Two southeast companies that make U.S. military uniforms are shedding hundreds of jobs, as the government looks to federal inmates for the fatigues.

American Power Source makes military clothing in Fayette, Ala., but its government contract expires in October. Federal Prison Industries – which also operates under the name UNICOR will snag the work, and leave the task to inmates. FPI has the first right of refusal for U.S. Government contracts, under a 1930 federal law.

American Apparel, the Selma, Ala., based military clothing manufacturer closed one of its plants and continues to downsize others due to the loss of some of its contracts to FPI. According retired Air Force colonel and spokesman Kurt Wilson, the company laid off 255 employees and cut the hours of 190 employees this year alone. So private workers end up losing their jobs to prisoners.

"The way the law is – Federal Prison Industries gets first dibs and contracts up to a certain percentage before they have to compete against us," Wilson, the executive vice president of business development and government affairs, said. "The army combat uniform, for instance, is an item that they take off the top. As a result American tax payers pay more for it – but the bottom line is each soldier is paying more for their uniform."

American Apparel charges $29.44 per uniform, but the FPI uniform costs $34.18 – a 15 percent difference.