Texas Gov. Rick Perry has called a halt to transfer of state records to IBM under an outsourcing contract in place since 2005
The Dallas Morning News reported today that Texas Gov. Rick Perry has called a halt to transfer of state records to IBM under an outsourcing contract in place since 2005, citing lack of data backups and security required under the contract. The paper reported last month that a server crash in the Tyler Medicaid fraud division resulted in loss of records essential to Medicaid fraud prosecution by the state attorney general.
An industry insider, who asked not to be named, told Government Technology that the project has had issues from day one, and that IBM got the contract by underbidding Northrop by half. "IBM bought the business," said the insider, "and they've never been able to make a profit." The company had been seeking "the mother of all change orders" and had been fined repeatedly for non-delivery. Then in June, IBM started ratcheting back on the contract, said the source, and state CIO Brian Rawson fined the company $900,000.
The insider said that the Attorney General's Office was an early adopter of the contract and when the attorney general lost data that was not backed up, the state began to realize that something was wrong. "There's a real cluster of issues here. The agencies are complaining, and DIR is making them increase funding for this, but it was supposed to save money."
And the issue is only going to get hotter. "The governor is running against Kay Bailey Hutchison [for governor in 2010] and she's going to use this against him, so he's got to do something," said the insider.
In addition, IBM is the sole remaining bidder on a similar project in Georgia, but the Texas situation could halt or delay that award, said the industry source.