IG details fundamental flaws in HealthCare.gov IT acquisition

It's no secret that HealthCare.gov failed to work as advertised when it launched in October 2013. The site's high-profile flop is cited as part of the recruiting pitch for the government's high-tech rescue squad, the U.S. Digital Service.

Behind the over-stressed, crash-prone website was a rushed procurement strategy that failed to yield meaningful competition, faulty and undocumented acquisition planning, a lack of controls and coordination over contractors, and contracting methods that increased the risk of cost overruns, according to a new report from the Office of the Inspector General at the Department of Health and Human Services.

The result of this failure to plan wasn't merely a buggy website, according to the report. Cost estimates on the six largest contracts associated with HealthCare.gov were pegged at $464 million when the awards were made beginning in 2011. By early 2014, the contract value had nearly doubled to $824 million.

One particularly ill-fated move was the decision to conduct the HealthCare.gov procurement under an existing 2007 contract used by the Centers for Medicare and Medicaid Services to acquire IT systems.

The 16 companies on the CMS Enterprise System Development Contract, an indefinite delivery, indefinite quantity vehicle, were the only firms allowed to bid to develop the five major components of HealthCare.gov. Only one firm -- CGI Federal -- submitted a qualified bid to develop the Federally Facilitated Marketplace (FFM), the insurance plan comparison and shopping center of the HealthCare.gov system. The FFM proved to be particularly buggy at the launch of HealthCare.gov, and required extensive redesign. During this race to repair the site, CGI Federal was put under the supervision of a lead contractor, before being taken off the project and replaced in January 2014.

Two other key contracts, the $68 million Data Services Hub component that routed eligibility queries to government databases and the $109 million identity proofing service, attracted only two qualified bids each.

CMS failed to review key contractors for past performance issues, according to the report. Contracting officials did not consult government databases on vendor past performance when awarding the FFM or the Data Services Hub contracts, the IG said. And just two of the six biggest contracts got a second look from the CMS Contract Review Board before awards were made.

CMS raised the risk of taking on additional costs by using cost-reimbursement for some of the largest contracts, putting the government on the hook for overruns and delays. The choice of contract model was not adequately defended in contracting documents, according to the report. The justification was limited to "general statements that fixed-price contracts could not be used because costs could not be defined accurately due to uncertainties with the required work."

The report is also critical of the decision not to name a lead integrator from among the vendors on the biggest HealthCare.gov contracts, considering the size and complexity of the project. Former CMS CIO Tony Trenkle told OIG that within the agency, CGI Federal was perceived to be the lead contractor. According to the report, however, "the company did not have the same understanding of its role."

CMS tapped QSSI, a component of the United Health division Optum, to serve as lead contractor during the effort to fix the site. The Optum executive in charge of the HealthCare.gov work, Andy Slavitt, was eventually tapped to join CMS as deputy administrator. He will move into the top job at CMS on an acting basis when Marilyn Tavenner steps down in February.

In reply comments filed in November 2014, when CMS reviewed the report, Tavenner and HHS chief financial officer Ellen Murray concurred with the conclusions of OIG auditors. "CMS is taking the HHS OIG's findings and recommendations seriously, and is using the report as an opportunity to make needed change," they wrote.

The HealthCare.gov site is functioning smoothly by most accounts as the second open enrollment period under the 2010 health care law winds up. Accenture, the contractor tapped on a limited source basis in January 2014 to take over the FFM, recently won a five-year, $563 million contract to run the FFM through 2020.