A Texas-sized consolidation

Consolidating the Texas Health and Human Services System

Commissioner: Albert Hawkins

Annual budget: $20 billion

Old: 12 agencies

New: Four departments:

Aging and disability services

Assistive and rehabilitative services

Family and protective services

State health services

Savings: $1 billion by eliminating redundant costs and services

Other requirements:

Centralize eligibility for programs

Consolidate administrative functions

Establish an inspector general office

Primary business opportunities:

Applications development

Business process re-engineering

Infrastructure development

Outsourcing

Bob Campbell, Deloitte's national consulting leader for its public-sector practice, said the company benefits from the "national visibility" that comes with its work on the Texas health and human services consolidation.

Olivier Douliery

"Instead of just offering a set of policies and oversight without a backbone, the entire organization has been stiffened by putting each of the remaining four departments in a direct line underneath the commissioner." ? Gregg Phillips, deputy commissioner of the Texas Health and Human Services Commission

State's effort to merge human services agencies sparks new business

A major consolidation of Texas' health and human services functions should produce a wave of fresh opportunities for integrators over the next three to five years.

The state will need contractors for business process re-engineering, applications development, infrastructure development and outsourcing major administrative and IT support functions, state officials said.

"We're really not taking anything off the table," said Gregg Phillips, deputy commissioner of the Texas Health and Human Services Commission (HHSC).

Analysts expect the consolidation to produce projects worth hundreds of millions of dollars. Integrators hope the effort will re-energize their state and local businesses, which have been hammered by ongoing budget shortfalls.

"This is the most important IT opportunity in Texas for the next two years," said Kate Connelly, the Texas state executive with American Management Systems Inc. of Fairfax , Va. "Most vendors will be eager to see how they can participate."

In June, Texas Gov. Rick Perry signed House Bill 2292, which consolidates 12 HHSC agencies into four departments. By eliminating redundant functions and operations, the legislature hopes to improve service and achieve more than $1 billion in savings. The legislature changed the fundamental role of the commission from strategy and planning to oversight.

"Instead of just offering a set of policies and oversight without a backbone, the entire organization has been stiffened by putting each of the remaining four departments in a direct line underneath the commissioner," Phillips said.

The four new departments are family and protective services, assistive and rehabilitative services, aging and disability services, and state health services.

The law also requires the commission to centralize eligibility determination for a variety of health and human services programs, establish an office of inspector general and consolidate administrative functions across health and human services agencies.

[IMGCAP(2)]HHSC has an annual budget of about $20 billion to operate more than 200 programs that employ 50,000 people. The existing agencies will be merged into the new departments by this fall, but the total transformation should take three to five years, Phillips said.

The commission wants to attract a wide range of technology companies that can share best practices and innovative approaches to help complete the consolidation, he said.

The commission qualified 93 companies last year to serve as "implementation consultants," bidding on task orders to work on the consolidation.

The commission has awarded about six task orders, but is expected to generate larger requests for proposals over the next few months, company officials said.

For larger initiatives, such as outsourcing contracts for human resources, payroll services and IT support and services, the commission will release requests for proposal open to all vendors, not just the implementation consultants, Phillips said.

HHSC is pursuing infrastructure initiatives related to e-mail, address file and print servers and identity management, he said.

The commission also is implementing software from PeopleSoft Inc. of Pleasanton, Calif., for human resources and financial management, and launching pilot projects with Hewlett-Packard Co. of Palo Alto, Calif., and Gateway Inc. of Poway, Calif., to supply tablet personal computers with digital signature capabilities, he said.

Several integrators are qualified as implementation consultants, including Accenture Ltd., Hamilton, Bermuda; AMS; BearingPoint Inc., McLean, Va.; Maximus Inc., Reston, Va.; Northrop Grumman Corp., Los Angeles; and Tier Technologies Inc., Walnut Creek, Calif. A large number of Texas-based technology companies also won the right to compete as implementation consultants.

Several key projects have been awarded to get the consolidation rolling. Last year, New York-based Deloitte won a pivotal contract to operate and manage the project management office that oversees the consolidation. The one-year, $1.8 million deal has several option years. The state received 131 responses to the contract's RFP, Phillips said.

"This is a good contract for Deloitte, given its national visibility," said Bob Campbell, national consulting leader for the company's public-sector practice.

Because it runs the project management office, Deloitte will not participate as an implementation consultant, although the company may pursue future opportunities outside that contract, Campbell said.

Deloitte is also the prime contractor developing the Texas Integrated Eligibility Redesign System, known as Tiers, which will provide state workers with a Web-based eligibility determination system for human services programs. The company has received $68 million of the $119 million total contract value, Campbell said. The contract expires in June 2005.

The commission plans to give Tiers a top-to-bottom review to see how it works in the new environment. It may make changes to the system, most notably adding call centers where appropriate, Phillips said.

At the same time, the commission has awarded a contract for $1.2 million to Accenture for communication strategy and risk management services, Phillips said.

The consolidation is moving quickly, and the implementation consultants have a short time to respond to task orders, company officials said. The task order process is designed to allow the commission to procure services quickly to meet the consolidation's aggressive timelines, Phillips said. The response deadlines are set on a case-by-case basis, he said.

In some cases, companies have had only seven days to respond to task orders, company officials said.

"The window to respond to task orders is very tight," Connelly said. "Those of us in the consulting community knew that would be standard procedure. However, having a sense of what work is in the pipeline would help all of us in responding."

For the consolidation to succeed, the commission must develop processes to measure progress and make adjustments along the way to deal with legislative, economic and technological changes, said Thom Rubel, vice president of government strategies for Stamford, Conn.-based market research firm Meta Group.

"They're going to need to adapt as they go along," Rubel said.

Staff writer William Welsh can be reached at wwelsh@postnewsweektech.com.

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