The state is splitting the sheets with one of its biggest contractors — Accenture — unable to come to terms on revisions to a huge Health and Human Services contract that was supposed to save hundreds of millions of dollars.
Accenture — the leader of a consortium called the Texas Access Alliance — and the Health & Human Services Commission apparently couldn't settle a $100 million difference in what the state was willing to spend on call centers and related computer equipment and programming. According to state officials, the company has tentatively agreed to pay about $30 million and will walk away from its contract. A spokesman for Accenture, however, said no money would change hands to terminate the contract.
The state will have to hire as many as 800 workers — that's one estimate, and it's early in the game — to pick up the slack, delaying or possibly forfeiting some of the cost savings lawmakers were hoping to see when they consolidated eligibility systems from various state and federal welfare and health programs. Workers in the call centers that deal with clients of those programs, for instance, now work for Accenture. The state will have to hire them or their replacements — or bring in a new private company to do the work — to keep those programs going. An early estimate from House budget-writers is that those hires will cost $17 million to $18 million in the next budget.
And savings the state had hoped to realize from the Accenture deal — around $200 million over five years — will be delayed or lost now that the partnership between the state and the company is ending.
HHSC still hopes to see some savings from the switch to call centers and the new integrated eligibility program, which was supposed to consolidate the various applications for help Texans had to file under the old system. You'll also find lawmakers and policy makers who never thought this would work. Sen. Judith Zaffirini, D-Laredo, said she wasn't surprised: "Since the initiation of Accenture's contract, independent audits, investigations by the Comptroller's staff and reports from eligible persons who were denied services revealed Accenture's growing list of problems."
A spokesman for Accenture says the state would have realized the savings it originally hoped for if it had stuck with the contract and the procedures put in place by the company.
Jim McAvoy said the company agreed to scale back the contract in November, from $899 million to $543 million. The negotiations that followed that announcement didn't produce a deal, however, so the company and the state agreed to call the whole thing off.
"Negotiations start tomorrow on how to implement the unwind," he said.
Albert Hawkins, the state's commissioner of HHS, said the state and the company ended up around $100 million apart, with most of that attributable to work on the computers and programs used to run the state's integrated eligibility system. HHSC says that money was for services not included in last year's agreement to shrink the contract; the company says it was. That's the stuff divorces are made of.
Accenture will run the computer end of that through November, according to McAvoy, and when it'll stop doing other things it's doing will be determined in negotiations starting this week.
Maximus, another state contractor, will take over part of what Accenture is doing now; the state will take over the rest. And in its statement announcing the divorce, HHSC indicated that the grand privatization experiment might be over. The state will eventually take over most of what it farmed out to Accenture and others.
The broken deal will delay and probably shrink any savings the state hoped to realize. Hawkins said about $200 million in expected savings will be delayed. The state's top budgeteers were less specific, saying it's almost impossible to tell whether any money would have been saved at all.
In a press release, HHSC said the transition out of the contract will be done by November. They'll decide between now and then which services should be performed by state employees and which might go to new contractors.
Most of what was covered in the contract has been done by the private sector all along. But the call centers where claims and details are handled are new, and most of the savings were supposed to come from cutting state payrolls and letting the contractors do the work. Those cuts never came, and the state and Accenture were already shrinking the contract a year after they signed it.
The two legislators in charge of the budget — Sen. Steve Ogden, R-Bryan, and Rep. Warren Chisum, R-Pampa — said the numbers are too fuzzy at this point to say whether the breakup would have any impact on the budget. Senate Health and Human Services Chair Jane Nelson, R-Lewisville, was a proponent of the privatized eligibility system.
"I'm disappointed that it didn't work, but my goal is just to make sure that our clients get services. I don't care if it's state, I don't care if it's a vendor," she said. "But we had great frustrations, and we continue to have great frustrations."
