Political Struggle Centers on Welfare-to-Work Contractor

Los Angeles County today becomes ground zero in a growing battle over privatizing social services, as the Board of Supervisors prepares to sign a $23-million welfare-to-work deal with a corporation whose tactics in acquiring government contracts have come under scrutiny.

The scheduled awarding of the contract to Maximus Inc. of McLean, Va., comes after a year of battle between county unions and a majority of the Board of Supervisors over whether the task of helping San Fernando Valley and north Los Angeles County welfare recipients find work should be done by private or public employees. And while Maximus has come under fire elsewhere in the country for the way it wins public contracts--a New York judge barred the company from receiving $100 million in city contracts there after ruling that the procurement process was “corrupted”--Los Angeles County unions and staff have been accused of rigging bids here to prevent the company from winning a contract.

Beneath the battles over the arcana of public contracting and placement rates lies a deep, divisive question: Should private, for-profit corporations continue to have a role in welfare reform?

“This is the kind of work that should never be contracted out,” said Tanya Akel, an analyst with the Service Employees International Union, Local 660, which represents many county workers. “This money that is meant to make people self-sufficient should not be going to stockholders.”

Maximus officials disagree. They point to what they say is a proven record in many states of helping more than 100,000 people find jobs after years on the welfare rolls and of running other government programs ranging from child support to enlisting people in Medicaid. County documents predict that the contract with Maximus would save the county $4 million annually.

“Maximus has built its history around helping these populations and working directly with them and changing lives,” said company spokeswoman Rachael Rowland. “We’re really proud we’ve changed the lives of more than 2 million people because of work we’re doing.”

Both sides--the unions and Maximus--are distributing press kits with newspaper clippings either praising or criticizing the rapidly growing company, which a former federal official founded in his basement in 1975 and which now has more than 4,000 employees.

Maximus’ literature highlights the government experience of its employees--not just founder and Chief Executive David Mastran but also the local contract manager in Los Angeles, a former manager in the county welfare office.

The board is believed to be split over awarding the contract. Democratic Supervisors Yvonne Brathwaite Burke and Gloria Molina have previously expressed opposition to the idea. Supervisors Mike Antonovich and Don Knabe, both Republicans, have backed it, as has Democrat Zev Yaroslavsky, who represents most of the Valley.

In defending his position, Antonovich took aim at the unions’ stand: “The unions would rather keep people on welfare so they have people to watch over, and I believe we ought to empower people on welfare with training and skills.”

Unions and activists have for months been pushing Yaroslavsky, normally a friend of organized labor, to kill the deal. In an interview last week, Yaroslavsky would not reveal how he plans to vote today, saying the specifics of the deal will determine his decision.

“Everybody’s got an ax to grind and we need to strip that away,” Yaroslavsky said. “It’s not so much a philosophical question as a management question.”

The contract--which includes three $11-million options--would give Maximus responsibility for managing the cases of 21% of the welfare recipients in the county’s main welfare-to-work program, Greater Avenues for Independence, or GAIN. Those recipients live in the Valley, Burbank and the Antelope Valley--all in the districts of Antonovich and Yaroslavsky.

Molina said the company, which she criticized when it had a prior contract with the county, will not invest in its employees, and therefore will not deliver top-quality service to those who need it.

“It’s not the best arrangement for the recipients,” she said. “You’re not going to have the caliber of workers working on these issues.”

Maximus’ Rowland rejected those contentions. “We will certainly hire the most qualified people because we’re accountable for the results, which is putting people in jobs,” she said. “If we don’t perform, we won’t be there anymore.”

Many experts say the jury is still out on whether corporations provide welfare services better than public workers, but union officials are marshaling studies critical of contracting to buttress their arguments at today’s board meeting.

Los Angeles County has extensive experience with Maximus. In 1989 the county became the first in California to privatize part of its welfare program. It awarded that contract to Maximus. The deal was smoothed out by a network of former members of Ronald Reagan’s gubernatorial staff in Sacramento and Los Angeles and at Maximus.

But when the political composition of the board changed, the contract ended. County officials disagree over whether it was a success or a failure. Burke and Molina say it was a poor experience; Maximus says it did the job well, and a report on welfare from the federal General Accounting Office states that the county said it was satisfied.

This time around, Maximus was one of three vendors that made it to the final round of the bidding process.

In analyzing its bid, the county welfare office’s initial results showed that hiring Maximus would be more expensive than using county workers. Under county law, that would bar supervisors from awarding the contract. The county auditor-controller verified the result.

But Antonovich, Knabe and Yaroslavsky were skeptical of the county’s methodology. As a result, the board hired an outside company--which has a welfare contract in another state--to examine the bid. The review found that the county had set the parameters of the bid in a way that made Maximus seem more expensive and public workers less.

The board ordered a new bid, and Maximus bid $4 million lower than the county. Although it was not the lowest bidder, county officials ruled that it was the most qualified, and are recommending that supervisors award the company the contract. Unions have vowed to sue if it is approved.

Maximus is no stranger to contract controversy. It is embroiled in a battle in New York City, where the city controller held up Maximus’ contract after it was revealed that the corporation had hired the city welfare commissioner’s father-in-law as a subcontractor in Wisconsin while its contract was under consideration in New York. The disclosure led to an investigation by the Manhattan district attorney’s office.

A New York Supreme Court judge blocked the award of the contracts because Maximus had not disclosed that it was assisted in preparing its proposal by a company connected to a former city administrator and because it received special information in meetings with state officials.

Maximus is appealing the ruling and has said that its conversations with the state were normal and that the company’s involvement was not relevant. It has acknowledged concerns about the appearance of paying the welfare commissioner’s father-in-law but said nothing improper was intended.

Union officials, however, have compiled a list of other alleged problems with Maximus, including scattered complaints that welfare recipients were mistreated and that Maximus gave souvenirs to officials at a state conference.

In the end, said company spokeswoman Rowland, Maximus has never had a contract terminated for cause, never been found guilty of any crime and never been fined for any violations in its decades of experience with governments across the nation.

“For such a large and diverse company to have such a record of integrity is really something to be proud of,” Rowland said. “I don’t believe anyone could say we’re not sensitive to these populations or question our motives.”