Watchdog: Accountability

Feds reviewed only one bid for Obamacare website design

BY: Richard Pollock October 14, 2013 | 5:00 am
Federal officials considered only one firm to design the Obamacare health insurance exchange website that has performed abysmally since its Oct. 1 debut.

Federal officials considered only one firm to design the Obamacare health insurance exchange website that has performed abysmally since its Oct. 1 debut.

Rather than open the contracting process to a competitive public solicitation with multiple bidders, officials in the Department of Health and Human Services' Centers for Medicare and Medicaid accepted a sole bidder, CGI Federal, the U.S. subsidiary of a Canadian company with an uneven record of IT pricing and contract performance.

CMS officials are tight-lipped about why CGI was chosen or how it happened. They also refuse to say if other firms competed with CGI, or if there was ever a public solicitation for building Healthcare.gov, the backbone of Obamacare’s problem-plagued web portal.

Instead, it appears they used what amounts to a federal procurement system loophole to award the work to the Canadian firm.

CGI was one of 16 companies that had been qualified by HHS during President George W. Bush's second term to deliver, without public competition, a variety of hardware, software and communication products and services.

In awarding the Healthcare.gov contract, CMS relied on a little-known federal contracting system called ID/IQ, which is government jargon for “Indefinite Delivery and Indefinite Quantity.”

CGI was a much smaller vendor when it was approved by HHS in 2007. With the approval, CGI became eligible for multiple awards without public notice and in circumvention of the normal competitive bidding procurement process.

The multiple awards were in the form of “task orders” for projects of widely varying size. Over the life of the CGI contract — which expires in 2017 — the IT firm can receive awards worth anywhere from the “$1,000 to $4 billion,” according to a contracting document provided by CGI to the Washington Examiner.

This is apparently the route chosen by CMS officials in awarding the Obamacare Healthcare.gov website design contract to CGI.

Between 2009 and 2013, CMS officials awarded 185 separate task orders to CGI totaling $678 million for work of all kinds, according to USAspending.gov, a federal spending database.The Obamacare website design contract was for $93 million.

There is no evidence CMS issued any public solicitation for the Obamacare website contract. The Examiner asked both CMS and CGI for copies of any public solicitation notice for the Healthcare.gov task orders. Neither CMS nor CGI furnished any such public notice.

Linda Odorisio, CGI’s vice president for global communications insisted in an email to the Examiner that the Obmacare Healthcare.gov project had multiple bidders.

“There were at least two bidders, we believe three, for the task order. That is all the information I have,” she said.

Similarly, CMS spokesman Tasha Bradley declined to provide a public solicitation document, saying the only way to obtain such a document would be to submit a Freedom of Information Act request.

It is not uncommon for federal officials to delay responses to FOIA requests for years, provide useless documents instead of those requested, or use the legal system to prevent public access.

The ID/IQ system provides a fast-track contract approval process, but it is much less likely than competitive bidding to secure high quality at a reasonable cost.

“Whenever you have limited competition, but certainly with a sole source or a one-bid offer, the government has to question whether it is going to get the best product at the best price,” said Scott Amey, general counsel for the Project on Government Oversight, a nonprofit watchdog organization that monitors federal contracting.

Both USAspending.gov, which tracks federal spending, and the FFATA Subaward Reporting System, which specifically tracks contracts, refer to CGI as the lone bidder for the Obamacare website design award.

Each site describes the CGI contract award as the product of “full and open competition,” but CGI is the only bidder listed.

Amey suggested that CMS officials linked the “full and open competition” to the original 2007 ID/IQ process.

“They certainly could have handcuffed themselves by creating a schedule to require them to use an existing ID/IQ rather than going with a normal negotiated procurement,” Amey told the Examiner.

“By putting in tight turn-around times, creating something that was brand new in a year, they had a very tight schedule that required them to use the existing contract rather than starting from scratch,” Amey said.

But was there really competition? “In the multiple award ID/IQ world, you do worry about whether there is actual competition generally in the task order stage,” he says.

CGI is a relatively new company in the United States. Its Canadian executives grew their corporate U.S. presence through major acquisitions of U.S. companies.

The first acquisition came in 2004 when CGI purchased American Management Systems Inc. for $858 million in a cash tender offer that covered existing federal IT contracts in healthcare, financial services, and communications work.

In August 2010 CGI doubled its size again through the $1.07 billion cash tender offer to acquire Stanley Inc.

The first indication of questions of CGI performance and pricing came in February 2010 when the firm protested a $230 million CMS contract award to Computer Sciences Corp. Inc.

In a sharp rebuff to CGI in November 2010, General Accountability Office acting counsel Linda H. Gibson denied the CGI protest.

In doing so, she noted that CSC’s bid was $148 million versus CGI’s bid of $258 million. When CMS modified the terms of its proposal, CSC was still substantially lower, coming in at $223 million versus CGI’s price tag of $395 million.

Worse, Gibson noted that at the time CMS officials had only rated some of CGI's previous services as “fair.”

“The record reflects,” Gibson wrote in her 2010 decision, “that CGI's positive ratings were somewhat tempered by the fact that [DELETED] had received 'fair' ratings on one of its relevant contracts and that CGI's performance had also been rated as "fair" on another contract, which CMS deemed relevant.”

As the Examiner previously reported, CGI in Canada also suffered embarrassment in 2011 when it failed to deliver on time for Ontario province's flagship project a new online medical registry for diabetes patients and treatment providers.

Ontario government officials cancelled the $46.2 million contract after 14 months of delay in September 2012. Ontario officials currently refuse to pay any fees to CGI for the failed IT project.

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