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The city welfare agency has revamped its job placement and job training contracts, shifting to a setup that puts them all into the hands of a dozen giants, City Limits has learned. Five of those are for-profit companies, and the records of some of them–in particular Maximus, based in Virginia–raise serious questions about why the city passed over well-respected local organizations in favor of 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 former Defense Department analyst David Mastran, Maximus, which posted an 81 percent increase in third quarter net income last year, boasts 3,200 employees in 34 states. It was recently ranked among the top 10 small companies by Fortune magazine. But in Connecticut, the name “Maximus” is synonymous with the pitfalls of privatization.
In 1997, Maximus botched a $12.8 million contract to run a state program that paid child care fees for women enrolled in a welfare-to-work program. Within three months, Maximus staff was a month late processing 10,000 of the 17,000 clients’ checks. Threatening to terminate the deal, Connecticut demanded that the firm increase its staffing and bring in better equipment. Maximus doubled its staff–then made its own demand, for a 50 percent increase in its contract. State officials forked it over.
“In terms of service here, they’ve been abysmal,” notes 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 magazine reports, the company contacted the parents of mentally disabled youngsters living in state institutions and demanded that they submit complicated financial data within 10 days. The state had to ask Maximus to lighten up. Nebraska terminated a Medicaid management contract with Maximus in 1996 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,” responded spokesperson Colleen Roche, who pointed 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.”
Pennsylvania-based ARBOR, Inc., is more of a mystery, even though the firm has held a few job training contracts with New York City in the past five years. According to the Service Employees International Union’s job training office, the company is “nowhere on our radar map”–a consensus view among job trainers interviewed. The firm was launched in 1963 by DuPont to develop new forms of market research; today, ARBOR consults for corporations on everything from new product development to work training.
The nonprofits awarded New York City contracts are 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 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 behemoths may eliminate the specialized, hands-on work that helps people get and keep good jobs in favor of a supermarket-style system. Many are now hammering out subcontracting agreements with the big winners, but specific arrangements have yet to be determined.