(WASHINGTON, D.C.) – The federal government systematically mismanaged the contracts to develop the HealthCare.gov website leading to last year’s disastrous roll-out while wasting millions of taxpayer dollars, according to a new report by the Government Accountability Office. 

“CMS committed just about every mistake in the book on how to mismanage a contract: failing to develop requirements or perform oversight, ignoring key reviews intended to make sure the website worked, and deliberately choosing to pay out $12.5 million in profits to a contractor who failed to deliver a working system instead of holding them accountable and protecting American taxpayers’ money. Most appalling, CMS awarded a sole source contract to fix the failed system, under which costs have exploded from $91 million to $175 million and counting. This case is a poster child in how we are ripping off our children to pay for our stupidity. The quality work of the GAO, a non-partisan watchdog, highlights in striking detail another example of the disastrous fiscal consequences of ObamaCare.”

The GAO report focuses on three contracts, one awarded to CGI Federal for the federally facilitated marketplace (FFM), one to QSSI, to develop the underlying data hub, and one awarded to Accenture to continue development of the system. GAO noted that CMS used 62 different contracts at a total cost of $840 million since 2010 on IT spending related to HealthCare.gov. According to the report, “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. Late in the development process, CMS identified major performance issues with the FFM contractor but took only limited steps to hold the contractor accountable.”

Key findings include:

• From September 2011 to February 2014, the two primary contracts grew by almost 245%, from $86 million to $294 million.

• CMS chose to use risky contracts that pay for a contractor’s cost to perform work, rather than paying for a finished end-product, despite having been cited by GAO in 2007 for “pervasive internal control deficiencies that increased the risk of improper payments” when using these kinds of contracts.

• CMS awarded the contracts before requirements were stable, and used a new IT development approach the agency had not tried before.

• CMS delayed key governance reviews, including one to review system readiness from March to September 2013—just weeks before the launch—and did not receive required approval. As a result, CMS launched Healthcare.gov without verification that it met performance requirements.

• Instead of relying on required quality assurance plans to oversee the contracts, CMS officials said that they “relied on their personal judgment and experience to determine quality.”

• GAO identified approximately 40 instances during FFM development in which CMS program staff inappropriately authorized contractors to expend funds totaling over $30 million because those staff did not adhere to established contract oversight roles and responsibilities.

• In August 2013, a month before launch, CMS officials sent a letter detailing concerns with CGI Federal’s code quality, testing, failure to provide a key deliverable, and scheduled release not including all agreed upon functionality. The letter stated that CMS would take aggressive actions, including withholding money from the contractor. The letter was retracted one day after it was sent, because the CMS Chief Operating Officer preferred a different approach and the agency elected to instead collaborate with the contractor. CMS withheld a mere $267,000, or 2% of the total $12.5 million in profits paid to CGI Federal.

GAO’s report includes a number of recommendations to address these failures and improve contract management practices at CMS.