Michigan Leader Talks about Taking on Offshoring

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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.