A report released by the HHS' Office of Inspector General found CMS did not meet all the requirements or leverage all available planning tools when awarding contracts for developing the Federal Marketplace.
Overall, CMS awarded 60 contracts across 33 companies to work on HealthCare.gov, the main one with Canadian IT company CGI Federal. The bumpy rollout of the federal marketplaces in October 2013 spurred a number of investigations into the project and planning efforts of the exchange.
The OIG report indicates CMS did not always meet contracting requirements for the online marketplace project. The report outlines six major missteps by CMS.
1. CMS did not adequately plan for the Federal Marketplace contracts. The report indicates CMS did not perform all the required acquisition planning for the contracts. Agencies are required to develop a written acquisition strategy to describe the overall acquisition approach and outline factors that will guide decisions for major IT projects, which CMS did not do, according to the report. Additionally, many contract files were missing required planning information, such as an outline of market research conducted. The report also indicates CMS didn't explore additional acquisition planning tools that could have aided the agency in its planning stages.
2. Only two of six key contracts underwent Contract Review Board oversight before being awarded. Such oversight reviews ensure the contracts comply with agency requirements and established laws.
3. CMS limited its choices for selecting contractors. Of the 60 contracts awarded, 55 were awarded under previously established contracts. Just five were newly awarded. Additionally, the report indicates CMS only solicited one proposal for approximately one-third of the 60 contracts.
4. CMS did not perform thorough reviews of prior performance for two key contracts. For two of the key contracts that implemented key functions of the marketplace, CMS did not use any performance database to evaluate the companies' past performances.
5. CMS awarded five cost-reimbursement contracts, meaning the government assumes the cost. With cost-reimbursement contracts, the government absorbs the risk of changes, delay and cost overruns. Agencies must submit documented rationale for choosing this type of contract, which CMS did not thoroughly do for five of the six key contracts.
6. CMS grossly underestimated the contract values. The agency's original estimation of contract value for the 6 key contracts was $464 million. In 2014, this estimate was revised to $824 million.
According to the report, HHS and CMS both agreed with the OIG's recommendations for action.
In HHS' response to the draft report, the agency said, "CMS has moved aggressively to implement extensive contracting reforms, bring in new leadership to oversee Marketplace operations, hire a systems integrator and end our largest contract with CGI and move to a new type of contract with Accenture that rewards performance and reduces risk to the federal government."
In January 2014, CMS selected Accenture to oversee maintenance of HealthCare.gov. In December, CMS awarded Accenture a five-year $563 million contract to continue maintenance of the federal exchange.
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