AUSTIN – A former state official who played a major role in the state's biggest privatization fiasco is now making money trying to help Texas fix the problems that resulted.
Gregg Phillips was the state's No. 2 social services official several years ago, and he led a push to hire a private company to evaluate applications for public assistance.
Now his Austin-based company, AutoGov Inc., has received $207,500 since November to help the state eliminate errors in deciding whether an applicant gets food stamps or other aid and how much recipients get. AutoGov was hired without other companies having a chance to bid for the work.
Health and Human Services Commission spokeswoman Stephanie Goodman said that the agency's commissioner, Tom Suehs, and his predecessor, Albert
Hawkins, agreed that the company's software might alleviate the problem.
"They both faced the same problem – high error rates – and thought it offered a potential solution," Goodman said.
State laws on former employees lobbying or contracting with agencies would not prohibit such an arrangement, given that Phillips had been off the state's payroll for several years. But critics of the deal say it's troubling that a former employee is getting paid to try to fix problems spawned by an idea he helped hatch.
A leader of a state employees union complained that Hawkins and Suehs – both appointees of Gov.
Rick Perry – again have sought high-tech, low-cost fixes for the loss of experienced state workers.
Mike Gross, vice president of the Texas State Employees Union, also said he's troubled that Hawkins approved a vendor subcontract with two of his former aides – Phillips and AutoGov's chief executive, Rose A. Hayden, Hawkins' former chief of staff. The company is paid as a subcontractor to the larger firm that the state hired to run the system.
"The whole thing smells very bad," Gross said. "We're now hiring the guy who got us in the mess in the first place. It is absolutely stunning."
Phillips couldn't be reached by phone or e-mail to answer questions about the contract. A receptionist at AutoGov said Hayden was in a meeting and would not be able to return a call.
Hawkins said AutoGov was the right choice because it had experience doing similar work for the Texas Youth Commission and in other states' social programs. He said he saw no conflict of interest or appearance problem.
"Both of them had been gone from the agency, what, four or five years?" Hawkins said. "So I certainly didn't perceive it as being any kind of conflict-of-interest concern."
Hawkins said he didn't put the work up for competitive bidding because "it was within the scope of a contract that was already in place."
He was referring to an interim deal under which Texas pays Reston, Va.-based
Maximus Inc. $134 million a year to run eligibility-screening call centers, enroll youngsters in the Children's Health Insurance Program, and assign them a doctor.
It's unclear whether the state could have found a better deal by seeking bids for a contract. Hawkins suggested that had he tried, Maximus might have sued the commission. When pressed, he said: "It at least would have required some contract discussions with Maximus."
Lisa Miles, vice president for investor relations for Maximus, declined to discuss the company's hiring of AutoGov. She referred all questions to Goodman, the state spokeswoman.
Goodman said Suehs, who formally approved Maximus' hiring of AutoGov as a subcontractor on Nov. 10, showed no favoritism toward his former colleagues.
"Played no role in the decision," she said in an e-mail.
Phillips, a former
Mississippi state official, served under Hawkins in 2003-04. He headed Perry's 2004 investigation of ineptitude at Adult Protective Services before resigning for health reasons in September 2004.
Hayden was Hawkins' $125,000-a-year chief of staff at the commission and played a role in the agency's help with legislation in 2003, Hawkins said. Earlier, the two were colleagues in Gov.
George W. Bush's budget office and at the Legislative Budget Board. Hayden left the state in October 2004.
Phillips helped former Rep. Arlene Wohlgemuth, R-Burleson, fashion a 2003 legislative requirement that privately run call centers be used to help process applicants for Medicaid, CHIP, food stamps and cash assistance. He testified before lawmakers on the idea.
Hawkins says the state's key misstep came two years later, when lawmakers ordered a 40 percent reduction of state eligibility staff. But his critics have said he didn't stand up to the state's
GOP leaders and demand enough money and time to adequately support and test the proposed public-private screening system.
It was launched in late 2005, after a large outsourcing company,
Accenture, won an $899 million, five-year contract. But soon after the state notified its own workers that they might lose their jobs and shifted duties to Accenture – and its main subcontractor, Maximus – the project went sour.
Call centers were jammed, people were wrongfully cut from benefits, and it took months for services to begin once Texans applied.
Most infamously, applicants for a time were given a wrong fax number for sending pay stubs and other private documents. It belonged to a
Seattle warehouse that had no part of the deal. That company shredded and threw away the paperwork after unsuccessfully trying for weeks to alert Texas that something was amiss.
By mutual agreement, the Accenture deal was terminated, state workers were rehired and Maximus mostly took over a scaled-down contract. In June, the commission tentatively chose Maximus' bid to continue the work. However, the two sides are still negotiating and haven't settled on a proposed three-year contract, Goodman said.
For Texans hammered by the recession, problems persist. Long processing delays for
food stamps and Medicaid have continued for a year.
A Feb. 25 report by the commission shows the state overpaid or underpaid food stamp recipients 7.3 percent of the time in August, compared with a national rate of 4.3 percent. And it wrongly denied people benefits in 14.3 percent of cases that month, while the nationwide error rate was 8.2 percent.
Celia Hagert, a social programs analyst at the Center for Public Policy Priorities, which advocates for low- and middle-income Texans, said that between 1999 and 2005, Texas received federal bonuses each year for having low error rates in food stamp processing.
She called it "ironic" that Phillips has re-emerged as fix-it man.
His computer software, no matter how good it may be, is no substitute for hiring back enough state workers "who know what they're doing," Hagert said. "That's the key. The system we have now is neither accessible nor accurate."
Goodman stressed that the commission has no obligation to retain AutoGov if it doesn't meet expectations. The company has billed the state an additional $62,500 but hasn't yet been paid.
"There's no obligation for additional payments beyond those if the tool isn't proven effective during testing," Goodman said.
She said that the commission is exploring whether "similar services are available through DCS," a vendor that checks industrial payroll databases and automobile ownership records to spot applicants who make too much or own too much property to qualify.
Meanwhile, a March 4 AutoGov news release suggested that Phillips and Hayden intend to take their software to terrain even more troubled than Texas.
It said the company recently won contracts from the University of Miami's Project Medishare and the U.S.
Centers for Disease Control and Prevention to "implement the software in Haiti's central plateau."
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