Indiana states entrusted IBM (International Business Machines Inc) to act as a private partner to start its welfare eligibility system. This system included a program to pay medical bills for low income families which is also known as Medicaid. In addition, the state agency also coupled with food stamp system that also supports the low income earning families to buy a monthly allowance and to support their daily consumption needs, known as the dole. Indiana state intended in awarding this contract to improve its out dated social welfare system which included Medicaid, food stamps and other benefits. This contract was in the tune of $1.37bn over a period of 10 years to automate the welfare system.

The contracting parties fell apart due to poor performance from both parties. The first party became strong when the welfare private partner ‘IBM’ denied payment for a nun and cancer patient. According to IBM, the cancer patient has not responded to a rectification interview but has informed the IBM call centre about the hospitalization. IBM has tried to contact nun through its call centre but were unable to do so. The nun tried rescheduling the interview but she just managed to send a fax. Yet the IBM ignored both these attempts of the lady.

Therefore highlighting these events the state has sued IBM to recover $437.6 as cost incurred in third party law suits; federal penalties and over time payment made to employees due to the contract. In return IBM has counter sued the state agency FSSA for $83.4 million as cancellation penalties under the contract terms, which denied by the FSSA that as IBM has intentionally denied welfare benefits citing the above mentioned two cases. Law suits by both parties were filed in Marian County courts in Indianapolis.

Finally, the Indiana state has improved their outdated welfare system by calling a private partner to participate in performing various duties. IBM, through its ineffective calling system has damaged the image of the state of Indiana in performing its welfare system to people who get a little income or having fewer resources. This has resulted Indiana state to face third party law suits and litigation from the state run organizations. In this respect, they had to go before the budget committee. Now, Indiana state has introduced a new hybrid system by replacing the call centers and documents imaging system by face-to-face contact with local case workers and automated data base management. In doing so the Indiana state hopes to expand this system to serve 10 southwestern Indiana counties this year. During the next coming year they intend to cover the remaining 49 counties and they are actually working hard on it and will surely do according to their plans.