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EDITORIAL

The lesson to learn from failure of IBM contract

Privatization efforts should now be refined, not abandoned.

Monday, October 19, 2009 - 11:44 am

Gov. Mitch Daniels' cancellation of IBM's $1.37 billion contract to deliver welfare services will undoubtedly win praise from Republicans (he realized a mistake and corrected it) and criticism from Democrats (there was evidence to end it a lot sooner).

There is some truth in both those positions, but the governor should be given credit for the honesty of his announcement. Daniels said it wasn't a lack of resources that made the experiment in privatization fail. Nor was it a lack of effort.

“It was a flawed concept that simply did not work in practice.” He's admitting that his critics were right, or at least partly so. For Daniels, that amounts to an apology.

And the experiment did fail. The problems that plagued the system before - too many errors and too much fraud - were replaced by even more errors and unacceptable wait times for people to get vital benefits.

The state will now face monumental challenges in trying to get its welfare system back on track. It says it will create a “hybrid” system with the best of the old analog days and the best of the IBM automated approach. That will also mean a hybrid personnel system with state workers and employees of companies winning contracts for small pieces of the system.

There is likely to be an ugly transition period during which service will get a whole lot worse before it gets any better.

But the goals are worthy, and two are worth special mention:

• Clients won't just be herded into the automatic system. They will have a choice of applying for benefits in person, over the phone, by fax or online, and there will be face-to-face contact in county offices.

• Case management will take place in county offices: “There will be much more of a local focus instead of a statewide focus,” FSSA spokesman Marcus Barlow told the Indianapolis Star.

The failure of the plan should not be taken as proof that the effort never should have been tried in the first place. If we still believe in our republic's promise that states will be laboratories of democracy, we must accept experimentation. And some experiments fail.

The point is to learn from the failures. It could be argued that Indiana could have learned better from Texas, where a similar effort to privatize welfare failed spectacularly. And it should be argued that Texas and Indiana together provide a cautionary tale for other states planning such efforts.

But the focus should be on improving privatization efforts rather than eliminating them. Government can and must both serve its constituents and become more efficient.