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By Mel Duvall
IBM has taken the state of Indiana to court in an attempt to get the state to pay for work it performed in revamping and modernizing its welfare eligibility system.
IBM filed a suit in Marion County seeking recovery of fees and expenses it says it is owed under a contract signed with the state’s Family and Social Services Administration (FSSA) in 2006. The 10-year, $1.34 billion contract called on IBM to automate the system the state uses for food stamps, Medicaid and other benefits.
But it’s not the only one suing.
The state announced in October of 2009 that it had decided to change course and would no longer use IBM as the main contractor on the project. It cited a number of problems with the project, including inaccurate eligibility determinations, lost files and backlogs. The state is looking for IBM to return a portion of the amount already paid for work performed. It too has filed a suit in Marion County, but it has not specified the damages sought.
The state agency says it is “now faced with expending hundreds of millions of dollars in re-programming” and will need to replace IBM’s failed systems. “FSSA’s damages are significant and growing,” it says in the suit.
While IBM doesn’t dispute the state has the right to take a different course, it says its contract requires Indiana to pay certain amounts to IBM, including deferred fees and equipment costs, if terminates the contract “for any reason.”
“By refusing to honor certain contract provisions, while at the same time relying on other provisions to remove IBM from the project, the state threatens to undermine the integrity of a public procurement process under which thousands of private companies conduct their business,” IBM said in a statement.
In terms of the work performed on the contract, IBM argued that “under the FSSA’s close supervision, IBM rolled out a revised eligibility system to 59 Indiana counties during a time of dramatically increased demand for welfare services because of the deteriorating state and national economies and statewide natural disasters.”
It claims the systems implemented resulted in a simplified and more accurate application process via a Web portal; a curtailment of fraudulent claims; a $40 million reduction in operating expenses per year in 2008 and 2009; and the ability for agents assisting clients to view case files electronically.
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