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Back in 2003 (2001?) when the Republican Lege was attempting to create a balanced bi-annual budget without raising taxes one of the big 'savings' used to close a $10 billion shortfall was privatization.

In the case of the Texas Health and Human Services Commission at least, the planned savings aren't quite as much as expected.

AUSTIN - Privatization of functions formerly performed by government workers has yet to achieve any of the predicted $21.7 million in savings at the Texas Health and Human Services Commission, the state auditor reported Tuesday.

And, the auditor found, it's not clear whether using private workers for payroll and human resources jobs will save the state any money at all.

The commission says it never expected to save money in the first year but concedes it has sliced its own projected cost savings in half since the private contract was awarded last year.

The auditor sharply criticized the agency for "significant errors and omissions" in its assumptions about how much it would cost a private company versus the government to perform the administrative duties.

The inaccuracies resulted in overstating what it would cost for an in-house consolidation of payroll and human resources functions while understating what it would cost for a private company running the system, the auditor found.

...

The auditor said commission officials overestimated the cost of a government-run system by $19 million while omitting $24 million in start-up costs and not counting other costs for the private contractor.

Not only are we not saving the money expected but the Commission may have broken the law when it awarded the contract:

The commission also lacks documentation that it complied with a "best-value" statute when it hired Convergys to take over payroll and human resources duties. It used an objective scoring process for vendors, but it did not award the contract to the highest-scoring vendor, the auditor found.

This might put the kibosh on an even larger plan to privatize call-center responsibilities:

[The auditor] urged the state auditor also to review the commission's contract with Accenture, which says it will save the state $646 million over five years as it replaces 2,500 state eligibility workers with a controversial and privately operated call-center system.

The state has awarded Accenture an $899 million call-center contract to screen applicants for food stamps, health insurance and cash welfare.

That privatization project remains on hold awaiting approval by the United States Department of Agriculture, which has raised questions.

(the comment that the plan was put on hold because the USDA 'raised questions' is quite a understatement. If memory serves Texas officials have been moving forward with this plan without first getting approval from the USDA and it's possible that legislation pending in Congress which will explicitly prohibit this).

10/13/05 - Update:

I've heard that the Texas Health and Human Services Commission is involved in far larger blunders than this. Rumor has it that an effort to replace its mainframe system with a cluster of UNIX boxes and an Oracle database has consumed more than a billion (yes, with a 'b') dollars, and many years into the effort, it still hasn't produced a system that works, even in modest trials. Nonetheless, money continues to be poured into the project, presumably because it's too expensive to ever be declared a failure. Among its problems, jobs that must run every night are taking more than 24 hours to complete. Meanwhile, the "old" mainframe system continues to handle such tasks easily, just as it always has, which is what allows the department to continue functioning.