The Courier Press is running an AP story on the ACS/IBM welfare privatization contract. The state may have gotten itself into a situation where it has no viable option to actually cancel the contract due to the fact that the contractor is doing a horrible job (at least under normal metrics — if you hated welfare programs to start with and wanted to kill them through a back channel, maybe the contractor is performing quite well.)
Gov. Daniels’ appointee to run the Family and Social Services Administration, Mitch Roob, gave a contract to ACS — his former employer — to review applicant eligibility for food stamps, Medicaid, and other benefits. It was a 10 year, $1.6 billion contract that privatized the work previously performed by about 1,500 state workers. The privatized operation has been riddled with problems – the most common of which are paperwork that is “lost” repeatedly and dropped telephone calls. Information is being sent 5 – 6 times before being acknowledged as “received” by the state. The ACS call center staff apparently has a tendency to just hang up when they get questions they don’t like. Gov. Daniels had characterized the state welfare system as “one of the worst in the country” when he took over. I don’t disagree that FSSA was in bad shape when he took over. But, he’s made it worse.
Paul Ogden has, many times, posted a thoughtful list about when government privatization is appropriate, and he has done so again in the context of the ACS/Medicaid privatization. Government privatization, like communism, seems to be one of those things that works well in theory but not in practice. Ogden suggests that some of the things you need before privatizing government services are actual competing contractors; no long term contracts; avoiding privatizing services for people with no political power; and contractors who are subjected to the open records and other transparency requirements imposed on government.
Gary Welsh has also had some good posts on the subject, particularly with regard to problems associated with having Roob – a privatization disciple in the Stephen Goldsmith mold – heading the department granting the contract to Roob’s old employer.
Needless to say, the ACS contract fails miserably on the Ogden chart. I would suggest that most big ticket government privatization efforts do. All too often, privatization seems to be a way for its champions to reward their cronies for undermining government services that the champions didn’t much like in the first place.
I think that Paul’s points are good, and that this point:
>>I would suggest that most big ticket >>government privatization efforts do
is especially true.
Big ticket privatization has one great advantage over using existing government workers – they private firms have the ability to make large political donations.
Although I do want to emphasize that small-scale outsourcing of non-core functions may be appropriate and efficient. Many state agencies (along with many downtown businesses) outsource their copier operations to IKON and other firms to run the copying center, with good results AFAICT. It would be reasonable to investigate whether outsourcing something like lawn servicing would make sense.
Although I *also* want to emphasize that outsourcing often turns out to be more expensive. Legislative Services, as you’ve pointed out before, apparently saved several hundred thousand dollars per year by bringing printing operations in house.
Just now seeing this Doug. Excellent post. I like Peter’s comment to that these big privatization contracts are more about generating or rewarding large political contributions.
I have to admit I was a big proponent of privatization in the 90’s. I just didn’t see the problemsthat privatization would become more about political patronage than leveraging the competitive forces of the marketplace.