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Reality pops state's privatization bubble

As projected savings on a big contract have shrunk, complaints have soared, legislators learn.

By STEVE BOUSQUET
Published February 17, 2005

TALLAHASSEE - Three years ago, Gov. Jeb Bush decided to hire a private company to handle personnel services for state government.

The projected savings to taxpayers: $93-million.

It didn't work out that way.

The savings are now projected to be about a fifth of the original estimate. And state employees are furious about lousy service.

What was once a seven-year contract worth $262-million is now a nine-year deal worth $350-million, Florida legislators were told Wednesday. And the $93-million in savings over seven years has shrunk to $25-million over nine years.

The disclosures fueled growing bipartisan skepticism about Bush's drive to pay private companies to handle government services. Lawmakers want proof that the Convergys contract, the state's largest privatization venture ever, is a good deal for taxpayers.

Complaints from state workers surged in January, after Convergys Corp. took over employee benefits, the final phase of the so-called People First initiative. The company is fielding 11,000 complaints a week.

Convergys acknowledged some problems, but it said it has worked hard to improve the system.

Also, the company questioned the lower estimate of savings, saying it does not reflect money diverted for other uses. State officials also say they saved another $60-million to $80-million by not upgrading outdated technology that privatization replaced.

They also say savings would have increased if lawmakers had cut personnel budgets as much as recommended.

Critics were not appeased.

"Where is their cost analysis? They never gave us any answer to that," said Rep. Kim Berfield, R-Clearwater. She said privatization is a good concept, but added: "I think the manner in which we went about it was poorly executed and poorly thought out."

Berfield joins a growing chorus of Republican lawmakers who supported the Convergys deal and similar ventures but are disillusioned by the reality. Democrats have been staunch opponents.

In a tense House committee meeting, a state official recited a litany of problems with the so-called People First initiative, from lengthy call-waiting times to employees' losing their insurance coverage to missed United Way payroll deductions.

Taylor Smith, deputy secretary of the Department of Management Services, suggested giving Convergys time to "stabilize the system" while "easing the pain" on state workers, retired employees and their families.

But Smith urged the state to "stay the course" by setting rigid deadlines for the company to improve or lose monthly payments.

"We've got to hold Convergys accountable here," Smith said. "There's no excuse for the impacts on state employees and their families, and we take each one of these very, very seriously."

Legislators described calls from desperate employees who learned that health insurance had been canceled. The employees blamed Convergys, but a Convergys official, Chris Emerick, said part of the problem was that employees' premiums went up, and they did not pay the premium increases.

"There were quite a few coverage lapses," said Emerick, Convergys' vice president for public sector operations. "We worked very hard with the state to get those reinstated."

The Convergys contract was extended to nine years when a nine-month implementation schedule ran more than a year late. The state did not begin paying Convergys until September 2004.

One reason for the heightened scrutiny is that legislators are experiencing the problems firsthand.

Sen. Jim Sebesta, R-St. Petersburg, said that when his wife, Jean, went to the doctor, she discovered that Blue Cross/Blue Shield didn't have her listed for coverage.

"They didn't have me in the system either," Sebesta said. "So she called, and she was panicky, and it took about two hours, but we finally got it straightened out."

State universities gave lawmakers a four-page list of complaints about the changes. The first complaint listed: "Average time on hold is in excess of 45 minutes to an hour."

The focus of the Legislature's concern is not the contract but the Bush administration's ability to oversee it.

Berfield was upset when officials revealed a timeline for Convergys to fix what's wrong. The timeline runs into June, after the 2005 Legislature adjourns. By then, legislators will have decided whether to continue funding the contract another year.

"That's not a good option," Berfield said. "At that point in time, the Legislature has gone home. We need to be doing that now. We need to be evaluating what those options are going to be."

Some lawmakers asked whether the state could fire Convergys if the problems are not corrected by June. Smith did not answer directly. "We're reviewing those options," Smith said.

"This is a pretty sad situation," said Rep. Julio Robaina, R-Miami, after listening to the state's five-point plan for fixing the system. "Is there a light at the end of the tunnel?"

Rep. Franklin Sands, D-Weston, said he could not understand why, despite the problems, the state extended Convergys' contract by two years - giving the company the opportunity to earn an additional $88-million. "It's a golden lollipop," Sands said.

Florida is Convergys' first venture with a state government, but the company recently won a five-year, $85-million contract to privatize personnel services for 46,000 Texas state employees. The contract, like the one in Florida, was awarded through a competitive selection.

--Times staff writer Joni James contributed to this report.

[Last modified February 17, 2005, 01:22:08]