Date: Tue, 3 Feb 2004 17:36:28 -0800 From: Norm Matloff To: Norm Matloff Subject: latest on Drozda bill To: H-1B/L-1/offshoring e-newsletter A reader forwarded me the following message which he said he received today from Sen. Jeff Drozda of the Indiana state legislature: I'm assuming you know that Indiana's Anti-Outsourcing Legislation SB 4 passed the Senate yesterday 38-10. Jeff Drozda The reader was ecstatic, but I am not. The bill, if enacted, would prevent Indiana government work from going offshore, but apparently would NOT prevent H-1Bs and L-1s from being imported to do government work in Indiana. Some of you will react to this comment of mine by saying that the main issue was offshoring, not H-1B/L-1. Well, that's not really true. The Indiana government project awarded to the Indian software giant Tata Consultancy Services--the contract which started this whole controversy last year--never was mainly about offshoring. That contract, according to news reports, would mainly employ H-1Bs/L-1s in Indiana, rather than ship the work offshore. From TCS' point of view, it will be business as usual under this new version of the bill. The new version of the bill is available at http://www.in.gov/legislative/bills/2004/PDF/SB/SB0004.2.pdf It requires that government work be done only by those eligible to work in the U.S. under 8 USC 1324a. I believe that statute encompasses BOTH U.S. citizens and permanent residents, AND holders of H-1B and L-1 visas. This of course was the intent of the statute, whose purpose was to penalize employers who hired illegal aliens. H-1Bs and L-1s do have I-9 forms filed for them by their employers, and this serves as proof of compliance with the statute. See for example http://www.usdoj.gov/crt/osc/ref/8usc1324a.htm What is especially annoying to me is that I brought this up with Sen. Drozda in December, and he assured me that the bill would reserve these jobs for Americans (i.e. U.S. citizens and permanent residents). See my posting of Dec. 23 below. As you can see, my concerns at that time were right on the mark. Drozda's original intention was to stipulate that no more than 20% of the workers on any given state contract can be non-Americans. At the time, many tech worker activists were upset, saying only 0% was acceptable, but I stated then that I consider it a good, workable compromise. Sadly, what has happened now is that the figure will be 100%, just as I had feared. Granted, there is some symbolic significance in the bill passing the Indiana Senate, even if it is only on offshoring, but it's not going to help the American programmers and engineers in Indiana one bit. Norm Date: Tue, 23 Dec 2003 13:54:16 -0800 From: Norm Matloff To: Norm Matloff Subject: update on Drozda bill To: H-1B/L-1/offshoring e-newsletter Recall that Senator Jeff Drozda of the Indiana state legislature has a bill designed to ensure that workers on state contracts will be Americans, i.e. U.S. citizens or permanent residents. This was prompted by the awarding of a $15 million state contract to Tata which would employ mainly H-1B/L-1 programmers. His bill came under heavy attack, first from Indian lobbyists and later from farm interests, apparently after Indian interests indicated that an Indiana ban on Indian programmers might be responded by a ban on an Indian ban on Indiana farm exports. The current language of the bill is quite vague. Here is a summary from the legislature's Web page, http://www.IN.gov/apps/lsa/session/billwatch/ (plug in "4" where it says, "Go to Bill"): DIGEST OF INTRODUCED BILL Award of state contracts. Provides that a contract for services entered into by a state agency must specify that only citizens of the United States and individuals authorized to work in the United States may be employed in the performance of services under the contract or any subcontract. The problem lies in the language, "individuals authorized to work in the U.S." Does this mean U.S. permanent residents (i.e. green card holders)? That would be fine and appropriate. Or does it include H-1B/L-1? They are authorized to work in the U.S., albeit only for a specific employer. If they qualify under the wording of the bill, then the bill would be useless. I asked Sen. Drozda if he could give me a quote for my e-newsletter to clarify this. He replied, Senate Bill 4 is scheduled for a second hearing and possible vote on January 5th, 2004. There will be language offered as amendments to the bill at that time. The new language, which has bipartisan support, will work to promote those in the United States who pay taxes if they want to bid on Indiana state government contracts. Our goal is to promote Indiana and US workers who are fighting for their jobs. We need to do more to protect and support US workers who just want to raise and support their families. Unfortunately, this was even murkier. Does it mean that the only criterion for bidding would be paying taxes? Tata does have its American subsidiary, TCS America, and that controversial $15 million contract did go through the subsidiary, which presumably pays taxes. The senator is quoted in the article below as saying that the subsidiary does not pay taxes, but even if it does, that taxpaying clause would not help American programmers in Indiana one bit. I again asked Sen. Drozda for clarification, and he said that this would emerge after the hearing. In my correspondence with Sen. Drozda, he has always come across as very sincere and genuinely interested in putting a stop to these outrages, so I look forward to the outcome of the hearing. I'm enclosing several articles on this topic below which I have not posted earlier. There are some interesting tidbits here and there, such as: * though that $15 million contract is being awarded by the State of Indiana, the money came to the state from the federal government as part of a program to--get this--increase high-tech employment for Hoosiers * the contract would employ up to 65 Indians but only 18 Americans * Tata considers prevailing wage for programmers to be only $36,000 per year! * the state government originally said the contract was "legally binding," but after the furor it magically noticed that the contract contained a "convenience clause" which allowed it to cancel Norm http://news.indiainfo.com/2003/12/02/02outsourcing.html Indiana lawmakers oppose anti-outsourcing Bill Tuesday, December 2 2003 17:37 Hrs (IST) New York: Amidst the mounting backlash against outsourcing in the United States, lawmakers in Indiana State opposed a Bill to ban non-US citizens from doing Government contract works, as they felt the law would affect overseas investment prospects. The Bill was introduced after Governor Joe Kernan cancelled a $ 15 million outsourcing contract won by an American subsidiary of Tata Consultancy Services (TCS) for upgrading the computer system of a State agency. During a debate yesterday (Dec 1, 2003), a majority of lawmakers, both Republicans and Democrats, on the Senate's panel on technology and economic development, opposed the Bill as they felt it goes too far and could have unintended consequences as the State seeks overseas investments. They are now trying to "limit the scope" of the Bill and find "better ways" to help State companies to win contracts for Government. "In it's current condition, I think it's pretty dead," Senator Vi Simpson, a Democrat and a member of the panel, was quoted by 'Indianapolis Star' as saying. In the hope of reviving the Bill later, the Senate panel's chairman David Ford did not seek a vote. He said a modified Bill could be debated in January after the General Assembly begins its 2004 session, the report said. The Bill's author, Senator Jeff Drozda, said he filed it because he opposes Indiana spending public money to create jobs for low-paid workers from other countries. Drozda criticized the $ 15.2 million contract State officials signed in August with Tatas to upgrade State computers used to process unemployment claims. TCS America won the Department of Workforce Development contract after its proposal came in $ 8.1 million lower than the next-most-competitive bid. Tatas had said they would hire local subcontractors and do some local recruiting, but most workers would be Indians. "This is a real significant issue for American workers," Drozda told the committee, adding, "These companies don't pay taxes. It doesn't help our economy one bit." Several panel members suggested limiting the scope of the Bill or finding a better way to help Indiana companies compete for State work. Kernan's deputy chief of staff, Tom McKenna, said Drozda's concerns could be taken care of through changes in the State's contracting procedures. PTI http://www.indystar.com/print/articles/0/078950-2810-009.html State job agency hires India firm No Indiana company sought the contract to upgrade computers for Workforce office Where the money goes Here's how the state is planning to allocate the $39.3 million in federal money: o Computer reprogramming: $15.2 million o New computers, software: $11.2 million o Maintenance, licensing fees: $7.4 million o Project support: $3.1 million o Worker training: $711,400 o Remodeling work: $270,000 o Unallocated money: $1.4 million Source: Department of Workforce Development Here's what agency's upgrade will accomplish The Department of Workforce Development, which processes more than 270,000 jobless claims a year, is moving from an outdated Cobol-based mainframe installed in 1989 to a Java-based, server system that should last a dozen years. It will be the first system in the country that allows employers and jobless people to do business with the agency via the Internet 24 hours a day, state officials say. For instance, workers could file initial claims online and track their payments. A state study indicates this could save employers $36.4 million a year in postage and other costs and speed delivery of unemployment checks. The new system also could help detect fraud and prevent overpayments. By Kevin Corcoran September 29, 2003 The Department of Workforce Development is supposed to help out-of-work Hoosiers find jobs. But when the agency needed $15.2 million worth of computer upgrades to speed handling of unemployment claims, it hired a company based in India. State officials acknowledge that hiring an overseas firm that competes with U.S. companies has raised concerns, especially given their legal responsibility to put Indiana workers first. But they say the contract will save taxpayers millions of dollars -- and insist those savings won't come at the expense of jobs in Indiana. "We wanted someone that would give us good value for the price," said Alan Degner, the state's work force development commissioner. "They are committed to paying U.S. market wages." Computer programmers with Tata America International Corp., the New York subsidiary of a Bombay firm, are scheduled to begin work Oct. 28 on the four-year project. Top aides to the late Gov. Frank O'Bannon gave their go-ahead to the politically sensitive deal before his death Sept. 13. The project will be paid for entirely with federal money tied to Energize Indiana, a 10-year economic development plan the General Assembly passed portions of this year. In 2002, Indiana paid $872.7 million in benefits to 272,554 jobless Hoosiers. This computer overhaul should speed claims processing, as well as save postage and reduce hassles for businesses that pay unemployment taxes, state officials say. In the United States, Tata operates as TCS America. The firm won the state contract over two U.S.-based companies -- Accenture LLP and Deloitte Consulting LP -- with a proposal that came in $8.1 million to $23.3 million lower. Tata's proposal also was better, according to state officials' subjective ratings of the various proposals. No Indiana-based companies submitted proposals. During the project, as many as 65 contract employees will work alongside 18 state workers. Such contracting has been common for years among major firms, including Columbus-based Cummins Co., Indianapolis-based Eli Lilly and Co. and Fishers-based Sallie Mae, which do business with Tata. But concerns among U.S. software programmers are growing as more cash-strapped state and local governments sign contracts with off-shore companies, according to Information Week, which tracks software industry trends. Overseas firms offer high-quality work at much lower costs than U.S.-based companies, often by paying workers 75 percent less, the publication says. Under the state contract, all work will be done at the Indiana Government Center, but Tata is free to bring in workers from India and elsewhere and pay them as it sees fit. Company officials say they will do local recruiting, but the vast majority of workers will come from India on L-1 visas -- which do not require paying comparable U.S. wages. Some also will be here on H-1B visas for workers in specialty occupations; these visas do require paying comparable U.S. wages and certifying the workers' presence won't eliminate U.S. jobs. Although it's not required, Tata will pay the U.S. Department of Labor's "prevailing wage" for each type of worker on the project, said Jayanta Banerjee, the company's Indianapolis project manager. For instance, a programmer analyst would be paid at least $36,733 a year. Tata also has hired two minority-owned firms -- Bucher & Christian Consulting of Indianapolis and Troy, Mich.-based Nexor Technologies Inc. -- to do at least 5 percent of the work. As word of the contract seeped out after it was signed in August, Degner's phone "rang off the hook for a while." But he said most critics were satisfied after he explained the state's reasoning. New Mexico officials caught flak for hiring Tata in May 2001 to overhaul its unemployment claims system, but the company does superior work at low cost, said Alex Georgieff, a deputy director with the New Mexico Department of Labor. "They have an enormous amount of technical breadth and depth," Georgieff said. "We've been very satisfied," he said. The $6 million software overhaul, involving 25 Tata employees working in Albuquerque and 80 in India, will be done within six weeks. Unlike what company officials say will happen in Indiana, Tata paid workers who went to New Mexico on visas the same lower wages as its workers in India, plus a living allowance. Tata also does business with Pennsylvania and Montana. Overall, says the leader of TechPoint, a nonprofit Indiana technology trade group, taxpayers should be pleased with the deal state officials cut. "This is just a growing trend in globalization," said Cameron Carter, TechPoint's interim president and chief executive. "The lines on the map don't count for a lot when it comes to getting the best deal." Star reporter Michele McNeil Solida contributed to this story. Call Star reporter Kevin Corcoran at 1-317-444-2770. http://www.courier-journal.com/localnews/2003/10/20in/met-front-india1020-5398.html Monday, October 20, 2003 Overseas contract to be kept Jobless agency refuses to drop Indian company _________________________________________________________________ By KEVIN CORCORAN The Indianapolis Star About Top Jobs INDIANAPOLIS -- The state agency that helps out-of-work Hoosiers find jobs won't reverse its controversial decision to have an overseas firm upgrade the computers that process unemployment claims. State officials say they cannot legally honor a request from state Sen. Jeff Drozda, R-Westfield, to cancel the $15.2million deal. "It's a binding agreement," said Alan Degner, commissioner of the Department of Workforce Development. Tata America International Corp., the New York subsidiary of a firm in Bombay, India, is scheduled to begin work Oct. 28 on the four-year project. State officials say they got a lot of letters and calls complaining about the contract after The Indianapolis Star disclosed it Sept. 29. They're hearing from people like Skip Miller of Indianapolis, who suggested: "Maybe we should start looking overseas for our political leaders." When the General Assembly reconvenes in January, Drozda said, he will pursue passage of a bill that would ban businesses from using foreign workers to do state work. Officials acknowledge that hiring a company that competes with U.S. businesses might appear to run counter to their legal responsibility to put Indiana workers first. But they say the contract will save taxpayers millions of dollars -- and insist the savings won't come at the expense of jobs in Indiana. Drozda said he was upset to learn that federal tax money meant to help unemployed Indiana workers will be spent this way. The computer overhaul was approved in Energize Indiana, a 10-year plan -- parts of which the legislature passed this year -- to create 200,000 high-tech, high-wage jobs. "It was my understanding that Energize Indiana was established to create high-paying, high-tech jobs in Indiana, not India," Drozda wrote in a letter sent Thursday to Degner and news outlets. In the United States, Tata operates as TCS America. The company's public-relations firm released the following statement: "TCS certainly understands Senator Jeff Drozda's concerns regarding jobs in Indiana. This is a matter between Indiana officials. No Indiana company bid on the proposal, and the other two finalists both have significant facilities in India. No jobs will be lost as a result of this project." Indiana paid $872.7 million in benefits to 272,554 jobless Hoosiers last year. State officials say the computer overhaul should speed the processing of those claims, save postage and reduce hassles for businesses that pay unemployment taxes. During the project, as many as 65 contract employees will work in the Indiana Government Center alongside 18 state workers. Tata has said it will hire local subcontractors and do some local recruiting, but most workers will come from India. It's not the first work Tata has done for state government. The company helped overhaul the Bureau of Motor Vehicles' computer system a few years ago, and officials were pleased with the results. The state's Division of Information Technology has Tata on a list of 56 vendors prequalified to work on state and local computer projects that don't exceed $250,000. Tata won the Workforce Development contract through a separate competitive process over two U.S.-based companies -- Accenture LLP and Deloitte Consulting LP. Tata's proposal came in $8.1 million to $23.3 million lower, and state officials say it was best-suited to their needs. Connecticut-based Deloitte employs 160 Indiana residents and has done similar work in four states, said Paul Dunker, a manager and spokesman for that company. Deloitte sends some work to overseas programmers. But Dunker said the company is "extra-cautious" about proposing the use of foreign labor for government projects and proposed using none for the Workforce Development project. Although it's not required by the state contract, Tata officials say they will pay the U.S. Department of Labor's prevailing wage for each type of worker. For instance, the company said, a programmer analyst would be paid at least $36,733 a year. But critics of the contract have noted the same federal data show experienced software engineers and programmers in Indianapolis command $65,187 to $76,274 a year. http://www.hindustantimes.com/news/181_467764,0003.htm HindustanTimes.com UK Edition Tuesday, November 25, 2003 US state cancels $15.2 mn outsourcing contract with Indian firm Vasantha Arora (Indo-Asian News Service) Washington, November 21 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. 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. http://www.hindustantimes.com/news/181_480254,0003.htm Indiana lawmakers oppose anti-outsourcing bill S Rajagopalan Washington, December 2 In a blow to the ongoing campaign to keep foreign workers (read Indians) out of American state contract jobs, an Indiana Senate panel has refused to support a sweeping Bill to limit these jobs to US citizens. The opposition to the measure was so strong and unexpected that the Bill's sponsors beat a hasty retreat and decided to come up with a modified proposal rather than risk certain defeat. At a special hearing on Monday, the majority of lawmakers on the state's Senate Committee on Economic Development and Technology concluded that the Bill was excessive and could have unintended consequences. They felt its passage would send a wrong message at a time when Indiana seeks to attract investment. "In its current condition, I think it's pretty dead," Democratic Senator Vi Simpson told the Indianapolis Star while commenting on the status of the Bill brought up by Republican Senator Jeff Drozda. The Indiana decision against a blanket ban on foreign workers in state contract jobs is regarded as important in the context of pending legislative moves in several American states against outsourcing of similar jobs. In line with the majority opinion at the Monday hearing, Drozda is expected to come up with a modified Bill in January. It is, however, unclear if the Senate panel's deliberations hold out any fresh hope for Tata Consultancy Services (TCS), whose $15.2 million contract was recently cancelled by Indiana Governor Joe Kernan. Kernan took the stand that the terms had been designed in such a way as to keep Indiana companies out. At the hearing, two Indianapolis consultants claimed that they could handle a contract of the type awarded to TCS "if given time to join forces with other companies". The Indiana authorities are still to spell out how they propose to award the work of upgrading the state computers network to process unemployment claims. It remains to be seen if TCS submits a fresh bid. A senior state official is on record that TCS will not be excluded when new proposals are invited in the coming months. The contract was cancelled in the face of a campaign that TCS had undercut American companies, thanks to its planned import of 65 low-paid Indian programmers to execute the project alongside just 18 Indiana employees.