Obamacare agency rushed in contractor without bids, documents show

NEW YORK Sat Nov 23, 2013 2:54pm EST

House Speaker John Boehner attempts to sign up for healthcare on the DC Health Link in Washington, in this handout photo courtesy of the Speaker of the House website on November 21, 2013. REUTERS/Speaker.gov/Handout via Reuters

House Speaker John Boehner attempts to sign up for healthcare on the DC Health Link in Washington, in this handout photo courtesy of the Speaker of the House website on November 21, 2013.

Credit: Reuters/Speaker.gov/Handout via Reuters

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NEW YORK (Reuters) - Caught flat-footed by the challenges of building the financial-management and accounting parts of the U.S. government's new online marketplace for health insurance, officials rushed to hire a familiar contractor without seeking competing bids, according to government procurement documents reviewed by Reuters.

The documents dated in August - less than two months before the opening of online marketplaces established by President Barack Obama's landmark healthcare law - showed the agency in charge had only "recently learned" that building the financial management functions was "beyond (its) currently available resources."

The Centers for Medicare & Medicaid Services (CMS) documents shed more light on the problems facing the agency as it worked on the marketplaces established by the law commonly called Obamacare and on its revelation this week that at least 30 percent of the marketplace is still being built.

Those problems and others have been revealed by congressional oversight investigators who released emails and outside reports that paint an administration scrambling to meet the technological challenges of the marketplace - and usually failing to do so.

CMS spokeswoman Joanne Peters said on Friday and on Saturday that representatives of the agency were unavailable to comment on the contract or on an estimate of when the financial management part of the marketplace is expected to be finished.

Although the consumer-facing part of the marketplace, the HealthCare.gov website, opened for enrollments on October 1, CMS had a goal of January 1, 2014 for the financial components of the system to be operational.

"The prospect of a delay...even for a few days, would result in severe consequences, financial and other," CMS said in a "justification and approval" document explaining the lack of competition for the contract.

The contract, valued at nearly $12 million, was awarded on August 9 to Novitas Solutions, according to the documents. Novitas has numerous contracts with CMS, including to administer doctor and hospital claims in the federal Medicare program for elderly Americans.

The problem-plagued HealthCare.gov is being worked on by contractors racing to fix it by the end of November so that people can enroll in insurance plans for 2014 under the 2010 Affordable Care Act. The law aims to provide health care insurance to millions of uninsured people.


Federal agencies are normally required to solicit bids for work, so as to get the best deal for taxpayers, but can award a contract to a favored company in emergencies as long as they document the urgency.

A few weeks after taking office in 2009, Obama issued a memorandum to government agency heads ordering them to minimize the use of non-competitive contracts, calling them potentially "wasteful, inefficient, subject to misuse."

The procurement documents made clear how crucial the financial functions on the healthcare portal are. If payments were not made on time and accurately, CMS said, "operation of the Marketplace and the Affordable Care Act will certainly be jeopardized."

Financial management includes such functions as transmitting premium payments to insurers. Building that capability into the Obamacare marketplace "is already minimally two months overdue," according to the August documents.

Just a few weeks before the financial-management contract was awarded, according to emails released last week by the House Energy and Commerce Committee, CMS officials were becoming increasingly concerned about the status of the federal insurance marketplace, asking for assurance that the lead contractor was not "going to crash the plane at take-off."

On Tuesday, CMS's deputy chief information officer, Henry Chao, author of the "crash" email, told a congressional panel that 30 to 40 percent of the federal marketplace was still under construction.

Invisible to consumers are what Chao called the "back office systems." Those include accounting and payment systems to send premiums to insurers and transfer funds to insurers that attract more than their share of customers with high medical costs.

The no-bid contract awarded to Novitas includes these systems. Novitas is a subsidiary of Diversified Service Options, which is wholly-owned by Blue Cross and Blue Shield of Florida.

Asked about how Novitas was awarded the contract and the work it is doing, Florida Blue spokesman Mark Wright said a company official told him, "We're not going to be able to get into this right now."

Chao told a House Energy and Commerce subcommittee that CMS and its contractors had focused on building HealthCare.gov so it could launch on October 1, postponing construction of "the financial management aspects of the system."

The lead contractor on HealthCare.gov, the U.S. subsidiary of Canada's CGI Group Inc, is also involved in building the financial management piece of the marketplace, a company official said.

The construction "is a bigger problem than people realize," said Robert Booz, a vice-president and healthcare specialist at technology consultant Gartner.

"Everyone recognizes it's going to be a problem in January," he said, referring to financial management. In the worst case, if financial records are wrong, then people who have signed up for, and paid a monthly premium for, insurance may be told incorrectly that they are not covered.

(Editing by Ross Colvin and Grant McCool)

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Comments (3)
TheNewWorld wrote:
“Toni Townes-Whitley, a senior vice president at CGI Federal, is also a Princeton University classmate of first lady Michelle Obama — and a political donor.”

Smells like cronyism to me.

Nov 23, 2013 5:09pm EST  --  Report as abuse
Chazz wrote:
cronyism?…..CRONYISM???? Not on Mr. Obama’s watch…no, no, no…he’s about making things “fair” and spreading the wealth around equally, remember?

Heh heh….that’s the hook that so many swallowed, and still choke on today, (though they’ll refuse to admit it.)

In the 1950′s a certain author wrote, “your society is in trouble, when you see that money is flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and by pull [rather] than by work, and your laws don’t protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice.” That author was Ayn Rand and it describes the way the Obama Administration operates to a “T.”

Remember Solyndra, the California-based company that made solar panels. In spite of widespread predictions that the company was not viable because of recurring losses, cash flow problems and a decreasing worldwide market for the company’s products, the White House pushed hard to give Solyndra huge infusions of cash because Obama crony, campaign contributor and frequent White House visitor George Kaiser owned an equity firm that backed the company.

Remember Solyndra did fail – but only after delaying the announcement of massive layoffs until after the 2010 mid-term election as requested by administration officials.

Remember a company called Siga, whose flagship product is a drug to treat smallpox. The Los Angeles Times’ headline and sub-headline summarize the story nicely: “Cost, need questioned in $433-million smallpox drug deal; a company controlled by a longtime political donor gets a no-bid contract to supply an experimental remedy for a threat that may not exist.” There’s TONS more about this story and I’m not gonna post it here – a simple Google search will put you on the rest of this crony story.

And finally, the latest example of Obama administration cronyism that betrays our trust: the abject failure of the ObamaCare sign-up process, largely due to the design and testing shortcomings of the enrollment website.

The website was designed and created by CGI Federal, which was awarded a $678 million no-bid, sole-source contract, and whose senior vice-president, Toni Townes-Whitley, is an old buddy of Michelle Obama and an Obama campaign contributor. Mrs. Obama and Townes-Whitley were college classmates and both are members of the Association of Black Princeton Alumni. (I suppose I’m racist for saying that….oh well, I’m putting a Nativity scene up in my yard too this Christmas so hate me times two.)

Let me say, there’s nothing fundamentally wrong with government officials doing business with old acquaintances, but…….hugely lucrative, sole-source contractual arrangements with friends DO have the appearance of cronyism, especially when the beneficiary of the contract is incapable of delivering the goods – as has been proved so far by the stellar job done by CGI Federal (a Canadian company with a not-so stellar track record.)

ACA should certainly have gone out for bids, so that other, “non-connected,” qualified firms could have competed for it – US Companies especially since our economy and jobs and the middle class and etc., etc., are soooooo high on Obama’s list of “things I care about…right now.”

For a “leader” who characterizes himself as one concerned with transparency, fairness and equity, the proof is in the putting those “cares” are so many lies. Perhaps that’s why his approval numbers are at an all-time low and why most retinal citizens believe the country is on the wrong track.

Nov 23, 2013 11:11pm EST  --  Report as abuse
Chazz wrote:
…that was supposed to be “RATIONAL” not “retinal”…..EG:

“Perhaps that’s why his approval numbers are at an all-time low and why most RATIONAL citizens believe the country is on the wrong track.”

(My apologies on that typo-craziness. I gave a sole-source contract to my old buddy spell-check and well…..it boned me again, rat bastard! It does this at least ten times a day….but I’m not gonna fire it….we’re old friends.)

Nov 23, 2013 11:27pm EST  --  Report as abuse
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