Privatization lessons learned
December 29, 2006
Privatizing state social services was supposed to
save Texas taxpayers money, streamline a cumbersome bureaucracy
and speed up the delivery of assistance to the state's neediest
residents. Hundreds of state employees — who earned decent
salaries and benefits — would be replaced by hundreds of
lower-paid workers in call centers. Applicants for welfare,
Medicaid and food stamps would simply pick up the telephone, go
online or fax in documents. Call center employees would promptly
screen and determine whether applicants were eligible for social
services, relieving state workers of that complex, costly and
The state put up $899 million for the high
profile venture with Accenture. But the model that the
Legislature promoted and the Texas Health and Human Services
Agency set up flopped.
Texas Health and Human Services Commissioner
Albert Hawkins pulled the plug on the much-ballyhooed pilot
project the agency rolled out in Travis and Hays counties. He
was right to do that. Now the state human services agency is
revising its strategy to go private, hiring hundreds of
permanent state employees to pick up the slack and scaling back
its initiative to privatize public assistance enrollment.
Accenture's errors were costly. Many families
were wrongly denied social services or lost eligibility for
services because Accenture workers made policy decisions they
lacked training and experience to make.
Recognizing the privatization experiment was not
working, Hawkins slashed the contract with Accenture by $356
million and ended some of its functions two years early — in
2008 instead of 2010.
The commissioner made 900 temporary employees
permanent hires and scrapped plans to cut 2,900 state jobs.
Instead, 700 positions will be eliminated.
Hawkins also stopped Accenture from screening
applicants following the Central Texas pilot flop. Accenture
will be relegated to collecting and entering data regarding
applicants, a back office function. State employees will do the
more complex jobs of determining eligibility. The state will
recoup $30 million from Accenture in service credits and
"We didn't draw the line between vendor work and
state work in the right place," Hawkins said. "As we rebalance
the roles between the state and the vendor, we will be drawing
the line in a different place."
Hawkins has taken some very public hard knocks in
what he calls the rebalancing of the roles for the state and the
private vendor. It's rare, but refreshing, to hear a public
official openly acknowledge such an expensive and embarrassing
The state's antiquated system will be replaced
over the next 18 months with a modern computer system, called
TIERS, as the kinks are worked out. When the system is fully
functional, needy Texans will have a variety of ways to apply
for social services — online, by phone or in person. The
modernized system is up and running in Williamson County.
The commissioner now wants to apply the lesson
learned from Accenture in other areas where the Legislature has
mandated privatization, specifically the state foster care
system. He told us that the Legislature has an opportunity to
reexamine the foster care mandate when it convenes Jan. 9.
"These are a very fragile, vulnerable group of
kids and there needs to be careful deliberation about what is
delivered through contract and what is delivered through state
services," Hawkins said.
The Accenture experience has taught us important
lessons that legislators should take to heart.
State employees are indeed better suited for
administrative functions. Another is that privatization is no
guarantee that taxpayers are going to save money.