UNICOR Products:

Federal Prison Industries Can Further Ensure Customer Satisfaction

GGD-86-6: Published: Nov 1, 1985. Publicly Released: Nov 1, 1985.

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Pursuant to a congressional request, GAO examined the operations of the Federal Prison Industries (UNICOR) to determine whether improvements were needed in: (1) setting and maintaining prices for its products and services; (2) staying abreast of and dealing with customer problems; and (3) granting clearances for federal agencies to buy elsewhere.

GAO found that UNICOR was not doing the market checks that its pricing policy requires to ensure compliance with the law requiring that its prices do not exceed market prices. Neither UNICOR policy nor federal regulations define market prices or how they should be determined. Some UNICOR officials stated that the checks were not being performed because of: (1) lack of time and staff; (2) difficulties in finding comparable items and identifying differences in product specifications; and (3) difficulty in getting data from some private-sector firms. Although agency officials had mixed views, most of the customers contacted had few complaints about the prices and products. In addition, the prices reviewed did not exceed the highest price charged or quoted. However, UNICOR continues to have problems implementing its cost accounting system since job cost data are needed to facilitate assessing and setting prices and evaluating factory performance. GAO found that data on customer complaints indicated that UNICOR customers were not experiencing significant problems. However, a standard complaint form will be used to: (1) facilitate reporting by product divisions and factories; (2) stay abreast of the level of complaints; and (3) identify recurring or systematic problems. GAO also found that two-thirds of the clearances granted were issued within 10 days of the date UNICOR received the order. GAO believes that the clearance process could be avoided by improving corporate catalogs to note special products which it does not make and products which do not require a clearance.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The corporation issued a directive: (1) requiring separate files to explain and document price determinations; and (2) defining the data to be used in setting/documenting prices. These changes were included in the corporate policy manual. Compliance is being checked through quarterly management reviews. Justice auditors will be asked to review this area in fiscal year 1987.

    Recommendation: The Attorney General should direct the Commissioner, UNICOR, to treat the pricing support problems as a corporatewide concern. The Commissioner should direct the product divisions to comply with the corporate policy of checking market prices for its products and services for which comparable market products exist and documenting price determinations. Consideration should be given to having the corporation's internal auditors periodically check to ensure compliance with corporate policy. Also, guidance should be provided on the type of documentation required so that prices will be supported in a standard manner. The documentation should include the basis or support for any determination that no comparable market products exist for a specific UNICOR product or product line.

    Agency Affected: Department of Justice

  2. Status: Closed - Implemented

    Comments: A price documentation checklist was developed. The Department of Justice stated that this serves to define market price. It does, in part, identify numbers, dates, and sources of market prices. However, it does not address frequency of checks, number of prices to be checked, or how the UNICOR price should be calculated.

    Recommendation: The Attorney General should direct the Commissioner, UNICOR, to define current market price for its products and services. UNICOR should provide guidance on such things as how many prices need to be checked or attempts made to check prices, how frequently prices need to be checked, and what factors should determine where, within the price range, the UNICOR price should fall.

    Agency Affected: Department of Justice

  3. Status: Closed - Implemented

    Comments: A December 12, 1985, corporate directive advised product divisions of the need to follow cost-accounting procedures. This is being emphasized during factory manager meetings, which includes cost-accounting training. The internal and contract audit staffs will also determine reasons for problems with unit cost statements and critique adequacy of training in this area.

    Recommendation: The Attorney General should direct the Commissioner, UNICOR, to require each division and factory to follow UNICOR cost-accounting procedures.

    Agency Affected: Department of Justice

  4. Status: Closed - Not Implemented

    Comments: Justice disagreed with this recommendation and believes that it would be difficult and costly to maintain up-to-date catalogs. Justice also believes that its present system allows it to identify new potential products.

    Recommendation: The Attorney General should direct the Commissioner, UNICOR, to reduce the number of situations requiring clearances by adding to the UNICOR catalogs, wherever feasible, a description of product types it does not manufacture or plan to manufacture but which are frequently requested by customers. The catalog should contain a statement indicating that items identified as not manufactured do not require a clearance. Also, UNICOR should notify its employees that clearances should not be prepared for items UNICOR does not make.

    Agency Affected: Department of Justice


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