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.

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