Obama administration to end contract with CGI Federal, company behind HealthCare.gov

The Obama administration has decided to jettison from HealthCare.gov the IT contractor, CGI Federal, that has been mainly responsible for building the defect-ridden online health insurance marketplace and has been immersed in the work of repairing it.

Federal health officials are preparing to sign early next week a 12-month contract worth roughly $90 million with a different company, Accenture, after concluding that CGI has not been effective enough in fixing the intricate computer system underpinning the federal Web site, according to a person familiar with the decision who spoke on the condition of anonymity in order to discuss private negotiations.

Accenture, one of the world’s largest consulting firms, has extensive experience with computer systems on the state level and built California’s large new health-insurance exchange. But it has not done substantial work on any Health and Human Services Department program.

The administration’s decision to end the contract with CGI reflects lingering unease over the performance of HealthCare.gov even as officials have touted recent improvements and the rising numbers of Americans who have used the marketplace to sign up for health coverage that took effect Jan. 1.

The government is able to sever its relationship with CGI readily because the company’s contract to work on the exchange is to run out at the end of February. Federal officials had the option of extending it for another year and possibly two more times, or of not renewing it. While rejecting a year’s extension, federal officials are discussing with company executives ways to try to ensure a smooth transition, according to individuals familiar with the conversations.

What went wrong with HealthCare.gov

Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services (CMS), the agency that oversees the new online marketplace, did not confirm the decision to switch IT contractors but said, “We continually evaluate our needs and remain focused on ensuring consumers have access to affordable, quality coverage.”
A CGI spokeswoman, Linda Odorisio, acknowledged Friday that the company’s work on HealthCare.gov was ending but said in a statement:“We are proud that more than 400 CGI employees worked around the clock from October through December to deliver a consumer experience that works for a vast majority of Americans.” She noted that the company will continue to perform other work for CMS, including nearly $37 million in contracts that the company has been given during the past few months.

Accenture declined to comment. “We are in discussions with potential clients all the time, but it is not appropriate to discuss with the media contracts we may or may not be discussing,” Accenture spokeswoman Joanne Veto said in a brief telephone interview.

At the beginning of December, administration officials announced that the Web site was largely working for consumers who wanted to enroll in health plans. But the site continues to malfunction in other ways. For instance, it is not yet able to automatically enroll people eligible for Medicaid in states’ programs, compute exact amounts to be sent to insurers for their customers’ federal subsidies or tabulate precisely how many consumers have paid their insurance premiums and are therefore covered.

According to officials familiar with the matter, who spoke on the condition of anonymity because the decision is not yet public, leaders of CMS became frustrated with the pace and quality of CGI’s work on the repairs. As federal officials and contractors have been trying to fix various aspects of the Web site in the past few months, about half the new software code the company has written failed when it was first used, according to internal federal information.

CGI Federal was hired Sept. 30, 2011, as the main contractor to build one of the most complex computer systems the federal government has ever attempted to create. The company’s failure to deliver on key aspects of the project was a main reason behind the site’s botched Oct. 1 launch, when error messages were generated when many consumers tried to shop for and select health plans online. President Obama described the launch as one of his “fumbles,” while Health and Human Services Secretary Kathleen Sebelius called it a “debacle.”

Late last summer, as federal health officials were worrying that construction of the Web site was running far behind schedule, CGI executives promised CMS that they could deliver a functioning marketplace by the Oct. 1 start date. But by the week before the launch, the company had failed to deliver on 45 percent of the components for which it was responsible, according to documents obtained by The Washington Post.

The fact that there is now a transition period of less than two months before Accenture takes over — significantly shorter than ideal for major IT projects — presents its own challenges for the federal officials and contractors and requires coordination between the outgoing and incoming firms.

Because of time constraints, CMS is awarding the Accenture contract on a sole-source basis, according to the person familiar with the decision.

The switch in contractors for the online marketplace reflects the administration’s broader effort to reassess how it handles its $80 billion-a-year IT contracting operations, now that HealthCare.gov’s performance is improving and more than 1 million Americans have selected plans on the exchange. The administration replaced the contractor that maintains the computer servers handling the data generated by HealthCare.gov, switching from Verizon’s Terremark to Hewlett-Packard. And it is preparing to sign a contract affirming that Quality Software Services, which took over as the project’s general contractor in late October, will stay on for at least another year to coordinate the system’s operation.

The White House is also debating how it can change the way it handles technology projects government-wide, officials said, including proposals to establish an office that oversees IT ventures across agencies. Other changes include allowing agencies to circumvent the Office of Personnel Management’s hiring process by directly retaining software experts and rotating government technologists through stints in the private sector.

The decision to switch contractors for HealthCare.gov is unlikely to tamp down persistent Republican criticism of the Affordable Care Act, the 2010 statute that created the new marketplace. “A change in contractors does not change the sad state of this law,” said Rep. Fred Upton (R-Mich.), chairman of the House Energy and Commerce Committee.

In turning to Accenture, CMS is placing the project in the hands of a government contractor that has significant technological expertise but which also signed a high-profile legal settlement with the Justice Department less than three years ago over its contracting practices. The global management consulting, technology services and outsourcing firm lately has worked extensively to upgrade and modernize some states’ social services systems, several in anticipation of the health-care law’s rollout.

Accenture was hired by the Internal Revenue Service in 2009 to work on the temporary expansion of a health-care tax credit that was part of federal policy to stimulate the economy.

In June 2012, California entered into a $359 million contract with the company to build the state’s health-care marketplace and operate it for 3 1/2 years. Accenture developed the marketplace, called Covered California, along with CGI , which served as one of its subcontractors.

Covered California is the largest of 14 state-run insurance exchanges, and it has worked relatively smoothly since it was launched at the same time as the federal marketplace. By late December, more than 400,000 Californians had enrolled.

In other instances, Accenture has sparred with CGI as the firms have competed for technology projects.

In the fall of 2012, Accenture finished an online human-services eligibility project for Iowa, modernizing a nearly 20-year-old system in less than a year. In February, it won a $230 million grant to overhaul the technology behind Ohio’s Medicaid program and to create a streamlined online application process for several state aid programs.

The company’s contracting dispute with the federal government ended with Accenture agreeing in September 2011 to pay $63 million to settle a Justice Department lawsuit alleging that it improperly benefited from recommending specific hardware and software as part of government contracts, as well as by inflating prices on contracts and distorting the federal bidding process. The firm, one of several contractors targeted by federal authorities, denied any wrongdoing as part of the settlement.

Alice Crites contributed to this report.

Amy Goldstein is a national reporter for The Washington Post, focus on health-care policy.
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