By Roberta Rampton and Caroline Humer
Jan 10 The U.S. government will part ways next
month with contractor CGI Federal over the troubled Obamacare
enrollment website, HealthCare.gov, which failed to work when it
launched in October for millions of Americans shopping for
insurance, the company said on Friday.
HealthCare.gov struggled with error messages and slow speeds
for weeks after its Oct. 1 launch, creating a political crisis
for President Barack Obama, threatening the roll-out of his
signature healthcare law and emboldening its foes among
Republican lawmakers to call for its repeal.
CGI Federal, a subsidiary of CGI Group ,
built the website.
Its contract with the Centers for Medicare and Medicaid
Services (CMS), the agency responsible for the roll out of the
Affordable Care Act, was originally awarded in 2011 and is
scheduled to end Feb. 28.
CMS would not confirm or deny CGI's departure. "We are
working with our contract partners to make a mutually agreed
upon transition to ensure that HealthCare.gov continues to
operate smoothly for consumers," a CMS spokeswoman said.
Obama has said the fiasco with HealthCare.gov has made him
want to overhaul the way the federal government buys technology
services. Critics say the system favors large, established
contractors such as CGI.
"At the end of the day, you have a company here that turned
in subpar and visibly high-profile work. I think that that's a
fireable offense," said Clay Johnson, chief executive officer of
the Department of Better Technology, and former Presidential
Innovation Fellow who has pushed for procurement reforms.
But the government appears poised to replace CGI with
another large contractor. The Washington Post, which first broke
the news, reported that Accenture will get a year-long
contract for the website worth about $90 million.
The government's dissatisfaction over the website's early
crashes, as well as aspects of the site that still do not work,
prompted the switch, the Post reported, citing a person familiar
with the matter.
In an emailed statement, an Accenture spokesman said, "We
are in discussions with clients and prospective clients all the
time - but it is not appropriate to discuss new business
opportunities we may or may not be pursuing."
Johnson called the news "disappointing" and pointed to
examples of poorly managed Accenture contracts highlighted by
the Project on Government Oversight, a watchdog group.
For example, the company was publicly faulted by the
California Public Employees' Retirement System (Calpers) for
costly delays and other problems during a major IT overhaul,
"We'll see how well they do, but Accenture doesn't have a
strong reputation of doing this stuff successfully," Johnson
CASEWORKER SYSTEM FOR TRICKY CASES
Officials from the administration and CGI had assured
Congress over the summer that HealthCare.gov would open on time
and work as intended.
At a Sept. 10 hearing, CGI vice president Cheryl Campbell
testified that the company "is confident that it will deliver
the functionality that CMS has directed to enable qualified
individuals to begin enrolling in coverage when the initial
enrollment period begins on Oct. 1."
Instead, the site failed to load, returned countless error
messages, and generally thwarted the attempts of millions of
users to create accounts, shop for coverage or enroll.
The administration eventually acknowledged that the fault
lay in hundreds of coding errors in the software CGI wrote, and
the White House brought in trusted Obama aide Jeffrey Zients to
fix the site by the end of November.
The improvements allowed more than 1.1 million people to
shop for and enroll in insurance on HealthCare.gov by the end of
2013, far short of original hopes for early enrollment.
Although the site is vastly improved, technical glitches
continue to bedevil enrollment. There are about 13,000 people
who are now in a "caseworker system" to try to resolve
particularly thorny technical issues, White House spokesman Jay
Carney told reporters.
The website still lacks several "back end" features, such as
a payment system for insurance companies.
The deadline for signing up for 2014 health insurance under
the Affordable Care Act is March 31, meaning the new contractor
will take over at a time when the government needs the site to
handle what it hopes will be a surge of last-minute sign-ups.
"With only limited days to enroll, the government is rolling
the dice, and the new vendor could be a savior or a bust if new
problems arise," said Scott Amey, general counsel for the
Project on Government Oversight.
But Peter Neupert, an operating partner with Health
Evolution Partners, a private equity firm that invests in health
companies, said he did not think the switch in contractors
likely would affect the website, which is now overseen by Kurt
DelBene, a former Microsoft executive.
"This appears to be about getting a new, hopefully better,
team for the next few cycles of iteration," Neupert said, noting
he suspects DelBene will have a "transition plan" to manage the
'A VERY, VERY GOOD THING'
This is at least the second contract switch for
HealthCare.gov. In November, CMS said it would not renew its
contract with Verizon Communication Inc's Terremark unit
for computer servers hosting the troubled website and instead
award a contract for that work to Hewlett-Packard Co.
Terremark's contract ends on March 30, the day before the
sign-up deadline. The Terremark servers suffered at least one
outage last fall that lasted for hours, making the website
Despite the bad publicity from the website woes, two
analysts said they did not expect CGI to take a significant hit
from the end of the HealthCare.gov contract.
"You could say what they're losing in effect is this $90
million, 12-month contract, which in the context of a $10
billion revenue company is nothing," said one of the analysts,
who declined to be quoted by name.
U.S.-listed shares of CGI Group closed at $31.58, down 2.9
The second analyst said CGI might be better off to not be
associated with the highly politicized project. "We will never
hear CGI's name associated with Obamacare, which, frankly, is a
very, very good thing," the analyst said.