Cost and risks mount in billion dollar IT privatization gamble
The BCGEU is calling on the Campbell government to review Information Technology (IT) privatization and halt any further expansion following the spectacular failures, privacy breaches, massive cost overruns and allegations of fraud and bribery against subsidiaries of the Texas based Electronic Data Systems (EDS) and Virginia based Maximus.
The BC government has already privatized the administration of Provincial Revenue collection with EDS. MSP and Pharmacare are privately administered by Maximus.
"The Campbell government has committed nearly a billion dollars to foreign based multinationals that fail to deliver time and time again" said BCGEU president George Heyman.
The BC government has an outstanding Request For Proposal looking for a private company to provide mainframe hosting for the BC government. The contract could run for 20 years. EDS and Maximus are both considered prime contenders for these contracts. This privatization would put a vast array of confidential government information in the hands of these troubled companies.
Serious problems continue to plague both EDS and Maximus in jurisdictions around the world (for a detailed list see attached backgrounder):
- EDS is at the centre of a data leak in Britain described as "catastrophic" by The Times newspaper (November 22, 2007). To avoid an exorbitant EDS surcharge to remove personal data, the government shipped insecure files. Data on 25 million British citizens has been misplaced leaving them vulnerable to identity theft.
- In September EDS agreed to pay almost $500,000(US) to halt a U.S. Securities and Exchange Commission investigation into allegations of accounting irregularities and bribery allegations in an Indian contract.
- In July Maximus paid a $30 million (US) settlement after the company was accused of helping to defraud the federal Medicaid program.
"Why is the Campbell government continuing to sign multi-year contracts with foreign multinationals that are experiencing serious problems in other jurisdictions," Heyman added. "The benefits are non-existent. The risks are too high."
MAXIMUS AND EDS IN BRITISH COLUMBIA:
- November 2004 - EDS awarded a 10-year contract worth $572 million by the Ministry of Provincial Revenue to manage revenue and debt collection. Cost to taxpayers has climbed 21% in the first three years of the contract.
- November 2004 - Maximus awarded a 10-year, $325-million contract by the BC government to manage provincial health records (Pharmacare & MSP).
- 2005 - Maximus fined for violating contract with BC government. Failed in seven consecutive months to provide adequate service and waitlists were longer than contractually agreed.
MAXIMUS AND EDS IN OTHER JURISDICTIONS:
- November - EDS is at the centre of a "catastrophic" data leak in which personal information on 25 million British citizens was lost. Attempting to avoid an EDS surcharge to remove confidential information from data files, the UK government transported insecure files which were lost in transit.
- November - State of Connecticut sues Maximus over a botched $6 million upgrade of a major law enforcement database.
- October - The UK government considers court action against EDS. Problems plaguing an EDS computer system to implement tax credits led to millions of pounds of overpayments.
- September - EDS agrees to pay $490,902 (US) to settle a Securities and Exchange Commission investigation into accounting irregularities. The company still faces shareholder and employee lawsuits connected to the case. In a related decision, a former employee pays a settlement in relation to allegations of bribing a government official in India.
- August - the UK National Offender Management System freezes spending on an EDS contract to deliver a computer system for the prison & probation agencies after EDS cost estimate increases from £234 million to £950 million. The entire program may be scrapped.
- July - Maximus agrees to a $30 million (US) settlement amidst allegations from the US government that Maximus helped defraud the federal Medicaid program. Chief Executive Richard Montoni tells the Washington Post that Maximus "has accepted full responsibility for the conduct of its employees."
- March - Texas government cancels $899 million (US) contract with private consortium, including Maximus, hired to privatize the state's social services eligibility system after a year of problems including delays, missing data, missed payments and declining enrollment.
- Ontario government terminates a 4 year contract with Maximus for failing to deliver services as contractually agreed. Ontario government sues Maximus and wins a $2.5 million law suit.