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We still have those outsourcing blues

We never learn from history. That’s just how we roll in this state.

In 1991, the Texas attorney general’s office signed an $11 million contract to computerize its child-support payments system. By 1997, the deal with Andersen Consulting had ballooned to more than $68 million and was three years behind schedule. A state audit found the company deserved its fair share of the blame for overpromising and underperforming.

A decade later, Andersen Consulting had renamed itself Accenture and was in the crosshairs of Texas lawmakers again after an $899 million contract to manage the Children’s Health Insurance Program and run call centers enrolling Texans in food stamps and Medicaid went awry. Poorly trained staff and technical problems led to a series of well-publicized snafus, including applicant backlogs growing by thousands and misinformed workers denying benefits to eligible families. Texas ultimately paid Accenture $244 million and canceled the contract.

Despite the two high-profile flubs, Accenture’s relationship with Texas appears stronger than ever. The company is in charge of most of the state’s Medicaid claims processing, as well as a $99 million upgrade of the AG’s child support payments system, two areas synonymous with its past missteps.

That a company with a 20-year history of troubled state contracts would continue drawing state business does not surprise capital veterans who have tried to reform the state’s contracting system.

“My observation over the years is we have often entered into contracts that may not have been in the best interest of the state, and we try to overcome it by managing them poorly,” said Carl Isett, a Republican state representative from Lubbock from 1997 to 2010 who worked on contracting issues and is now a lobbyist. “It’s just the recurring theme.”

[…]

State Rep. Garnet Coleman, a Houston Democrat first elected in 1991, said he would support temporary “freeze-outs” from future bidding by companies that have been shown to handle past contracts poorly. Yet more important than holding vendors accountable, he said, is boosting the state’s resources so that agencies aren’t outgunned when dealing with the private sector.

“The only way to do outsourcing properly is to have enough people working on the agency side to do appropriate oversight of the company that has the contract,” Coleman said. “What we don’t want is the tail wagging the dog, which is what usually happens.”

Coleman recalled being in the Legislature in the 1990s, when “outsourcing” emerged as a buzzword, coming up constantly in hearings and in policy proposals. Texas was drawing national attention for its efforts to transfer responsibilities onto the private sector, which Republican lawmakers predicted would lower costs while producing a reliable, efficient and technologically sophisticated delivery of services.

In 1997, under Gov. George W. Bush, the state began taking bids to outsource the state’s welfare, Medicaid and food stamp programs, predicting the move would save the state at least $10 million a month. The concept, viewed at the time as the most ambitious privatization effort by any state, fell apart after President Bill Clinton denied Bush’s request for a waiver from federal rules requiring that government employees handle much of that work. Bush accused Clinton of siding with politically powerful labor unions over good policy solutions.

The setback slowed, but didn’t stop, Texas’ march toward privatization. In 2003, Gov. Perry signed House Bill 2292, which consolidated 12 health and human services agencies into five and ultimately replaced thousands of state workers with private contractors handling duties like screening welfare recipients.

More than a decade later, the bill’s author and lead proponent, former state Rep. Arlene Wohlgemuth, described the bill as a success in its goal of shrinking state government and outsourcing services better handled by the private sector. Yet contracting oversight needs to be reformed, she said.

“In my opinion it is one of the greatest weaknesses of state government,” said Wohlgemuth, executive director of the Texas Public Policy Foundation, a conservative think tank. “We need to do a better job of enforcing the contract once we have agreed upon it and auditing those contracts.”

Of course, firing all of the HHSC employees and simply discontinuing all of its programs – an outcome that would have delighted Arlene Wohlgemuth – would have succeeded in “shrinking state government”, too. The fact that HB 2292 was a massive boondoggle that cost the state hundreds of millions of dollars while providing worse service and disrupting the lives of hundreds of experienced state employees isn’t worth comment on her part. You can see why we continue falling into this particular rabbit hole. No business would undertake this kind of project without a phalanx of project delivery managers and a contract that provided for rebates and penalties in the event of failing to meet benchmarks. All the outsourcing zealots want is to save a few bucks by any means necessary, even if it winds up costing more in the long run. Go read the whole thing and remind yourself why oversight matters. EoW has more.

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