Food stamps outsourcing has survived its near-death experience, but vendors looking to pick up outsourcing work in social services should heed Congress's shot across the bow.

As you might have heard, the $289 billion 2007 "Farm Bill" has recently been passed out of the Senate Committee Agriculture, Nutrition, and Forestry and is headed for the President's desk. President Bush has promised to veto it (with the encouragement of GOP Presidential nominee Sen. John McCain) and Congress has promised to override that veto, setting up one of the most dramatic legislative battles of recent years.

While the larger battle over the Farm Bill is related to subsidies for farmers, government IT vendors will be most interested in the bill's impact on outsourcing of social services functions--primarily eligibility determination for the Food Stamps program. (Food Stamps enjoys a $7.8 billion funding increase in the current bill.) The House version of the bill (H.R. 2419) contained language in section 4006 ("REVIEW OF MAJOR CHANGES IN PROGRAM DESIGN"), which explicitly forbid vendors from performing eligibility-determination functions. This was a direct shot at Indiana's recent outsourcing of such functions to an IBM-ACS consortium.

The version that passed out of the Senate committee did not include this language. However, the same "major changes in program design" section of the Senate version (Sec. 4211) attacks this issue from a different angle. Rather than prohibit outsourcing directly, it significantly discourages "closing county food stamp offices and requiring households to contact a central call center by mail, telephone, fax, or over the web to apply for benefits, provide documentation, and report changes." It does so by requiring extensive review of program performance data to prove the effectiveness of such an approach. These sorts of program changes are essential to any savings from outsourcing. So, while this is not an out-and-out ban on outsourcing, it puts a a definite chill on it.

Vendors should recognize that the Democratic Congressional majority, which is likely to become veto-proof in both chambers, is cool (at best) to the idea of outsourcing. Past outsourcing efforts--despite the best spin of the governors--has been more about reducing per-transaction costs than program effectiveness. But, outsourcing will not go away. Those who want to thrive in this space should begin thinking about third-party strategies that include buy-in from state/county workers and have performance metrics baked in from the start.

The Campaign to Protect Children's Nutrition, a coalition which includes the American Federation of State, County and Municipal Employees (AFSCME), has been actively opposing food stamps outsourcing and has a website dedicated to the cause. However, civil servants are not all of one mind. They know they are swamped with caseloads and could use some help. But, like anyone else, they do not want to pay the full price for the system's long-standing inefficiencies--many of which are the result of bad program design by Congress.

Oh, and by the way, the bill also renames the Food Stamps Program the "Supplemental Nutrition Assistance Program" (SNAP). Supplemental nutrition assistance is now dispensed via EBT, not stamp booklets.