The Hindu Business Line : US study warns of increase in outsourcing of Govt work

EVEN as the dust is yet to settle on the controversy over offshoring of work by private firms in the US to low-cost destinations like India, a new report by the Washington Alliance of Technology Workers (WashTech) has warned that a growing number of offshore contractors are gearing up to capture contract work from US State Governments, especially in IT services.

The study has identified 18 offshore outsourcing firms, mostly from India, that are involved in the State Government market in the US.

"Offshoring is going on to some degree in just about every State Government. At least 18 firms that specialise in offshore outsourcing are positioning themselves in no fewer than 30 States to capture a large share of the State Government market, especially in IT services," said the study, titled `Your Tax Dollars at Work... Offshore: How foreign outsourcing firms are capturing State Government Contracts'.

These 18 firms have already captured work worth at least $75 million and are seeking more "by gaining access to qualified contractor lists, hiring former Government officials and even making State electoral campaign contributions". The report added: "The total amount or value of State contract offshoring cannot be estimated, because most State Governments do not know where their contracted out service work is performed. State officials know whether work is done onsite at the offices of the agency that commissioned it or offsite, but `offsite' could mean the other side of town or other side of the world."

As subcontracting is common, States are often unaware of the exact identity and location of the company that ultimately performs the work.

"States award contracts to US firms and assume that the work will be done domestically, but then the company subcontracts to an offshore firm," said the report dealing with offshore outsourcing of State Government work with focus on information technology and food-stamp call centres said.

Moreover, it said, companies that appear to be domestic, sometimes, were not.

"States may think they are dealing with a US firm because it has a domestic mailing address, but sometimes that address is just a marketing office for a company that is based offshore; other firms are technically headquartered in the US but do all or most of their work in offshore facilities."

It added that while foreign IT contractors were aggressively poised to capture more State Government work, the State policymakers were not well-positioned to respond, "as they often lack the most basic information necessary to determine who is actually doing contracted work and where".

It argued that the States needed to pay more careful attention to offshore outsourcing.

"At the very least, States should follow the lead of Minnesota and Missouri in creating requirements for contractors to disclose where they plan to perform the work. Such disclosure should apply to existing as well as future contracts, so that State officials can do meaningful audits of current work."

It suggested that States require contract bidders to certify where the work on a project will be performed, require all contract bidders to disclose the name and headquarters of their parent company, and create a comprehensive centralised database of contract awards by all State agencies.

"Once in possession of this information, State officials will be able to see the full extent to which offshoring is contributing to the export of jobs, which may prompt more States to follow in the footsteps of Arizona in prohibiting the practice."