Politics & Policy

O’care’s Foreign Contractors

These firms surely aren’t more competent than their American rivals.

Democrats spent much of the recession pushing us to “Buy American” — a sentiment based much less in solid economics than in union politics. But be that as it may, apparently the Department of Health and Human Services didn’t get the message, judging from the foreign origins of five of the companies awarded contracts to work on the Obamacare health exchanges — including the two most lucrative ones.

The Obama administration and congressional Democrats look hypocritical for allowing foreign firms to play such a significant role in the implementation of their most significant policy in decades. And while free-marketeers are quick to note that Buy American clauses limit competition and drive up costs, justification for using these particular foreign companies for the insurance exchanges remains lacking.

#ad#It would be one thing if these companies had secured the contracts because they were more competent than their American competitors — but as Healthcare.gov flounders, it becomes harder and harder to believe these bids were the best options available.

Nevertheless, as I reported recently, Serco, a British multinational with a terrible history abroad, was awarded a $1.249 billion contract — the largest awarded under the so-called Affordable Care Act — to process paper applications for the insurance exchanges. That contract has since been upped to $1.336 billion, an $87 million increase.

CGI Federal, a Canadian company, won a $93 million no-bid contract from the Centers for Medicare & Medicaid Services to become the main contractor for HealthCare.gov. That initial award has more than doubled, with CGI Federal receiving at least $197.5 million to date. And Reuters has reported that the contract now has a potential total value of nearly $292 million.

Other Obamacare insurance-exchange awards were made to Accenture (headquartered in Dublin, with most of its employees in India), PricewaterhouseCoopers (headquartered in London), and BearingPoint (headquartered in Amsterdam, with the American-owned Deloitte LLP as the parent company).

HHS has not yet responded to a National Review Online inquiry about whether procurement rules require all companies, foreign and domestic, that engage in the activity in question to be considered during the bidding process.

But back in the summer of 2008, candidate Obama deliberately catered to an emergent protectionist strain. At the time, CBS was reporting that 62 percent of American adults thought the rise of China and India had come at the expense of the U.S. economy, whereas only 14 percent thought it had been beneficial. So he launched the “Buy American, Vote Obama” campaign.

One of Obama’s favored talking points centered on how John McCain had failed to support Buy American requirements for motorcycles used by the Secret Service. The Obama campaign ad claimed that “American-made motorcycles like Harleys don’t matter to John McCain,” adding that “this is the same John McCain who supported billions in tax breaks for companies who ship American jobs overseas.” The ad concluded that “it’s time to hear the roar of the strong American economy again — and stop John McCain from shipping our jobs overseas.” The Obama campaign also began holding “Harley & Hybrid” rallies, touting his candidacy and the two American-made products — all green cars welcome, except Toyota Priuses.

The realities of reciprocal trade didn’t register until after Obama won the race. As president, he was hesitant to pursue the protectionist policies that he had endorsed as a candidate. But plenty of other Democrats took up the Buy American mantra in his place.

Harry Reid was among the leading advocates for Buy American provisions in the stimulus bills. Likewise, in 2009, Nancy Pelosi defended the Buy American clause in the stimulus. Speaking in Rome, she said that Democrats were simply “looking out for [American industries’] interest as we look to grow the U.S. economy. I don’t think that’s protectionism. I think that’s what any country would do for its workers.” And even Joe Biden publicly said that it was “legitimate to have some portions of Buy American” in the stimulus bills.

The list continues. Before he lost his Senate seat to a Tea Party candidate, Wisconsin’s Russ Feingold said that “by purchasing American-made goods whenever possible, our federal government will send a simple message to American workers: We support you.” Illinois Representative Daniel Lipinski echoed that claim: “For American taxpayer dollars to needlessly wind up in the pockets of workers in China and other foreign countries is indefensible in the best of times,” he said in 2009. “During the worst recession in more than a quarter-century, it’s a disgrace.” And West Virginia Representative Nick Rahall has said that “it is appalling, offensive and downright wrong to send out tax dollars to China when they should be invested right here at home in U.S. companies rebuilding America.”

Democrats’ Buy American advocacy has always been economically faulty, driving up prices and limiting options. Now, they can’t even claim the honor of consistency. Obamacare did not buy American, leading to suspicions that Democrats’ protectionist rhetoric has really been about winning votes all along. Meanwhile, American taxpayers are sending huge checks overseas to inept companies.

Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity.


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