Thursday, October 15, 2009

Governor Daniels Ends Billion Dollar FSSA Privatization Contract

Indiana Governor Mitch Daniels today announced that he is cancelling the state's 1.34 billion contract entered into with an IBM-led group to privatize Indiana’s welfare system. This is a stunning reversal of the Governor's position early this year when he harshly criticized two Republican legislators who had publicly suggested there be a pause in the roll out of the FSSA privatization so that problems could be studied.

What we may have seen today is a welcome turning point in the concept of privatization. Originally started for the purpose of introducing competition into the delivery of services normally provided by government, privatization has devolved into a new form of patronage for elected officials seeking campaign contributions. Further, the original goal of privatization - competition - has been subverted by long-term, monopolistic contracts and a failure to supervise the contractor's performance under those contracts.

Hopefully the cancellation of the FSSA privatization contract will send a message to Indianapolis officials considering long term privatization contracts for such things as for parking meters and utilities. If privatization effort is not about market competition, it is not something that should be done.

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