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Privatizing poverty programs Welfare services: Private companies seek contracts to administer welfare benefits.

EVERY BIG CHANGE brings big opportunities -- a truism not lost on private companies eager for government contracts. With the federal overhaul of social services, a number of large corporations -- some better known for defense contracts than administering social programs -- are hoping to take advantage of new opportunities.

In Texas, for instance, the $30 billion defense giant Lockheed Martin is bidding against Electronic Data Systems, the company founded by H. Ross Perot, and Andersen Consulting, a subsidiary of the accounting firm Arthur Andersen, to run the state's welfare services. The contract is worth more than $550 million. Some private companies have been inquiring about similar contracts in Maryland, but state officials say there are no plans for contracting out these services.

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The new federal welfare law allows states to hire private contractors not only to administer services but also to determine eligibility. Since a hallmark of the reform is the requirement that states move most welfare recipients into jobs within two years, the idea of a fixed-price contract has understandable appeal.

The advantages private contractors can bring to the administration of welfare programs are enormous. So are the potential pitfalls. The need for welfare reform has been obvious for years, but the system had become so bogged down in bureaucracy that it was foolish to expect it to re-invent itself.

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Good private contractors can bring efficiency, accountability for results and a badly needed sense of urgency to the challenge of helping poor people reach self-sufficiency. As for pitfalls, one lies in the possibility that states could become so conscious of the bottom line that they would wink at practices that help contractors meet their budgets by denying benefits to people who should get them.

At their best, private contractors can bring productive ideas, fresh energy and efficient management to the administration of social services. At their worst, they could boost private profits at the expense of the nation's most vulnerable citizens.

Pub Date: 10/12/96


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