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INDIANAPOLIS – Indiana will spend nearly $180 million more than it initially planned to privatize and automate many of its welfare functions just two years into a closely watched 10-year deal that is one of the most lucrative contracts in state history.
The cost of the $1.16 billion contract Gov. Mitch Daniels signed in late 2006 has risen 15 percent, to $1.34 billion, under changes made to the agreement with a group led by Armonk, N.Y.-based IBM Corp.
The amendments, found in a contract review by The Associated Press, include one that gave the IBM group an additional $47.3 million – some of which will be used to correct problems with the project. Four top administration officials signed off on the additional money in April, shortly after Daniels told IBM officials they needed to fix a system that critics charge has erroneously canceled benefits even as the recession forces more people to seek food stamps, Medicaid and other government help.
Indiana’s welfare project is one of the most ambitious efforts by a state to automate welfare systems and move away from cost-intensive, hands-on work by government caseworkers. The government services industry, federal officials and some members of Congress have scrutinized Indiana’s effort after a similar one in Texas ended with a canceled contract with Accenture in 2007.
Daniels has said repeatedly that he inherited one of the nation’s worst welfare systems. The Republican governor has made the IBM deal one of the hallmarks of his 4 1/2 -year-old administration.
Money for the project comes from appropriations to the state’s Family and Social Services Administration. The state legislature approves the social service agency’s funding but did not have a role in approving the IBM contract, which Daniels initiated.
Indiana House Speaker Patrick Bauer, D-South Bend, a frequent critic of the effort, expressed dismay over the rising costs.
“I think the whole thing’s out of control,” Bauer said. “It didn’t work in Texas, and it’s not working here.”
John Cardwell, leader of a group of advocates documenting problems that clients have faced, said the project has been shrouded in secrecy and questioned whether the contract amendments fully reflect the cost. He noted FSSA still has its own employees involved in welfare intake, must invest resources in responding to increased federal oversight and is defending itself against two lawsuits challenging the contract.
“We need a complete audit,” he said.
IBM spokesman John Buscemi acknowledged Friday that additions had been made to the contract but declined to elaborate.
FSSA spokesman Marcus Barlow said the contract amendments reflect work not included in the original agreement, such as processing applications for the Healthy Indiana Plan, the state-sponsored medical savings account for low-income adults, and emergency food stamps after floods last year.
Two amendments approved in 2008 provided an additional $130.2 million for HIP-related work. Barlow said the IBM team, including Dallas-based Affiliated Computer Services Inc., has 93 people working on HIP.
Nearly 100 changes had been proposed or executed as of Jan. 12. Some were rejected or withdrawn, and Barlow said many added no cost.
