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US contractors could be banned from outsourcing

Two lawmakers in Seattle have announced they will bring legislation to ban outsourcing.

business Updated: Feb 14, 2004 16:53 IST

Furious about Washington state contractors shipping tech jobs to India and other countries, two lawmakers in Seattle have announced they will bring legislation to ban outsourcing.

Rep Zack Hudgins, a Democrat from Tukwila and a former Amazon.com employee, and Rep Sandra Romero, a Democrat from Olympia, said they will introduce legislation this month to prevent state government contracts from being awarded to companies that send jobs to India, which is becoming a forerunner for back-end office support.

What provoked the politicians is that the Washington state Department of Corrections is negotiating with a company to send part of the agency's $20 million Offender Management Network Information system to India.

Besides this, in the past two years the Washington State Health Care Authority and the state Department of Social and Health Services have signed contracts with US companies that then hire Indian subcontractors to do the work.

"I think it is terrible, it is just that simple," Hudgins was quoted as saying by the Seattle Post-Intelligence Reporter.

"We are trying to create jobs in the state and at the same time we go to the lowest bidder (on state contracts) and they take the jobs overseas," he added.

Politicians in at least eight states this year are slated to vote on bills that aim at banning foreign workers from public contracts. These include Connecticut, Florida, Indiana, Maryland, Michigan, New Jersey, North Carolina and Washington, according to the Seattle labour organisation WashTech.

More than 300,000 US jobs are expected to be outsourced overseas by 2005, says a BusinessWeek report.

According to Roy Lum, deputy director of the Washington state Department of Information Services, which oversees the largest technology projects in the state, some government work is occurring offshore.

But he said there was no state policy that banned such a practice.

That's exactly what happened at the Health Care Authority, which provides access to healthcare for more than 500,000 residents in the state.

In mid 2000, the Health Care Authority was looking for a vendor to help replace two old insurance eligibility and accounting computer systems.

The agency finally signed a $3 million contract with Healthaxis -- an Irving, Texas-based company. Healthaxis outbid PeopleSoft, Oracle/Physmark and Deloitte & Touche by submitting an offer that was a third of the cost of its competitors. It did this by including a plan to outsource much of the work to Satyam Computer Services in India.

Currently there are 40 Satyam employees working on the project, with 34 of them based in India and six in the US. Seven more employees from Healthaxis are working on the project, according to the Health Care Authority.

Michelle George, a spokeswoman for the Health Care Authority, said the legislature allocated $3.6 million for the project. That was $1.3 million less than they requested.

"Any computer company could have bid to do the job and we did have bidders but we found that the rest of them were way over our price that we had from the legislature," George was quoted as saying.

"We found a contract that could meet the amount of money that we had to spend on this and that's who we chose."

George questioned whether the legislation drafted by Hudgins and Romero would be enacted given the budgetary constraints facing the state government.

"Would that legislation be tied back to more funding? Some of these other (US) contractors were over $8 million," she said.

The Health Care Authority is not the only state agency whose work is being shipped overseas.

About 18 months ago, the Department of Social and Health Services (DSHS) received word from Chicago-based Citicorp Electronic Funds that it was moving the agency's call centre functions to a subcontractor with operations in Pune, Bangalore and Tijuana (Mexico).

First Published: Feb 14, 2004 16:53 IST