ACS blames N.C. officials for Medicaid project debacle

In response to the North Carolina Health and Human Services Department's termination of its $171 million contract to build a new Medicaid payment system, Affiliated Computer Services Inc. accused state officials of causing crucial delays and is threatening to sue the Tar Heel State.

ACS lays out seven instances in which the state allegedly breached the contract with the Dallas-based company in a July 12 letter from Tom Burlin, ACS executive vice president, to North Carolina HHS Secretary Carmen Hooker Odom. Washington Technology obtained a copy of the letter this week.

Burlin alleges that state officials halted planned project activities and failed to provide adequate staffing, and did not provide necessary information to the company or comply with the contract deliverables review process. He further states that "actions and attitudes" of state officials demonstrated a lack of willingness to stick to the contract's schedule.

Moreover, Burlin' asserts that ACS had to involve resources beyond what was called for in its contract because of various state failures and that the company performed work for which it has not been compensated.

Burlin also lays the foundation for a lawsuit, saying that the state's termination of the contract, "will result in a costly lawsuit, ultimately the loss of many millions of dollars to the state [and] a substantial delay in the completion of a new MMIS."

Odom's July 14 letter canceling the contract claims that ACS failed to meet staffing levels and did not complete terms of its contract.

ACS spokesman Joe Barrett said that the company is waiting to see whether the state rescinds its contract termination, but acknowledged that a lawsuit is being considered.

"We feel that we've been left with no choice," Barrett said. "Legal action has been caused by bad faith actions in North Carolina."

In his letter to Odom, Burlin states that the new Medicaid payment system is about 30 percent complete, though considerable planning and design work has also been done.

Burlin asserts that as of May 18, North Carolina was considering an ACS takeover of its current MMIS operations from rival EDS Corp., Plano, Texas, and had requested ACS present a proposal for such a move.

ACS signed a five-year contract in 2004 to build a new Medicaid Management Information System for North Carolina.

EDS, which has handled Medicaid claims processing for North Carolina for about 30 years, and ACS have been battling over the contract since EDS protested the award in 2004.

ACS and EDS continued to feud over the contract through 2005, with EDS lawyers writing Democratic Gov. Michael Easley, asking him to stop ACS' work on the contract, according to published reports.

The contract also has been the subject of an ongoing lawsuit by EDS, which charged that the state improperly awarded the contract to ACS.