Governor Issues Executive Order Prohibiting Use of Public Funds for Outsourcing
Columbus, Ohio- Ohio Governor Ted Strickland today issued an executive order that prohibits the expenditure of public funds for services provided offshore.
“Outsourcing jobs does not reflect Ohio values,” Strickland said. “Ohioans have been among the hardest hit by more than a decade of unfair trade agreements and the trickle-down economic policies that promoted offshoring jobs at the expense of Ohioans who work for a living. We must do everything within our power to prevent outsourcing jobs because it undermines our economic development objectives, slows our recovery and deprives Ohioans and other Americans of employment opportunities.”
“Ohio’s policy has been, and must continue to be, that public funds should not be spent on services provided offshore” Strickland says in the order. “Throughout my Administration, procurement procedures have been in place that restrict the purchase of offshore services. Despite these requirements, federal stimulus funds were recently used to purchase services from a domestic company which ultimately provided some of those services offshore. This incident was unacceptable and has caused me to redouble my commitment to ensure that public funds are not expended for offshore services.”
In March, the Department of Development contracted with Texas-based service provider Parago, Inc. to assist with the agency’s implementation of the federal stimulus-funded appliance rebate program. Despite state procurement requirements designed to restrict service providers from using public funds for offshore labor, in particular, a DAS directive that requires agencies to ask potential vendors to list all locations where the services will be performed, the contract was let with a company that ultimately used offshore labor.
Earlier this week, the governor asked Development Director Lisa Patt-McDaniel to further review the circumstances surrounding the award of the Parago contract including any potential legal recourse with the vendor.
Ohio’s appliance rebate program has stimulated manufacturing activity with Ohio companies such as Whirlpool, which has increased shifts and moved to a six day schedule to satisfy demand generated by the program. Nearly $10.5 of the $11 million in total program funding was awarded directly to Ohio consumers for the purchase of energy-efficient appliances. Parago was awarded $357,300, or 3.2 percent, of the total funding, for providing services.
“This program was successful in stimulating economic activity for Ohio appliance manufacturers and retailers” Strickland said. “But contracting with a domestic service provider that ultimately outsourced jobs could and should have been prevented. This order will ensure that this never happens again.”
In June 2008, Strickland signed an executive order (E.O. 2008-12S) that implemented Think Ohio First practices, which promotes economic development by maximizing the use of Ohio businesses when agencies conduct purchases. The order outlined procurement reform efforts and directed all state agencies to work together for cost savings and efficiencies when purchasing supplies and services. In addition, it directed the Department of Administrative Services to hire a chief procurement officer to oversee agency purchasing functions.
Full text of the governor’s executive order is pasted below:
Executive Order 2010-09S
Banning the Expenditure
of Public Funds for Offshore Services
1. Ohio’s Economic Vitality Necessitates Constant Vigilance in State Job Creation Efforts. State officials and employees must at all times remain passionately focused on initiatives that will create and retain jobs in the United States in general and in Ohio, in particular, and must do so especially during Ohio’s continuing efforts to recover from the recent global recession.
2. No Public Funds Should be Spent on Services Provided Offshore. Allowing public funds to pay for offshore services undermines economic development objectives and any such offshore services carry unacceptable quality and security risks.
a. The Purchase of Offshore Services with Public Funds Undermines Economic Development and Other Job Creation and Retention Objectives. The expenditure of public funds for services provided offshore deprives Ohioans and other Americans critical employment opportunities. It also undermines efforts to attract businesses to Ohio and retain them in Ohio, initiatives in which the State has invested heavily.
b. The Purchase of Offshore Services Has Unacceptable Business Consequences. The use of offshore service providers could pose unacceptable data security, and thus privacy and identity theft risks. There are pervasive service delivery problems with offshore providers, including dissatisfaction with the quality of their services and with the fact that services are being provided offshore. It is difficult and expensive to detect illegal activity and contract violations and to pursue legal recourse for poor performance or data security violations. The State’s use of offshore service providers ill-serves the people of Ohio who are the primary consumers of the services provided by the State.
3. Ohio’s Policy Has Been, and Must Continue To Be, That Public Funds Should Not Be Spent on Services Provided Offshore. Throughout my Administration, procurement procedures have been in place that restrict the purchase of offshore services. Despite these requirements, federal stimulus funds were recently used to purchase services from a domestic company which ultimately provided some of those services offshore. This incident was unacceptable and has caused me, through this Order, to redouble my commitment to ensure that public funds are not expended for offshore services.
4. Additional Steps Will Ensure that Public Funds Are Not Spent on Services Provided Offshore. In order to ensure that the State of Ohio makes no expenditures for services provided offshore, I hereby order the following:
a. No Cabinet Agency, Board or Commission (Executive Agency) shall enter into any contract which uses any funds within its control to purchase services which will be provided outside the United States. This Order applies to all funds in the custody of an Executive Agency, be they from state, federal, philanthropic or private sources. It applies to all purchases of service made directly by an Executive Agency and services provided by sub-contractors of those providing services purchased by an Executive Agency.
b. This Executive Order will be personally provided, by the Director, Chair or other chief executive official of each Executive Agency, to the Chief Procurement Officer or other individual at that entity responsible for contracts for services.
c. The Department of Administrative Services, through Ohio’s Chief Procurement Officer (OCPO), shall have in place, by August 31, 2010, procedures to ensure all of the following:
i. All agency procurement officers, or the person with equivalent duties at each Executive Agency (APOs), have standard language in all Executive Agency contracts which:
(a) Reflect this Order’s prohibition on the purchase of offshore services.
(b) Require service providers or prospective service providers to:
(i) Affirm that they understand and will abide by the requirements of this Order.
(ii) Disclose the location(s) where all services will be performed by any contractor or subcontractor.
(iii) Disclose the locations(s) where any state data associated with any of the services they are providing, or seek to provide, will be accessed, tested, maintained, backed-up or stored.
(iv) Disclose any shift in the location of any services being provided by the contractor or any subcontractor.
(v) Disclose the principal location of business for the contractor and all subcontractors who are supplying services to the state under the proposed contract.
ii. All APOs are ensuring that all quotations, statements of work, and other such proposals for services affirm this Order’s prohibition on the purchase of offshore services and include all of this Order’s disclosure requirements.
(a) Any such proposal for services lacking the affirmation and disclosure requirements of this Order will not be considered.
(b) Any such proposal where the performance of services is proposed to be provided at a location outside the United States by the contractor or any sub-contractor, will not be considered.
iii. All procurement manuals, directives, policies, and procedures reflect the requirements of this Order.
iv. All APOs have adequate training which addresses the terms of this Order.
5. Exceptions. Nothing in this Order is intended to contradict any state or federal law. In addition, this Order does not apply to:
a. Services necessary to support the efforts of the Department of Development Global Markets Division to attract jobs and business to the State of Ohio, including incidental services for the support of trade missions, payment of international staff, and services necessary for the operation of international offices.
b. Academic, instructional, educational, research or other services necessary to support the international missions of Ohio’s public colleges and universities.
6. I signed this Executive Order on August 6, 2010 in Columbus, Ohio and it will not expire unless rescinded.
Ted Strickland, Governor
Jennifer Brunner, Secretary of State