New GAO testimony faults HHS management of federal marketplace project

07/30/2014 3:37 PM

07/31/2014 5:45 AM

- The Department of Health and Human Services failed to properly plan and oversee development of the federal health insurance marketplace despite tight deadlines, ever-changing requirements and the complex nature of the project, according to new congressional testimony released on Wednesday.

Those management failures ultimately doomed the October 2013 rollout of the HealthCare.gov website, which was riddled by technical problems before a team of Silicon Valley tech experts finally repaired the faltering system in late November.

In testimony to be delivered Thursday, July 30 before the House Energy and Commerce Committee, William Woods, director of acquisition & sourcing management at the Government Accountability Office, outlined the findings of a GAO investigation into problems behind the launch of HealthCare.gov.

The probe found that from Sept. 2011 to February 2014, the cost of developing the marketplace went from $56 million to more than $209 million and the cost of the system’s so-called “data hub” went from $30 million to nearly $85 million.

The review also revealed nearly 40 instances in which HHS staff inappropriately authorized contractors to expend funds, totaling over $30 million. “This is not to say the work was not necessary: however, the work was not approved properly,” Woods written testimony said.

In spite of numerous problems with CGI Federal, the lead contractor on the marketplace project, HHS only withheld about $267,000 in fees to the company. That’s about two percent of the $12.5 million in fees that CGI received.

“CMS takes its responsibility for contracting oversight seriously and has already implemented contracting reforms that are more extensive than the recommendations in the report, including ending our contract with CGI and moving to a new type of contract with Accenture that rewards performance,” said Aaron Albright, spokesman for HHS’ Centers for Medicare & Medicaid Services.

In January, HHS gave the $91 million marketplace development contract to Accenture Federal Services. But cost increases have pushed that contract to more than $175 million even though the financial management portion of the marketplace – which is responsible for paying premium tax credits to insurance companies – remains inoperable.

The financial management system is scheduled to be completed incrementally through December 2014, when the 2015 enrollment period will be well underway.

“Unless CMS improves contract management and adheres to a structured governance process, significant risks remain that upcoming open enrollment periods could encounter challenges,” wrote Woods.

GAO issued five recommendations for HHS to better manage the federal marketplace and future projects with private contractors.

Those recommendations call for: assessing the cause of increasing marketplace costs and the inoperability of various marketplace functions and develop a plan to resolve them; ensuring that quality assurance surveillance plans and other oversight documents are collected and used to monitor contractor performance; formalizing the roles and responsibilities of contract officers and others with oversight duties; informing program and contract staff about the requirement to create acquisition strategies and make sure those strategies are completed when required; making sure information technology projects adhere to requirements for governance board approvals before proceeding with development.

Officials at HHS agreed with four of the recommendations and “partially concurred” with one, according to Woods’ written testimony.

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