How Much Did the Government Pay for Obamacare’s Broken Website?

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You are not welcome here. Photo: Joe Raedle/2013 Getty Images

Canada’s largest technology company has, until this month, maintained a low profile in the United States. Unlike, say, Blackberry, mentioning CGI Federal at a cocktail party hasn’t tended to elicit strong opinions or emotional heat. After all, it’s a Canadian IT company.

That shroud of gentle anonymity has dissipated, however. America is now officially pissed off at Montreal-based CGI, and the company is hunkering down under a barrage of questions — including the one asked on air by a CNBC host: “Should we immediately go to war with Canada over the CGI thing?”

The “thing” is the error-plagued national website for Obamacare, healthcare.gov, and the large sum of money CGI was paid to build it. Even ten days after going live, the site is, by most reports, still virtually inoperable. Users hit a wall of errors when they try to price plans or find out what subsidies they may qualify for. By pretty much all accounts, the launch of the website has been a complete fiasco.

While the news media has stayed largely focused on the shutdown, the question of how much American taxpayers shelled out for the busted site has generated a fair amount of heat and speculation online. Was it $634 million, as one report suggested? A CGI official rejected that figure as too high in a comment to the Blaze, Glenn Beck’s eclectic media property. The Washington Post reported that “CGI has been awarded at least $88 million by CMS to build the federal exchange and provide related technical support.” (CGI did not respond to our request for comment.)

Seeking insight, Daily Intelligencer tracked down a senior official at the Department of Health and Human Services who, on the condition of anonymity, was willing to give us the skinny on CGI’s Obamacare work — and how much the company was paid for it. The official, who did not have permission to speak to the press, is a contracting specialist at HHS who has managed more than $1 billion in purchases (although did not work directly with CGI).

The answer? All contracts between CGI and the Center for Medicare and Medicaid Services, the arm of HHS that is charged with implementing the Affordable Care Act, inked since mid-2010 were for Obamacare IT work. The total value of the contracts meeting that description (they can be found here) is $515 million.

"It is safe to say that everything CGI has done for HHS since Obamacare passed is related in some way to Obamacare and preparations for the rollout of healthcare.gov,” said the official. “Even technological alterations to the Medicare and Medicaid systems were modifications required by Obamacare. None of it happens separately. It's all one massive system now."

 Whether this Obamacare broader IT ecosystem is of higher quality than the gateway website isn't clear. Certainly, there is already much concern. (Our HHS official opted not to comment on the matter.)

Obama, HHS Secretary Kathleen Sebelius, and various pro-ACA pundits have said the site’s woes are a result of overwhelming demand — but that argument is being batted away even by friendly witnesses.

“There is no excuse for not withstanding that traffic,” says digital political strategist Karl Frisch, a former spokesman for liberal think tank Media Matters for America and the Democratic Senatorial Campaign Committee. The tasks of the campaign and Obamacare websites are radically different and managed by different people, Frisch said, but "if Obama for America was missing the opportunity to collect donations and e-mail addresses from the volume of people visiting the site, that would be unacceptable. One would hope that's the case in the government environment, but it’s not.”

Another politically friendly critic is Clay Johnson, co-founder of Blue State Digital, the agency that helped Obama win the technological ground game in two presidential elections. In mid-2012, Johnson left BSD to work at the White House as a presidential innovation fellow, a six-month gig in which he was assigned to design new, easy-to-use systems to encourage small businesses to bid on government contracts.

“It’s been three years and [hundreds of millions of dollars] for this level of poor performance?” Johnson said, continuing a scathing assessment that began with a blog post entitled "The Healthcare.gov Fiasco." “I buy that lots of people are on the site and that causes problems. That excuse is valid for Day 1. We ought to be forgiving about that stuff. But now that we’re out there a week later and … the site hasn’t technically changed very much. It shows no signs of recovery.”

But Johnson sees the healthcare.gov fiasco as more of a systemic crisis than a blunder by CGI or the Obama adminstration. The federal system for letting big contracts favors large, entrenched companies with a history of government contracts — typified by CGI, a $10 billion company — and excludes smaller, more innovative firms that could do the work better and cheaper, following the model of Silicon Valley start-ups. This way of doing things, in his view, will generally produce poor-quality, expensive work.

George Washington Law professor Joshua Schwartz, an expert on government procurement law, agrees that the system for contracting out projects like healthcare.gov is broken. “There is probably a lesson here on unintended consequences,” Schwartz says. “Each of these rules and regulations is probably well intended and serves a genuine need, but when you put it all together it makes the system a little bit of a straitjacket. It’s mistrust of government that leads to this straitjacket, and then this straitjacket leads to more mistrust of government.”

Ironically, the many failures could end up benefiting CGI, said Johnson. “What really terrifies me is that the contractor that built this is going to say, ‘Yep, that’s going to cost a lot more money to fix.’” In other words, we may go to war with Canada yet.