Critics: Failed Indiana-IBM deal can warn others

Indiana said it was going to get outsourcing right when it turned welfare eligibility services over to a private contractor in 2007. Now critics say the failed move is the latest warning that states should not allow for-profit companies to run social services.

The ambitious, $1.34 billion effort to automate applications for food stamps, Medicaid and other welfare benefits was being closely watched after states such as Texas had problems when they tried similar plans.

Indiana fired IBM Copr. as the lead contractor on the project Thursday over problems including lost documents, delays in benefit approvals and poor service.

"Other states should beware," said Jim Wallihan, an advocate for senior citizens in Indiana. "Indiana's been a good demonstration, along with Texas, that there's some variables involved that just don't take well to privatization."

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