Texas Agency Finalizes Termination of $899 Million Accenture Contract
AUSTIN, Texas, 15 December 2008 -- The Texas Health and Human Services Commission (HHSC) has agreed to a final settlement for the troubled $899 million five-year consulting and outsourcing services contract the agency originally signed with Accenture in June 2005.
HHSC says the agreement to end its contract with Accenture's Texas Access Alliance (Alliance) is worth more than $100 million to the state. Under the settlement, HHSC secured the following: (1) Accenture's Alliance will forgo $70.9 million in payments for services provided to the state; (2) the Alliance will pay $20 million in cash; and (3) it will provide a $10 million credit against future work performed by Accenture sub-contractor, MAXIMUS.
"We had two primary goals in winding down this contract, and we achieved both of them," said Health and Human Services Executive Commissioner Albert Hawkins. "We successfully transitioned the work to other vendors and back to the state without disrupting services, and we've negotiated a final agreement that protects the interests of taxpayers."
The contract originally covered call center operations and other eligibility support services for Medicaid, CHIP, food stamps and Temporary Assistance to Needy Families (TANF). In March 2007, HHSC announced that it would end the contract early. All services covered by the contract were transitioned to other vendors or back to the state by June 2007, and HHSC continued to negotiate on the final financial terms of the contract.
After the 2007 decision to terminate the Accenture contract, HHSC took over management of CHIP and maintenance of the state's computer system for eligibility services. HHSC signed interim agreements with MAXIMUS to process CHIP applications, staff the call centers, and perform enrollment broker services to help Medicaid clients enroll in health plans.
HHSC says it is now in the process of seeking competitive bids for call center operations and document processing services. The state has paid Accenture approximately $243 million under the 2005 agreement. Texas had originally anticipated $856 million in savings from the $899 million project. In addition to MAXIMUS, a number of other Accenture sub-contractors participated in the Alliance. Approximately 22 percent of the total contract value was expected to fund services delivered by historically underutilized Texas businesses.
"There's more work to be done, but we've made real progress in our effort to modernize our eligibility services and make it easier to apply for assistance," added Hawkins. "We have four call centers up and running, we've integrated modern technology into our business process, and the conversion to the new computer system is proceeding. We have put in place the infrastructure to let Texans choose how they want to apply for services and the means to deliver services more efficiently."
MAXIMUS announced that it resolved the firm's arbitration matter with Accenture concurrently with the Texas HHSC contract dispute, which had been outstanding since early 2007. MAXIMUS will pay $27.5 million in cash ($37.5 million pre-tax), net of insurance proceeds from its primary carrier, and $10 million in future services. The firm says it is pursuing additional insurance reimbursements.
Richard Montoni, Chief Executive Officer of MAXIMUS, commented, "We are pleased to put this long outstanding matter behind us on terms that are balanced and clearly manageable. In summary, the settlement is $23.2 million after-tax and this is before any additional recovery from our excess insurance carriers. In addition, MAXIMUS will realize the benefit of future revenue from the $10 million in in-kind services we will provide to Texas HHSC."
Montoni added, "We determined that resolving the matter and avoiding the continuing costs, distractions and uncertainty of the arbitration process was in the best interests of our customers, shareholders and employees. Following the wind down of the Texas Access Alliance contract in 2007, HHSC entered into direct contracts with MAXIMUS for the administration of its most critical health and human services programs including Medicaid Enrollment, State Children's Health Insurance Program (SCHIP), and eligibility support services, and we continue to run those programs for the State of Texas. That is the most important indicator of the quality of our services."
Texas H&HS release
Original 2005 Texas release
Project plan details
MAXIMUS release