Offshore outsourcing draws fire from Hill

'My sense is, not a lot' of federal IT work is being outsourced offshore.

'GSA's David Drabkin

Lawmakers are grumbling about the practice of moving government IT work across U.S. borders to offshore providers'even if there are significant cost savings.

Because agencies don't track where every software product was developed, they have few statistics about how much the federal government relies on overseas IT.

'My sense is, not a lot,' said David Drabkin, deputy associate administrator for acquisition policy at the General Services Administration.

But one government analyst said he believes the demand for specific skills and low costs might result in more foreign detours than anyone realizes.

Vendors 'build into their cost models that programming work will be done in India or Singapore,' said John Kost, managing vice president for government research at Gartner Inc. of Stamford, Conn.

The loss of U.S. high-tech jobs has pushed politicians to protest transferring federal work and money to foreign hands, he said, but that's not necessarily cause for alarm.

Offshore outsourcing became a trend during the dot-com era, and when the economy recovers, Kost predicted, the issue will be forgotten.

'Why would a programmer in India be less secure than an Indian programmer in the United States?' Kost asked. 'It's xenophobic thinking.'

At the Treasury Department, all outsourcing contracts, whether domestic or offshore, must conform to departmental security edicts.

'We just have to make sure our requirements are clear,' Treasury CIO Drew Ladner said. 'The process is not as demanding for hardware. Software is different.'

Rep. Ike Skelton (D-Miss.) and, separately, Washington state Democrats Adam Smith and Jay Inslee have asked the General Accounting Office to study the issue.

'We're planning to start shortly,' said Linda Lambert, assistant director of GAO's IT team. 'We will be working with the three requestors to reach agreement on specific objectives.'

Smith and Inslee want GAO to research the trend, point out pros and cons, find existing policies, explain how offshore outsourcing fits into global trade guidelines and, based on those findings, recommend a policy that balances payoff with risk.

'I want more data and less speculation,' Smith said. 'A protectionist approach makes me nervous. I don't want to cut off competitive companies that make us better.'

But some of his colleagues believe those companies are taking American jobs and possibly building back-door access into software.

The Berry Amendment in the House version of the fiscal 2004 Defense authorization bill and a revision of the Buy American Act would require the Defense Department to buy military-ready goods entirely manufactured in the United States.

And legislation is cropping up below the federal level, too. Lawmakers in six states have introduced bills this year that would require agencies to dole out contract work only to American citizens. Four states have considered bills giving preference to local companies. In Maryland, the General Assembly has asked for a study of the offshore outsourcing movement.

State concerns

George Newstrom, secretary of technology for Virginia, said state lawmakers 'may introduce legislation to prohibit or reduce offshore outsourcing. We have political leaders with great angst over this.'

When some New Jersey welfare recipients phoned their Human Services Department and reached a call center in India, a state senator introduced a bill demanding American citizenship for state contract workers. The call center returned to New Jersey at an additional $1.2 million cost.

In February, U.S. Rep. Lane Evans (D-Ill.) criticized the Veterans Affairs Department for outsourcing 125 property management jobs to Ocwen Federal Bank of West Palm Beach, Fla., which had often outsourced work to India.

'The OMB Circular A-76 process should not be a tool to make government employees obsolete and replace American jobs with low-paid foreign workers,' Evans wrote in a letter opposing the contract. The Ocwen bank has since emphasized that the VA work won't leave U.S. shores.

GSA's Drabkin noted that U.S. officials must abide by global trade agreements, which make full-scale prohibition of offshore outsourcing unlikely.

'We as a country have an obligation under our trade treaties,' Drabkin said. 'If another country did that to us, we'd react badly.'

Some critics say any such legislation will hike prices and lower efficiency of federal IT services.

'The reality is that components come from all over the world,' said Harris N. Miller, president of the IT Association of America of Arlington, Va. 'You're talking about PCs suddenly costing $5,000 rather than $500 because you need to establish a manufacturing facility for one customer. That's bad for policy. That's bad for defense.'

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