Labor group: States, unknowingly, offshore millions

U.S. state governments are granting public contracts to foreign outsourcing firms and funneling millions of state taxpayer dollars offshore, in many cases without being aware of it, according to a study released Wednesday by the Washington Alliance of Technology Workers (WashTech) in Seattle.

However, at least one of Indian contractors named in the study questions its accuracy.

The study found that state governments are often unaware that they are sending work abroad, and in some cases, states assume they are dealing with a domestic company because a U.S. mailing address is used. Offshore vendors typically use such addresses for sales and marketing purposes, while the contract work is performed offshore.

In other instances, U.S. companies that have been awarded contracts have in turn outsourced the work overseas, without the knowledge of the states involved, according to the report, which tracked projects awarded by a departments in a number of U.S. states.

The Department of Revenue in Georgia, for example, awarded a $638,000 contract to an Indian company last year, but did not know where the work was being executed, according to the report.

The report ” Your tax dollars at work…Offshore” was prepared for WashTech by the Corporate Research Project of Good Jobs First, a research firm in Washington, D.C.

“It is important for states to know where the work they have contracted is being performed, and many states have no idea that this work is sent offshore,” said Philip Mattera, director of the Corporate Research Project of Good Jobs First, a Washington, D.C., research group.

The research firm found that 18 offshore outsourcing firms, including Indian and Russian firms, are aggressively seeking state government contract work — primarily in information technology — in at least 30 states. The 18 firms have currently captured about $75 million in state contracts and are seeking more, in part by hiring former government officials and by making state electoral campaign contributions, the report said.

That figure does not completely tally every offshore outsourcing company working on state contracts, according to Marcus Courtney, president of WashTech. “That is the amount we could say with certainty that is going offshore, but we know it is much higher,” added Courtney. “For example IBM and EDS have large offshore facilities in locations such as India that do state work. But because state governments don’t ask where the work is getting done, it is impossible to determine that.”

Government is supposed to act in its peoples’ best interest, and not imitate for-profit organizations’ cost-cutting practices, the report said. The report recommends that states require all contract bidders certify where the work or project will be performed and disclose their parent company’s name and headquarters.

The report’s release is timed to influence offshoring discussions at the National Governors Association meeting that begins Friday in Seattle.

However, Wipro, which was named in the report, has not executed any federal or state government work, either directly or as a subcontractor, according to Sudip Banerjee, president for enterprise solutions in the Wipro Technologies division of Bangalore, India-based Wipro.

“We have stayed out of the U.S. government market because it can be time-consuming to get business from that market,” Banerjee said.

Other contractors named in the study declined to comment or said they were reviewing it. Several other leading Indian outsourcing companies were mentioned in the study, including Infosys Technologies in Bangalore and Tata Consultancy Services in Mumbai.