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Failing the Test of Accountability

Saturday January 24th, 2015   •   Posted by Craig Eyermann at 11:22am PST   •  

17282820_S If you were the federal government bureaucrat who is responsible for selecting an information technology (IT) company for a major computer software development project, would you select the same company that was responsible for producing the debacle?

Perhaps “debacle” is too light a word. Reason‘s Peter Suderman describes a just-issued report by the Department of Health and Human Services’ (HHS) Inspector General on that massive failure from a little over a year ago:

A new report from the Inspector General (IG) for the Department of Health and Human Services (HHS) reveals that contract managers at the Centers for Medicare and Medicaid Services (CMS) failed to take basic measures to ensure that contracts for went to reliable firms, didn’t draw up required risk mitigation plans, and agreed to multiple contracts that left taxpayers to pay for any cost overruns incurred by the work.

The HHS IG is both thorough and damning. Investigators looked at 60 different CMS contracts for the online health insurance portal as well as surrounding documentation. The IG also conducted interviews with “high level HHS and CMS staff” about how they planned the contracting process—or what little planning there was, anyway.

According to the report, CMS did “not conduct thorough past performance reviews of potential contractors,” including CGI Federal, the main contractor for the essential components of the federal exchange.

Before going any further, please re-read that last sentence, because that management failure on the part of the Department of Health and Human Services’ bureaucrats responsible for overseeing the development of the web site and all of its supporting IT systems is the key to understand what can only be described as a brand new management failure on the part of the bureaucrats who run the Internal Revenue Service. The Daily Caller‘s Richard Pollack breaks the story:

Seven months after federal officials fired CGI Federal for its botched work on Obamacare website, the IRS awarded the same company a $4.5 million IT contract for its new Obamacare tax program.

CGI is a $10.5 billion Montreal-based company that has forever been etched into the public’s mind as the company behind the bungled Obamacare main website.

After facing a year of embarrassing failures, federal officials finally pulled the plug on the company and terminated CGI’s contract in January 2014.

Yet on Aug. 11, seven months later, IRS officials signed a new contract with CGI to provide “critical functions” and “management support” for its Obamacare tax program, according to the Federal Procurement Data System, a federal government procurement database.

Pollack’s report also describes the company’s failures to develop functional IT systems in both Vermont and Massachusetts, as well as in the province of Ontario, Canada.

In the case of the debacle, the failure of the federal government’s bureaucrats to provide any effective oversight of CGI Federal’s work led to a $149 million overrun of the $58 million government contract that the company was awarded, costing taxpayers $207 million. And that was just on the contract for overseeing the project!

In all, the federal government awarded six major separate contracts to develop the web site and the various computer systems and software that were meant to support the implementation of the Affordable Care Act, the awarded value of which totaled $464 million. The HHS’ Inspector General indicates that the actual bill for all six of these contracts exceeds $824 million.

So why on earth is the IRS handing out a new multimillion dollar IT development contract to the company that is directly responsible for such massive failures in so recent years?

In 2013, the Washington Post profiled CGI Federal and its business model as follows:

CGI Federal is a wholly owned subsidiary of the Canadian firm CGI Group, which was founded in Quebec City in 1976 by a pair or 26-year-olds named Serge Godin and Andre Imbeau. (CGI stands for “Conseillers en Gestion et Informatique” in French, which roughly translates to “Information Systems and Management Consultants”). Growing through scores of acquisitions, and providing outsourced IT services to massive companies such as Bell Canada and Quebec’s provincial pension plan, CGI’s business model depends on embedding itself deeply within an institution.

“The ultimate aim is to establish relations so intimate with the client that decoupling becomes almost impossible,” read one profile of the company.

In other words, the company depends upon establishing crony relationships with their target customers: the bureaucrats who award federal government contracts, whom they entice into gifting sweetheart deals to the company. In fact, here’s how the Washington Post describes the company’s CEO’s comments regarding their work on the Affordable Care Act’s IT systems in the third quarter of 2013, just before their failures with exploded into public view:

That said, they’ve learned quickly, and see the U.S. federal government as their area of biggest growth. CGI Federal’s health-care practice has grown 90 percent year over year, largely due to the project. And for a contractor, ballooning projects are a good thing. “In the Federal Government business, we continue to see more extensions and ceiling increases on our existing work, while we further leverage our position on contract vehicles,” said CEO Michael Roach on their latest earnings call. Those “contract vehicles” now amount to $200 billion, which Roach later referred to as a “hunting license.”

“Accordingly, we continue to view U.S. Federal Government as a significant growth opportunity,” Roach continued.

As the IRS’ newly awarded contract demonstrates, having produced such massive failures hasn’t prevented them from exploiting their crony relationships to gain new business. That’s not their fault – instead, it is the judgment of the IRS’ managers that has failed the American people.

It’s just a shame that today’s IRS leadership continues to fail the test of accountability, a failure made all the worse because they have established no effective system of oversight to right their ongoing wrongs.

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January 2015