All Isn't Great in Government Outsourcing

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I've written several times about the trend of local and state government agencies employing outsourcing in an effort to cut costs and supplement their staffs. In fact, some agencies even work with offshore providers, a practice once widely shunned by the public sector.


But the practice shouldn't be seen as a panacea. As I wrote in April, while some government outsourcing efforts across Georgia are quite successful, others haven't been.


And Texas Gov. Rick Perry recently halted the state's plan to offload its data management tasks to IBM until the two sides can agree on a plan to correct ongoing problems. Two dozen agencies have submitted complaints about Big Blue, including instances of unexpected server and e-mail outages, corrupted files and a hacking incident revealing security breaches that weren't addressed in a timely manner. In one notable incident, a server malfunction in July destroyed nearly half of eight months' worth of documents belonging to Attorney General Greg Abbott's Medicaid fraud investigators.


Brian Rawson, the state's CTO, noted in a letter that the company "is not meeting expectations" and has been fined $900,000 for failure to complete timely backups, a condition of its $863 million, seven-year contract. Under the agreement, IBM will manage IT services and equipment purchases for 27 state agencies.


IBM is "taking the appropriate steps to resolve any issues," said company official Jeff Tieszen, who notes the state is on track to save $178 million by 2013. Some agency officials have claimed the state will need an additional $71 million in the next two-year budget cycle to cover unexpected IT costs and overruns. Most of the higher costs are driven by increased demand for computer time and services, according to Rawson's department, the Department of Information Resources.


Ironically, Texas was an early advocate of outsourcing government work, with lawmakers in 2005 ordering agencies to outsource their data storage, security and disaster recovery services. Not many other states have outsourcing initiatives of this scope, though Virginia last year launched a similarly ambitious program. Interestingly, IBM was the only one of three services providers that did not withdraw a bid for a contract to provide IT services to the state of Georgia earlier this year.