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Office of the Washington State Auditor - Correctional Industries Planning, Pricing and Market Share, 2017

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Office of the Washington State Auditor
Pat McCarthy

Performance Audit
Correctional Industries: Planning, pricing
and market share
May 4, 2017
In Washington, about one-third of all inmates released will reoffend or violate
conditions of their release within five years and return to the correctional system.
The Correctional Industries (CI) program offers inmates a chance to gain skills
that make it more likely they will find jobs later. Over a four-year period, CI has
increased the number of inmate workers from about 1,500 to more than 2,400.
However, we found CI has experienced challenges when expanding its existing
industries and planning for new ones. Some challenges arose due to the loss
of a contractor, but most problems were primarily due to a lack of formal
planning tools and related policies. We also examined pricing. We found most
of the products we examined were priced lower than similar products offered by
other vendors, but CI lacks a written pricing policy to ensure it establishes and
maintains competitive prices. Such a policy would also help it fulfill its statutory
requirement to reduce costs for tax-supported agencies and nonprofit agencies.
The law restricts CI from competing with private businesses, but it does not
specify how CI should measure its compliance with this restriction. The CI
Advisory Board set a 3 percent market cap guideline, and we noted that sales by
CI industries for the vast majority of its industries do not exceed it.
Applying leading practices would help CI more effectively plan for and manage
successful industries, and set competitive prices that achieve sufficient profit
for reinvestment. Clarifying the Legislature’s intent for addressing competition
would also help CI more accurately evaluate its impact on local business.

R ep o r t N um b e r: 1 0 1 9 0 9 5

Table of Contents	
Executive Summary.................................................................................................... 3
Introduction.................................................................................................................. 6
Background................................................................................................................... 7
Scope and Methodology........................................................................................11
Audit Results...............................................................................................................13
Recommendations....................................................................................................24
Agency Response......................................................................................................25
Appendix A: Initiative 900......................................................................................30
Appendix B: CI Industries and Locations..........................................................31
Appendix C: Results of Pricing Comparisons..................................................33

The mission of the Washington State Auditor’s Office State Auditor’s Office contacts
The State Auditor’s Office holds state and local governments
accountable for the use of public resources.
The results of our work are widely distributed through a variety
of reports, which are available on our website and through our
free, electronic subscription service.
We take our role as partners in accountability seriously. We
provide training and technical assistance to governments and
have an extensive quality assurance program.
For more information about the State Auditor’s Office, visit
www.sao.wa.gov.

Americans with Disabilities
In accordance with the Americans with Disabilities Act, this
document will be made available in alternative formats. Please
email Communications@sao.wa.gov for more information.

State Auditor Pat McCarthy
360-902-0360, Pat.McCarthy@sao.wa.gov
Chuck Pfeil, CPA – Director of Performance Audit
360-902-0366, Chuck.Pfeil@sao.wa.gov
Christopher Cortines, CPA – Principal Performance Auditor
206-355-1546, Christopher.Cortines@sao.wa.gov
Erin Catterlin – Senior Performance Auditor
360-725-5567, Erin.Catterlin@sao.wa.gov
Olha Bilobran – Senior Performance Auditor
360-725-5606, Olha.Bilobran@sao.wa.gov
Brenton Clark, CIA – Performance Auditor
360-725-5386, Brenton.Clark@sao.wa.gov
Kathleen Cooper – Deputy Director for Communications
360-902-0470, Kathleen.Cooper@sao.wa.gov

To request public records
Public Records Officer
360-725-5617, PublicRecords@sao.wa.gov

Correctional Industries | 2

Executive Summary	
One of the ways the Washington State Department of Corrections (DOC) attempts
to reduce the number of inmates returning to prison after release is through its
Correctional Industries (CI) program. This program fulfills a policy objective set
by the Legislature, serving as an inmate work-training program that strives to
teach inmates marketable job skills and promote a positive work ethic. In turn,
inmates are able to meet financial obligations, increase job skills and increase the
likelihood of meaningful employment upon release from incarceration.
Studies have identified other benefits of the CI program, such as increased
prison safety and cost savings. However, CI also is legally required to avoid
unfair competition with private businesses while striving to operate financially
sustainable programs. These competing demands have led to some public
criticisms, including those voiced in a Seattle Times series in December 2014, about
issues such as the prices it charges state agencies for some of the products provided
by its Class II industries, which are the focus of our audit. These industries are
designed primarily to reduce the costs of goods and services for tax-supported
agencies and for nonprofit organizations.
With this performance audit, the State Auditor’s Office analyzed the practices of
CI, not the policy behind the program. We designed the audit to answer three
questions:
1.	 How effective is CI in maintaining and expanding its inmate work
training programs?
2.	 Does CI price products in such a way that meets its legal requirements
and goals?
3.	 Does CI compete unfairly with Washington businesses?
Washington’s CI operates various service, manufacturing and agricultural
industries at 13 locations across the state, employing more than 450 staff statewide.
As of June 30, 2016, it had more than 2,400 inmate workers.

CI could use leading practices to more effectively maintain
and expand its industries

CI seeks to maintain and expand its inmate work training programs. Although it
succeeded in adding about 800 inmate workers between the end of fiscal year 2014
and the end of fiscal year 2016, CI has experienced challenges when expanding
its existing industries as well as planning for new ones. It closed two industries
and delayed expansion on a third, indicating the need for CI to implement
leading practices that help correctional industries in general plan for and manage
successful industries. We identified four leading practices that could help CI
strengthen its planning and program development:
•	 Establish a formal, agency-wide business planning policy
•	 Develop a formal process for assessing demand for job skills
•	 Improve processes for getting customer feedback
•	 Establish additional performance measures to assess how well it is meeting
its mission 

Correctional Industries :: Executive Summary | 3

Establishing a pricing policy could help CI ensure it prices
its products competitively

State law requires that CI price its Class II products and services with the objective
of reducing public support costs. To achieve this requirement, CI agrees it must
price its products competitively. Our review of 12 high-volume products showed
that only one was priced higher than similar products offered by other vendors
we reviewed. However, we found CI has not formalized a pricing policy as leading
practices recommend. A formal pricing policy would help ensure that CI sets
competitive prices while pricing its products in a way that allows it to reinvest in
its industries.

Most industries are under the market share threshold set by CI

State law intends to protect Washington businesses from unfair competition.
However, the law does not specify how CI should measure its impact. CI
management told us that the CI Advisory Board established a guideline marketshare cap of 3 percent, but there are no records to show how that figure was chosen
and no written policy currently exists.
To demonstrate the effect its Class II industries have on private businesses, CI
publishes an annual market share report that compares revenues for its industries
to Department of Revenue (DOR) data on revenues for similar businesses in the
state. CI’s fiscal year 2016 market share report shows 14 of 16 Class II industries
operate with a market share below the 3 percent threshold. The five-year total for
fiscal years 2012-2016 shows that CI’s overall market share is less than one-half of
1 percent of all revenues from similar businesses in the state.

Recommendations

We recommend the agency:
1.	 Use leading practices to establish a formal business planning policy for
new and expanding industries
2.	 Develop a documented process to regularly assess the demand for skills
taught to inmates based on input from private industry and current labor
market data
3.	 Improve existing efforts to obtain customer feedback on prices and
products by:
ӽӽ Expanding its customer survey to include questions about product
quality and prices, and customer needs
ӽӽ Analyzing feedback to determine if CI’s products and services
adequately meet customer needs
4.	 Develop, track and publish the following industry-specific performance
measures:
ӽӽ Inmate post-release employment outcomes
ӽӽ Accuracy of CI’s cost of goods sold forecast
ӽӽ Accuracy of CI’s operating expense forecast
ӽӽ Profitability

Correctional Industries :: Executive Summary | 4

5.	 Establish a formal agency-wide pricing policy and a timeframe for
implementing that policy. The pricing policy should include a documented
process for:
ӽӽ Comparing prices for new and existing products to ensure prices are
competitive
ӽӽ Approving prices to ensure they are set in accordance with policy
ӽӽ Reviewing prices at specified intervals, with formalized roles and
responsibilities for reviewers
We recommend the Legislature:
6.	 Clarify RCW 72.09 to explain how CI should measure compliance with
unfair competition restrictions for its Class II industries

Correctional Industries :: Executive Summary | 5

Introduction	
The Department of Corrections seeks to increase
inmate success after release through its Correctional
Industries program

In 2016, about 19,000 inmates were confined in Washington state prison facilities.
Almost all (about 97 percent) will complete their sentences and return to the
community. Many, however, find the prison gate turns into a revolving door,
returning to prison within a few years of release. Roughly a third of inmates
released since 2012 committed a new crime or violated the conditions of their
release and returned to the correctional system.
One of the Department of Corrections’ (DOC) efforts to break this cycle is its
Correctional Industries (CI) program. The program’s mission is “to maintain
and expand inmate work-training programs which develop marketable job skills,
instill and promote positive work ethics, and reduce the tax burden of corrections.”
CI also improves prison safety by reducing the time inmates are idle.
Researchers at Washington State University found inmates who participated in
CI’s work training program were less likely than other inmates to commit new
offenses and more likely to find employment after being released. Their 2015 study
found that inmates were significantly less likely to commit any type of infraction
during the period of time they were employed by CI, and significantly less likely to
commit violent infractions. When ex-inmates are able to successfully reintegrate
into society, the state saves money. The Washington State Institute for Public
Policy has repeatedly found CI is cost effective: in December 2016, it estimated
that CI provides $4.31 in benefit for every dollar spent.
CI produces a wide range of goods and services, from foods to furniture, and
patterns its operations after the private sector. State law directs state agencies to
purchase goods and services from CI. However, state law also mandates that CI
should have a minimal impact on Washington businesses.
Nonetheless, media reports have raised concerns that CI has cost the state money
due to industry failures, competes unfairly with private businesses, overcharges
customers for its products and services, and has not increased the number of
inmate workers it employs despite its promises to do so.
We designed the audit to answer three questions:
1.	 How effective is CI in maintaining and expanding its inmate work
training programs?
2.	 Does CI price products in such a way that it can meet its legal requirements
and stated goals?
3.	 Does CI compete unfairly with Washington businesses?

Studies highlighting the
benefits of Washington’s
CI program include:
•	 Washington
State University –
Washington State
Correctional Industries:
An outcome evaluation
of its effect on
institutional behavior,
employment, and
recidivism
December 2015
•	 Washington State
Institute for Public
Policy – Benefit-Cost
Results: Correctional
industries in prison
December 2016
•	 Washington State
Department of
Corrections –
Does Participation
in Washington’s
Correctional Industries
Increase Employment
and Reduce Recidivism?
October 2011

Correctional Industries :: Introduction | 6

Background	
Correctional Industries offers inmates work experience
and training

Washington State Correctional Industries (CI) was established as a division
within the Department of Corrections (DOC) in 1981. The program offers inmates
work experience and vocational training to improve their chances of finding work
after release. State law requires CI to reduce the cost of corrections through the
production of goods and services for sale.
As shown in Exhibit 1, CI operates at 13 locations across the state; see Appendix B
for a detailed list of CI industries and their locations. The program employs
more than 450 staff statewide. As of June 30, 2016, it had more than 2,400 inmate
workers; CI managers told us their goal is to employ at least 3,100 inmates by June
30, 2017. While working in CI, inmates receive training in technical skills that can
help them secure a job after release, as well as the “soft” skills required to keep a
job – such as showing up to work on time or working with a team.
Exhibit 1 – Locations of the Washington Correctional Industries
operations in 2016
McNeil Island
Stewardship
Clallam Bay
Corrections Center
Olympic
Corrections Center

Washington Corrections
Monroe
Center for Women Correctional Complex

Airway Heights
Corrections Center

Washington
Corrections Center

Stafford Creek
Corrections Center
Cedar Creek
Corrections Center
Correctional Industries
Headquarters

Larch
Corrections Center

Coyote Ridge Washington State
Corrections Center Penitentiary

Source: Washington State Correctional Industries 2016 Annual Report.

CI is overseen by an advisory board

The CI Advisory Board includes representatives from organized labor, the business
community and the general public, as well as members of the Legislature. Before
2011, the Board was responsible for setting policy for CI operations – including
deciding whether to open, close, expand or reduce a specific industry. However, in
2011, the Legislature amended state law and made the Board advisory. Even though
the Board no longer has authority to approve or disapprove program decisions, CI
managers told us they regularly communicate with Board members and consider
their input.
Correctional Industries :: Background | 7

How CI operates and who is eligible to participate

DOC inmate training programs are divided into five classes of operation, listed
in Exhibit 2. Of the five, only four (Class II through Class V) are currently
operational. CI has authority over two work programs, Class I and Class II. In
2017, DOC requested that the Legislature update applicable state laws to comply
with the Department of Justice requirements for Class I industries. Once CI makes
these changes, it will need to secure partnerships with private-sector businesses
so it can begin planning for new Class I ventures. Although this audit focused
on CI’s existing Class II industries, our recommendations may also help CI with
these Class I ventures.
Exhibit 2 – Training programs operate in five classes
Class I

Class II

Class III
Class IV
Class V

Free Venture Industries – In cooperation with for-profit or nonprofit
organizations, inmate workers produce goods and services for sale to
both the public and private sector. Currently, CI does not have any
Class I industries in operation.
Tax Reduction Industries – State-owned and -operated industries
designed primarily to reduce the costs of goods and services for
tax-supported agencies and for nonprofit organizations. Class II
manufacturing and service operations generate funds from the sale
of their goods and services to support their activities. (Example:
Furniture)
Institutional Support Industries – Operated by DOC. Inmates
working in Class III industries support the activities of the facility.
(Examples: Facility groundskeeper and office clerk)
Community Work Industries – Operated by DOC. Class IV programs
provide services in the facility’s host community, to public and
nonprofit agencies, at a reduced cost. (Example: Forestry workers)
Community Restitution Programs – Inmates that are placed
on community supervision work off all or part of a community
restitution order as ordered by sentencing court.

Source: Department of Corrections

Correctional Industries :: Background | 8

DOC policy outlines specific requirements inmates must meet to be eligible to
work in any Class II industry, listed in Exhibit 3. State law requires that inmates
must volunteer to participate in Class I, Class II and Class IV industries. Any
inmate eligible to work and not working in another DOC industry class shall work
in Class III.
Exhibit 3 – Inmate employment eligibility requirements
A minimum of 12 months since being found guilty of any Category A infraction
or drug-related infraction
A minimum of six months since being found guilty of any other serious
infraction
No pending dispositions for any serious infractions
Completion of the Incoming Transport/Job Screening Checklist by the screening
committee when the inmate transfers to the facility
A minimum of two years since any escape, excluding absconding supervision
in the community or absence from Work Release with voluntary return within
24 hours
Meet minimum requirements – such as security clearances – established by the
industry and the facility
Inmates terminated for any cause from a CI position will require the General
Manager’s approval for a new Class II assignment.
Source: Department of Corrections.

Gratuities paid to inmates working in CI are used to meet financial
obligations

CI typically pays its inmate workers between $0.65 and $1.70 an hour. Inmate
income must be used to meet their financial obligations, and much of their earnings
are withheld to pay for crime victims’ compensation, court-ordered payments
such as child support, and the cost of incarceration, as well as mandatory savings.
According to DOC, CI inmate earnings contribute around $1.63 million annually
to meet these financial obligations.

Correctional Industries :: Background | 9

State agencies are required to purchase from CI

State law directs state agencies, departments and the Legislature to purchase certain
goods and services from Class II correctional industries. State institutions of higher
education are required to set a target to purchase 2 percent of their total goods and
services from CI. CI may also sell goods and services to nonprofit organizations,
local governments, school districts, DOC employees and their families, inmates
and their families, and private contractors when the purchased goods will be
ultimately used by a public agency or a nonprofit organization. As Exhibit 4 shows,
CI sells most of its Class II goods and services to state agencies and departments
that are required by law to purchase from CI; DOC is its largest customer.
Exhibit 4 – Most of CI’s Class II sales are to state agencies required to
purchase from it

Other state agencies

30%

Department of
Corrections

52%
Local governments

5%
Non-profit

6%
State employees
Other

4%

Education

2%

1%

Source: National Correctional Industries Association (NCIA) Directory 2017.

A state agency may request an exemption from purchasing CI goods and services
if they do not meet the agency’s requirements, are not of sufficient quality, or are
more expensive than the private sector. However, it cannot use this waiver for
goods manufactured or services obtained from outside the state.

CI relies on sales revenue to support its operations

CI supports itself primarily through the sale of goods and services it produces.
However, it also receives about $11 million annually in appropriations for some
administrative functions and stewardship of McNeil Island. For fiscal year 2016,
CI reported operating revenues from all industries of nearly $104 million and
expenses of about $95 million. It projects revenues to reach nearly $110 million for
fiscal year 2017. CI uses program revenues to cover expenses such as staff wages
and inmate gratuities, and the cost of goods sold. It also uses them to reinvest in
the program, such as purchasing new equipment.

Correctional Industries :: Background | 10

Scope and Methodology	
We used the following approaches to address the audit objectives.

Identified industry leading practices for correctional industries

The National Correctional Industries Association (NCIA) and the American
Correctional Association (ACA) publish materials designed to help states operate
and improve their correctional industries. We reviewed NCIA’s “Re-entry Focused
Performance Excellence Guide,” which addresses inmate success, ensuring
sustainability and enhancing operations. We also reviewed ACA’s “PerformanceBased Standards for Correctional Industries” to identify standards that relate to
our audit objectives. We compared CI’s practices to these standards to identify
specific practices CI could adopt.

Contacted other states to obtain examples of management policies
and tools

We wanted to learn how other states have implemented these leading practices
to maintain and expand their inmate work training programs and set prices.
To select comparison states, we asked CI managers and the NCIA president to
suggest states they consider leaders in planning and managing their industries.
We also considered states that had recently published performance audits with
similar audit objectives, and ACA-accredited states, because they must meet some
standards related to our objectives. We used auditor judgement to select six states
(listed in the sidebar); CI’s managers concurred with the states we selected.
We asked officials from these states about the policies and procedures they use to
plan for and manage their industries, and for setting prices for their products and
services. We also asked for examples of management tools and written policies
they use.

Comparison states
Arizona	
California
Indiana	
Maryland
Minnesota	
North Carolina

Reviewed CI’s practices and processes to identify gaps

We interviewed CI managers and reviewed relevant documentation to gain an
understanding of how CI:
•	 Plans for new industries
•	 Maintains its existing industries – including soliciting customer input and
tracking program performance
•	 Sets its prices
•	 Demonstrates that it does not unfairly compete with Washington
businesses

Conducted a price comparison

To determine whether state agencies pay competitive prices for the products they
purchase, we compared CI and non-CI prices on selected Class II goods, which
agencies must buy from CI. We excluded sales to DOC since the audit focused
on whether external state agencies purchase competitively priced items. We
also excluded services from the comparison because of the difficulty in finding
comparable services offered by private vendors.
We selected the 12 top-selling items in terms of volume, using sales revenue data
for fiscal year 2016, for five industries: furniture, food, textiles, communications
and boxes. We selected two items from all industries except furniture. There, we
selected four, because furniture achieves the highest revenue and because of past
criticism that prices are too high.
Correctional Industries :: Methodology | 11

We identified private-vendor products through internet searches during August
and September 2016, choosing like-for-like products by using product specifications
such as thread count for the pillowcases or size and quantity of envelopes. When
we could not find comparable vendor products, we replaced that item with the
next-highest-selling item from the CI sales data. For nine of CI’s 12 products, we
found three comparable vendor products but for the tenth product, we found
only two comparable vendor products. In the case of the food industry products
(hamburger buns and dinner rolls), we could find only one comparable product.

Assessed whether CI unfairly competes with Washington’s
businesses

CI classifies its industries according to the North American Industry Classification
System codes, using them in its market share report for Class II industries. This
report shows CI’s current and potential impact on private sector businesses. To
assess its impact, CI uses data from DOR to compare the percentage of its revenues
for 16 business lines to revenues for similar businesses operating within the
state. To determine whether CI’s market calculations were accurate for our audit
purposes, we obtained gross business income data from the DOR website and
compared it to CI’s reported program revenues for each of its 16 lines of business.
We then recalculated the percentage of the market share each CI line of business
takes based on the obtained data.

Audit performed to standards

We conducted this performance audit under the authority of state law (RCW
43.09.470), approved as Initiative 900 by Washington voters in 2005, and
in accordance with Generally Accepted Government Auditing Standards
(December 2011 revision) issued by the U.S. Government Accountability Office.
Those standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objectives.
See Appendix A, which addresses the I-900 areas covered in the audit.

Next steps

Our performance audits of state programs and services are reviewed by the Joint
Legislative Audit and Review Committee (JLARC) and/or by other legislative
committees whose members wish to consider findings and recommendations on
specific topics. Representatives of the State Auditor’s Office will review this audit
with JLARC’s Initiative 900 Subcommittee in Olympia. The public will have the
opportunity to comment at this hearing. Please check the JLARC website for the
exact date, time and location (www.leg.wa.gov/JLARC). The State Auditor’s Office
conducts periodic follow-up evaluations to assess the status of recommendations
and may conduct follow-up audits at its discretion.

Correctional Industries :: Methodology | 12

Audit Results	
Question 1: How effective is Correctional Industries (CI) in
maintaining and expanding its work training programs?
Answer in brief

CI has increased the number of inmate workers from about 1,500 to more than
2,400 over four years. However, it has experienced challenges when planning
for new industries and expanding its existing ones. Low profits and inadequate
planning have prompted CI to close two industries. These planning problems
and responding to the unexpected loss of a food service contractor also slowed
expansion plans for a third industry. We found CI lacked formal planning tools
and policies that could have helped it plan for and manage successful industries.
We identified leading practices that can help improve the likelihood that new
industries will succeed in the future.

CI has increased the total number of inmate workers
in recent years

Studies show that inmates who participate in work training programs are less
likely to reoffend and more likely to find a job after they are released from prison.
To maximize these benefits, CI’s mission is, in part, to maintain and expand its
inmate work training programs, which develop marketable job skills and promote
positive work ethics.
CI increased the number of inmates the program employed from about 1,600
at the end of fiscal year 2014 to more than 2,400 at the end of fiscal year 2016.
CI’s financial reports attribute the growth to its expansion into the food service
industry in fiscal year 2014, which added about 900 Class II inmate workers by
fiscal year 2016. CI’s goal is to increase the total number of inmate workers to at
least 3,100 by June 30, 2017.

CI faces unique challenges that affect its efforts to expand
its industries

Although state law directs CI to pattern its operations after private businesses, it
faces three unique challenges that most private businesses do not:
•	 Space constraints
•	 Hiring instructional or supervisory staff
•	 Restrictions on eligible inmate workers
Space constraints – Unlike private sector businesses, which can expand by moving
into larger facilities, CI cannot expand past the secure walls of the prison.
Hiring supervisory staff – Staff must possess industry-specific technical skills and
be willing to work in a prison setting. For instance, CI managers told us that some
qualified recruits may have safety concerns around working with inmates, or are
unwilling to work in the rural areas where some prison facilities are located. CI
managers also told us they have trouble matching private-sector wages for some
technical fields like computer-assisted design.

Correctional Industries :: Audit Results | 13

Restrictions on eligible inmate workers – Finally, not all prisoners can or want
to work in a Class II industry. First, DOC policy requires inmates to meet certain
eligibility criteria to work in a Class II industry (see Exhibit 3 on page 9 for a
complete list of inmate eligibility requirements). For example, they must have
no serious infractions for at least six months. Second, participation is voluntary;
some inmates might lack interest in working in industries offered in their facility,
while others might already be participating in another type of training program.

CI experienced planning challenges and the unexpected
loss of a contractor when expanding industries and adding
new ones

The practical limits of program expansion are not the only issues affecting CI’s success.
We identified three instances where similar planning deficiencies contributed to CI
either closing an industry or delaying planned industry expansions. We found these
problems all had similar root causes; responding to the unexpected loss of a food
service contractor also contributed to delays in one industry.

CI closed two industries after they failed to be financially
sustainable
Tilapia Farm – CI modeled its tilapia farm after a similar correctional industries
program in Colorado. The tilapia farm at Stafford Creek Correctional Center
opened in fiscal year 2013, but according to CI managers, closed in October 2015
before selling fish, after a net operating loss of almost $195,000. CI management
told us about two specific planning issues:
•	 CI did not identify a cost-effective fish processor. CI planned to outsource
fish processing but could not find a reasonably priced local processor. As
a result, CI staff had to drive live fish to a distant processor, which was
expensive, time consuming and killed fish. CI researched purchasing
processing equipment but decided it was also too expensive.
•	 CI did not obtain subject matter expertise. Even though CI had never
before attempted to grow or breed fish, it only consulted with staff from
Colorado’s correctional fish industry and did not hire an on-site subject
matter expert. Consequently, CI did not develop the right breeding
conditions, such as proper water temperature, resulting in large die-offs
and few fish growing to maturity.
Although CI planned to sell the tilapia only to DOC to serve to inmates, it was
unable to process enough tilapia into the consistent portion sizes that DOC requires.
As a result, the business was left without a customer and was not sustainable.
Recycling – The recycling industry, located at the Monroe Correctional Complex
and in a light industrial park near CI’s headquarters in Tumwater, opened in fiscal
year 2010 to recycle paper, cardboard and mattresses. CI financial reports show
the recycling industry had a net operating loss of about $900,000 before it closed
the industry in fiscal year 2015. CI managers told us low profits from the mattress
recycling portion of the industry, stemming from a lack of demand for recycling
by-products, was the main reason they closed the industry.

Correctional Industries :: Audit Results | 14

CI experienced delays expanding food services in the prisons

Food service – The third industry has seen some success, adding about 900 new
Class II jobs in food services over three years, but it has also encountered delays.
CI managers identified two benefits to transitioning food service from a Class III
to a Class II industry: it would increase CI’s overall number of inmate workers and
provide more training opportunities. For example, Class II food service workers
may earn a traditional food handler’s certification and an industry-recognized
food management certification, neither of which were offered with the Class III
classification.
However, CI underestimated the time and effort needed to put necessary
personnel changes in place. For example, CI human resources staff had to create
new job descriptions, as CI staff originally hired as cooks became responsible for
training and supervising inmate workers. Collective bargaining issues related to
position changes also took time. Finally, these new supervisors had to be trained
themselves and become proficient at their new roles. This extra work resulted
in CI hiring two additional staff to manage the workload and delayed planned
expansions. After transitioning four prisons, CI delayed its planned expansion
into a fifth facility until transition issues were resolved. It plans to transition into
the next three facilities from October 2017 through October 2018.
Another factor contributed to these delays. CI managers told us that DOC had
received notice from a contractor in June 2015 that it would stop providing food
services at the Reynolds Work Release facility in 30 days. In response, DOC directed
CI to assume the management and operations of food service at the facility. They
went on to say that this required them to develop a plan for providing meals,
writing menus, scheduling, and determining necessary equipment upgrades
at the facility. They said these unanticipated tasks further delayed planning for
additional DOC food service expansions until May 2016.
These three examples share some common problems, particularly in the areas of
project planning. When we asked how CI planned new industries or expanded
existing ones, managers told us CI lacks a formal policy or procedures for either
situation. The leading practices we identified in our literature reviews and through
discussions with other states could have helped CI better identify and assess
barriers that limited the success of these programs.

Correctional Industries :: Audit Results | 15

Leading practices could help CI more effectively maintain
and expand its industries

We identified four areas of leading practices that could help CI strengthen its
planning and program development. We reviewed the National Correctional
Industries Association (NCIA) performance excellence guide and the American
Correctional Association (ACA) standards for correctional industries, and
interviewed officials in six high-performing states to get specific examples of how
they have implemented these practices. We focused on identifying practices that
are key to effectively planning for new and expanding industries and managing
existing ones. They include:
•	 Establish a formal agency-wide business planning policy
•	 Develop a formal process for assessing demand for job skills
•	 Improve processes for collecting and analyzing customer feedback
•	 Establish additional performance measures to assess how well it is
meeting its mission

CI has not established a formal industry planning policy to help
ensure all essential business questions are considered

Leading practices recommend that correctional industries programs have
a formal, documented process for developing new and expanding existing
industries. It allows inmate work programs to weigh the costs, benefits and risks
of a new venture before committing resources to it. The sidebar shows some of the
typical questions correctional industries should consider before embarking on a
new venture.
CI lacks a formal policy requiring a business plan that would consider these
questions, although managers told us they attempt to answer many of them when
planning the introduction or expansion of an industry. However, CI could not
find any planning documents related to the recycling industry for us to review,
and the documents for the tilapia farm did not show evidence that all questions
were considered. And while planning for these two industries, CI did not identify
whether there would be sufficient demand for its products.
Furthermore, when we reviewed the planning document for one of CI’s newest
expansions – the optical industry – we found it also failed to consider similar
questions. For example, the plan did not identify how the skills taught to
inmates will be marketable, the potential impact on support staff, and projected
sales and profitability.
By formalizing a business planning policy that incorporates these processes, CI
could make it easier for industry managers to ensure they have considered all
necessary questions. Such a process might have avoided some of the missteps that
led to financial losses and delay.

CI could improve its processes for identifying marketable job skills

Leading practices recommend that correctional industries programs conduct
research to ensure that the skills inmates learn align with the needs of the current
job market. It is essential in the initial planning phase and should be revisited
periodically as local and state workforce markets continuously evolve. Industries
should consult directly with private sector employers and business associations to
determine the types of technical and soft skills they require.

Key business planning
considerations
	 How much facility space,
utility infrastructure and
equipment is needed,
and what will it cost?
	 What is the industry’s
projected sales and
profitability?
	 How many inmate
workers will the industry
need to employ?
	 How many correctional
industries staff will the
industry need? Does
it require specialized
training or instructors to
establish or maintain?
	 Will the industry have an
impact on support staff,
such as human resources,
financial services and
administration?
	 Does the industry teach
skills that are in demand
in the workforce?
	 Is there customer demand
for the products and/or
services?
	 What impact will the
industry have on private
Washington businesses?

Correctional Industries :: Audit Results | 16

CI could enhance its job-demand assessment by making two improvements:
1.	 Documenting the results of job-demand monitoring would provide CI with
justification for continuing an existing industry or planning for a new one.
CI managers told us that although they monitor jobs that are in demand
using information from the Employment Security Department, they do not
create or retain documentation showing the result of their research.
2.	 Soliciting and documenting feedback from businesses would help ensure
that its existing industries provide marketable job skills and offer CI some
direction when it considers new industries. For example, Arizona meets
periodically with business associations to learn about industry trends.
While managers said they meet regularly with private businesses to
promote the value of hiring former inmate workers, they do not ask what
specific skills those employers need.
In the summer of 2017, our Office will publish a performance audit report that
examines how the state identifies high-demand occupations and incorporates
them into its secondary career and technical education programs. The information
in that report may help CI assess the demand for the job skills it offers.

Collecting and analyzing customer feedback on products and
services can guide decision-making once industries are under way

Once an industry is up and running, leading practices recommend that correctional
industries programs be responsive to the needs of their customers. This includes
regularly soliciting customer feedback to help managers assess product quality,
delivery timeliness, and customer satisfaction with prices. Customer feedback can
also provide information about new business development opportunities.
CI’s current customer survey includes some but not all of the information needed
to assess customer satisfaction. Currently, CI sends a paper copy of its customer
survey with each order it delivers. It also has an online version on its website. This
survey asks customers for feedback on CI’s product quality and timeliness, but it
does not ask about prices or whether CI’s products and product design met the
customer’s needs. Furthermore, because CI does not compile the survey results
or analyze them, it cannot identify positive and negative trends in customer
comments.
We noted that CI’s response rate for its surveys is less than 2 percent of orders.
Other states have used a variety of methods to encourage more customer feedback.
For example, Maryland solicits input on its operations and potential new products
and services from a customer advisory council composed of representatives from
customer agencies.
Aside from surveys and panels, CI could use other data to assess customer needs
and satisfaction. State law allows agencies to request exemptions if they determine
CI’s goods and services are more expensive or of lesser quality than the private
sector, or otherwise do not meet the agency’s requirements. CI managers told us
they track exception requests, but only for the furniture industry. However, CI
does not use them to assess customer satisfaction. CI could also begin tracking the
reasons for customer returns and requests for repairs under warranty. For instance,
California reviews exception reports to identify the most common reasons for its
returns and requests. This prompted California to adjust its furniture designs.

Correctional Industries :: Audit Results | 17

Additional performance measures could help CI assess
how well it is meeting its mission

Performance measures help an agency or program understand whether it is
achieving its objectives and goals. Leading practices recommend that correctional
industries programs develop performance measures and benchmarks to
help establish priorities, clearly define industry goals, and report progress to
stakeholders such as legislators and the public.
CI tracks a wide range of performance measures internally using a management
dashboard. Topics range from staff safety to business performance and Lean
business practices. Exhibit 5 presents four that apply directly to CI’s mission to
maintain and expand work programs.
Exhibit 5 – Four performance measures CI currently tracks
Measure

What it tracks

What is learned

Goal

Class II employment by
industry

# of inmates working
monthly

Which industries
have gained, lost
or maintained
employment

3,100 total
workers by June
30, 2017

CI-wide Class II
worker post-release
employment

% of former workers
employed 3 years
post-release

How effective CI’s
training programs
are in helping people
gain employment
post-release

55% of inmates
working
post-release

CI-wide actual cost of
goods sold compared
to forecast

Variance between
actual and forecast
costs

Are product costs
within budget

Variance of 3%
or less

CI-wide actual
operating expense
compared to forecast

Variance between
actual and forecast
operating expenses

Are operating
expenses within
budget

Variance of 3%
or less

Industry-specific performance measures would help identify causes
for unexpected variances
Although CI already tracks one of these measures by industry (Class II inmate
employment), the other three are only tracked for the program as a whole.
Consequently, performance issues occurring in specific industries could be
difficult to identify. Monitoring each performance measure by industry could help
CI better identify where performance issues are occurring and allow it to track
industry-specific trends over time.
Profitability performance measures would help set targets and
track profitability trends
Industry literature we reviewed recognizes that some industries provide benefits
that are unrelated to profitability, such as marketable job skills. As a result, leading
practices do not require profitability in each individual industry. But they do require
that correctional industries programs maintain overall financial sustainability to
support their current operations and plan for new ones. Although state law does
not specifically require CI to be profitable, it does require CI to reinvest its net
profits into the expansion and improvement of the program.

Correctional Industries :: Audit Results | 18

CI does not have performance measures or benchmarks on its dashboard to
track profitability, but it does obtain and review industry-specific profit and loss
information on a monthly basis. Managers agreed that establishing profitability
measures would help them set targets and track profits over time, and said setting
targets would help them balance program profitability with the need to ensure
their training programs help inmates secure a job after release.
Some states we talked to track and report industry-specific performance in annual
business plans or reports. For example, California and Maryland have performance
measures and goals for profitability. North Carolina produces an annual business
plan that includes the financial performance for each of its industries, as well as
analyses of strengths, weaknesses, opportunities and threats specific to each.

Question 2: Does CI price its products in a way that meets
its legal requirements and goals?
Answer in brief

State law requires that CI price its products and services with the objective of
reducing public support costs. To meet this requirement, CI agrees it must
establish and maintain competitive prices for its products. However, the media
has questioned whether CI prices are truly competitive. We compared CI’s
prices for 12 products to those of private vendors and found that all but one were
within the range of private vendors’ prices. However, CI does not have a written
pricing policy to ensure and demonstrate it sets competitive prices, reinvests in its
industries, and reduces public support costs.

State law requires CI to price its products competitively
and reinvest profits in its programs, but perceptions exist
that CI’s prices are too high

State law requires CI to balance these price-related mandates:
•	 Design its Class II industries in such a way that they reduce the cost of
goods and services to tax-supported entities. CI managers interpret this to
mean they should set competitive prices for their products and services.
•	 Although CI is not required to make a profit, it is required to reinvest any
profits back into the program to expand and improve its operations.
The law also prohibits CI from pricing its products so low that it undercuts
Washington private businesses – a topic we address further in Question 3.
Some have questioned whether CI’s prices are too high. A Seattle Times series in
2014 claimed that CI does not set competitive prices, particularly in the furniture
industry. It accused CI of “exorbitant markups” for products it sells to state
agencies to compensate for losses in other businesses it runs. The authors claimed
that CI took advantage of state law that requires state agencies to purchase goods
and services from CI, adding that “the prison program has capitalized on that
monopoly with hefty markups.”

Set
competitive
prices

Reinvest
profits

Correctional Industries :: Audit Results | 19

Our comparisons showed all but one of the products we
reviewed were within or below the comparable price range

To see whether state agencies are paying competitive prices for the products they
purchased, we conducted an analysis of 12 products, using CI’s sales revenue data
for fiscal year 2016. We identified the top-two-selling products by volume from
five of the main industry groups: textiles, furniture, food, communications and
boxes. We selected two additional items (total of four) from the furniture industry
because it had been singled out for criticism in the past.
In conducting the comparison for each of these CI products, we performed an
internet search for comparable products from three different vendors. However,
in some cases we were only able to find one or two comparable products.
When we found too many differences between the CI products and those offered
by the private vendors, we selected the next product on the list of top-selling
products by volume.
As shown in Exhibit 6, our comparison found that three of the 12 products were
within and eight of the 12 were below the price range of competitive products. The
one product that was priced higher than its competitors was the desk called the
Ergo Design Sit/Stand Mechanism (2K16). Appendix C has additional detail on
the price comparison results.
Exhibit 6 – Most of the products we price-checked fell within
the ‘comparable price’ range
Archive box

Lowest private vendor

Box

Highest private vendor

Colored index tabs

Correctional Industries

Envelopes
Dinner rolls
Hamburger buns
Sit/Stand mechanism
Dash chair
Mobile pedestal
Navigator chair
Pillowcase
Washcloth
Source: Auditor analysis based on reviews of CI prices and those of private vendors.

Because our price comparisons were limited to these 12 high-volume products,
we cannot conclude that all CI prices are competitive.

Correctional Industries :: Audit Results | 20

Without a pricing policy, CI cannot ensure it saves agencies
money while producing sufficient profit for reinvestment

A formal pricing policy would help ensure that CI sets competitive prices that also
allow it to reinvest in its programs. ACA standards recommend that correctional
industries programs establish formal pricing policies to ensure pricing decisions
are based on the cost of goods and manufacturing as well as market information.
We also talked to six states to learn about their pricing policies and obtain examples
of their policies and procedures.
Based on the ACA standards and input from other states, we developed the
following framework to help CI ensure it has an effective pricing policy:
•	 Compare prices to the private market and document the results
•	 Establish a price-approval process
•	 Establish a process for periodically reviewing prices for possible
adjustments
To understand how CI managers set prices, we talked to executive management
and the managers of the five industries we included in the price comparison. We
then compared CI’s practices to this framework and found gaps and inconsistent
practices across its industries.
We learned CI does not have an agency-wide pricing policy. Some CI managers
said this puts the overall program at risk of not recovering costs or overcharging
customers. For example, one industry manager said that the industry’s method is
too subjective, meaning prices and resulting margins are sometimes estimated,
sometimes based on what a customer can afford to pay. None of the industry
managers we talked to said they document the reasoning behind pricing or
margins. Indeed, two managers said margins in their industries were set years ago
and they did not know the justification for them. With no pricing policy in place,
CI cannot ensure it achieves its goals to save agencies money while achieving
sufficient profit to reinvest in its industries.
Comparing prices and documenting results helps ensure prices
are set competitively
To help correctional industries establish sound pricing policies, the ACA
recommends they periodically conduct market analyses and document the results.
Comparing prices to the private market helps ensure prices are set competitively,
while documenting the results helps promote transparency. CI compares prices to
the private market, but its practices are inconsistent and largely undocumented.
CI’s practices for conducting market comparisons vary. Managers for the five
industries all told us they compare prices to the private market, but only one
documents the results. Moreover, the reasons why managers compare prices vary.
For example, one brand manager conducts market comparisons when reviewing
prices, another when the industry receives complaints about products, while
another “only if there is a need.”
Other states we talked to said they compare prices for their products to those
offered on the private market when setting or reviewing prices. Two, Maryland
and California, have written policies that require CI programs to periodically
compare prices. Maryland’s policy requires its marketing department to conduct
market studies of the average selling prices of three private vendors. Factors
considered include the targeted profit goal, vendor price changes, and cost increases
experienced by the agency. California has a marketing and business analysis unit
that obtains information on available, comparable products.
Correctional Industries :: Audit Results | 21

Having a formal price-approval process helps ensure policy is implemented
as intended
Leading practices recommend that correctional industries establish formal
processes for approving prices to help ensure the pricing policy is implemented
as intended. It is also a good way for executive management to see how well the
policy is working and identify any changes that may be needed. CI does not have
an overarching pricing policy, nor does it have a formal process for approving
individual industry prices. Only one manager told us they have an unwritten
approval process while other managers do not have any.
Four of the states we talked to have an approval process that requires a designated
person or entity to review and approve a price. For example, a senior manager at
the Minnesota program approves new pricing. In Maryland, an external agency,
the Department of General Services, has this duty.
Periodic reviews help ensure prices remain competitive by identifying
necessary price adjustments.
Leading practices recommend periodically reassessing prices because prices can
fluctuate, particularly for commodities. We found CI does not have a formal
process for reassessing prices.
Four other states we talked to said their pricing policies establish a schedule
for when prices should be reviewed. For example, Maryland, Minnesota and
California conduct annual reviews. Arizona reviews costs to identify needed price
adjustments for standard products every six months and for custom products
every 30 days. Most of the CI industry managers told us they have an informal
process for reviewing prices, but there is no program-wide standard for when or
how to conduct a review.
Not periodically reviewing prices can lengthen the time that prices are set too
low or too high. For example, when we shared price comparison results for the
sit/stand mechanism with CI managers, they said no one had reviewed the price
of the product since 2013. They said the price had originally been based on the
product cost, the designer’s fee and the market value at the time. Although the
designer fee ended in January 2015, CI did not review the product price for possible
adjustment until we asked about it in October 2016. CI managers noted that there
are many similar products on the market now, so the price for the product is no
longer competitive. CI lowered the price in November 2016, and told us it would
replace the desk with another product in January 2017.

CI is developing a formal pricing policy

During the audit, CI recognized the benefits of a formal pricing policy and began
working on one for all industries. CI managers told us they expect to implement
this policy by July 2018.

Correctional Industries :: Audit Results | 22

Question 3: Does CI compete unfairly with
Washington businesses?
State law is not clear about what “fair competition” means

State law intends to protect Washington businesses from unfair competition.
However, the law does not specify how CI should measure its impact. ACA
standards do not address the topic of correctional industries competing with local
businesses, while other states we talked to do not measure their market share
annually or do not have a formal process for determining it on a regular basis.
CI management told us that the CI Advisory Board established a 3 percent
threshold to cap the extent to which CI impedes the local market. However, this
threshold was established several years ago, and CI does not have a record of how
this decision was reached. It is unclear whether the threshold set by the Board
meets legislative intent of restricting CI from competing with private businesses.
Different states we talked to have different market-share goals ranging from
1 percent to 5 percent.

The majority of industries are under the market share threshold
set by CI

To demonstrate the impact of its Class II industries on state businesses, CI
publishes an annual market share report that compares revenues for its lines of
business to Department of Revenue information on revenues for similar types of
businesses in the state. We performed procedures on the numbers reported in CI’s
annual market share report to conclude they were sufficiently reliable for our audit
purposes.
The fiscal year 2016 market share report shows 14 of the 16 Class II industries
operate with a market share of less than CI’s 3 percent threshold. One industry,
food service, has a bigger market share of 3.4 percent. Because of a lack of private
sector sales information, CI could not accurately determine the market share for
a second industry, field crops.
The five-year total for fiscal years 2012 through 2016 shows that CI’s overall market
share is less than one-half of 1 percent of all revenues from similar businesses in
the state.

Correctional Industries :: Audit Results | 23

Recommendations	
We recommend the agency:
1.	 Use leading practices to establish a formal business planning policy for
new and expanding industries
2.	 Develop a documented process to regularly assess the demand for the skills
taught to inmates based on input from private industry and current labor
market data
3.	 Improve existing efforts to obtain customer feedback on prices and
products by:
ӽӽ Expanding its customer survey to include questions about product
quality and prices, and customer needs
ӽӽ Analyzing feedback to determine if CI’s products and services
adequately meet customer needs
4.	 Develop, track and publish the following industry-specific performance
measures:
ӽӽ Inmate post-release employment outcomes
ӽӽ Accuracy of CI’s cost of goods sold forecast
ӽӽ Accuracy of CI’s operating expense forecast
ӽӽ Profitability
5.	 Establish a formal agency-wide pricing policy and a timeframe for
implementing that policy. The pricing policy should include a documented
process for:
ӽӽ Comparing prices for new and existing products to ensure prices are
competitive
ӽӽ Approving prices to ensure they are set in accordance with policy
ӽӽ Reviewing prices at specified intervals, with formalized roles and
responsibilities for reviewers
We recommend the Legislature:
6.	 Clarify RCW 72.09 to explain how CI should measure compliance with
unfair competition restrictions for its Class II industries

Correctional Industries :: Audit Results | 24

Agency Response	

STATE OF WASHINGTON
May 2, 2017

The Honorable Pat McCarthy
Washington State Auditor
P.O. Box 40021
Olympia, WA 98504-0021
Dear Auditor McCarthy:
Thank you for the opportunity to review and respond to the State Auditor’s Office (SAO) performance
audit report, Correctional Industries: Planning, Pricing, and Market Share. The Office of Financial
Management worked with the Department of Corrections (DOC) to provide this response.
We appreciate the Auditor’s recognition that the department’s Correctional Industries (CI) program has
increased inmate worker participation by 60 percent over the last four years. As the report notes, the CI
program provides its workers with marketable job skills, thus increasing their ability to find work upon
release. This is a critical element of our state’s goal of promoting positive change for the incarcerated
population and reducing recidivism, which increases public safety for all Washingtonians.
The department recognizes the value of the Auditor’s recommendations to formalize and document
Correctional Industries’ business planning tools and related policies. The department also sees the value
in engaging customers when evaluating pricing structure and overall product satisfaction.
We appreciate the collaborative approach your staff used during the course of the audit. The attached
action plan addresses the areas for improvement identified in the report.
Sincerely,

David Schumacher
Director
Office of Financial Management
cc:

Stephen D. Sinclair
Secretary
Department of Corrections

David Postman, Chief of Staff, Office of the Governor
Kelly Wicker, Deputy Chief of Staff, Office of the Governor
Drew Shirk, Executive Director of Legislative Affairs, Office of the Governor
Roselyn Marcus, Assistant Director, Office of Financial Management
Scott Merriman, Legislative Liaison, Office of Financial Management
Rich Roesler, Acting Director, Results Washington, Office of the Governor
Tammy Firkins, Performance Audit Liaison, Results Washington, Office of the Governor
Danielle Armbruster, Assistant Secretary, Department of Corrections
Correctional Industries :: Agency Response | 25

OFFICIAL STATE CABINET AGENCY RESPONSE TO THE PERFORMANCE AUDIT ON CORRECTIONAL
INDUSTRIES: PLANNING, PRICING AND MARKET SHARE
MAY 2, 2017
This coordinated management response to the State Auditor’s Office (SAO) performance audit
report received April 12, 2017, is provided by the Office of Financial Management and the
Department of Corrections (DOC).
SAO PERFORMANCE AUDIT OBJECTIVES:
The SAO designed the audit to answer:
1. How effective is Correctional Industries (CI) in maintaining and expanding offender participation
in its work training programs?
2. Does CI price products in such a way that it meets its legal requirements and goals?
3. Does CI compete unfairly with Washington businesses?
SAO Recognitions:
1. SAO price comparisons showed all but one of the products reviewed were within or below the
comparable price range.
2. The majority of industries are under the market-share threshold set by CI.
SAO Findings:
1. CI has experienced planning challenges and contractor difficulties in the past when expanding
industries and adding new ones.
2. Without a pricing policy, CI cannot ensure it saves agencies money while producing sufficient
profit for reinvestment.
3. State law is not clear about what “fair competition” means.

SAO Recommendation 1: Use leading practices to establish a formal business planning policy for
new and expanding industries.
STATE RESPONSE: CI acknowledges the benefits of having a documented process for expanding
and opening new businesses. We appreciate the SAO’s recognition of our success in increasing the
number of inmate workers. CI has instilled an agency-wide Lean culture that promotes and values
strong business practices focused on customer satisfaction and efficient production models. We
recognize the identified gap of planning new business expansions and will implement a formalized
policy that is rooted in consistency, Lean principles, and evidence-based leading practices.
Action Steps and Time Frame
 Develop a formal business planning policy encompassing process constraints, business impacts,
training requirements, effects on private Washington businesses, and customer demand for CI
goods and services. By July 1, 2018.

1
Correctional Industries :: Agency Response | 26

SAO Recommendation 2: Develop a documented process to regularly assess the demand for skills
taught to inmates based on input from private industry and current labor market data.
STATE RESPONSE: CI agrees a formalized documented process will contribute to the goal of
increasing post-release employment and reducing recidivism. Information gained from private
industry and current labor market data will aid CI in identifying the technical and soft/interpersonal
skills required by employers. CI anticipates that developing and following a process to assess realtime employer demand will help develop stronger connections and pathways to employment for
individuals upon release in our communities. These efforts are already a part of CI’s strategic plan.
Formalizing the process will enhance the work of CI and its workforce development unit. We
acknowledge that using this data on a more frequent basis will allow us to better understand inmate
programming needs, recognize successes and evaluate effectiveness.
Action Steps and Time Frame
 CI will establish a process to regularly review labor market data developed by the state
Employment Security Department. By June 30, 2017.
 CI will identify and deploy leading practices to engage potential employers for individuals
released from incarceration. By September 30, 2017.
 CI will leverage existing relationships with stakeholders to define a process to request or run
additional reports on labor market data. By December 31, 2017.
 CI will evaluate the need for and interest in a cross-sector employer advisory group. By
December 31, 2017.
 CI will develop an employer needs survey for businesses that already employ previously
incarcerated individuals. By December 31, 2017.

SAO Recommendation 3: Improve existing efforts to obtain customer feedback on prices and
products by:
•
•

Expanding its customer survey to include questions about product quality and prices, and
customer needs
Analyzing feedback to determine if CI’s products and services adequately meet customer
needs

STATE RESPONSE: CI acknowledges the benefits of being responsive to the needs of its
customers. CI recognizes the importance of regularly soliciting feedback in order to assess product
quality, delivery timeliness and overall customer satisfaction. CI also recognizes the identified gap
in obtaining feedback as it relates to product quality, pricing and new business development
opportunities. CI has a current practice of providing a survey form to each customer at the time of
delivery. We understand SAO’s conclusion that the survey forms receive a low response rate, and
those that are returned lack an appropriate assessment of customer needs and satisfaction. In order
to guide decision making for the furniture industry, CI will enhance and strengthen analysis of
customer feedback.

2
Correctional Industries :: Agency Response | 27

Action Steps and Time Frame:
 Develop a customer request tracking system to identify the most common reasons for requests,
including returns, and requests for repairs under warranty. By July 1, 2017.
 Develop a formalized and modern customer feedback process designed to significantly increase
participation and to enhance assessment of product quality, pricing, and new business
development opportunities. By September 30, 2017.
 Establish an advisory council composed of representatives from customer organizations. A
customer advisory council will assist CI in soliciting input on its operations and potential new
products. By September 30, 2017.

SAO Recommendation 4: Develop, track and publish the following industry-specific performance
measures:
•
•
•
•

Inmate post-release employment outcomes
Accuracy of CI’s cost of goods sold forecast
Accuracy of CI’s operating expense forecast
Profitability

STATE RESPONSE: CI recognizes the importance of having accurate performance measures to
evaluate how well the program is achieving its mission. CI appreciates the SAO’s overview of the
current performance measures being tracked to assess staff safety, Lean practices and business
performance. CI recognizes the opportunity to improve and expand these measures to help CI more
accurately reflect current business performance and efficiently report to key stakeholders. In order
to continue to strengthen CI’s post-release employment metrics, we will move to an industryspecific model to track performance and trends.
CI has increased efforts to accurately forecast overall prices of goods sold and operating expenses.
Processes to collaboratively work across industries and refine current forecast modeling techniques
will allow CI to more accurately project future costs and expenses. To improve forecasting, CI will
implement industry-specific measures for accurately forecasting goods sold and operating expenses.
As noted by SAO, CI tracks industry-specific profit and loss information on a monthly basis, but
does not have performance measures to track profitability. While our industries provide benefits
beyond profitability — such as developing marketable job skills and reducing inmate infraction
levels — CI recognizes the benefit of profitability performance measures. To ensure consistent and
effective reinvestment into the program, CI will establish profitability performance measures.
Action Steps and Time Frame:
 Expand current post-release employment tracking to include industry-specific measures. By
July 1, 2018.
 Improve the current forecasting model to include an industry-specific measure for accurate price
of goods sold. By July 1, 2018.
 Improve the current forecasting model to include an industry-specific measure for accurate
operating expense. By July 1, 2018.
 Develop industry-specific measures of profitability. By July 1, 2018.
3
Correctional Industries :: Agency Response | 28

SAO Recommendation 5: Establish a formal agency-wide pricing policy and a timeframe for
implementing that policy. The pricing policy should include a documented process for:
•
•
•

Comparing prices for new and existing products to ensure prices are competitive
Approving prices to ensure they are set in accordance with policy
Reviewing prices at specified intervals, with formalized roles and responsibilities for
reviewers.

STATE RESPONSE: CI supports the SAO recommendation, and looks forward to establishing a
formal pricing policy governing all products and services. In September 2016, CI recognized it
could improve its market competitiveness and operational effectiveness by developing a uniform
and objective pricing model. CI will adopt the SAO recommended pricing policy to further increase
fiscal transparency and program reinvestment.
The intent of the policy and corresponding pricing model would provide price stability for CI
customers and help address market fluctuations and other factors affecting operations.
Action Steps and Time Frame:
 Improve annual fiscal forecast detail and accuracy by aligning industry-specific revenues and
expenses, enabling full cost recovery for respective industries. By July 1, 2017.
 Improve annual fiscal forecast detail and accuracy by developing a new warehouse and
transportation cost allocation model. By October 1, 2017.
 Establish a phased equipment replacement schedule by respective industry. By January 1, 2018.
 Distribute the final pricing policy and corresponding pricing model, and train staff on using the
model during the annual forecasting process. By March 1, 2018.
 Implement the final pricing policy and corresponding pricing model. By July 1, 2018.

SAO Recommendation to the Legislature: Clarify RCW 72.09 to explain how CI should measure
compliance with unfair competition restrictions for its Class II industries.
Action Steps and Time Frame
 Not applicable. Directed to the Legislature.

4
Correctional Industries :: Agency Response | 29

Appendix A: Initiative 900	
Initiative 900, approved by Washington voters in 2005 and enacted into state law in 2006, authorized the State
Auditor’s Office to conduct independent, comprehensive performance audits of state and local governments.
Specifically, the law directs the Auditor’s Office to “review and analyze the economy, efficiency, and effectiveness
of the policies, management, fiscal affairs, and operations of state and local governments, agencies, programs,
and accounts.” Performance audits are to be conducted according to U.S. Government Accountability Office
government auditing standards.
In addition, the law identifies nine elements that are to be considered within the scope of each performance audit.
The State Auditor’s Office evaluates the relevance of all nine elements to each audit. The table below indicates which
elements are addressed in the audit. Specific issues are discussed in the Audit Results section of this report.
I-900 element

Addressed in the audit

1.

Identify cost savings

No. However, implementation of the audit’s recommendations could help avoid
future costs related to failed industries. Furthermore, CI’s customers could see
cost savings if CI regularly reviews its prices to ensure they are competitive.

2.

Identify services that can be reduced or
eliminated

No. However, the audit’s recommendations could help avoid establishing or
expanding industries that do not effectively serve state agencies or do not
provide meaningful training to inmates.

3.

Identify programs or services that can be No. The purpose of the CI program is to provide inmates with the opportunity to
learn skills that assist them upon release, while providing agencies with low-cost
transferred to the private sector
products and services. The audit concludes that CI pricing was competitive for
most of the products we examined.

4.

5.

6.

7.

8.

9.

Analyze gaps or overlaps in programs or
services and provide recommendations
to correct them
Assess feasibility of pooling information
technology systems within the
department
Analyze departmental roles
and functions, and provide
recommendations to change or
eliminate them
Provide recommendations for statutory
or regulatory changes that may be
necessary for the department to
properly carry out its functions
Analyze departmental performance
data, performance measures and
self-assessment systems
Identify relevant best practices

Yes. The audit concludes that CI needs to review its pricing more frequently and
improve the quality of its planning when entering into new industries.
No. The areas examined during this audit were not dependent on information
technology systems.
Yes. The audit concludes that CI needs to review its pricing more frequently and
improve the quality of its planning when entering into new industries.

Yes. The audit recommends that the Legislature clarify how CI should measure
whether it is complying with laws that restrict unfair competition.

Yes. The audit recommends that CI improve its performance measures related to
profitability and expand its measures to include each industry.
Yes. The audit identifies leading practices for pricing and business planning that
CI should implement to strengthen its management of the program.

Correctional Industries :: Appendix A | 30

Appendix B: CI Industries and Locations	
ABERDEEN
Stafford Creek Corrections Center
• Custom Furniture
• Customer Service
• Ergonomic Seating
• Laundry
• Metal Fabrication
• Metal Files and Storage
• Office Systems
• Panel Systems
• Residence Hall Furniture
• Wood Furniture

GIG HARBOR
Washington Corrections Center for
Women
• Braille Services
• Computer Aided Design Services
• Embroidery
• Inmate Clothing Distribution
• Screen Printing
• Textiles
• Trades Related Apprenticeship Coaching
LITTLEROCK
Cedar Creek Corrections Center

TUMWATER (CI HQ)
WA State Light Industrial Park
• Consolidated Distribution Center
• Furniture Installation and Warranty
• Janitorial Products

AIRWAY HEIGHTS
Airway Heights Corrections Center
• Commissary
• Food Manufacturing
• Food Service
• Furniture Refurbishing
• Laundry
• Optical Lab
• Promotional Products
• Screen Printing
• Textiles

• Laundry

• Statewide Transportation

MONROE
Monroe Correctional Complex
• Food Service
• Commissary
• Laundry
• License Tabs
• Optical
• Printing
• Socks

CLALLAM BAY
Clallam Bay Corrections Center
• Garments
• Laundry

SHELTON
Washington Corrections Center
• Food Service
• Laundry
• Inmate Clothing Distribution
• Safety Kits

WALLA WALLA
Washington State Penitentiary
• Cardboard Boxes
• Composting
• East Transportation
• Field Crops
• Food Service
• Laundry
• License Plates
• Metal Manufacturing
• Recycling

CONNELL
Coyote Ridge Corrections Center
• Food Manufacturing
• Food Service
• Laundry
• Mattresses
• Textiles

STEILACOOM
McNeil Island Stewardship
• Work Crews:
Grounds Maintenance
Marine
Vehicle Maintenance
Waste Water/Water Distribution

YACOLT
Larch Corrections Center
• Laundry

FORKS
Olympic Corrections Center
• Laundry

Correctional Industries :: Appendix B | 31

McNeil Island
Stewardship
Clallam Bay
Corrections Center
Olympic
Corrections Center

Washington Corrections
Monroe
Center for Women Correctional Complex

Airway Heights
Corrections Center

Washington
Corrections Center

Stafford Creek
Corrections Center
Cedar Creek
Corrections Center
Correctional Industries
Headquarters

Larch
Corrections Center

Coyote Ridge Washington State
Corrections Center Penitentiary

Correctional Industries :: Appendix B | 32

Appendix C: Results of Pricing Comparisons	
“Total price” line includes shipping unless otherwise noted. Shipping costs reflect the product quantities shown in the
specifications row for each of the products above. In instances where we changed these quantities so we could compare
vendor’s prices to CI’s prices, we did not adjust the shipping costs. For this reason, it is possible that the shipping costs
shown in our price comparisons above may differ from actual shipping costs.

BOX INDUSTRY
2nd highest priced
vendor

Archive box

Lowest priced vendor

CI

Specifications

15”D x 12”W x 10”H;
Corrugated cardboard;
lift-off lid; 100% recycled
content

15.5”D x 12”W x 10”H;
Lightweight, heavygauge cardboard; lift-off
lid; 70% recycled content

No custom printing
options
Sold in packs of 10

Highest priced vendor
15”D x 12”W x 10”H
Standard-duty strength
cardboard; lift-off lid;
65% recycled content

Custom printing options

15”D x 12”W x 10”H;
Corrugated cardboard;
stacking strength of 200 lbs;
lift-off lid; recycle content
not noted
No custom printing options

Sold in packs of 10

Sold in packs of 10

Sold in packs of 10

No custom printing options

List price/pack

$12.95

$23.88

$22.99

$34.99

Shipping

$7.24

Included in price

$9.95

$9.95

$20.19

$23.88 *

$32.94

$44.94

Total price/pack

* CI sells top and bottom of the box separately, so we combined the prices.

Box

CI

Lowest priced vendor

2nd highest priced
vendor

Highest priced vendor

Specifications

12”D x 12”W x 9”H;
Lightweight, heavygauge cardboard; 70%
recycled content
Sold in packs of 25

12”D x 12”W x 9”H;
Corrugated box; recycle
content not noted

12”D x 12”W x 9”H;
Material and recycle
content not noted

12”D x 12”W x 9”H;
Corrugated box; recycle
content not noted

Sold in packs of 25

Sold in packs of 25

Sold in packs of 25

List price/pack
Shipping

Specifications

$33.49

$19.00

$31.08

$9.95

$27.16

$18.45

$29.85

Total price/pack

Colored index
tabs

$29.85
Included in price

CI

Lowest priced vendor

Colored index tabs
Paper size 9”x11”; 12 tabs
per set; 3-hole punched

Colored index tabs
Paper size 9”x11”; 12 tabs
per set; hole punch not
noted
Sold by the set

Sold by the set
List price/unit

$43.44
$46.16
COMMUNICATIONS INDUSTRY
2nd highest priced
vendor ‡

$49.53

Highest priced vendor
Colored index tabs
Paper size 8 1/2”x11”;
12 tabs per set; 3-hole
punched
Sold 6 sets in a package

$2.70/set

$4.37/set

$6.07/package

Price/set

$2.70

$4.37

$1.01

Shipping

Included in price

Included in price

$7.95

$2.70

$4.37

$8.96

Total price/set

‡ We were unable to find another vendor with comparable products to identify other prices.

Correctional Industries :: Appendix C | 33

COMMUNICATIONS INDUSTRY, continued
Envelopes

CI

Lowest priced vendor

2nd highest priced
vendor

Specifications

#10 envelope, window
w/return address
Priced individually

#10 envelope, window
w/return address
Sold 500 envelopes/box

#10 envelope, window
w/return address
Sold 500 envelopes/box

List price/unit

Highest priced vendor
#10 envelope, window
Sold 500 envelopes/box

$0.06220/one envelope

$73.99/box

$77.30/box

$105.00/box

Included in price

Included in price

Included in price

$21.22

$31.10 *

$73.99

$77.30

$126.22

Shipping
Total price/500
envelopes

* Although CI sells envelopes in a box of 500, the list price was for one envelope. We multiplied the price of one envelope by 500 to get the price
of one box.

FOOD INDUSTRY
2nd highest priced
vendor ‡

Dinner rolls

CI

Specifications

White whole-grain dinner
rolls; 2 oz
100 rolls/case

Wheat dinner rolls; 2 oz

$12.75/case

$57.35/case

List price/unit

Lowest priced vendor ‡

Highest priced vendor

180 rolls/case

Price/roll

$0.13

$0.32

Shipping

Included in price

$42.40

$12.75

$74.26 *

Total price/100
rolls

* Since CI sells 100 rolls per case and the private vendor sells 180, we calculated an approximate price for 100 rolls for the private vendor.
‡ We were unable to find other vendors with comparable products to identify other prices.

Hamburger
buns

CI

Lowest priced vendor ‡

2nd highest priced
vendor ‡

Highest priced vendor

Specifications

White whole-wheat
hamburger buns; 2 oz
Sold 192/case

Whole-grain hamburger
buns; 2 oz
Sold 120/case

List price (unit as
noted)

$19.17/case

$34.05/case

Price per bun
Shipping
Total price/192
buns

$0.10

$0.28

Included in price

$49.20

$19.17

$103.68 *

*Since CI sells 192 buns per case and the private vendor sells 120, we calculated an approximate price for 192 buns for the private vendor.
‡ We were unable to find other vendors with comparable products to identify other prices.

Correctional Industries :: Appendix C | 34

FURNITURE INDUSTRY
Sit/Stand
Mechanism
Specifications

List price/each
Shipping
Total price/each

Lowest priced vendor

2nd highest priced
vendor

Adjustable work surface;
fits dual-monitor setups
Overall dimensions:
Footprint 35”W x 25”D,
15” vertical travel

Adjustable work surface;
fits dual-monitor setups
Overall dimensions:
Footprint 36”W x 29.75”D,
about 14” vertical travel

Construction details:
Work surface and
keyboard tray move in
tandem; keyboard tray
25”W x 9”D; supports up
to 35 lbs; two colors

Construction details:
Keyboard and work
surface move in tandem,
11 height settings; full
height 17.5” for work
surface, 14” for keyboard
tray; supports up to
35 lbs; three colors

Adjustable work surface;
retractable keyboard tray
Overall dimensions:
Footprint 36”W x 18.5” D,
16.5” vertical travel

Some assembly needed;
assembly adds $19.00

Construction details: Work
surface and keyboard
platform move in tandem.
Depth with keyboard
tray extended 24”-31.5”,
keyboard tray 30”W x
10.5”D, adjusts from level
to 25 degree negative
tilt; steel with powder
coat finish. Black/white
combination only.

$499.00

$590.00

Included in price

Included in price

Included in price

Included in price

$380.58

$395.00

$499.00

$590.00

2nd highest priced
vendor

Specifications

Task chair with lumbar
support
Overall dimensions:
27.25”W x 25”D x
38”-41.9”H, seat height
18”-22”, seat 20.5”W x
19.25”D
Construction details:
Mesh back, upholstered
seat; pneumatic height
adjustment; tilt tension
adjustment; adjustable
height padded arms;
heavy duty nylon base;
dual-wheel casters
5-year limited warranty.
Assembly not available
$143.99

5-year limited warranty
Assembly adds $54.71
$148.99

Total price/each

Adjustable work surface;
fits single monitor
Overall dimensions:
Footprint 28”W x 24”D,
16.5” vertical travel for
work surface
Construction details:
Separately adjustable
monitor shelf 16”W x
9.25”D with 6.5”H rise,
base plate 17.5”W x 16”D;
supports up to 34 lbs;
four colors

$395.00

Lowest priced vendor

Shipping

CI

$380.58

Dash chair

List price/each

Highest priced vendor

CI

Highest priced vendor

Task chair with adjustable
lumbar support
Overall dimensions:
28.4”D x 28.4”W x 43.1”H,
seat height 17.5”-22.5”

Task chair with adjustable
lumbar support
Overall dimensions:
37”-41.75”H; seat height
17”-21.75”; seat 20.5”W x
19.5”D; back: 20”W x 20”H

Construction details:
Mesh back, upholstered
seat; pneumatic height
adjustment; tilt tension
adjustment; adjustable
height arms; five-star
base of reinforced resin

Construction details:
Mesh back, upholstered
contoured seat;
pneumatic height
adjustment; tilt tension
adjustment; adjustable
height padded arms;
heavy-duty five wheel
nylon base
5-year limited warranty
Comes fully assembled
$264.00

Task chair with adjustable
lumbar support
Overall dimensions:
27.25”W x 25.75”D x
42”-46.25”H; seat: 20”W
x 19.5”D; back: 22.5”W x
25.75”H
Construction details:
Mesh back, upholstered
seat; pneumatic height
adjustment; tilt tension
adjustment; adjustable
height arms; five wheel
metal base
Lifetime warranty
Assembly not available
$319.00

Included in price

Included in price

Included in price

$47.00

$143.99

$148.99

$264.00

$366.00

Correctional Industries :: Appendix C | 35

FURNITURE INDUSTRY, continued
Mobile filing
pedestal

Lowest priced vendor

2nd highest priced
vendor

CI

Highest priced vendor

Specifications

Mobile filing cabinet with
three lockable drawers (2
box, 1 file)
Overall dimensions: 15”W
x 23”D x 31.5”H
Construction details:
Metal; full-length
recessed drawer pulls;
four casters, two locking
(optional stationary glides
incl); counterweight
added; four colors

Mobile filing cabinet with
three lockable drawers (2
box, 1 file)
Overall dimensions: 15”W x
22 7/8”D x 27 3/4”H
Construction details:
Steel; full extension on
box drawers; four hidden
casters; counterweight
added; one color

Mobile filing cabinet with
three lockable drawers (2
box, 1 file)
Overall dimensions: 15”W
x 22”D x 27.75”H
Construction details:
22-gauge steel; full
extension drawer guides;
four twin-wheel hooded
casters, two locking; fifth
wheel for counterbalance;
five colors

Mobile filing cabinet with
three lockable drawers (2
box, 1 file)
Overall dimensions: 15”W
x 22 7/8”D x 28”H.
Construction details:
Steel; 90% file drawer
extension, 75% box
drawer extension; pencil
tray included; four casters
(front fixed, back casters
swivel); counterweight
added; one color

List price/each

$207.38

$194.99

$297.00

$264.80

Included in price

$29.99 *

Included in price

$67.00

$207.38

$224.98

$297.00

$331.80

Shipping
Total price/each

* Vendor also offers free in-store pick up, but we included shipping costs in our total price.

Navigator
chair
Specification

Lowest priced vendor

Nesting guest chair with
arms and casters
Overall dimensions: 33”H;
seat 17.5”W x 17”D x 18”H;
back 18”W x 16”H

Nesting guest chair with
arms and casters
Overall dimensions:
23.5”W x 20.5”D x 32.2”H;
seat 17.5”W x 17.2”D x
19.5”H; back 17.5”W x
10.5”H
Construction details:
Steel frame construction;
upholstered back and
seat; 4 casters; 9 fabric
colors

Nesting guest chair with
arms and casters
Overall dimensions: 26”D
x 36”H x 26”W; back width
19.25”; seat dimensions
not noted

Lifetime warranty

Lifetime warranty

15-year warranty

Construction details:
Frame and legs 13-gauge
tubular carbon steel,
chrome plated or powder
coated; upholstered foam
seat cushion; articulating
nylon polymer back with
1/2” upholstered foam;
injection molded polymer
armrests; barrel carpet
casters; 3 frame colors, 2
plastic colors, 130 fabric
choices
Limited 5-year warranty
List price/each
Shipping
Total price/each

2nd highest priced
vendor

CI

Construction details:
Tubular steel frame;
upholstered back and
seat; backrest reclines
5°; dual-wheeled casters;
glides available at
additional cost; 2 frame
colors, 13 fabric choices

Highest priced vendor
Nesting guest chair with
arms and casters
Overall dimensions:
23.5”W x 24.25”D x
32.25”H; seat 17.25”W
x 18.5”D x 18”H; back
dimensions not noted
Construction details:
13-gauge steel tube
frame; upholstered back
and seat; carpet or hard
floor casters; 2 frame
colors, 3 shell colors, 11
fabric colors

$249.00

$189.00

$378.30

$473.59

Included in price

$89.00

Included in price

Included in price

$249.00

$278.00

$378.30

$473.59

Correctional Industries :: Appendix C | 36

TEXTILE INDUSTRY
Pillowcase

CI

Lowest priced vendor

Specifications

Percale pillowcase
50% cotton / 50%
polyester
31”L x 20”W
180-thread count
White only
Sold individually

Percale pillowcases
60% cotton / 40%
polyester
30”L x 20”W
200-thread count
White only
Sold in sets of two

2nd highest priced
vendor
Percale pillowcase
100% cotton
32” L x 20” W
300-thread count
Comes in 13 colors
Sold in sets of two

Highest priced vendor
Percale pillowcase
40% polyester / 60%
cotton
30” L x 20” W
220-thread count
White only
Sold in sets of two

List price/unit

$2.45/pillowcase

$7.29/set

$16.09/set

$24.99/set

Shipping

Included in price

$6.89

$4.00

$4.95

$4.90 *

$14.18

$20.09

$29.94

Total price/2
pillowcases

* Since all other vendors we found sell pillowcases in sets of two, we multiplied the price of one CI pillowcase by two to get the price for two
pillowcases if CI were to sell it in such quantity.

2nd highest priced
vendor

Washcloth

CI

Lowest priced vendor

Specifications

White washcloth
12” x 12”; 86% polyester,
14% cotton; cam border

White washcloth
12” x 12”; polyester/cotton
blend

White washcloth
12” x 12”; 100% loopedterry cotton; reinforced
edges

Sold individually

Sold by the dozen

Sold in packs of 24

White washcloth
12” x 12”; polyester /
cotton base with cotton
loops; cam border; ring
spun; hemmed edges
Sold by the dozen

$.64/washcloth

$8.98/dozen

$13.95/24 pack

$12.12/dozen

List price/unit
Price/washcloth
Shipping
Total price/dozen

Highest priced vendor

$0.64

$0.75

$0.58

$1.01

Included in price

Unknown ◊

$8.06

$10.48

$7.68 *

$8.98

$15.04 *

$22.60

* Since two vendors we found sell washcloths in packs of 12, we divided or multiplied the price of the other vendor and CI to get the price for
12 washcloths if they were to sell them in such quantity.
◊ We could not determine shipping charges.

Correctional Industries :: Appendix C | 37

 

 

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