Ind. Cancels IBM's $1.3 Billion Welfare Contract

KEN KUSMER

INDIANAPOLIS (AP) — Indiana fired IBM Corp. on Thursday as the lead contractor on an ambitious, $1.34 billion project to automate applications for food stamps, Medicaid and other welfare benefits.

Gov. Mitch Daniels said the state informed IBM that it will lose its 10-year contract within 60 days because the Armonk, N.Y.-based company made too little progress to fix poor service as required by a corrective action plan ordered last spring.

The state's Family and Social Services Administration will develop a detailed plan for a "hybrid system" that Daniels said will incorporate successful elements of Indiana's old, face-to-face welfare system along with the call centers, document imaging and other automation IBM and its partners introduced.

The new system will involve companies that had worked with IBM, including Affiliated Computer Services Inc. of Dallas. Those companies now will work directly for FSSA, the project's new leader, FSSA spokesman Marcus Barlow said.

"Basically, we're cutting out the middle man," Barlow said.

IBM spokesman John Buscemi said the company believed it was making progress under the corrective action plan submitted July 1. The recession and high unemployment led to more demands on the welfare system, making the changes more difficult, he said.