Healthcare.gov:

Ineffective Planning and Oversight Practices Underscore the Need for Improved Contract Management

GAO-14-694: Published: Jul 30, 2014. Publicly Released: Jul 30, 2014.

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What GAO Found

The Centers for Medicare & Medicaid Services (CMS) undertook the development of Healthcare.gov and its related systems without effective planning or oversight practices, despite facing a number of challenges that increased both the level of risk and the need for effective oversight. CMS officials explained that the task of developing a first-of-its-kind federal marketplace was a complex effort with compressed time frames. To be expedient, CMS issued task orders to develop the federally facilitated marketplace (FFM) and federal data services hub (data hub) systems when key technical requirements were unknown, including the number and composition of states to be supported and, importantly, the number of potential enrollees. CMS used cost-reimbursement contracts, which created additional risk because CMS is required to pay the contractor's allowable costs regardless of whether the system is completed. CMS program staff also adopted an incremental information technology development approach that was new to CMS. Further, CMS did not develop a required acquisition strategy to identify risks and document mitigation strategies and did not use available information, such as quality assurance plans, to monitor performance and inform oversight.

CMS incurred significant cost increases, schedule slips, and delayed system functionality for the FFM and data hub systems due primarily to changing requirements that were exacerbated by oversight gaps. From September 2011 to February 2014, FFM obligations increased from $56 million to more than $209 million. Similarly, data hub obligations increased from $30 million to nearly $85 million. Because of unclear guidance and inconsistent oversight, there was confusion about who had the authority to approve contractor requests to expend funds for additional work. New requirements and changing CMS decisions also led to delays and wasted contractor efforts. Moreover, CMS delayed key governance reviews, moving an assessment of FFM readiness from March to September 2013—just weeks before the launch—and did not receive required approvals. As a result, CMS launched Healthcare.gov without verification that it met performance requirements.

Late in the development process, CMS identified major performance issues with the FFM contractor but took only limited steps to hold the contractor accountable. In April and November 2013, CMS provided written concerns to the contractor about product quality and responsiveness to CMS direction. In September 2013, CMS program officials became so concerned about the contractor's performance that they moved operations to the FFM contractor's offices to provide on-site direction. At the time, CMS chose to forego actions, such as withholding the payment of fee, in order to focus on meeting the website launch date. Ultimately, CMS declined to pay about $267,000 in requested fee. This represents about 2 percent of the $12.5 million in fees paid to the FFM contractor. CMS awarded a new contract to another firm for $91 million in January 2014 to continue FFM development. As of June 2014, costs on the contract had increased to over $175 million due to changes such as new requirements and other enhancements, while key FFM capabilities remained unavailable. CMS needs a mitigation plan to address these issues. Unless CMS improves contract management and adheres to a structured governance process, significant risks remain that upcoming open enrollment periods could encounter challenges.

Why GAO Did This Study

In March 2010, the Patient Protection and Affordable Care Act required the establishment of health insurance marketplaces by January 1, 2014. Marketplaces permit individuals to compare and select insurance plans offered by private insurers. For states that elected not to establish a marketplace, CMS was responsible for developing a federal marketplace. In September 2011, CMS contracted for the development of the FFM, which is accessed through Healthcare.gov.

When initial enrollment began on October 1, 2013, many users encountered challenges accessing and using the website. GAO was asked to examine various issues surrounding the launch of the Healthcare.gov website. Several GAO reviews are ongoing.

This report assesses, for selected contracts, (1) CMS acquisition planning activities; (2) CMS oversight of cost, schedule, and system capability changes; and (3) CMS actions to address contractor performance. GAO selected two task orders and one contract that accounted for 40 percent of CMS spending and were central to the website. For each, GAO reviewed contract documents and interviewed CMS program and contract officials as well as contractors.

What GAO Recommends

GAO recommends that CMS take immediate actions to assess increasing contract costs and ensure that acquisition strategies are completed and oversight tools are used as required, among other actions. CMS concurred with four recommendations and partially concurred with one.

For more information, contact William T. Woods at (202) 512-4841 or woodsw@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In commenting on this report, HHS partially concurred with this recommendation, stating that CMS had already taken steps to address cost growth and delays and to ensure timely and successful performance. In 2016, HHS provided an update on these efforts, including updated policy for monitoring contract spending and overruns. The policy, which was distributed with CMS? fiscal year 2015 Operating Plan, requires that new funding be approved by the Office of Financial Management so that resources can be appropriately vetted. CMS also provided documentation of weekly oversight meetings with contractors to track system development and deliverables.

    Recommendation: In order to improve the management of ongoing efforts to develop the federal marketplace, the Secretary for Health and Human Services should direct the Administrator of the Centers for Medicare & Medicaid Services to take immediate steps to assess the causes of continued FFM cost growth and delayed system functionality and develop a mitigation plan designed to ensure timely and successful system performance.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: In commenting on this report, HHS concurred with this recommendation and stated that CMS is taking steps to better enforce existing policies and procedures for monitoring contractor performance. In 2015, CMS introduced an operating manual for contracting officer representatives that provides information on the use of quality assurance surveillance plans (QASP) in contract monitoring. Specifically, the manual states that a QASP must be developed along with performance work statements. The manual also includes a QASP template.

    Recommendation: In order to improve the management of ongoing efforts to develop the federal marketplace, the Secretary for Health and Human Services should direct the Administrator of the Centers for Medicare & Medicaid Services to ensure that quality assurance surveillance plans and other oversight documents are collected and used to monitor contractor performance.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: In commenting on this report, HHS concurred with this recommendation. In 2015, CMS created an operating manual for contracting officer representatives to provide specific information on the roles and responsibilities of personnel, such as government task leaders or technical monitors, who may support the representatives in performing their oversight duties. This is in addition to training that CMS developed in November 2014 on government functions and oversight and which emphasizes the roles and responsibilities of personnel assigned contract oversight duties. Additionally, as of January 2015, CMS requires the personnel assisting the contracting officer's representative to complete the first level of contracting officers training to develop a better understanding of their roles and responsibilities.

    Recommendation: In order to improve the management of ongoing efforts to develop the federal marketplace, the Secretary for Health and Human Services should direct the Administrator of the Centers for Medicare & Medicaid Services to formalize existing guidance on the roles and responsibilities of contracting officer representatives and other personnel assigned contract oversight duties, such as government task leaders, and specifically indicate the limits of those responsibilities in terms of providing direction to contractors.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Implemented

    Comments: In commenting on the report, HHS concurred with the recommendation and said it is taking steps to insure that program managers fully understand their roles and responsibilities, including updating guidance and providing training. In 2015, HHS issued an acquisition alert emphasizing the requirement for acquisition strategies and in 2016 CMS finalized acquisition planning guidance that addresses program and contracting staff roles in conducting acquisition planning. The CMS guidance emphasizes the responsibilities that program managers have to develop, review, and implement acquisition strategies, including required approvals at various contract value thresholds. The guidance also addresses requirements for the acquisition strategies? content, including defining contracting needs, determining the appropriate contract type, and addressing acquisition risks.

    Recommendation: In order to improve the management of ongoing efforts to develop the federal marketplace, the Secretary for Health and Human Services should direct the Administrator of the Centers for Medicare & Medicaid Services to provide direction to program and contracting staff about the requirement to create acquisition strategies and develop a process to ensure that acquisition strategies are completed when required and address factors such as requirements, contract type, and acquisition risks.

    Agency Affected: Department of Health and Human Services

  5. Status: Closed - Implemented

    Comments: In commenting on the report, HHS concurred with the recommendation and said that CMS has adopted and enforced a governance structure to manage deliverables. In 2016 HHS provided additional information supporting the implementation of the governance structure, including an updated charter for the CMS Intake Review Team (CIRT). According to the charter, CIRT is the central point for evaluating and approving new or enhanced IT projects, which results in recommendations for implementation. This process includes providing updates to various governance boards and escalating any issues to appropriate governance boards as needed.

    Recommendation: In order to improve the management of ongoing efforts to develop the federal marketplace, the Secretary for Health and Human Services should direct the Administrator of the Centers for Medicare & Medicaid Services to ensure that information technology projects adhere to requirements for governance board approvals before proceeding with development.

    Agency Affected: Department of Health and Human Services

 

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