April 16, 2005
Another CBMS mess update

Meant to post on this earlier, but things got a little crazy around here: Here's the latest installment from Father John on the privatization of Colorado's Benefit Management System (CBMS), which is described in this Denver Post article as being "a pathetic state of affairs". Father John makes a point at the end that I want to touch on:

One of the more telling comments above is the one about how they wanted to dump EDS as a vendor, but then realized this would cause more problems than it would solve. This shows the danger of the privatization of such essential elements of a welfare system. It's sort of like checking into the roach motel, you can check in, but you can't check out. Once these vendors get their hooks into the system, they become indispensible, and can then start jacking up the price, and/or simply fail to live up to all their contract obligations, and what can the state do? ...nothing, but like it.

There's a parallel to IT outsourcing here, since the main promise of each is reduced cost. Outsourcers will write a huge contract which covers all of the services they will provide in return for whatever sum of money you pay them. One of the ways in which they can ensure that this deal is profitable for them is to strictly enforce the terms of that contract; this enables them to control their labor costs. Anything which is not explicitly spelled out as being a service they provide is therefore something for which they can charge you an hourly time-and-materials fee at industry standard consulting rates. That can add up in a hurry, which gives them a strong incentive to nitpick about the contract. And as Father John observes, once this happens you don't have a whole lot of options available to you.

Posted by Charles Kuffner on April 16, 2005 to Budget ballyhoo | TrackBack