Failed IBM deal could still cost millions



IEDC secretary, and former FSSA director, Mitch Roob
  • Image from IEDC
  • IEDC secretary, and former FSSA director, Mitch Roob

Amid news surrounding the Indiana primaries, the Times Square bomber and the Gulf oil spill, here's something you may have missed:

Remember that deal Gov. Mitch Daniels made with IBM to privatize welfare administration? The one that, despite ending up a total disaster riddled with waste and mismanagement, was costing the state millions each month?

Angela Mapes Turner, at Fort Wayne's Journal Gazette, revealed Sunday that IBM has continued to bill the state of Indiana since Oct. 15, when it was announced the contract would terminated. The bill since then? Another $125 million.

In today's Journal Gazette:

It took a public records request from The Journal Gazette to determine IBM has billed the state for $125 million since the deal was canceled.

IBM is one of two private-sector partners in the contract with Indiana’s Family and Social Services Administration. [...] The claims include $43 million for an annual “deferred fee,” $40 million in payments to subcontractors, $8.1 million for computer hardware and $1.2 million for furniture.

Where to begin? When budget shortfalls are forcing school cuts, possible library closings, and cuts to other services around the state, this is clearly something we can't afford.

But what fascinates me is the involvement of Mitch Roob, who, as FSSA director until Jan. 2009, oversaw the plan's implementation. The JG writes:

The governor and Secretary Mitch Roob, the [former] FSSA director, defended the plan, which was supposed to replace a paper-based caseworker system with an automated program. About 1,500 state caseworkers became employees of Affiliated Computer Services, IBM’s partner, which opened a call center and processing center in Marion. From the start, the effort was problem-plagued. [...]

In January 2007, before the program was rolled out, the portion of food-stamp cases mishandled was 4.38 percent. By January 2009, that number had increased to 18.2 percent. [...] The contract was canceled in October, to be replaced with a “hybrid” system in which FSSA staff and subcontractors handle cases as a team. ACS continues as a subcontractor [my emphasis].

What was Roob doing before his job at the FSSA? His bio on the Indiana Economic Development Corporation's (IEDC) Web site lists an impressive resume that includes Director of the Indianapolis Department of Transportation, President of the Marion County Health and Hospital Corporation, and Chief Operating Officer of the Indianapolis Water Company.

It doesn't mention Roob's tenure at ACS, where he was an executive before being hired to the Daniels administration.

Roob was promoted in Jan. 2009 to Secretary of the IEDC, the state's lead economic development agency, before the whole deal went to hell. It's a position he retains today. Reward, apparently, for a job well done.

But as long as Roob retains a major position in this administration, as long as ACS remains on the state payroll as a subcontractor, and as long as this costly experiment privatization deal continues to hemorrhage millions, the precise relationship between Roob, ACS and the state wants a bit more sunlight.

State assembly members promised in October to scrutinize ACS carefully, but we haven't heard much since then. This latest news reminds us that the whole thing still smells pretty bad, and that our days of paying for this ill-conceived deal are far from over.

Hat tip to the Indiana Law Blog.


That the debacle involves the state's Family and Social Services Administration (FSSA) is too ironic. Recall that State's Attorney General Greg Zoeller is suing the federal government over health care reform — reform Daniels claims will cost the state dearly. Citing cost concerns, Daniels suspended new enrollment for childless adults in the state's Healthy Indiana Plan, which is managed by FSSA.

Would Daniels need to be half as concerned with FSSA costs if he hadn't already shelled out millions to IBM and its subcontractors for an FSSA-linked program that didn't work?


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