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Computerworld - An Indiana state agency chartered to help unemployed residents find jobs began a controversial IT project this month with the U.S. subsidiary of an offshore software developer, which plans to bring in programmers from India to work on the project. (Editor's note: The contract was later cancelled (see update).
New York-based Tata America International Corp. will send up to 65 IT staffers from India to work alongside 18 state employees over the next two years at a government facility in Indianapolis. The team will replace a tax and unemployment claims processing system that runs on Unisys Corp. mainframes with a client/server application written in Java, said Patrick Murphy, a deputy commissioner at the Indiana Department of Workforce Development.
The DWD awarded Tata a $15.2 million contract last summer, and development work began Nov. 4. But the contract has infuriated some state legislators and Indiana residents, particularly because of the nature of the work done by the DWD. "This is such an egregious example, and many policy-makers find it baffling," said Jeff Drozda, a Republican state senator.
Last month, Drozda filed a bill that would ban contractors from using foreign workers on IT initiatives and other state projects. Similar legislation has been proposed in other states, such as New Jersey and Michigan. Drozda said he expects the state assembly's economic development and technology committee to hold a hearing on the bill in January.
The committee likely will also probe the procurement process that the DWD used for the contract with Tata, Drozda said. "We've spoken to several vendors who claim this contract was tightly written," he noted.

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Drozda said that when some rivals of Tata asked for more information from the DWD during the requirements-gathering phase, "they didn't receive any feedback, as if this contract was written with one vendor in mind."
The Bid Process
Murphy dismissed those accusations, pointing to an October 2002 letter that the state sent to 84 companies located inside and outside of Indiana inviting them to attend a prebid conference. The contract process "followed Indiana code and all state laws," Murphy said. He added that no Indiana-based companies bid on the project, although a few showed an early interest in doing so.
Tata America, which is also known as TCS America and is a subsidiary of Mumbai, India-based Tata Consultancy Services, has developed a similar tax and claims processing system for the state of New Mexico. The other finalists for the Indiana contract were Accenture Ltd. and Deloitte Consulting. According to Murphy, Tata's proposal was $8.1 million less than one of the rival bids and $23.3 million lower than the other one.
The project is part of Energize Indiana, a 10-year plan that was approved by the state assembly last year and is aimed at creating 200,000 high-tech jobs in the state. Murphy said studies also suggest that replacing the DWD's existing system could save the state up to $360 million over 10 years, partly by speeding up the processing of unemployment claims.
Tom DeMarco, a consultant at Cutter Consortium in Arlington, Mass., said he was sorry to hear that a U.S.-based jobs development agency had opted to hire a firm that would bring in foreign workers to meet its systems needs. But bringing Indian programmers to the U.S. is a better long-term approach than moving the IT work offshore, DeMarco added.
"You can only move some of the work offshore, but the hard work—conferring with stakeholders—should be done where the stakeholders are," he said.
Jayanta Banerjee, regional manager at Tata's office in Indianapolis, said it's too early to tell how many of the Tata employees who are assigned to the DWD project will be workers from India with H-1B or L-1 visas. Tata plans to subcontract at least 5% of the work to Bucher & Christian Consulting in Indianapolis and Nexor Technologies Inc. in Troy, Mich., he noted.
Tata isn't obligated to pay the U.S. Department of Labor's prevailing wages to L-1 visa holders who come from India to work on the project, but it must pay those amounts to H-1B workers under U.S. immigration laws, Murphy said.
Banerjee said Tata pays the same wages to comparably skilled workers in the U.S. whether they're based here permanently or hold L-1 or H-1B visas. The company's salaries "meet or exceed industry norms and the Department of Labor's prevailing wage levels," he said.
Drozda also said he's worried that the IT workers Tata sends to Indianapolis won't be paying federal or state taxes on their wages.
But Murphy dismissed that possibility. "Since they'll be living here, I'm assuming those taxes will be paid," he said.

Indians in Indiana What's involved: A $15.2 million systems development contract between the Indiana Department of Workforce Development and Tata America International. Why it's controversial: A jobs development agency awarded a contract to a unit of an offshore company. New York-based Tata plans to import up to 65 IT workers from India to work on the project for the next two years. What's at issue: Whether the contracting process was fair.

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