Daniels cancels IBM welfare privatization contract


Sandra Chapman/13 Investigates

Indianapolis - Indiana has ended its troubled $1.3 billion deal with IBM to provide welfare services to the state's neediest families.

For months, 13 Investigates has shown you how the largest contract in state history has failed to deliver.

"I've ordered the termination of IBM's contract. We will now be trying again with a hybrid system in which we try to incorporate the best of both, the old and the new," said Gov. Mitch Daniels in his opening statements Thursday announcing the end of the deal.

Daniels said IBM was fired for failing to live up to its $1.3 billion deal with the state despite months of warnings to fix the broken system.

"It was very flawed in concept. In many respects they were right. The system wasn't working and it wasn't getting better despite best efforts," the governor said, acknowledging the ongoing complaints of critics.

"I think it's the right thing to do when you recognize you make a mistake to adjust, regroup, because there were too many people suffering; too many people's lives in danger," said Speaker of the House, Pat Bauer (D-South Bend), in reaction to the news.

Under the revised plan, FSSA will now oversee the intake of applications using workers from ACS and Arbor until more highly trained staff can be placed in those roles. State employees will continue to make benefit determinations.

Advocates like John Cardwell welcome the return of caseworkers to the system.

"The state blew up a ton of experience, a ton of the people in the system that had 20 years, 30 years of experience and who were awfully good at what they did are now gone," he said.

"We're going back to a face to face system. We're going back to case management," insisted the governor, calling it a better safeguard against mistakes.

The deal with IBM and Dallas-based ACS was supposed to bring the state nearly $500 million in savings over ten years and promised improved customer service.

Former FSSA Chief Mitch Roob made the push online back in November 2006.

"You shared with me your fears that the changes we are about to make will hurt our clients and our employees. If we don't make these changes we stand to lose millions," Roob said on the black and white videotape.

Roob abandoned the transition earlier this year to take a promotion as Director of Economic Development, leaving behind lost records, long wait times and a system that erroneously denied the neediest Hoosiers of their benefits - people like Shannon Frye who is legally blind and unable to work. She waited nearly a year just for a decision.

"Over and over the same thing. It would be like it's processing, it's been approved and it's going out," explained Frye about the year of delays.

Insiders at the ACS-run Call Center in Marion told 13 Investigates:

"We were told at one time to tell clients their benefits would be in there within 48 hours regardless of it they were or not," said former Team Leader Gregory Guy. "We were told to lie."

"It makes you sick, 'cause you know that there's no way that this will be done," another former worker, Angie Kennaugh, told 13 Investigates.

"It's a blow to privatization," added House Speaker Pat Bauer, who was against the deal from the beginning. "I personally don't think you should make profit off of the poor. I think they [IBM] ought to be embarrassed enough to go away and pay us something. Pay us a penalty," he told reporters.

The governor denied the failed contract is an indictment on privatization, but insists Indiana residents will see some savings, albeit smaller than originally projected.

"This will still save Indiana taxpayers tens of millions of dollars a year," he said.

IBM says it was making progress and regrets the governor's decision. The company has not indicated whether it will take any legal action.

The contract will end in 60 days, followed by a transition period to determine new roles for the remaining contractors.

Daniels admits training is a high priority. ACS says it will work closely with the state and is committed to its success.

Read more about the new plan.

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