Michigan Leader Talks about Taking on Offshoring

Thursday Apr 8th 2004 by Sharon Gaudin
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With the offshoring of American jobs increasing in volume and discourse, some politicians are looking for ways to keep work within their own borders. In an exclusive interview, one state leader talks to Datamation about Michigan's efforts to support companies that supply jobs and revenue for his state.

With the offshoring of American jobs increasing in volume and discourse, some state leaders are looking for ways to keep work within their own borders.

Michigan, a state hard-hit by the exportation of automobile manufacturing jobs and IT positions, is taking steps to recognize companies that get the work done inside the state of Michigan, or at least inside the United States. A new executive directive handed down by Governor Jennifer Granholm will mandate that companies vying for state contracts disclose where they are headquartered and where the work for that specific contract will be done.

Sean Carlson, director of acquisition services for the state of Michigan, says the move, which goes into effect on April 30, will allow state leaders, as well as residents, to know if their tax dollars are going to support Michigan workers or if they're being shipped overseas. Carlson, who will be making the final buying decisions based on the new directive, says it supplements a preference law that has been on the books there for more than 10 years. That law states that if more than one company is vying for a state contract, and all factors being equal, the preference goes to the company from Michigan.

The problem, says Carlson, is that the law wasn't being enforced. Granholm came on board and first put a stop to that, and then went one step further with the new initiative.

In an interview with Datamation, Carlson talks candidly about how the state has been affected by offshoring, and how they're trying to do something about it.

Q: How is this new directive different than the laws that Michigan already had on the books?
The big difference, and the big plus, is the component of vendor disclosure. One of the top requests we get in this office is people calling to ask where the contracts are going. How many went out of the state and how many went out of the country? It's frustrating to me not to know that. It's data that hasn't been collected. The information hasn't been asked for. We're now asking people where they're incorporated, and what is their zip code. Taxpayers have the right to know how much of their tax dollars go to support Michigan and how much goes outside the state.

Q: Why was this important for the state to do?
There's high unemployment in the state of Michigan so it's a big, big concern here. I'm sure a lot of that unemployment has to do with the manufacturing of vehicles and cars, but there's a lot of IT work that goes on for those auto industry suppliers that are located here in Michigan. It's a concern of course... Jobs in general is a big issue. The governor, in her State of the State Address, said her focus is jobs, jobs, jobs. That is the vision for our state right now. This is her focus. I'm not surprised to see an executive directive that is focused on valuing jobs.

Q: Are you more concerned about overseas offshoring or out-of-state outsourcing?
I think we want to make sure that we're working with U.S. companies as best as possible. I think there is a little bit of difference between ofshoring and out-of-state outsourcing. We're looking to promote full and open competition. If you cut off vendors from other states, you're driving up the costs of your contracts. That's not what this is about. We want to encourage companies to be involved.

Continue on to the next page to hear what Carlson has to say about the value of jobs, and how this plan can work.

Q: How do you respond to critics who say you should be focused solely on getting the best value for the dollar?
What the governor is doing is asking us to consider jobs as part of the idea of best value. What we value is jobs, disclosure and responsible spending.... It's a tough balance, but it's a balance we want to work on. Jobs will be an important consideration. When we look at best value, we look at the cost of unemployment. What is the revenue generated by somebody going to work? There's a big scope to best value. Jobs are one of those factors.

Q: Do you think you'll be spending more money on these contracts, though?
Another positive is that sometimes people think this will drive the price of doing business up. Will we be awarding contracts at a higher price? This presumes that we're currently reaping the benefits of offshoring with these contracts coming in at lower prices. That's not really true. Some vendors might give us a job rate for a U.S. programmer and then immediately, or later on, they ship that job over to India. They're getting a higher profit margin, but the tax payers ought to reap the benefits of that savings. I know it's happened in at least one situation, and I suspect it's potentially more.

Q: What kind of effect are you expecting this to have?
I can't really tell you that. That's why the directive is so important. We awarded over $8 billion in 2,200 contracts last year, and I don't know if it's 50 percent, 70 percent or 10 percent going to Michigan companies. What's important, too, is that if we're dealing with a company with headquarters in Denver, we're asking if that work will be done in Michigan or Colorado or India. We're asking who they are subcontracting with, and where are they located? Maybe 50 percent of the work is being done by programmers over in India. Now, we have more of a real sense of how much is staying in Michigan and how much is leaving Michigan.

Q: How much do you think this will help the residents of Michigan?
I think there's a very real possibility that it will have a positive outcome. Through these directives you communicate your values and what's important. This is what's important to us -- jobs. And the governor is backing it up with more than just talk.

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