Bill Summary and Fact Sheet for an Act Relative to Privatization Contracts

Bill Lead Sponsor: Senator John Hart, First Suffolk

Bill Number: SB1742

Bill Co-Sponsors:

General Law Affected:
Chapter 7
Section 54

Current Situation:
Right now, Massachusetts taxpayers are financing the loss of their own jobs. Vital services for the poor, for teachers, and for state administration are 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 still in a jobless recovery¹. Yet, in this critical time, the government is sending jobs overseas. For example:

• The Massachusetts Teachers' Retirement contracts with Tata Infotech of India to provide information management services. Cost: $2.1 million.²

• Educator Licensing and Recruitment has an information services contract with Deloitte & Touche. Deloitte subcontracts 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 subcontracts to MsourceE, an Indian firm. When a food stamp recipient in Massachusetts dials the help number on their benefits card, the telephone rings in Mumbai, India. Cost: $160,000/month.³
• The state Operational Services Division contracts with Tata Infotech. Cost: $3 million.

Those are just the ones we know about. Many agencies are unaware that their private contractors are sending work abroad.⁴

The situation in Massachusetts is part of a national trend. A widely cited study found that, nationally, 3.3 million jobs and $136 billion in wages will move overseas by 2015.⁵ While private businesses may "offshore" their work, public funds should support the local economy.

The Solution:
If a state agency gives 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."⁶ By amending the Taxpayer Protection Act, this bill taps into a proven system of enforcement which has served Massachusetts well for eleven 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 already happened in Massachusetts occurred through subcontracting, this term is vital.

What This Bill Doesn't 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:
Massachusetts tax funds should create jobs in Massachusetts, not in foreign countries. By strengthening the Taxpayer Protection Act, this bill will help bring the benefits of the economic recovery back to local workers.

AN ACT RELATIVE TO PRIVATITZATION CONTRACTS

The first paragraph of section 54 of chapter 7 of the General Laws, as appearing in the 2002 Official Edition, is hereby amended by inserting after paragraph (1) the following paragraph:

The agency shall prepare a written statement that the services proposed to be the subject of the privatization contract shall not be performed outside the territorial limits of the United States. A privatization contract and a subsequent agreement, including an agreement resulting from a re-bidding of previously privatized service or an agreement renewing or extending a privatization contract shall include:

(a) a provision prohibiting the person awarded the contract from performing any portion of the services proposed to be the subject of the privatization contract outside the territorial limits of the United States;

(b) a provision prohibiting the person awarded the contract from entering into a subcontract with any person that will perform any portion of the services proposed to be the subject of the privatization contract outside the territorial limits of the United States.

1. Massachusetts's unemployment rate has remained between 4% and 6% in 2004, compared with 2-3% before the recession began (http://www.bls.gov).

2. Wendy Lee, "Contractors With State Sent Work Overseas," Boston Globe, July 20, 2004.

3. Id.

4. Id.

5. Addressing the Regulatory Vacuum: Policy Considerations Regarding Public and Private Sector Service Job Offshoring, Public Citizen's Global Trade Watch, April 2004, p. 8.

6. http://boston.bizjournals.com/boston/stories/2002/11/04/editorial1.html