A micro considers the interests and rights of the individual company as the primary concern. Both of these views are valid depending on the lens that one wishes to use. The problem arises when the government is forced to develop policies regarding procurement in this volatile debate. The government must decide whether to take a micro view, favoring the rights of companies, or a macro view that places the interest of the American people at its forefront.
The issue of off shoring has several legal implications that must be considered. The first and foremost is that if a problem arise from an offshore contract, the legalities can be complex. There is always a question of which set of laws prevails. If laws in the two countries differ on key points, such as contract law, the problem arises of how to decide which law takes precedence. Off shoring makes a complex legal issue even more complex. These issues are often difficult enough in domestic courts. However, when the problem becomes an international issue, the problems are compounded.
One of the most recent issues regarding outsourcing involves polices regarding sending private information about American consumers overseas. Privacy policies in the U.S. are strict, compared to many foreign entities. Within the U.S., there are strict laws regarding who can obtain certain pieces of information and how they can be used. However, when that information crosses international boundaries, the rules change. Laws offshore may not have the same restrictions on sharing or use that protect American citizens. One example of this is the sharing of medical information or personal information that could be used to commit fraud or identity theft. This is a key concern in the practice of hiring offshore companies by government entities.
As of February 2006, no federal laws existed that regulated offshore outsourcing. There were certain laws that came into play, such as SOX for public companies, HPAA and GLB for certain types of information and data transfer. In addition, certain export laws came into play for where offshore entities are accessing onshore databases and customer records. These laws were not intended to address offshore outsourcing, but were intended to protect the rights and privacy of American citizens regardless of the circumstance. They domestic, as well as offshore companies.
The past two Congressional sessions have seen a flurry of activity regarding the introduction of new legislation concerning off shoring. This new legislation represents a trend that recognizes the problems associated with off shoring and the legalities associated with it. These new legislative introductions include contraction negotiations, licensing concerns, IP protection, tax issues, labor practices, employment practices, data protections, information security, immigration and national security issues. This new wave of interest in setting policies regarding off shoring reflects a growing concern for the issues surrounding it.
The laws of the United States are designed to protect U.S. citizens from exploitation by domestic and foreign entities. The crux of legalities regarding offshore entities lies in contract law and the specifics of how the contract is written. One of the key controversies in the practice of off shoring is that although contracts are written to comply with U.S. laws, there may be local laws that prevent enforcement of the law in the foreign country. In addition, enforcement requires cooperation of the foreign entity. This may not always be possible to obtain. In this sense, offshore outsourcing essentially strips the American citizen of the protections and rights afforded them by U.S. laws.
If the offshore company commits an act that is illegal according to U.S. law, they may have no recourse from a legal or practical standpoint. In the event that they can force enforcement of the legal issues, international lawyers are expensive. The average person cannot bear the costs of such litigation. This means that even if protections against exploitation exist, they may be out of reach from a practical standpoint. There is the potential that offshore entities may exploit these weaknesses and use off shoring as a way to engage in exploitative practices against American citizens. This leaves the citizen with little that they can do to protect themselves. Current proposed legislation is aimed at closing gaps that could potentially be exploited in the future.
Federal Acquisition Regulation (FAR)
The above regulations involve laws that affect actions by companies engaging in offshore activities. They are laws that are designed to protect individual U.S. citizens from illegal activities by offshore companies. Another set of legislation affects specifications that govern economics and public administration of procurement activities. The principle law regulating procurement is the Federal Acquisition Regulation (FAR). This legislation governs the primary procurement system for the government, otherwise known as the Federal Acquisition Regulations System. This system regulates acquisition process used by the government to purchase goods and services that are needed by the various government entities. It does not regulate purchasing activities of the private sector.
FAR is codified in Title 48 of the United States Code of Federal Regulations. It was an extension of the Office of Federal Procurement Policy Act of 1974 (Pub. L. 93-400 and Title 41 of the United States Code), Chapter 7. FAR is given the "force and effect of the law" by the Federal Court system, as decided in Davies Precision Machining, Inc. Vs. U.S. (1995). Certain government entities are exempt from FAR such as the U.S. Postal Service, Tennessee Valley Authority, Federal Aviation Administration, and the Bonneville Power Administration. These entities can make their own purchasing rules. However, government personnel in other areas cannot deviate from these regulations when making purchases.
The purpose of FAR is to provide uniform policies and procedures for acquisition of goods and services. FAR has been amended as needed since its inception in 2004. FAR regulates all areas of the contract process from the bid procedure to contract issues. FAR is meant to make certain that the government procurement is process fair and that is does not demonstrate unfair favoritism towards entities. For instance, there are specific regulations to provide protection against making monetary "favors" for the purposes of obtaining an advantage in the process.
FAR is the presiding document that governs procurement. With the exception of those listed agencies that make their own rules regarding procurement, the policies and procedures contained within the law must be adhered to in all government procurement, regardless of the size of the contract. Agencies do not have the option of deviating from these policies and procedures.
Key Issues Regarding Outsourcing
There are several key issues surrounding the topic of outsourcing that provide support for further investigation of the practice of off shoring. One of the key issues is that companies will use foreign workers to fill positions. Foreign workers can be hired at a much lower rate than American employees. This takes jobs away from American citizens and increases unemployment. This generates a greater need for public assistance for those displaced by off shoring. The company can gain by off shoring. A few corporate executives are the ones that have the most to gain by outsourcing to obtain lower costs. For every job that goes overseas, one American loses their job in return.
The United States is typically a net importer of jobs, rather than a net exporter. This places the above statement in perspective. It is true that exporting of jobs does take away jobs from Americans on a one for one exchange, but this does not result in the mass extinction of American jobs that opposition to off shoring would have one think. This opposition cites other factors as being responsible for the net loss of American jobs. They claim increased efficiency and technology are the culprits in the disappearing jobs in the American Workforce. These are the two perspectives that demonstrate the disparity in opinion regarding the practice of off shoring. Loss of jobs, whether it is due to off shoring or other factors, remains an important issue in the debate over government outsourcing.
Another issue that concerns those who question the practice of government outsourcing is whether the public entity has the expertise to administer outsourcing. This issue has as rhetorical answer, as the reason for outsourcing is often because the entity does not have the expertise to carry out the required task. One example of this is the large amount of outsourcing that takes place in the technology sector. Entities hire outside contractors that have the expertise to carry out the task when they do not have the internal expertise within the department. The need to acquire skills for a particular job that the department lacks is a primary reason for outsourcing.
Another key question is whether public entities can adhere to procurement principles in the process of outsourcing. According to Sidney Shapiro, outsourcing has the potential to either improve government performance or to potentially cause government failure. In several cases, the government has even outsourced the responsibility of regulation to and outside entity. Certain industries were allowed to write their own regulations…