Indiana fires IBM from $1.3 billion welfare contract

State says Big Blue wasn't making progress on corrective action plan

Indiana this week canceled IBM Corp. contract as the prime on a $1.34 billion award to overhaul the state’s applications for food stamps, Medicaid and other welfare benefits.

Gov. Mitch Daniels (R) said IBM was not making enough progress to fix poor services under a corrective action plan put in place last spring.

"The fraud appears to have been stopped and we're still on track to save taxpayers hundreds of millions of dollars, but the intended service improvements have not been delivered, and that's not acceptable," Daniels said in a statement.

An IBM official told the Associated Press that the company was making progress. He blamed the recession and high unemployment for putting more stress on the system and making changes more difficult.

"IBM rejects the state's claims and believes the state's actions are unjustified," company spokesman John Buscemi said.

The state’s plan now is to use parts of its old system and parts of the modernized system that have worked well, Daniels said. 

Indiana also will continue to work with IBM’s subcontractors such as Affiliated Computer Services Inc., the AP reported.

The move opens the way for ACS to work more closely with the state to "meet the needs of their vision to provide a program that best serves the citizens of Indiana," an ACS spokesman said. "ACS remains fully committed to the success of this project.."

About the Author

Nick Wakeman is the editor-in-chief of Washington Technology. Follow him on Twitter: @nick_wakeman.

Reader Comments

Thu, Oct 22, 2009

And maybe IBM had some issues with their offshore "Global Partners"?

Thu, Oct 22, 2009 tuomoks

Have to agree with Alexandria, much more behind this than we will ever know. And, the government should really have at least a couple of competent people on their payroll, not just politicians. Not that contract companies would be fully blameless, sometimes they play politics for profit and forget the real goals but the responsibility is and should be on customer. Seen / worked too many government projects, in many countries / states, where the customer, government, has made the project fail just by incompetence. Of course, same sometimes happens in private, with internal problems in consulting company, etc. But should be cleared out before very costly and difficult cancelation / reassign of the project is needed. It's always 99% personal problems, not technical.

Thu, Oct 22, 2009 Paul Kansas

You don't get to offshore half of your workforce AND whine about unemployment causing you to be unable to produce. I have no pity for IBM.

Thu, Oct 22, 2009 carlo

IBM relies heavily on India. Though they may be compitent coders, it still requires either extremely extensive specs and business analyst who are quick to understand what is needed. Somehow either proper specs were not done or the IBM team is unable to understand or convey the problem to indian coders. If they wanted to use this model then there was certainly enough money in a billion dollar project to either move them to Indiana for a year or two, or do a better jobs in analysys and specs. You need compitent people on location with the client. Always is and always has been the problem with any project. The bigger the project, the more detached you get from the client and the less chance of success. Governments should aim at 18 month at a max.

Thu, Oct 22, 2009

IBM has been fired by other states for the same problems.. Indiana is just the latest who has IBM for not fulfilling the contract.

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