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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowIndiana’s privately run welfare project has so many problems that the state could start taking steps to cancel its $1.16 billion contract with IBM as early as this fall, a state official said today.
Secretary Anne Murphy of the Indiana Family and Social Services Administration said she asked lead vendor IBM Corp. to submit a “corrective action plan” as part of a process that could result in canceling the 10-year deal if promised improvements don’t occur by the end of September. She said she expects to review data from the changes in mid-October.
“We’ll allow them an opportunity to start correcting those items, and we expect to see improvement by this fall,” Murphy said.
Canceling the contract would set back efforts in some states to outsource and automate welfare systems and move away from cost-intensive, hands-on work by government case workers. The industry and some members of Congress have closely watched the Indiana experiment after a similar one in Texas ended with a canceled contract with Accenture in 2007.
Murphy’s comments are the first by a senior member of Gov. Mitch Daniels’ administration saying that IBM and its partners, most prominently Dallas-based Affiliated Computer Services Inc., could lose the contract.
IBM and its partners so far have taken over welfare intake in 59 of Indiana’s 92 counties and now handle about one-third of the state’s 1.2 million-person caseload. The state so far has paid them more than $315 million under the contract.
Murphy said a 12-week review of their efforts resulted in more than 200 recommended changes to improve training, reduce turnover, add 350 more employees and introduce more technology to speed up approval of welfare applications and reduce error rates. The additional staff, including 40 managers, raises to more than 2,600 the number of private employees working with welfare recipients.
IBM spokesman Jim Larkin said the company “is working closely with the state to implement that plan in an aggressive manner.”
Clients, their advocates and lawmakers have harshly criticized the IBM team for lost documents, slow approvals and severed eligibility for Medicaid, food stamps and other benefits. Federal food stamp officials have also requested improvements.
Four members of the Indiana House of Representatives briefed by Murphy said she told them the corrective plan was an intermediate step before the state resorted to canceling the deal.
“She did say that they would initiate breach of contract, and she said IBM was aware of this,” said Rep. Suzanne Crouch of Evansville, a Republican like Daniels.
Daniels’ spokeswoman, Jane Jankowski, emphasized that the state wants the IBM team to succeed and the contract to continue.
“Our focus is on improvements to the project, and that’s what we’re working on,” Jankowski said.
Daniels has said repeatedly that he inherited one of the worst welfare systems in the nation and has made the IBM deal one of the hallmark initiatives of his 4½-year-old administration. When Murphy, shortly after becoming FSSA’s chief in January, told him how many problems the project had, he became personally involved.
“I took it to the governor and I showed him the data, and he called the executives at IBM and ACS and told them that they needed to make changes,” Murphy said.
Daniels had signed the contract in December 2006, saying it would give Indiana taxpayers “a billion dollars of savings” and serve welfare recipients better. “No decision we’ve made is more clearly in the public interest,” he said at the time.
However, critics wary of seeing similar problems to those in Texas already were condemning the contract. In Washington, Sen. Tom Harkin of Iowa and Rep. Henry Waxman of California, both Democrats, raised concerns in letters to then-U.S. Agriculture Secretary Mike Johanns, whose agency oversees the food stamp program.
Also criticized were ACS’ ties to Murphy’s predecessor, Mitch Roob, a former executive at the Texas-based technology vendor. Under the Indiana contract, FSSA outsourced 1,500 of its employees in 2007 to ACS to operate call centers and perform other tasks.
Roob left FSSA in January to take over Indiana’s economic development efforts, and Murphy, his deputy secretary and chief of staff, rose to FSSA’s top job. After reviewing data on the welfare project, she decided to halt its rollout and go to the governor.
“It was apparent that there were a lot of problems,” she said. “I just told him I was surprised at the level of problems with the project and that it was going to take a lot of work to correct it.”
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