Subcontractor On Troubled Texas Welfare Contract Files Claim Against Accenture

Government systems integrator Maximus Inc. said Thursday that it has initiated an arbitration process to resolve disputes arising under a subcontract with outsourcer Accenture for work on a Texas Health and Human Services Commission program that has come under fire from state lawmakers.

Maximus claims that Accenture unilaterally redefined the scope of the work on a contract to automate welfare eligibility assessment and enrollment services in the state, and that it's no longer profitable for Maximus to continue working on the deal.

Texas and Accenture recently agreed to scale back the contract from $899 million to $546 million and terminate the deal in 2008 -- two years earlier than the original term -- after receiving numerous complaints about inaccuracies and citizens being improperly denied benefits.

Maximus said in a statement that it "has incurred substantial losses in connection with the project and believes that the revised arrangements are not economically viable for Maximus and are not in the best interests of its shareholders."

Maximus said it will continue working on the project for the time being but that it expects to eventually hand off much of the work to Accenture. Maximus also claims Accenture violated its intellectual property rights while working on the contract.

Maximus said it could not immediately estimate the impact of the contract dispute on future earnings. On Friday, analysts at Stifel Nicolaus & Co. downgraded Maximus from "buy" to "hold" because of increased risk associated with the Texas contract.

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