Outsourcing News & Commentary: You Should Read…

Several recent updates relating to outsourcing remind corporations of the financial and business risks associated with the practice (both foreign and domestic). For your reference:

Gearing Up For The Complicated Worlds of Outsourcing and Offshoring (Dechert LLP)

“Last time, we wrote about ‘country risk’; i.e., the risk a company takes by doing business in a different country, where laws might be different from what you might expect in your home country. Since then, a case has been decided in Mumbai, India before the Controller of Patents that illustrates the need to take country risk into account when selecting offshore locations. In the matter of Natco Pharma Limited and Bayer Corporation, Natco applied for and was granted a compulsory license… Under the patent law in India, a compulsory license is an involuntary contract between a willing buyer and an unwilling seller imposed and enforced by the State – essentially the government permits someone else to produce the patented product without the consent of the patent holder. Read the update>>

Outsourcing Company to Pay Record $500 Million Settlement in CityTime Investigation (Loeb & Loeb LLP)

“Science Applications International Corp has agreed to pay more than $500 million in fines and penalties to settle federal charges alleging that the outsourcing company overcharged the city of New York for work and ignored kickbacks on its CityTime project, an employee time-management system that ran more than $500 million over budget. Most of the money will be returned as restitution to the city… The excess cost to the city is alleged to be largely the result of the actions by one of those subcontractors, Technodyne, which prosecutors assert engaged in a scheme of overbilling and kickbacks, including that Technodyne principals facilitated kickbacks to SAIC employees.” Read the update>>

Declining Dollar Impacts Outsourcing Market (Kilpatrick Townsend)

“As wages rise in many of the traditional outsourcing geographies, service providers are locating service centers in new lower-cost locales. In many cases this exposes customers to political instability, regulatory issues, security issues and cultural problems. Customers should be aware of these risks and protect against them by requiring contractual control over the designation of geographies from which the services are provided.” Read the update>>

U.S. Suspends Controversial Outsourcing Program in Philippines (Loeb & Loeb LLP)

“At the urging of Reps. Timothy Bishop and Walter Jones, the U.S. Agency for International Development has suspended funding for a program under which Filipino students trained to work in various industries, including offshore call centers serving U.S. companies… In an April 19, 2012 letter … the legislators criticized the program as posing a threat to American call center workers and demanded that the agency end the program – which is set to expire at the end of 2012 – immediately. Noting that more than 500,000 call center jobs had been outsourced since 2007, the letter charged that: ‘To essentially underwrite our international competitors is short-sighted public policy and a direct threat to our economic competitiveness. Call centers represent a substantial portion of the U.S. economy and currently provide economic stability and the promise of a middle-class income to over 4.5 million working families in the United States.’ Read the update>>

Update: Outsourcing Accountability Act Voted Down; Call Center Legislation Gains Support (Loeb & Loeb LLP)

“The House of Representatives March 8, 2012, voted down the Outsourcing Accountability Act of 2012 (HR 3875) by a vote of 230 to 175… In contrast, the U.S. Call Center and Consumer Protection Act (HR 3596), introduced in December 2011 by Reps. Timothy Bishop and David McKinley, has gained support in the House, and now has a reported 77 co-sponsors, including five republicans. The bill would, among other things, make companies that relocate call centers overseas ineligible for federal grant or guaranteed loan programs for five years.” Read the update>>

Related viewing:

Womble Carlyle’s Jennifer Collins on confidentiality and data security considerations for outsourcing arrangements

[Link: Jennifer Collins on Structuring the Best Outsourcing Arrangements for your Company]

Womble Carlyle’s Beth Jones on key labor and employment issues related to outsourcing

[Link: Beth Jones on Structuring the Best Outsourcing Arrangements for your Company]

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