Texas Suspends Massive Outsourcing Contract

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Late last week, the Dallas Morning News ran a story about a massive computer crash that destroyed hundreds of Texas Attorney General Greg Abbott's confidential documents which may prevent scores of Medicaid fraud prosecutions. The story also noted that the crash merely highlighted major problems with Texas's outsourcing of computer services to a group led by IBM.

Yesterday, the Dallas Morning News reported that Texas "Gov. Rick Perry suspended the transfer of state records to an IBM data management program ... saying serious glitches in Texasâ'' privatized computer system had put state agencies in danger."

Furthermore, "Mr. Perry said no more state data should fall under IBMâ''s control until his office can complete an assessment of the system."

In addition, the story states that the Governor in a letter to IBM says, â''IBM has failed to perform 'the crucial backup of data for more than 20 state agencies. The agency has failed to implement a system of checks and balances that ensures data security, jeopardizing the ability of state agencies to deliver services to their constituencies.' â''

IBM, leads a vendor group that won the $863 million, seven-year outsourcing deal in November of 2006; contract start was April of 2007.

Texas also told IBM that it has been fined $900,000 for a failure to complete timely backups as required by the contract.

According to yesterday's Dallas Morning News story, IBM spokesman Jeff Tieszen said the company is working to resolve the problems.

Tieszen was quoted as saying, â'' 'IBM takes very seriously the issues that have been reported,' he said. 'We are committed to helping the state to better serve its citizens through the innovative use of information technology.' â''

However, Tieszen implied in another story that the problems weren't really such a big deal: "Tieszen said that viewed from other angles, the contract is a success and the state is on track to save $178 million by 2013."

Do those savings include deductions for the added costs Texas citizens may have to eat from those lost prosecutions?

I hate to tell you, but trying to spin the situation positively by claiming it is a success if you look at it differently based on hypothetical savings five years from now isn't going to make the Texas Attorney General (or the Governor) happy about not being able to prosecute Medicaid fraud artists today. More likely, it is only going to make them - and all Texans - angrier.

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