Timeline of Key Events

PPACA required the establishment of marketplaces in each state by  January 2014. Oversight Weaknesses and Lack of Adherence to Planning Requirements Compounded Acquisition Planning Challenges

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 oversight. According to CMS program and contracting officials, the  task of developing a first-of-its-kind federal marketplace was a complex  effort that was exacerbated by compressed time frames and changing  requirements. However, CMS  did not use information available to provide oversight, such as quality  assurance surveillance plans. As a  result, key systems began development with risks that were not fully  identified and assessed. Changing Requirements and Oversight Gaps Contributed to Significant Cost Growth, Schedule Delays, and Reduced Capabilities during FFM and Data Hub Development

CMS incurred significant cost increases, schedule slips, and reduced  system functionality in the development of the FFM and data hub  systems—primarily attributable to new and changing requirements  exacerbated by inconsistent contract oversight. From September 2011 to  February 2014, estimated costs for developing the FFM increased from  an initial obligation of $56 million to more than $209 million; similarly, data  hub costs increased from an obligation of $30 million to almost $85  million. In addition, required design and readiness governance reviews  were either delayed or held without complete information and CMS did  not receive required approvals. As a result,  CMS launched the FFM system without the required verification that it  met performance requirements. Moreover,  CMS contract and program staff inconsistently used and reviewed  contract deliverables on performance to inform oversight. In April and November 2013, CMS provided written  concerns to CGI Federal regarding its responsiveness to CMS’s direction  and FFM product quality issues. Ultimately, CMS declined to pay  only about $267,000 of requested fee. This represented about 2 percent  of the $12.5 million in fee paid to CGI Federal. This work also has experienced  cost increases due to new requirements and other enhancements, with  costs increasing to over $175 million as of June 2014. By early September 2013, CMS program officials told us that they  became so concerned about the contractor’s performance that CMS  program staff moved their operations to CGI Federal’s location in  Herndon, Virginia to provide on-site direction leading up to the FFM  launch. CMS Took Some Actions to Hold the FFM Contractor Accountable after the Healthcare.gov Launch

After the Healthcare.gov launch on October 1, 2013, CMS contracting  officials began preparing a new letter detailing their concerns regarding  contractor performance which was sent to CGI Federal in November  2013. CMS’s letter also requested that CGI Federal provide a plan to  address these issues. pays the contractor’s allowable costs, plus an additional fee that was  negotiated at the time of award. CMS  chose to proceed with pursuing the deadline. Unless CMS takes action to improve acquisition  oversight, adhere to a structured governance process, and enhance other  aspects of contract management, significant risks remain that upcoming  open enrollment periods could encounter challenges going forward. Recommendations for Executive Action

In order to improve the management of ongoing efforts to develop the  federal marketplace, we recommend that the Secretary for Health and  Human Services direct the Administrator of the Centers for Medicare &  Medicaid Services to take the following five actions:
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. 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. Appendix I: Objectives, Scope, and Methodology

This report examines selected contracts and task orders central to the  development and launch of the Healthcare.gov website by assessing (1)  Centers for Medicare & Medicaid Services (CMS) acquisition planning  activities; (2) CMS oversight of cost, schedule, and system capability  changes; and (3) actions taken by CMS to identify and address contractor  performance issues. Specifically,  we selected the task orders issued to CGI Federal Inc. (CGI Federal) for  the development of the federally facilitated marketplace (FFM) system  and to QSSI, Inc. QSSI for the development of the federal data services  hub (data hub) in September 2011—and the contract awarded to  Accenture Federal Services in January 2014 to continue FFM  development and enhance existing functionality.
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 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.

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.