State Of Texas Awards Contract Extension To Scandal-Plagued ACS - InformationWeek
IoT
IoT
News
News
12/4/2006
01:41 PM
50%
50%

State Of Texas Awards Contract Extension To Scandal-Plagued ACS

Under a two-year extension to a deal originally signed in 2004, ACS will handle Medicaid claims processing, operations support, and primary care case management through August 2009.

Texas' Medicaid program on Monday handed outsourcer Affiliated Computer Services a $230 million contract extension despite the fact that the company was forced to oust its CEO and CFO last week because of improprieties surrounding its stock option plan.

Under a two-year extension to a deal originally signed in 2004, ACS will handle Medicaid claims processing, operations support, and primary care case management for the Texas Health and Human Services Commission through August 2009. A spokesman for the commission said legal troubles at ACS, which is based in Texas, "were not a consideration" in the decision to award the contract extension. "They've done a good job for us in the past," said the spokesman.

Last week, ACS said CEO Mark King and CFO Warren Edwards improperly backdated the price of options grants during a period from 1994 to 2005. During that time, ACS said the executives deliberately chose days on which ACS's stock took a dip as the effective date for the options, making them more valuable when exercised. ACS said King and Edwards would resign their positions.

ACS said the SEC and the U.S. Attorney's Office in New York are continuing their investigations of the company's stock options practices. ACS said it estimates the backdating cost the company $51 million in unrecorded expenses.

While ACS has retained its contract with the Texas Health and Human Services Commission, other deals could be in jeopardy as a result of the stock options scandal. Some city officials in Edmonton, Alberta, are calling for the cancellation of the city's contract with ACS for photo radar enforcement services. "I just think it's not very palatable to hear of a company that's having all these problems holding a contract with our city," Edmonton city councilor Ron Hayter said in an interview last week with the Edmonton Sun.

Experts say Texas Medicaid administrators may have felt bound to extend ACS's contract despite the options scandal, given the complexity of handing off the work to a new vendor. Said Doug Brown, a consultant and co-author of The Black Book Of Outsourcing, "The real impact will be felt by ACS via a likely halt in new business signings, not renegotiations."

Comment  | 
Print  | 
More Insights
Comments
Newest First  |  Oldest First  |  Threaded View
How Enterprises Are Attacking the IT Security Enterprise
How Enterprises Are Attacking the IT Security Enterprise
To learn more about what organizations are doing to tackle attacks and threats we surveyed a group of 300 IT and infosec professionals to find out what their biggest IT security challenges are and what they're doing to defend against today's threats. Download the report to see what they're saying.
Register for InformationWeek Newsletters
White Papers
Current Issue
2017 State of the Cloud Report
As the use of public cloud becomes a given, IT leaders must navigate the transition and advocate for management tools or architectures that allow them to realize the benefits they seek. Download this report to explore the issues and how to best leverage the cloud moving forward.
Video
Slideshows
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
Join us for a roundup of the top stories on InformationWeek.com for the week of November 6, 2016. We'll be talking with the InformationWeek.com editors and correspondents who brought you the top stories of the week to get the "story behind the story."
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Flash Poll