Golden state no big offshorer?

By: Ed Frauenheim
Topics: Workplace

The state of California appears not to be doing much offshore outsourcing, according to a report from the California State Auditor.

The study, published this month, also raises concerns about the legality and wisdom of enacting offshoring limits in California, and could diminish calls to curb offshore contracts by state agencies. "Our analysis of the limited survey data suggests the state is spending little on services performed offshore," the report concluded.

California lawmakers, like politicians in other states, have pushed to restrict offshore outsourcing by government bodies. But California Governor Arnold Schwarzenegger declined to sign into law a number of bills from the last legislative session dealing with offshoring.

Business leaders often defend sending work to lower-wage locales abroad as good for the economy overall, but critics say the trend harms U.S. workers and threatens the country's tech leadership.

In reviewing the extent of the state's offshore contracting, the auditor said 39 state entities reported 185 contracts totaling $638.9 million, where at least some portion of the work was possibly performed offshore. "For 109 of these contracts totaling $349 million, respondents estimated that only $9.7 million (2.8 percent) was for services performed offshore but could provide no estimate for the remaining 76 contracts," the report said.

Passing offshoring restrictions in California may be unconstitutional, and misguided, the auditor said. "State efforts to restrict offshore contracting may violate constitutional provisions allowing the federal government to set uniform policies for the country as a whole in dealing with foreign nations," it stated. "Also, restricting or limiting offshoring may invite retaliatory trade sanctions against the United States."

Even so, the auditor acknowledged that California's offshoring remains murky, meaning the state may be sending a fair chunk of work overseas. "No current state laws or regulations address the use of offshore contracting, making it difficult to judge the effects and prevalence of offshore contracting," the report said.