
US contractor fined $3.1M for outsourcing work to India - known
http://sakshipost.com/index.php/news/international/77667-us-contractor-fined-$3-1mn-for-outsourcing-work-to-india.html
======
esbranson
For those who prefer primary sources:

"STATE CONTRACTOR TO PAY MORE THAN $3 MILLION IN PENALTIES FOR ILLEGAL AND
COVERT OUTSOURCING OF MILLIONS OF FINGERPRINT RECORDS TO INDIA FOR DATA
ENTRY", New York State Inspector General Catherine Leahy Scott, 24 March 2016
(Press Release)

[https://ig.ny.gov/sites/default/files/pdfs/IGFocusedTechRepo...](https://ig.ny.gov/sites/default/files/pdfs/IGFocusedTechReportPR3-24-16.pdf)

"Investigation of Improper Outsourcing of Confidential Records", New York
State Inspector General Catherine Leahy Scott, March 2016 (contains report and
agreement/order by state IG)

[https://ig.ny.gov/sites/default/files/pdfs/FocusedTechnologi...](https://ig.ny.gov/sites/default/files/pdfs/FocusedTechnologiesReportandAOD.pdf)

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dkopi
"The agreement arises from a USD 3.45 million contract..." "Focused paid the
Indian company just over USD 82,000..." "Overall, the Indian company performed
approximately 37.5 per cent of the work on the contract”.

~~~
zaroth
The Indian company handled 16m out of 22 million documents. Not sure what
other work there was which led to the 37.5% overall figure, otherwise last I
checked 16/22=73%...

~~~
USNetizen
It goes by tasks. Each contract is broken into a series of tasks (CLINs) and
assigned a value. The "prime" contractor typically has to perform 51% of the
work by value and task when some sort of set-aside preference is used (like
Veteran-owned, etc.).

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abruzzi
My read is that the title here is a bit misleading. The article implies that
the illegality is not outsourcing to India, but rather that the Indian
contractor was not approved to handle the data it indexed. Am I misreading
this?

~~~
ksherlock
> Given the confidential nature of the information of the fingerprint cards,
> Focused was required to perform all of the work in New York and it could
> only use employees that had passed a criminal background check. It was also
> prohibited from subcontracting any of the work to any other entity.

(Breaching your contract is only illegal (as opposed to a tort) when the other
party is the government)

~~~
Spooky23
Not necessarily.

In this case, the contract involved a vendor bidding with/through NYS
Industries for the Disabled, which is a "preferred source" contractor that is
supposed to employ disabled people to perform work. Typically this is light
manufacturing work, although operating scanners for a purpose like this is
also common.

As a preferred source contractor, they have preference over any other
competitor -- if you bid on the contract and offered to perform the services
for $1, the preferred source vendor would win.

The issue is that this is a serious fraud, not just a case of violating some
contract term. I'm curious as to why the principles aren't facing criminal
prosecution.

~~~
newjersey
> "To advance special social and economic goals, certain providers have
> preferred source status under the law. The acquisition of commodities and/or
> services from preferred sources is exempted from statutory competitive
> procurement requirements. All state agencies, political subdivisions and
> public benefit corporations (which includes most public authorities), are
> required to purchase approved products and services from preferred sources
> in accordance with the procedures and requirements described in the
> Preferred Source Guidelines.

[https://www.nyspro.ogs.ny.gov/content/buying-preferred-
sourc...](https://www.nyspro.ogs.ny.gov/content/buying-preferred-source-0)

This is why the road to hell is paved with good intentions. It seems to me
that the people who should face criminal prosecution are the people who came
up with this nonsense "preferred source" scheme.

~~~
nl
You prefer welfare for blind people vs giving them meaningful work?

~~~
newjersey
If that means a level playing field, yes. Positive discrimination is
discrimination and should be banned outside of education.

Why the downvote? Is that for disagreeing?

~~~
nl
I didn't downvote you, but I would if I could. I both disagree with your view
and think that you haven't really argued your point very well.

Blind people aren't born on a level playing field.

I believe that a society should take care of people who are unfortunate, and
this method seems like a reasonable way to allow market mechanisms to improve
their life.

I'm assuming that you disagree that this is a role society should take.
However, the consensus of of most societies in history is that blind people
should be taken care of in some way.

I think it's reasonable that you should be expected to make a better argument
to overturn that view than you have.

------
bpicolo
For _illegally_ outsourcing a government contract

~~~
eplanit
Exactly. It's like immigration vs. illegal immigration. It's easy to drop the
"illegal" part and stir up racial emotion and thus divert attention away from
the real topic.

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theflork
can someone with more knowledge of the legal code explain why no criminal
charges?

$3.45m - $3.1m - $0.082m = $268k profit

Also getting to hold onto $3.4 million for the 8 year time period since 2008
would net some good returns as well.

~~~
cheriot
There's also the expenses for the other 62.5% of the contract, the taxes paid
on the profits, and the business development to get the contract in the first
place.

I don't actually know how these things are calculated, though.

~~~
zaroth
Good points. They are certainly not making out after the fines. Now I wonder,
if the fine is tax deductible?

~~~
jacalata
It shouldn't be in general - [http://www.nolo.com/legal-encyclopedia/business-
expenses-tha...](http://www.nolo.com/legal-encyclopedia/business-expenses-
that-are-never-deductible.html)

------
EvanPlaice
Sounds like 'business as usual' to me.

Small company is granted preferential treatment on the contract reward because
the company fits under a 'special class'. For example SDVOSB.

The company doesn't actually have the skill/ability to fulfill the contract
requirements so they outsource a significant portion of the work; either by
picking up one of the bidders who lost as a subprime or bynoutsourcing to a
third-party. Passing off the responsibility violates the 'protected class'
certification threshold but there's no oversight to verify compliance so the
contractor is never held accountable.

Many/most small business defense contractors are simply administrative
companies that work the 'special class' certification process, pocket a
significant percentage of the funds, and either outsource most of the actual
work or hire people and provide substandard pay and provide little/no
resources to do the work.

Source: I used to work for one such company. Never again...

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eddd
I love that kind of stories:
[http://www.bbc.com/news/technology-21043693](http://www.bbc.com/news/technology-21043693)

Capitalism! :)

~~~
0x264
It's like life imitates satire:
[https://www.youtube.com/watch?v=rYaZ57Bn4pQ](https://www.youtube.com/watch?v=rYaZ57Bn4pQ)
[Onion video]

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mchahn
This reminds me of the story from a while back about a contractor who took
jobs and farmed them all out to Indian companies for a small percentage of his
take.

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MichaelBurge
How did they catch them?

~~~
USNetizen
Contracting with the government means you open your books to them, essentially
whenever they want. They can audit you at any time.

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jpoech
man, that was messed up!

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Gustomaximus
So have these guys essentially lost $40k plus time involved? This doesn't
sound like much of a deterrent. There should really be criminal charges for
these blatant fraudulent behaviours. While I believe prison should primarily
be a rehabilitation, giving white collar criminals actual time will work as a
deterrent rather than a 'don't get caught' mentality.

~~~
ytpete
Don't forget lost future business too - good luck winning the next contract
bid with this kind of track record (hopefully). If that effect is strong
enough, it could potentially even put a place out of business.

