Bill Summary for An Act Relative to Privatizing Contracts

Lead Sponsor: Senator John Hart

Bill Number: SB1420

General Law Affected: Chapter 7. Section 54.

Current Situation:  Right now, Massachusetts taxpayers are losing their jobs in frightening numbers, and our state budget is in dire straits. There has been increased talk of privatizing vital public services. In the recent past the Commonwealth has offshored services for the poor, for teachers, and for state administration, thereby creating jobs in foreign countries, not in Massachusetts. Taxpayer funds can and should serve a double duty: to provide vital services for citizens and to create jobs here at home. This bill ensures that state funds will serve both purposes.

The Problem:
The Massachusetts economy is in a recession, perhaps on the way to a “Depression.” In the most recent recession, the state government sent jobs overseas. For example:
 The Massachusetts Teachers’ Retirement contracted with Tata Infotech of India to provide information management services. Cost: $2.1 million .
 Educator Licensing and Recruitment entered into an information services contract with Deloitte & Touche. Deloitte subcontracted the services to Auriga Inc., based in Russia. Cost: $2 million.
 The Department of Transitional Assistance, which provides food stamps, hired JP Morgan Chase to staff its telephone help centers. JP Morgan subcontracted to MsourceE, an Indian firm. When a food stamp recipient in Massachusetts dialed the help number on their benefits card, the telephone rings in Mumbai, India. Cost: $160,000/month.
 The state Operational Services Division contracted with Tata Infotech of India. Cost: $3 million.

These are just the known examples of the state offshoring public services that occurred during the last recession. Many agencies are unaware of whether or not their private contractors are sending work abroad. We do not want the situation in Massachusetts to continue a national trend. A widely cited study found that, nationally, 3.3 million jobs and $136 billion in wages will move overseas by 2015. While private businesses may resort to “offshoring” their jobs, public funds should support the local economy. In these challenging economic times, we should not solve budget problems by sending jobs overseas.

The Solution:  If a state agency transfers work to a private company that was formerly done by state employees, the Taxpayer Protection Act sets certain standards of quality and competitiveness. This bill expands the Taxpayer Protection Act’s protections by requiring that all of the work under a state contract is performed in the United States. This requirement must go directly into the contract. Contractors who move work overseas, either when the contract is made or at some time in the future, or through a subcontractor, will be liable for violating their contracts.  Even its detractors agree that the Taxpayer Protection Act “has served as a very effective state-jobs protection bill.” By amending the Taxpayer Protection Act, this bill taps into a proven system of enforcement which has served Massachusetts well for years.

What This Bill Does:
 As part of the report already required by the Taxpayer Protection Act, an agency must make a statement that no work under the contract will be done overseas.
 All Taxpayer Protection Act contracts – that is, any contract with a private company to do work traditionally done by state employees – must bind the contractor to keep the work in the United States.
 This bill also applies to re-bids and extensions of Taxpayer Protection Act contracts, and most importantly, to all subcontracts that a contractor might enter. Because the offshore outsourcing that has happened in Massachusetts in the past occurred through subcontracting, this term is vital.

What This Bill Does Not Do:
 This bill does not affect private business transactions – only contracts with the Commonwealth.
 The bill places no restrictions on any work done within the United States with regard to workers’ citizenship or work eligibility.

The Bottom Line:
As we face the worst economic conditions in three generations, Massachusetts tax funds should create jobs in Massachusetts, not in foreign countries. By strengthening the Taxpayer Protection Act, this bill will help provide quality public services and jobs for the people of Massachusetts.