooper and his assistant Cheryl Troutman managed to save about 5,000 last year and donate them to schools through the Computers for Learning website, which was set up in response to  Executive Order No. 12999.

Despite these efforts, truckloads of computers were still shipped to FPI every month.

"A lot of it was good stuff, but we didn't have time to go through it all," said Cooper, who has no official budget for the program and admits he is not supposed to spend time refurbishing computers for schools.

"My boss just kind of lets me do it out of the kindness of his heart," Cooper said.

Since the GSA moratorium took effect, Cooper has arranged to have shipments that would have gone to FPI sent to Pennsylvania's agency of surplus property instead. That office has arranged to have them refurbished and donated to inner-city families.

Bill Wilson, president of the National Association of State Agencies for Surplus Property (NASASP), said the huge shipments going to FPI included equipment that should have been donated to the states for distribution to schools and nonprofit organizations.

"Computers, that could be placed into public and private schools through EO No. 12999 and the donation program, are going to certain private/commercial vendors, who have developed a financial relationship with FPI," he said.  According to the GSA, last year all the states combined received computer equipment with a $96 million acquisition value -- about one-eighth of FPI's share.

Before the moratorium, the Defense Department and other federal agencies sent truckloads of monitors, modems and PCs to federal prisons in Ohio, New Jersey, and Florida for "demanufacturing."

At those facilities, hundreds of inmates dust off working systems, melt down motherboards to recover precious metals and break down systems for valuable parts. Everything is sold, and the FPI keeps the cash to pay its own bills.

Larry Novicky, who manages the computer-recycling program for FPI, makes no apologies for the agency's actions. He said FPI is providing a valuable service
by recycling waste -- some of it hazardous -- that would otherwise end up in landfill. Plus, the law requires the agency to cover its own costs, so it has to make money somehow.

"We take items and try to take them to their highest and best use," he said. "If we can sell them whole, we do; otherwise, we sell them for scrap. We offer a cost-effective way to recycle electronics," he said.

Sales revenues go toward covering the cost of running a prison factory. FPI's 22,000 "employees" -- culled from among the more than 130,000 inmates in federal [not state] prisons -- make between 25 cents and $1.25 an hour. But with guards to be paid, "the overhead is astronomical," Novicky said.

FPI has had to scramble to meet its goal of employing 20 percent of a federal prison population that has grown from 24,000 in 1980 to more than 130,000 today. The federal prison population is expected to hit 200,000 in 2006.

"The prison system is probably the fastest growing agency in the federal government," Novicki said. "In order to house 22,000 inmates, (FPI) has to generate revenue."

FPI has recycled over 300 million pounds of hardware since the computer equipment program began in 1997. Even assuming no items were sold individually, at the cut-rate price of two cents a pound (some loads bring 10 cents), that total would have brought in $6,000,000. Novicky could not provide sales figures for last year, but said FPI expects to do $3.6 million in recycling sales this year.

FPI admits that not all the computer equipment it receives is fit for the scrap pile. Its flagship recycling operation at the federal prison in Marianna, Florida, has been selling whole systems and parts directly to the public since 1997. The facility used to have a website where anyone could order complete systems, printers, disk drives, monitors, and other peripherals. Although the order form was taken down after the hearings, available items are still listed online.

Randy McBride owns the Alpha Omega computer store in Cottondale, Florida. After hearing about the dirt-cheap prices, he went to the Marianna prison "factory outlet" in February 2000. He found the computers and peripherals there so cheap that he began buying and reselling them on Internet auction sites for a huge mark-up. He kept one $50 laptop for personal use.

"I was astonished at the quantity of the computers and parts for sale. In one area, five or 10 inmates were sitting at a workbench disassembling a variety of computer types.... The 'display area' contained complete and tested used computer systems," McBride told the congressional committee.

FPI critics, such as Hoekstra and the GSA, have questioned the propriety of FPI selling excess property to the public. Even if there were no such thing as Executive Order No. 12999, they say, the sale of property acquired would violate FPI's mandate to avoid competition with private industry. In response to these concerns, FPI has stopped selling items to individuals, but continues to sell to private businesses and wholesalers.

Regarding Executive Order No. 12999, FPI claims to have been operating under the assumption that donating agencies had screened the equipment before sending it to be recycled. Some of it must have been useful, however, because FPI claims it has in fact donated over 1,800 computers to schools under Order No. 12999.

The agency is in a difficult position. It is required under the law to keep a flood of new inmates busy at no extra cost to the taxpayer, so it must find ways to make money. The executive order, meanwhile, called on all federal agencies to protect "educationally useful" equipment.

Randy Ream started the Marianna program when he was the associate warden of industries and education. Ream officially retired from that position last September, but he still oversees computer sales as a contract employee. During a phone interview, he alternated between bragging about sales and about helping schools.

Ream said the program has always given some computers to surrounding schools, but he wasn't sure how many. At the moment, there is a backlog of requests from 18 different school systems, he said.

Order No. 12999 stipulates that schools in needy areas dubbed Federal Enterprise Zones should receive "particular preference" from federal agencies looking to donate computer equipment directly to schools.

"The area we're sitting in (Marianna prison) is an enterprise zone," Ream said. "No. 12999 is pretty slick. It bypasses a lot of red tape. You're taking something the taxpayer paid for and giving it away."

That is, unless the government sells them instead. Ream estimated the Marianna factory had sold about $1 million in computers and parts since 1997.

"The assumption they're (FPI) working under is that once we break even, we'll donate. It's a bit of a cross," he said.