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Government Prison Contracts Gamble with Taxpayer Dollars

The US flag behind a tangle of barbed wire.

A Justice Department memorandum that was leaked online late last month orders federal prison administrators to identify inmates for relocation to private prisons. A stated goal of the move is to “maximize effectiveness” of the Justice Department’s private prison contracts. Because prison contracts are billed at a flat rate regardless of the number of prisoners housed, the Justice Department believes that sending over more prisoners will effectively get the biggest bang for its buck. However, heavier use of private prisons will not result in maximum contract effectiveness or efficient spending of taxpayer dollars without simultaneous and comprehensive federal oversight to enforce operation standards.

The memo follows up on similar guidance from last year when Attorney General Jeff Sessions rescinded an Obama Administration directive that phased out private prison contracts. These policy changes correlate with the Trump Administration’s overarching aim to shrink the federal government.

The rescinded Obama directive was a direct response to a Justice Department Inspector General report that found private prisons deficient. The report compared fourteen contract prisons with fourteen federal prisons using statistics on safety, security, and appropriateness of expenses paid. In light of its findings, the Inspector General recommended that the Justice Department overhaul its monitoring of contract prisons to better ensure that the private facilities are sufficiently performing under the contracts.

In the report, the Inspector General noted three main concerns: pervasive risks to the safety and security of prison staff and inmates, inadequate monitoring of prisons by the Justice Department, and improper billing practices by the contract facilities that result in improper payments by the government. 

Safety and Security

The Inspector General’s investigation revealed that in most key areas, contract prisons experienced more safety and security incidents per capita than their federal counterparts. For example, in comparing prison lockdowns—an emergency period of restricted movement in response to a security threat like a riot—contract prisons experienced 71 full lockdowns, whereas federal prisons had just 11. Further, there was a higher rate of assaults in the contract prisons (including twice as many incidents of inmate-on-staff assaults), and eight times more confiscated contraband cellphones, demonstrating insufficient security.

These problems were all found during the Inspector General’s investigation and demonstrate concerning differences between private and federal facilities in terms of security. The disparity raises the question of whether the Justice Department conducts sufficient oversight of the private prisons to identify and preempt problems. In its own prison inspections, for example, the Justice Department found a systematic failure by private prisons to initiate discipline in over fifty percent of incidents over a six-month period. The private prisons reportedly corrected this failure after being put on notice by the government, but the Inspector General later discovered that the problems persisted because the Justice Department did not change its inspection and evaluation policies to prevent these same problems from recurring. This led the Inspector General to conclude that the Justice Department needs to overhaul its checklists for evaluating private prisons so that it may preempt future problems.

Inadequate Checklists

The Department of Justice uses a monthly monitoring checklist through which its own on-site employees document day-to-day data. These checklists are used between annual prison audits to ensure that the prisons are compliant with the requirements of the underlying contract. The Inspector General found that the checklists are insufficient to adequately monitor and document inmate health and correctional obligations of staff, and that they don’t ensure fulfillment of the contract terms.

Regarding inmate health, the Inspector General determined that “none of the…health services checklist observation steps…examined whether the contractors were providing basic medical care to the inmates.” For one of the facilities, the Inspector General determined that there was no full-time physician, as required by its staffing plan. Both of these services were required under the prison contract, but the government wasn’t checking for either.

With respect to correctional monitoring, the Inspector General found that while there is a checklist requirement to observe duties like routine staff searches of inmates through pat downs, there is no checklist requirement to observe searches of cells or visitation and work areas. Additionally, there are insufficient checks of staffing levels to ensure the prison is employing enough correctional officers, security staff, and medical personnel to function safely. Again, while these searches are compulsory in the underlying prison contract, the Justice Department is not routinely evaluating their completion.

Because the checklists themselves are insufficient, the Justice Department cannot adequately determine whether contract prisons are satisfying contractual obligations. To make matters worse, the Justice Department has no process for regularly reviewing and revising inspection checklists to ensure their effectiveness. Without a system in place to ensure that the private prisons are doing what they contracted to do, the Justice Department cannot say conclusively that the prisons are holding up their end of the bargain.

Contract Billing and Improper Payments

Aside from highlighting inadequate security and superficial evaluative checklists, the Inspector General’s investigation raised the issue of improper monthly contract payments. The contracts are paid on a flat-rate, monthly basis, but the prisons also bill for their reasonable expenses. However, these extra expenses are not always adequately reviewed by the Justice Department for their accuracy and appropriateness.

For example, a previous Inspector General review of one private prison under federal contract revealed that the prison billed, and the government paid, nearly $3 million in costs that were unnecessary, unreasonable, or unsupported. Almost $2 million of these payments were improper fringe benefits that either were miscalculated or lacked payroll documentation entirely. To make matters worse, some of these improper fringe benefit payments compounded over time because they were incorporated into each monthly invoice to the Justice Department.

The Inspector General concluded in that report that those payments were the result of a “lack of understanding” between the government and the contractors about the fundamental requirements of the contract. However, this went beyond an excusable misunderstanding of contract terms. These payments should have come under review every month when they were being paid out. The fact that the payments weren’t questioned until $2 million in taxpayer funds had been improperly spent is simply unacceptable.

Even if there were no improper payments made by the Justice Department outside of that instance, prison contracts still may not save taxpayer money as the Justice Department asserts. The Project On Government Oversight found in 2011 that the average annual contractor billing rates for correctional officers and security guards were 15 percent and 36 percent more, respectively, than the full compensation paid to federal employees performing comparable services. Contracting out can be expensive.

Federal Officer Cuts

The Inspector General’s report raises strong and valid concerns, yet the Justice Department is adamant in relying more heavily on private prisons. The policy coincides with a nationwide push by the Justice Department to cut staffing in federal prisons. Just days before last month’s memo leaked, the Federal Bureau of Prisons told federal facility administrators to prepare for a 12 to 14 percent staff reduction, which would mean a loss of about 5,000 to 6,000 jobs. This cut falls in line with the Trump Administration’s proposed budget for fiscal year 2018, which eliminated 6,000 jobs within the Bureau, including 1,800 correctional officers.

Federal prison staff are reporting that their facilities are already dangerously short staffed. To compensate for officer vacancies and overtime limits, federal prisons are temporarily re-assigning staff civilians including nurses, secretaries, teachers, accountants, cooks, and religious service providers to serve as impromptu guards even in maximum-security facilities. Prisons are only supposed to use these reassignments, known as “augmentation,” for emergency situations, but they are becoming increasingly more common in understaffed facilities. According to John Kostelnik, the head of a prison workers' union in California, up to 60 civilian staffers are reassigned in this manner every day at the federal prison complex in Victorville, California. Kostelnik reports that there is only 1 correctional officer for every 130 inmates in that complex and that only 1 out of every 7 guard towers is staffed. Enter, staff nurses and accountants.

In a 2016 memo, then-acting Prison Bureau Director Thomas Kane admitted that augmentation prevents staff from being able to complete their regularly assigned duties and ordered that augmentation only be used as a last resort. Fast-forward to July 2017, the Senate Appropriations Committee released a report in which it ordered the Prisons Bureau to “curtail its overreliance on augmentation and instead hire additional full-time correctional staff….” The order resulted from the Prison Bureau’s own data, which showed a higher incidence of serious assaults by inmates on staff at high- and medium-security institutions—the very institutions where the Bureau is using augmentation.

These reassigned staffers have had standard officer training but in many cases haven’t worked in such a capacity in many years. One reassigned nurse noted: “When we play officer we are not equipped. The inmates know who we are and what our limitations are.” That same nurse has to show up to guard duty in scrubs and running shoes due to lack of officer uniforms. She says that reassigned staff are handed a set of door keys and a radio without knowing which keys belong to which doors.

This obviously creates an extremely dangerous situation for both staff and inmates, which will only get worse as the ordered staff cuts take place in accordance with the new policy of eliminating federal correctional officer positions in favor of outsourcing to private prisons.

The Revolving Door(s)

Meanwhile, as the Justice Department implements these changes, the private prison industry regularly lobbies Congress to advance its interests. According to Detention Watch Network, 70 percent of the lobbyists hired by the two largest prison companies, Geo Group and CoreCivic, are former Congressional staffers. This influence, fueled by a pervasive revolving door, is worrisome. Congress is responsible for reviewing an agency’s failure to incorporate recommendations from its Office of Inspector General. Such a strong lobby of insiders could curtail the level of importance legislators place on these independent reports, leaving compelling evidence insufficiently weighed when making laws.

It’s important to remember that private prisons serve corporate interests. They rely on enduring incarceration to ensure revenue and keep shareholders happy. Often, a prison’s success rate is measured by its rate of recidivism, or a return to criminal activity after release from incarceration. According to a 2016 report by In the Public Interest, a nonpartisan research and policy center, incarceration at a private prison actually raises the likelihood of recidivism by up to 17 percent. So, not only are these facilities more costly and less safe, they also discourage rehabilitation of incarcerated people, thereby resulting in more crime.

As the Trump Administration moves to fulfill its campaign promise of heavier reliance on private prisons, its leaders should consider the facts rather than narrowly focusing on shrinking the federal government by any means. Incarceration represents the most palpable exertion of control over a person’s freedom of movement. Privatizing that control has lined the pockets of prison company shareholders at the cost of transparency and human safety.

Private prisons cost taxpayers more for substandard services, violate federal safety and security standards established to keep staff and inmates safe, and actually increase the likelihood of repeat criminal activity. Systematic oversight of federally contracted private prisons is necessary to ensure prison companies are performing as promised under their contracts. Without such oversight, the government, and the taxpayer, will never see the “maximum effectiveness” of these contracts at all.

By: Rebecca Jones
Beth Daley Policy Associate, POGO

Rebecca Jones Rebecca Jones is the Beth Daley Policy Associate at the Project On Government Oversight.

Topics: Government Accountability, Open Government, Contract Oversight

Related Content: Ethics, Lobbying, Contractor Accountability, Contractor Compensation, Inherently Governmental Functions, Bureau of Prisons, Federal Contractor Misconduct, Presidential Priorities, Financial Oversight, Effective Government, Undue Influence, Transparency in Contracting, Department of Justice (DOJ), Government Privatization, Contractor Misconduct

Authors: Rebecca Jones

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