Obamacare: CGI Federal Out, Accenture In
Policy + Politics

Obamacare: CGI Federal Out, Accenture In

REUTERS/Joe Skipper

The Obama administration has decided to jettison CGI Federal, the main IT contractor that was 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 a 12-month contract worth roughly $90 million, probably early next week, 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, HealthCare.gov, according to a person familiar with the matter.

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

In a statement Friday, CGI spokeswoman Linda Odorisio said that even as the company’s work on HealthCare.gov was wrapping up, “CGI’s 15-year relationship with CMS will continue, including work on the nearly $37 million in contracts that have been awarded to CGI since October 1, 2013.”

“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 added. Accenture declined to comment on the matter Friday.

“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,” said Accenture spokeswoman Joanne Veto in a brief phone interview.

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Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services (CMS), 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.”

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 on Jan. 1.

The government is able to sever its relationship with CGI readily because the company’s contract period is set to run out at the end of February. Federal officials had the option of renewing it for another year and possibly extending it two more times, or not renewing it.

At the start 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, and tabulate precisely how many consumers have paid for their insurance premiums and are therefore actually covered.

According to officials familiar with the matter, who spoke on condition of anonymity because the decision is not yet public, leaders of the Centers for Medicare and Medicaid Services — which oversees the online marketplace — 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 of the new software code the company has written has failed on the first try, 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 reasons 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.”

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Late last summer, CGI executives had expressed confidence to CMS that they could deliver a functioning, scaled-back version of the marketplace by the Oct. 1 start day. But a week before the launch, the company had failed to deliver on 45 percent of those tasks, according to documents obtained by The Washington Post.

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

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 three-and-a-half years. Accenture developed the marketplace, called the Covered California, with CGI , which served as one of its subcontractors.

Covered California is the largest of 14 separate state-run insurance exchanges, and it has worked relatively smoothly since its launch 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. Accenture had one contracting dispute with the federal government that ended up in court, agreeing in September 2011 to pay $63 million to settle a Justice Department lawsuit alleging that it improperly benefitted from recommending specific hardware and software as part of government contracts, as well as inflating prices on contracts and distorting the federal bidding process. The firm denied any wrongdoing as part of the settlement.

This piece originally appeared in The Washington Post. Alice Crites contributed to this report.