Billions of dollars of IT contracts are wrapped inside the implementation of Obamacare, with federal tax dollars paying up to 90 percent of the cost for upgrading state Medicaid Management Information Systems (MMIS). These awards are some of the largest in state history.
Two weeks ago, Illinois Governor Patrick Quinn became national news for circumventing a three-year procurement process on up to $190 million in no-bid IT contracts. Last week, we found that one of the largest bid-contract awards outsources state jobs to H-1B contractors from India. This story led the nightly news covering the state capitol.
The Democratic governor awards $71.4 million contract to an outsourcing firm billing up to $256,160 per year per position -- plus $200,000 taxpayer financed "slush fund" for travel.
"Outsourced" at home in Illinois... at a higher cost
A $71.4 million IT contract was awarded to Cognizant Technology Solutions, which ranks in the top seven for procuring H-1B visa workers. As soon as the Illinois contract was signed, evidence shows the company has applied for more than 100 H-1B visas with the United States Department of Labor and Training Administration and is recruiting staff from India for the Illinois work.
According to myvisajobs.com, Cognizant filed federal applications for H-1B visas to fill more than 100 full-time positions for the Illinois work. The federal applications of Cognizant explicitly delineate that work locations are Springfield, Ill., and Lansing, Mich. (Illinois has admitted that the MMIS upgrade would occur in both Lansing, Mich., and Springfield, Ill., locations.)
Job listings in India offer further evidence of job outsourcing: Cognizant is in India recruiting consultants, coders, architects, MBAs and programmers with skills such as a "working knowledge of Medicaid and MMIS." In mid-July, Cognizant Technology Solutions India, Ltd., based in Chennai, held "open interviews" for applicants with the computer language skills needed for the Illinois work. Cognizant's recruiting agency posted jobs in India looking for medical billing specialists and system programmers with knowledge of Medicaid and the privacy HIPPA laws.
Even though the language in the state contract seems to prohibit off-shoring of the Illinois work, posted job descriptions show that once hired, the H-1B employees will work in Chennai and Bangalore, India. Does Illinois really know what its vendor is up to?
Cognizant's June 20, 2013, contract confirms figures found in the approved federal planning documents. Contracted fee schedules show that first-year charges of up to $109.28 per hour per position will increase on renewal to $128.08. Cognizant's consulting fees of up to $256,160 per person per year will replace senior state managers making $75 per hour or $150,000 per year, including pension and health insurance costs.
Adding to taxpayer cost, the Quinn administration lets Cognizant charge an additional $200,000 in first-year travel costs. It's a long way from India to Springfield, Ill.
Quinn Administration's Response
The Quinn administration responded to our first report with a blanket denial: "No state IT jobs will be eliminated for the MMIS project and that no state jobs are being outsourced to India." Furthermore, the administration called our report "entirely false, unfounded and misleading."
Quinn's rhetoric can't cover up the vendor's own H-1B visa applications to the Department of Labor, nor does it account for Cognizant's recruiting pitch taking place in India, and the high consulting fees and travel costs inside the contract.
Cognizant's outsourcing business model isn't an industry secret. In the company's 2011 SEC filings, they explained it this way: "The vast majority of our technical professionals in the United States and Europe are Indian nationals."
In 2006, the United States Homeland Security Office of Inspector General included Cognizant in its report on L-1 visas (specialized knowledge petitions for intra-company transfer of nonimmigrant visa program) assessment of vulnerabilities and potential sources of abuse. Among nine computer and IT firms, the report highlighted Cognizant and its "computer visa" applications, primary benefiting India.
In January 2013, Bloomberg News touted Cognizant as a leading outsourcing firm, specifically citing its bidding on the Illinois health care exchange. Revenues from writing code for state governments and pharmaceuticals make up 25 percent of Cognizant's revenues.
In a March 2013 Boston Globe editorial Outsourced at Home, Cognizant was highlighted after being sued for their H-1B recruiting on behalf of Molina Corporation -- a company working on the California MMIS upgrade. It was alleged that Cognizant recruited the replacement of 40 America workers at Molina with H-1B visa holders from India. The editorial argued that "this isn't off-shoring but a quiet replacement of American workers on domestic soil."
In August 2013, our research showed evidence that Cognizant not only outsourced MMIS IT jobs with H-1B visas, but is also currently off-shoring work for some states at its facilities in India. On the Alaskan MMIS project, Neha Anand, a business manager with Cognizant Technology Solutions since December 2011, is a "business analyst for Alaska Medicaid." According to his LinkedIn page, Anand is based in Chennai, India.
Illinois does not have an outsourcing prohibition. By contrast, both Democrat and Republican governors in Ohio have prohibited the outsourcing of state government services. In 2010, former Ohio Governor Ted Strickland banned state agencies from purchasing outsourced services; Governor John Kasich continued the policy. Even Ezekiel Emanuel, an architect of the Affordable Care Act, has weighed in, "An issue as important as health care is no place to get caught up in the politics of outsourcing."
Stipulating that Illinois MMIS IT work must be done in Michigan and Illinois did not stop the H-1B visa outsourcing of Illinois work to India. Imported H-1B visa contractors can still work under Cognizant on the Illinois project. American workers are displaced by this Democratic governor.
If the governor could prove his actions save taxpayers money, or provide better outcomes, he could have an argument. But, the governor can't argue there are savings when the cost of consultants is higher than the cost of Illinois-based staff. Instead, the administration argues that the outsourcing of Illinois-based jobs at a higher cost... is not even happening.
It's time to open the books on IT contracts in Illinois.
Adam Andrzejewski is founder of openthebooks.com and a former 2010 candidate for Governor of Illinois