3:55 pm, April 18, 2015

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  • OUTSOURCING OF FEDERAL CONTRACT SERVICES?
    echo
    In the above decision, GAO states— “A plain reading of FAR § 25.402(a)(2) dictates that the origin of services is determined based on the country in which the firm proving the service is legally established, not on the location from which the service is ultimately provided.” GAO has determined that the federal contracting officers must now solely look at where federal contractors are incorporated and NOT where they will provide services, for the purpose of determining TAA compliance. Considering 2/3 of federal contract spending is for services acquisition, this is likely to have significant implications. I’d like make a few obvious observations— 1) Now that the rule is clear, US-incorporated contractors could outsource their labor to non-designated countries with cheap labor and obtain a tremendous competitive advantage over contractors employing US workers; 2) Any foreign service provider could comply w/ TAA by incorporating in the US and perform all services off-shore; 3) Normally in legal disputes, when there is ambiguity in regulatory interpretation, other legal sources, such as underlying statute or legislative intent, are considered. In this decision, such attempt is absent; and 4) When one claims ‘A then B,’ it does not mean ‘not A then not B.’ It appears GAO overlooked this simple logic in footnote 6.
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