Contractus Maximus

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The city welfare agency is putting its welfare-to-work and job training and placement contracts into the hands of a dozen giant players, City Limits has learned. Five of those are for-profits, and the records of some–in particular Maximus, based in Virginia–raise serious questions about why the city passed over well-respected locals for some out-of-state firms.

Maximus was the first company to privatize a welfare system–Los Angeles County’s, from 1988 to 1993, Headed by West Point grad and former Defense Department analyst David Mastran, Maximus, which posted an 81 percent increase in third quarter net income over last year, boasts 3,200 employees in 34 states. It was recently ranked among the top 10 small companies by Fortune–a true corporate success story.

But in Connecticut, the name Maximus is synonymous with the pitfalls of privatization. In 1997, Maximus botched a $12.8 million contract to pay childcare fees for women enrolled in a welfare-to-work program. Within three months, Maximus staff was overwhelmed with calls, and a month late processing 10,000 of the 17,000 clients’ checks. Kids whose fees weren’t paid were sometimes kicked out of daycare centers; childcare centers with high numbers of state-sponsored clients faced ruin when the checks didn’t come.

Threatening to terminate the deal, Connecticut demanded that the firm increase staffing and bring in better equipment. After doubling its staff, Maximus made its own demand: to have its contract fee bumped up by 50 percent. State officials forked it over. “In terms of service here, they’ve been abysmal,” says spokesperson Rick Melita of Connecticut State Employees Association, the state workers union. “They underbid, over-promised and they didn’t deliver.”

Maximus has had other troubles. Handling a state contract in New Jersey, Time reports, the company contacted the parents of mentally disabled youngsters living in state institutions and demanded that complicated financial data be submitted within ten days. The state had to ask Maximus to lighten up.

In 1996, Nebraska terminated a Medicaid management contract with Maximus for poor performance. And Arizona officials claimed in 1993 that they had to refund $250,000 in child support payments because Maximus made data entry errors.

“Maximus has a stellar record in welfare to work,” responds spokesperson Colleen Roche (formerly of Mayor’s Giuliani’s press team). She points out that the company has an overall job-placement rate of 70 percent. “In Connecticut, no one could have anticipated the need that had to be filled, and calls were so voluminous that they overloaded the phone system. But the problems were fixed in short order.”

The nonprofits awarded New York City contracts, which cover everything from skills assessment to job placement and retention, include Wildcat, Goodwill, FEGS, the Consortium for Worker Education, Bronx Community College, NYANA, the Nonprofit Assistance Corp and the New York Urban League.

America Works, Curtis & Associates, ARBOR and Career & Educational Consultants are the other for-profits.

The contracts focus on welfare clients but include other low-income job seekers. Neighborhood-based job trainers are concerned that the shift to these behemoths may eliminate the specialized, hands-on training that helps people get and keep good jobs in favor of a supermarket-style system. Many are now in the process of hammering out subcontracting agreements with the big winners.

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