Virginia Unfairly Competes with the Private Sector
By John S. Massad
I am typically not a big fan of federal government policies, but when they are more pro-business than the State of Virginia’s policies one has to ask, “Why?”
I am referring to the Virginia Department of Corrections where currently there is a mandate that the state prison industries provide office furniture to all state agencies and any other entity (i.e. univeversities, municipal governments, etc.) that accept state funds. There are exceptions of course, but guess who grants the waiver. Yes, the Department of Corrections! Waivers are required before seeking pricing from any independent businesses throughout the state.
When the Virginia Correctional Enterprises (VCE) first started providing furniture it was not a bad idea. It was to keep inmates busy by making desks and chairs and having the state buy them. . This has now grown into a huge operation allowing VCE to employ a large staff, including salespeople and designers. And much of the product they sell is not furniture that the prisoners built or assembled in house, but open market products that Virginia office furniture dealers sell every day. So Corrections is a reseller of furniture they purchase from manufacturers the same way independent furniture dealers resale.
Yes, Virginia is now competing directly with private business. I use the word competing in a loose way. By law, state agencies are forced to buy furniture from Virginia Correctional Enterprises without any competitive bids. In order to purchase from a Virginia small business, an agency must first get a waiver from VCE. Those of us in the furniture business often hear from state entities that Corrections’ furniture is more expensive, has a longer lead time to deliver product, offers fewer selections and renders bad service compared to what private businesses offer. These same people will also tell you they know they are paying more through the state, but according to the law, they are obligated to purchase from VCE if it offers that product in their selections.
Back to the point of federal policies: Prior to 2002, the federal government used to operate in the same manner as Virginia does today; however, since that time they realized how much money and time could be saved by allowing competitive bidding. So the feds changed the rules so that any federal agency can get competitive pricing and not be forced to buy furniture from the federal prisons. The system works, and although furniture is provided by the federal prison system, private industries are allowed to compete for the business on a level playing field. Waivers from the Federal Prison Industries are not required to seek competitive bids. It comes down to who can provide the product and service for the best price.
The Governor states that he wants to privatize more businesses and yet Virginia has this massive Department that competes, at an unfair advantage, with private small businesses across the state. Here would be an ideal way to allow for less government and grow Virginia business at the same time...
Allowing for a competitive playing field would not only increase hiring for many small businesses, but it would also increase revenue to the state. The payroll taxes, gross receipt taxes and state income taxes could easily replace any net profits that Corrections is supposedly adding to the General Fund. Currently, it is estimated that the Department of Corrections takes away $50 to $100 million from private businesses every year.
I am not advocating the elimination of the VCE, but merely suggest that the state mirror the federal policies to have a level playing field.
According to federal government documents, there are over 500 furniture dealers in Virginia that employ over 6,000 employees and pay over 150 million dollars in payroll taxes. Currently one of the main sectors of stability of the office furniture industry is with state and federal governments. While the Fed’s have done their part to support the local economy, Virginia has made it more difficult.
I think the current administration would do well to look at this policy of mandated purchasing and open it up for the private sector to compete against the government and the taxpayers could reap the benefits.
(John S. Massad, Jr is a principle of one of the oldest office furniture dealers in Virginia, which started in 1980. It currently employs over 50 full time people and utilizes an additional 25 subcontractors on an ongoing basis.)