How Does Privatization Work in Indiana?

Kay at Balloon Juice challenges the alleged competency of Mitch Daniels:

Specifically, I’d like to look at one instance of his alleged competence and responsible stewardship of taxpayer money.
Daniels is currently, right now, embroiled in a lawsuit related to his failed privatization of the administrative services end of food stamp and Medicaid programs. Daniels outsourced the work to IBM. It was abundantly clear the privatization plan was a disaster right from the start for the people who receive food stamps and Medicaid, but Daniels waited two years to stop the statewide roll-out, because the conservative ideology behind the plan was pure and infallible.
IBM sued on the contract Daniels had negotiated and signed on behalf of the people of Indiana, when Daniels (eventually) fired them. That all by itself is amusing, because Daniels stripped middle class public employees of their bargaining rights with a stroke of his mighty executive pen shortly after assuming office. Sadly, Mitch found out IBM doesn’t go down as easy as teachers or firefighters do. They hauled his ass right into court, rather than having their lawyers march on the statehouse and sing solidarity songs.

One of the big things I noted in the discussion of privatizing the Ohio Turnpike was that Ohio's people said Ohio wouldn't get screwed like Indiana.  That takes a little of the sheen off of the mystique of one of the Indiana governor's signal accomplishments.