US state cancels contract with Tata group firm

Indiana cancelled a $15.2 mn contract with Tata AIC in what is being seen as a blow to outsourcing jobs to India.

The US state of Indiana has cancelled a $15.2 million contract with an Indian company in what is being seen as a blow to outsourcing jobs to India.

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The firm, Tata America International Corporation, the New York subsidiary of a firm based in Mumbai, had bagged the contract a few months ago to upgrade Indiana state computers processing unemployment claims.

None of the companies based in Indiana were able to bid against the Tata company.

But the contract was cancelled on Thursday when Governor Joe Kernan ordered a state agency that helps the unemployed to get benefits to cancel its order with the Indian company.

Justifying the cancellation of the four-year contract, Kernan said the agency's request for competitive proposals had been designed and advertised in such a way that it "virtually knocked Indiana companies out of the running."

No Indiana firms submitted bids.

"That is not the way I choose to do business," said Kernan, according to a report in the Indianapolis Star newspaper.

Top aides to the then governor, Frank O'Bannon, had signed off on the politically sensitive, four-year contract before his September 13 death. State officials got a number of letters and phone calls complaining about the contract after The Indianapolis Star wrote about it on September 29.

William Walder, a computer programmer from Fort Wayne who's looking for work, hailed Kernan's decision.

"That's excellent. I'm elated," Walder said. "That, hopefully, will open up the doors to Indiana people."

State officials said the computer overhaul, once completed, should speed the processing of unemployment claims, as well as save postage and reduce hassles for businesses that pay unemployment taxes.

Tata America International Corp. won the Department of Workforce Development contract over two US-based companies: Accenture LLP and Deloitte Consulting LP.

Tata's proposal came in $8.1 million lower than the next-most-competitive bid. State officials said, at the time, that it was best suited to their needs.

During the project, as many as 65 contract employees were to work in the Indiana Government Center alongside 18 state workers.

Tata had said it would hire local subcontractors and do some local recruiting, but most workers were to come from India.

Unemployment officials had acknowledged that hiring a firm that competes with US companies might appear to run counter to their legal responsibility to put Indiana workers first. But they argued that the contract would save taxpayers millions of dollars -- and insisted the savings wouldn't come at the expense of jobs in Indiana.

Lt. Gov. Kathy Davis, who leads the state's economic development efforts, said Thursday that the state government needs to do a better job of giving Indiana companies lead time on major projects.

She and Kernan said a new initiative, "Opportunity Indiana," will be launched to ensure the state buys even more goods and services within Indiana.

"As leaders, we have an obligation to build the capacity of our businesses here at home.

"This is in no way saying there's anything wrong with the company, that they have done anything wrong. We're taking another look at the state's procurement practices as a whole" Kernan said, in what was obviously a move against outsourcing jobs to India.

Kernan's decision, made with strong encouragement from several House Democrats, reverses an earlier decision by Alan Degner, the state's workforce development commissioner.

Degner had called the contract "a binding agreement" with Tata America. On Thursday, Degner said a "convenience clause" in the contract allowed the state to cancel it without financial penalty.

In the United States, Tata operates as TCS America. The state is awaiting a bill from TCS for training it has given state workers since October 28.

Degner said company officials were disappointed to get his call Thursday but understood that state officials had a right to end the deal. He said TCS will not be excluded from the work when new proposals are sought in the months ahead.

A spokeswoman for TCS said: "This is a decision for the state of Indiana to make, and TCS will comply."

Senator Jeff Drozda said he still plans to proceed with a December 1 hearing on Senate Bill 4 that would require that contracts for services entered into by a state agency must specify that only US citizens authorised to work in the United States can be hired.