Off-shoring, outsourcing and competive sourcing:

By Sen. Craig Thomas (R-Wyo.)

In the charged political climate of this election year, the issue of off-shoring and outsourcing has taken on a political life of its own in the last couple of months. As American companies look for ways to stay competitive in the global economy, many have turned to moving certain parts of their operations overseas. This has proved to be a powerful talking point in describing a growing economy and the pace of job growth.

This phenomenon of “off-shoring” presents a set of problems that certainly should be studied in greater detail and dealt with properly. We are all concerned with the trend of sending good-paying American jobs overseas. Unfortunately, the term “off-shoring” has increasingly been used interchangeably with the term “outsourcing.”

In the pursuit of an election-year slogan, the debate has become muddled. This is not a good way to identify the best solutions to the problem.

When a company chooses to “outsource,” it does not necessarily mean those jobs go overseas. American companies may outsource to other American companies. The federal government may outsource positions to the American private sector. In short, outsourcing is different from off-shoring, and efforts to claim they are the same are misleading and counterproductive.

Adding to the mix, “outsourcing” and “privatization” are also being used interchangeably and increasingly as ways of describing President Bush’s Competitive Sourcing Initiative in managing the federal bureaucracy. “Competitive sourcing” is a useful tool that allows federal agencies to evaluate whether or not commercial functions should be performed in the future by federal employees or the private sector.

When we talk about competitive sourcing in the federal government, we are not talking about outsourcing, off-shoring or privatization. These are four different terms that mean different things. In these days of tight federal budgets, competitive sourcing provides an extremely useful tool to make more efficient use of taxpayer dollars. It is an attempt to identify what federal employees can do best and what the American private sector can do better. And, it is good government.

As numerous independent reports to Congress have shown, competitive sourcing saves taxpayers between 10 to 40 percent — regardless of who wins. In fact, in 2003, federal employees won 89 percent of the federal jobs that were subjected to competition. Clearly, the American taxpayer is the real winner in this process. And, with more than half of the federal work force eligible for retirement in the next five to seven years, we need to perform sourcing reviews to ensure the continuity of important government programs.

Unfortunately, there are those who do not want to see a decrease in the size of government and believe that more private-sector activities should be done by the government. I expect we will be having several more of these debates in the coming months, and opponents of the president’s management agenda will indeed try to link them to the debate about off-shoring.

As I have stated, competitive sourcing is not about off-shoring. Not one federal employee has lost a job to overseas competition. I am unaware of a single example of a federal competition won by the private sector that was then sent off shore to another country.

In fact, it is already illegal to send federal contract work off-shore without the government’s prior knowledge. The Truth in Negotiations Act and False Claims Act outlaw that practice.

There are “place of performance” and Service Contract Act wage-rate requirements on most federal contracts that also restrict sending the work off-shore. In last year’s omnibus bill, I included an amendment to clarify and strengthen those provisions.

The off-shoring issue in the competitive sourcing debate has been taken off the table, and should remain there. As we continue to discuss the problem of off-shoring, it is important that we draw distinctions between the terms and not further confuse the debate.

Thomas has supported competitive sourcing during his time in Congress.

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Government urged to promote outsourcing

IT suppliers and customers are calling on the government to promote the benefits of outsourcing to employees, in order to help UK outsourcing companies better compete with their overseas rivals.

Supplier and customer body the National Outsourcing Association (NOA) said that changes to employee-related legislation are needed to address widespread concerns from staff about the implications of being transferred to an outsourcing supplier.

NOA chairman Nigel Roxburgh told vnunet.com that embracing the trend towards outsourcing, rather than introducing protectionist measures, would be key to a thriving UK economy.

"The government needs to be aware of the potential of outsourcing for the UK economy. We should see this as a trend rather than being the machine breakers of the knowledge economy," he said.

The call comes as banking giant HSBC Holdings announced plans to move 4,000 call centre and back-office processing jobs to India, Malaysia and China over the next two and a half years.

HSBC will close five back-office processing centres around the country by the end of 2005, enraging unions which have pledged to fight the plans.

Employee concerns, and the emotional reaction provoked by outsourcing, have tainted the industry's reputation.

Roxburgh believes that extending TUPE, the legislation to protect employees' rights when a business is sold or merged, to include pension rights would go some way to addressing fears.

The knock-on effect would be to bolster support for, and investments in, outsourcing.

"We would be better at this if we had a tight, regulatory environment and less fear about being displaced by an outsourcer," said Roxburgh.

"Constant learning, re-skilling and redeployment also need to be priorities for the UK government. Having strong outsourcing companies will bring employment back to the UK."

But Lee Whitehill, a spokesman for union Amicus MSF, said: "We have to move the UK into an ideas economy, and training and education definitely have a role to play.

"But I don't think anyone in their right mind would say that encouraging outsourcing, which has led to the loss of 4,000 jobs at HSBC, can be good for the UK economy."

The union has called on the government to set up an independent commission to examine the likely effects on the economy and levels of unemployment.

Analysts and consultants predict that 200,000 UK jobs are likely to be lost to offshore firms as the trend towards outsourcing gathers pace.

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