Offshore storm

States get tangled in contractor's outsourcing moves

After a Salt Lake City newspaper last month revealed that customer service calls for a state-run unemployment program were being answered in India, Utah citizens began phoning government offices throughout the state.

Michael Sullivan, a spokesman for the Utah Department of Workforce Services, said callers generally asked the same question: "Why are we sending the jobs overseas?"

Utah officials got the message. Nine days after the story broke, the department asked eFunds Inc., the government contractor that moved the call center offshore, to consider ways to bring the jobs back to the United States.

Utah's experience typifies that of a number of states thrust into the national spotlight when citizens discovered that government contractors were moving technology and related support services offshore.

Scottsdale, Ariz.-based eFunds, which specializes in managing electronic payments, has been caught up in the offshore-job controversy in at least two other states. Last year, New Jersey asked eFunds to bring back nine full-time customer service jobs the company had moved to a call center in India. The extra cost for establishing the call center in New Jersey is $886,000 annually.

Oregon also is debating whether to have eFunds bring back similar work to the United States.

"It's clear there is a national trend," said state Rep. David Clark, chairman of the Utah Technology Commission, regarding the public outcry against taking offshore jobs that are performed by government contractors. "It is reaching down to states and to individual departments."

With joblessness a hot topic, governors and state lawmakers alike are having trouble defending contractors that relocate work offshore. Many are scrambling to craft policy and pass legislation that limits or prevents contractors from taking government-funded jobs offshore.

The number of states considering legislation that would ban offshore outsourcing on government contracts has nearly tripled to 31 since the beginning of the year, according to the Denver-based National Conference of State Legislatures.

Government officials are torn between the benefits of cost savings that can be derived from offshore outsourcing and the need to protect jobs at home, said Justin Marks, policy associate with NCSL's Legislative Information Services.

Emerging technologies have created a new avenue for state agencies to save money by outsourcing state contracts to companies that use inexpensive overseas labor, but the economic downturn and slow rate of job recovery has made this move politically unpalatable.

"Job loss over the past three or four years is staggering, and legislators are searching for ways to help their constituents," Marks said. "Banning state agencies from outsourcing overseas is one of the many ways states are trying to deal with a very difficult problem."  

PUBLIC RELATIONS MESS

In Utah, eFunds provides electronic benefits transfer services to support the Horizon program under a five-year, $7.8 million contract awarded in 2002, Sullivan said. The Horizon card is issued to families that qualify for government assistance, such as food and child care services. The company declined requests for interviews.

Most jobs associated with the eFunds contract, including services and support for accounting, automated response and electronic funds posting, are handled in the United States, Sullivan said. But customer service is provided through one of several of eFunds call centers in India and involves four full-time positions.

The call center work previously was handled through an eFunds call center in Wisconsin. The company moved the work to India because the U.S. workers were not doing a good job, and the positions cost the company too much money, Sullivan said.

The Department of Workforce Services takes the four positions seriously, he said, and March 25 Utah asked eFunds to weigh some alternatives to offshore outsourcing.

One alternative would be to return the work to a call center in the United States, he said. Another would be to have one of the department's call centers handle calls during business hours, and one of eFunds' centers handle them after normal business hours.

Utah's Chief Information Officer Val Oveson declined a request from Washington Technology for an interview. The office of Utah Gov. Olene Walker referred questions to the Department of Workforce Services.

In Oregon, Gov. Ted Kulongoski asked the Department of Human Services to determine how many full-time positions eFunds moved to India. The department hopes to have the answer soon, said Jim Sellers, a department spokesman.

"This is something we didn't choose," Sellers said. "We contracted with our vendor to have good customer service. The vendor decided that it could do a good job, and the price was more attractive in India, so now it's something we must deal with."

If Oregon decides to bring the positions back to the state, it has several options, Sellers said.

Staff at one of eFunds' U.S. call centers, one of the department's other call centers or at another agency call center could handle the work. It could be done by welfare recipients re-entering the job market, or even by Oregon prison inmates getting job training.

Despite the small number of positions involved in the Utah Department of Workforce Services contract, the matter is a problem in a symbolic sense, said Tim Shultz, a policy analyst with Salt Lake City-based Utah Issues, a nonprofit organization focused on poverty issues.

"Government should set the example for the market," Shultz said. "This is as much a public policy question as an economic question."

Utah is not among the 31 states with pending legislation to ban state agencies from using offshore labor. The Utah Technology Commission, an ad hoc committee of lawmakers and top executive branch officials, will address the matter at its next meeting April 22, Clark said.

The commission's goal is to craft a bill that would establish a clear policy on offshore outsourcing by the end of the legislative session and be ready for a vote next January, he said.

In the case of the eFunds call center, the commission will investigate the savings involved in offshore outsourcing, determine whether those savings are being passed back to the state, and assess whether foreign workers are protecting the privacy of Utah citizens.

Clark doesn't fault the Workforce Services Department for outsourcing the contract to eFunds or for allowing the company to move call center support offshore.

"They've done exactly what [the state] asked them to do, which was find an efficient way to solve the problem," he said. "It may not be fair to ask them to change direction in midstream."

Staff writer William Welsh can be reached at wwelsh@postnewsweektech.com.

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