September 25, 2013, 11:23 AM — Some state governments are willing to hire offshore outsourcing firms to work on IT projects under controversial contracts that don't bar use of temporary foreign labor, or workers on H-1B visas.
Two multimillion dollar government health care IT projects, one in Illinois and the other in the District of Columbia, illustrate what's going on.
In Illinois, Cognizant was awarded a $74.1 million contract in June to upgrade the state's Medicaid systems to meet the requirements of the Affordable Care Act (ACA), or Obamacare.
In January,Washington D.C. awarded Infosys a $49.5 million contract to develop a health benefit exchange and replace its Medicaid and eligibility systems.
In Washington, H-1B visa holders may already be working on systems. In Illinois, state officials say that no H-1B workers are working on its project - for now.
Illinois said that Cognizant has assigned 13 workers, all U.S. citizens or permanent U.S. residents with Medicaid experience and expertise, to work on the project. Seven of the staff members are former state of Illinois employees with extensive knowledge of the state's Medicaid system, according to spokeswoman Kelly Jakubek, communication manager for Illinois Department of Healthcare and Family Services
Cognizant has submitted paperwork to bring on 60 visa workers or more, a proposal that the state isn't aware of, Jakubek said.
Computerworld emailed to Illinois officials copies of the paperwork filed by Cognizant with the U.S. Dept. of Labor to hire 60 senior system analysts at a wage rate of $76,814. This paperwork, Labor Condition Applications (LCAs), are part of the H-1B approval process and are used in wage determinations. As a general rule, though, the filing of an LCA doesn't mean that a visa worker in on the way.
The state controls the hiring process for the project, said Jakubek, though she could not say whether it will require the contractor to exclude temporary visa workers from the effort.
Asked about the Labor Dept. wage applications, Cognizant said it would take on visa workers if needed.
"Due to the shortage of qualified talent in many parts of the U.S., we routinely file LCAs when we anticipate a large contract to ramp up," Cognizant said in a statement. "Our first course of action is always to seek out qualified U.S. workers to fill these positions. We file LCAs as a fallback measure in the event that we are not able to find qualified U.S. workers."
Ron Hira, a public policy professor at the Rochester Institute of Technology and a researcher of tech immigration issues, said that Cognizant "is able to piggyback off of the false claims of a dire shortage of US IT workers," he said. "Microsoft and others are providing cover to firms like Cognizant by making broad-based claims of IT shortages," he said.
Cognizant has been one of the largest users of H-1B program, getting more than 9,000 approvals last year, according to government records. Infosys received 5,600 approvals last year. The hiring of temporary visa workers "isn't due to a shortage of U.S. IT workers but instead for the simple fact that those H-1B workers can be paid less than the market wage," said Hira.
Hira believes the government should use its IT funding to hire U.S. workers, and says government contracts "have also long been the sources of seed money to support workforce development and human capital development in technology areas," said Hira.
"Innovation and education are the primary sources of economic growth in a knowledge economy, so policymakers should steer precious tax dollars to fostering innovation and education here, not overseas," said Hira.
The paperwork that Computerworld emailed to the state wasn't a secret.
Adam Andrzejewski, who heads the Open the Books project, is expecting that visa workers will be used on the Illinois Medicaid systems project. He pointed to the state's high unemployment as one reason why using such workers is wrong.
The Illinois unemployment rate of 9.2% is the second highest in the U.S. Nevada tops the list at 9.5%.
Andrzejewski is critical of the cost of the contract, contending that the state's Democratic governor, Pat Quinn, is "not saving taxpayer money, but offshoring our jobs and tax dollars."
Cognizant is based in New Jersey, but conducts a major share of its work overseas. Most IT service firms also use offshore services. Infosys, hired by the District of Columbia, is based in India.
In D.C., the government says it does not hire workers on temporary visas, but a contractor can do so with restrictions. For any service contract valued over $300,000, the District says 51% of the new hires resulting from the contract must be District residents.
What constitutes a District resident? There is no length of residency requirement, and the employer verifies residency, which is usually a District issued identification card, according to a spokeswoman at the District's Office of Contracting and Procurement.
Infosys would not comment for this story.
In 2013, it had more than 140 LCA applications for District projects, according to LCA data gathered by MyVisaJobs.com.
Computerworld looked at a random sample and, except in a few instances, District government addresses were listed. The jobs included technology analysts to be paid at a rate of $63,631, project managers at $107,738, and technology architects at $130,147.
Computerworld received the D.C. Infosys contract through a Freedom of Information Act request. The contract provides no added insight into the workforce, other than a list of local IT partners, which are also part of the District's local partner contracting requirements.
Jimit Arora, a vice president at Everest Group, a consulting and research firm, says it's "still early days" in the effort of offshore firms to win government contracts. It's prompted by changes in the market.
Offshore "firms are realizing that the traditional cash cows of financial services, insurance, manufacturing and energy seems to be tapering," said Arora. This interest in looking at new sectors, "is a natural evolution of the firms wanting to grow as the traditional sources of growth start to slow down."
Paul Singer, principal at outsourcing consulting firm Pace Harmon, said that health care generally is becoming very important. For Cognizant, 25% of their revenues are from this sector, he said.
Singer said cost savings are a factor, but customers of these firms "are looking to providers to offer innovation, access to hard-to-find skills, and new technologies, which eliminates the need for some tasks completely, and therefore provides an even more meaningful cost impact than offshoring."
Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at @DCgov, or subscribe to Patrick's RSS feed . His email address is firstname.lastname@example.org.
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