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Privatization and the Affordable Care Act

The roots of the Affordable Care Act web site failures may start in the Reagan Administration’s fixation with contracting out federal services.

One of the main problems with the Affordable Care Act web site began with the Reagan administration and has adversely affected government performance since then. At that time, the management meme of concentrating on your core capabilities and contracting out other processes was applied to government. Government should contract out such non-core capabilities as logistics, food services and information technology (IT).

While it all sounded good, the policy had motives other than improved government operations. The practice of taking taxpayer money away from government salaries and moving it to contractor revenue and profits was certainly a part of conservative and business goals. If government were left with fewer internal capabilities and then failed at some important program, well, we told you government does not work.

These policies of contracting out government work also help all administrations claim they were reducing the size of government. Even though as much money – or more – is spent, there are fewer civil servants on the payroll, and that was a good political message. So from Reagan, through Bush I, Bill Clinton and Bush II, contracting out was standard policy. For this reason, President Obama inherited a government, especially a Health and Human Services agency, with no internal IT expertise. When the Affordable Care Act required a quite complicated web site and interface with other parts of health care networks, it became time to write contracts.

Excellent reporting in the Washington Examiner has revealed some details on the contracting for this web site. In an October 13, 2013, article, Richard Pollack reported that “CGI Federal, the U.S. subsidiary of a Canadian company” received the award of a contract to do the web site work. The contract was awarded on a sole source basis under a contract that CGI qualified for in 2007. After qualifying, CGI was eligible for direct awards, although competition was the preferred way to place such contracts. Although the Health and Human Services contracting office will not comment, Pollock’s sources indicate the award was awarded to CGI without competition.

CGI had “an uneven record of IT pricing and contract performance,” according to Pollack’s reporting. It had failed on a contract to produce a database registry for Ontario. The Canadian province had to cancel the contract and has refused to pay any fee on the contract. In November 2010, the GAO denied a CGI protest on another contract, noting that CGI had been rated only fair (out of an excellent/good/fair/poor rating scheme) on previous contract work.

According to The Washington Post, CGI Federal moved into the US market by acquiring American Management Systems. The Post wrote, “A year before CGI Group acquired AMS in 2004, AMS settled a lawsuit brought by the head of the Federal Retirement Thrift Investment Board, which had hired the company to upgrade the agency’s computer system. AMS had gone $60 million over budget, and virtually all of the computer code it wrote turned out to be useless, according to a report by a US Senate committee.” The AMS people were the core of the Affordable Care Act team.

Did CGI Federal have an incentive to perform or to make as much profit as possible? Poor performance does not appear to cost CGI Federal government work. In November 2013, the Army Contracting Command at Rock Island, Illinois, announced that on October 31 it awarded Option Year 4 against Contract W52P1J-10-C-0003 to CGI Federal for services in support of the Army Sustainment Command’s Integrated Materiel Management Operation System. The awarded amount was $20.7 million, increasing the contract value to $120 million.

Why HHS decided that of all qualified IT contractors, CGI was the one to go with without further competition is hard to explain. Competitions can be done very quickly, especially if there is a pool of previously qualified contractors. Only fair performance on previous contracts will generally disqualify you from competing for new awards, because there are generally several contractors with excellent or at least good past performance.

So far, HHS will not release documents without a Freedom of Information request. Mr. Pollack’s article notes that such requests can take more than a year for a response and that the response often does not provide the requested information. HHS appears to be stonewalling the release of information. This raises questions concerning how CGI received the award. Past Truthout reports indicate the possibility of some form of networking, rather than best value, as the deciding factor.

Using CGI Federal has resulted in poor contractor performance. All reports indicate an inability to handle high traffic, poor links between federal and state exchanges, glitches that crash the system and inoperable internal site links. Reuters reported, “The level of functionality they’re offering today is worse than we might have anticipated. I expected a level where you could at least get to the point of shopping,” said Austin Bordelon, an analyst with health care consulting group Leavitt Partners, who monitored federal and state marketplaces through the day. “But really, you just can’t get through the door.”

Several reviews of the government site have questioned the design of the site and the architecture of the operational aspects. It appears that to create an account, the personal computer must load a large number of programs and a large amount of data, which can crash many home computers. The site, of course, should have been designed to work with PCs from the start. On first review, the approach taken by CGI appears to have been inadequate for the required use.

These problems are inherent to privatization and the use of a contractor for this job. Had HHS used internal web site design and IT support, the process had greater potential for success. A team would have been put together for the task with constant contact between the Affordable Care Act implementation team, who had responsibility for the site requirements and the IT experts putting the site together. The team would have had a goal of ensuring that the web site worked, not of maximizing company profits.

Privatization required using a contractor for the project. At this point requirements had to be transmitted to a contracting officer, who is the government official authorized to award and manage the contract. Any changes regarding requirements, price or schedule must go through the contracting officer. Communication between the requirements people at HHS and the contractor doing the IT work are much more difficult than they would be for an internal team. The contractor is on notice not to accept any requirement changes unless authorized by the contracting officer. Sources indicate that there were a number of requirements changes that had to go through the contracting process, some fairly late for October 1 implementation.

Following award, there must be proper oversight of a contract. Once an agency has decided to privatize IT work, it often loses in-house expertise capable of contract oversight. There is simply more money to be made by working for contractors. Even the Defense Department, with the Defense Contract Management Agency devoted to this task, had a hard time finding the oversight people for the vast increase in service contracts in the past 20 years.

Since the Reagan administration, privatization has been the preferred way to provide services, such as IT, in the government. The problems with implementation of the Affordable Care Act highlight the ways in which this policy can go wrong. Opponents of the act will use its IT problems as a way to attack the progressive goal of providing greater access to health care to those who cannot afford necessary insurance. It will be cruelly ironic if the conservative policy of privatization will, by failing, further another conservative goal of restricting access to health care.

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