Science & Technology
Science and Technology
Science and Technology
Thu, May 13, 2010 
INDIANAPOLIS--([ BUSINESS WIRE ])--IBM (NYSE: IBM) today filed suit seeking payment owed by the State of Indiana for IBM's work to revamp and modernize Indiana's antiquated and highly inefficient welfare eligibility system.
"All IBM seeks are those payments that the State promised would be paid to IBM in the event that the State chose to terminate."
The suit, filed in Marion County, Indiana, seeks recovery of fees and expenses owed to IBM under a contract signed with the Family and Social Services Administration (FSSA) in 2006.
The State announced in October 2009 that it had decided to change course and would no longer use IBM as the prime contractor for the project. Although the contract gives Indiana the right to take such action, it also requires that it pay IBM certain amounts, including deferred fees and equipment costs, if it 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 business with Indiana expecting and depending on the State to fulfill its contractual commitments.
Specifically at issue in the suit are expenses IBM incurred at the outset of the project but, as an accommodation to the State, agreed to defer payment to spread costs more evenly over the 10-year project. Under the contract, payment of those expenses is owed to IBM if it is removed from the project "for any reason."
The FSSA is in the process of implementing a "hybrid" system using IBM technology, infrastructure, applications, automated processes and systems. The FSSA has announced that the hybrid system has been so successful that it wants to expand it a" underscoring IBM's contributions to an improved welfare eligibility system in the State.
IBM, in partnership with and directed by the FSSA, worked to revamp a welfare eligibility system described by Governor Mitch Daniels prior to IBM's involvement as "broken" and one of the worst in the nation because of extensive fraud, high error rates, long customer wait times, onerous requirements that applicants appear in person at county processing offices, and slow progress in moving people from welfare to work.
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.
Results acknowledged by the State include:
- A simplified and more accurate application process via a Web portal, call centers and automation that makes it easier for persons to apply for benefitsfrom their home, libraries or any PC connected to the Internet;
- Curtailing fraud that was estimated to cost Indiana taxpayers $100 million a year prior to IBM beginning work on the project;
- Reduction of Indiana's operating expenses by approximately $40 million per year for 2008 and 2009 and projected savings of hundreds of millions of dollars in coming years;
- Creation of 1,000 new private-sector, high quality jobs;
- Ability for agencies assisting clients to view case files electronically and better advocate on behalf of their client.
IBM is not disputing its removal from the project. In its court filing, IBM acknowledges that the contract gives Indiana the right to replace it as the lead contractor and that "All IBM seeks are those payments that the State promised would be paid to IBM in the event that the State chose to terminate."
