GAO: Poor Planning, Lax Oversight Caused HealthCare.Gov Issues

Ineffective planning and lax oversight of contractors hired to build the federal exchange website, HealthCare.gov, led to millions of dollars in additional costs and the website's rocky rollout, according to a Government Accountability Office report released Wednesday, the Wall Street Journal reports.

According to the report, the federal government as of March had spent nearly $840 million on building the website (Radnofsky, Wall Street Journal, 7/30). From the website's initial phases of development in September 2011 to February 2014, the site's estimated cost increased from $56 million to more than $209 million. Meanwhile, the cost for the exchange's data hub nearly tripled from $30 million to $85 million (Haberkorn/Norman, Politico, 7/30)

The report acknowledged that building "a first-of-its-kind marketplace" was bound to be a difficult project. However, GAO said CMS officials made the situation worse by:

• Not allowing enough time for work to be completed;
• Changing instructions given to the main contractor; and
• Not scrutinizing progress made on the site (Goldstein, Washington Post, 7/30).

In addition to challenges the federal government endured with CGI Federal, the site's first contractor, the report also noted ongoing issues for Accenture, the contractor picked to replace CGI. For example, the report found that:

Some aspects of the website are still incomplete, including financial management tools needed for health insurers; and

Accenture's no-bid, one-year contract, which was originally valued at $91 million, has increased to a value of more than $175 million because of additional requirements (Politico, 7/30).

Further, the report noted that CMS paid CGI Federal $12.5 million. Although CMS officials saw problems with CGI's work throughout the development, the agency withheld just 2% of the contractor's payment (Baker, National Journal, 7/30).

The report also highlighted widespread confusion about which officials were authorized to make contracting decisions in the days leading up to HealthCare.gov's Oct. 1, 2013, launch. Specifically, CMS officials inappropriately authorized $30 million worth of spending additions, according to the report.

In prepared testimony for a House Energy and Commerce Committee hearing on the report Thursday, GAO Director of Acquisition and Sourcing Management William Woods wrote, "In summary, we found that CMS undertook the development of HealthCare.gov and its related systems without effective planning or oversight practices, despite facing a number of challenges that increased both the level of risk and the need for effective oversight" (Politico, 7/30). He added, "CMS incurred significant cost increases, schedule slips and delayed system functionality for the [site] and data hub systems due primarily to changing requirements that were exacerbated by inconsistent oversight" (Wall Street Journal, 7/30).

Woods said the lapses resulted in "CMS launch[ing] HealthCare.gov without verification that it met performance requirements" (Al-Faruque, The Hill, 7/30).

Recommendations

Woods cautioned that if CMS does not "improv[e] contract management and adher[e] to a structured governance process, significant risks remain that upcoming open enrollment periods could encounter challenges" (Washington Post, 7/30).

The report recommended that CMS issue guidance on who is able to authorize extra contractor funding. In addition, it noted that CMS should inform staff about acquisition strategies and make sure new projects are better managed. The report also called on the administration to review the site's remaining issues and its increasing repair costs (The Hill, 7/30).

Reaction

Rep. Tim Murphy (R-Pa.) said the report shows the "Obama administration was not up to the job" of creating HealthCare.gov, "and American taxpayers are now paying the price." He added that the House panel will "have many questions" about how the administration "got into this near billion-dollar mess" (Politico, 7/30).

Meanwhile, Accenture spokesperson Joanne Veto said that the company "is delivering all of [its] work for CMS on time and on budget." She said that the increase in contract value noted by GAO "is a result of CMS assigning Accenture additional work."

CMS officials who received draft copies of the report before its release said they mostly agreed with GAO's findings. They noted that the department is working to address the issues, including bolstering training efforts, reorganizing its management configuration and hiring private-sector executives (Wall Street Journal, 7/30).

A CMS spokesperson said the agency "takes ... responsibility for contracting oversight seriously and has already implemented contracting reforms that are more extensive than the recommendations in the report" (The Hill, 7/30).