Senate approves restrictions on offshore outsourcing
By Amelia Gruber < >

By a wide margin, the Senate on Thursday approved a measure that would prevent most civilian federal agencies from outsourcing jobs to contractors working outside the United States.

The measure, introduced by Sen. Christopher Dodd, D-Conn., as an amendment to a corporate tax bill, also would prohibit agencies from procuring goods or services from companies that send work abroad, with some exceptions. Senators endorsed the bipartisan amendment by a vote of 70 to 26.

Under language in the fiscal 2004 omnibus spending package passed in late January, contractors winning public-private job competitions must work within the U.S. unless federal employees previously performed the jobs overseas. The language, offered originally by Sens. Craig Thomas, R-Wyo., and George Voinovich, R-Ohio, applies only to job competitions conducted using 2004 appropriations.

Dodd's measure is more expansive, and, consequently, more worrisome to industry groups. First, the provision is not tied to 2004 spending, and it would apply indefinitely. And it applies not only to work awarded through job competitions, but also to procurements.

In a last-minute deal, the senators made exceptions for the Defense and Homeland Security departments, as well as intelligence agencies and security programs at the Energy Department. The amendment also allows agency heads to make exceptions for some security-related purchases and for items or services only produced or available outside of the country.

"Taxpayers' hard-earned money shouldn't be used to bankroll the loss of taxpayers' jobs to overseas workers," Dodd said following the passage of his amendment. "American workers are the best workers in the world, and by investing in them, we invest in our nation's future." The measure is a "significant step forward in the right direction," he added.

But Alan Chvotkin, senior vice president and counsel at the Professional Services Council, an Arlington, Va. - based contractors association, said Dodd's amendment takes "multiple steps in the wrong direction." The measure would perpetuate and expand what he termed the already flawed Thomas-Voinovich omnibus bill provision.

Lawmakers did not spend enough time considering the implications of such a measure, Chvotkin said. The senators introduced an amendment "before knowing there is a problem" with government jobs lost through off-shore contracting, he argued.

Statistics on the extent of federal work handed to off-shore contractors through job competitions or procurements are scarce. For instance, the Defense Department, which has a longer history of holding job competitions than other federal agencies, does not keep track of contracts awarded to companies who move the work off-shore.

In addition, the senators did not spend enough time thinking through the types of procurements that should be exempt from the new rules, Chvotkin said. "There are implications for the homeland security, national defense and intelligence communities, and others [the senators] haven't thought of," he argued. Lawmakers should not introduce such expansive measures without first holding hearings and allowing time for further debate, he said.

The Information Technology Association of America, which has more than 400 members, also is concerned about

Dodd's measure. ITAA President Harris Miller said he worries that foreign governments may place reciprocal restrictions on the use of American technology. "Trying to protect unclassified government business from overseas competition is a step that is sure to backfire," he said.

In addition, the provision will allow agencies fewer choices for technology purchases, preventing them from obtaining the best deals, Miller said. "Such restrictions raise the cost of doing business at the very time that the federal government is running record deficits."

The American Federation of Government Employees hailed Dodd's amendment. John Threlkeld, a lobbyist for the union, said he was "pleased that Congress is determined to impose another restriction on the wasteful, job-killing public policy obscenity otherwise known as federal outsourcing."

Bush administration officials have yet to form an opinion of the amendment, said Office of Management and Budget spokesman J.T. Young. "I don't think the implications of what [the measure] will do are fully clear at this stage," he said. But he noted that the administration will oppose "anything that would limit or curtail" agencies' ability to obtain the "best value" in job competitions.

Martin Vaughan and Susan Davis of