Red Flags? Company behind ObamaCare site has checkered past


While the company behind the dysfunctional was virtually unknown to the American public until this month, critics say the Obama administration should have known this multibillion-dollar firm had a checkered history with other government contracts.

In projects stretching from Canada to Hawaii, parent company CGI Group and its subsidiaries ran into complaints about its performance. And this was while, and in some cases before, CGI Federal was paid millions, along with other contractors, to create the ObamaCare website.

“The morning I heard CGI was behind [], I said, my God, no wonder that thing doesn’t work,” said James Bagnola, a Texas-based corporate consultant who was hired by the Hawaii Department of Taxation (DOTAX) in 2008.

CGI Technologies and Solutions, Inc., another subsidiary, had been responsible for overhauling the IT systems for the Hawaii tax department, and then, developing its new delinquent tax collection services. Not only was the software and implementation problematic, but the second contract, signed in 2009, paid CGI millions for work it did not complete, according to a state audit completed in 2010 on the matter.

Still, they hold contracts all over the Hawaii government. Hawaii’s Health Connector, the state’s new health exchange for providing insurance options under ObamaCare, hired CGI to build its website. Like, the Hawaii portal had immediate problems when it launched on Oct. 1, but those have since been rectified and so far, according to Health Connector officials who spoke with, they are not blaming CGI.

Bagnola doesn’t buy it, saying when they overhauled DOTAX’s IT, “the system was broken all the time.”

“I can’t believe people continue to hire incompetency,” he added.

The firm’s performance was also called into question when parent company, CGI Group, was hired to design and execute a new $46.2 million diabetes registry for eHealth Ontario, part of the Canadian government health care system. That contract was canceled in September 2012 after a series of delays that rendered the system obsolete, according to news reports at the time.

“They did not meet the requirements of their contract which was faced with many layers of delays, which caused great angst among the health care providers who are trying to do their best,” Frances Gélinas, a member of Ontario’s provincial parliament, told the Washington Examiner, in an Oct. 10 report.

It was reported initially that Canadian taxpayers were not on the hook for the nearly $15 million already spent by CGI because a clause in the contract said that if CGI did not meet the deadlines, it wouldn’t get paid. The registry was supposed to be up and running by June 2011. A later audit, however, found that the provincial government spent $24.4 million of its own money on the project before it was scrapped.

Meanwhile, the state of Vermont is reportedly considering whether to penalize CGI for not meeting its deadlines for designing and producing Vermont’s health care exchange, Vermont Health Connect, which is also experiencing the same kind of glitches as the federal system. In that case, the state recently signed an amended $84 million contract with CGI — just $9 million less than the one it signed with the federal government in 2011. In late September, reported that CGI failed to meet 21 deadlines this summer and the state could charge as much as $125,000 a day in penalties as a result.

“I’m going to demand answers,” said Don Turner, who is the Republican minority leader in the Vermont House of Representatives. He told that he just recently heard of CGI’s problems in Canada. “There were a number of deliverables (in the Vermont contract) that have been missed. We are preparing to ask some tough questions. There are a lot of things that don’t seem right about CGI.”

In the meantime, he added, “there has been a lot of frustration” with citizens trying to register on the new health care system. “It is very disappointing.”

CGI came to national attention after the problems with turned out to be much more than a short-term glitch. Since its dubious debut on Oct. 1, it’s been determined that the software code and the basic infrastructure of the site’s design is at the root of the problem, which is keeping Americans from registering, logging in and buying health insurance. For the first time, President Obama personally addressed the issue this week, calling the problems “unacceptable” and pledging to put an army of new technicians on the problem.

CGI is not the only company or agency taking heat, with experts pointing out that numerous changes to the specifications, plus an unrealistic timetable that did not allow for proper testing, could account for the website’s most prevailing problems. That would be the government’s fault, not necessarily the contractor’s. As the administration has said all along, some glitches were expected as with the roll-out of any product; they just ended up being far worse than expected. The White House has not said anything about the CGI contract publicly.

The company is also doing health care work in Colorado, Massachusetts, California and Kentucky. In the case of Kentucky, officials there reportedly say CGI, which is not the prime contractor on the job, has been “great,” helping to make Kentucky’s exchange one of the most successful in the country.

Representatives from CGI and other contractors working on the website project are scheduled to testify Thursday before the House Energy and Commerce Committee. In prepared testimony, CGI Federal’s Cheryl Campbell says that “no amount of testing” could “adequately replicate a live environment of this nature.”

But as more stories emerge that problems were anticipated well in advance of the Oct. 1 rollout, critics are naturally looking to the main contractor on the job for answers. CGI has already received $196 million to develop the new health care exchange, including the website, well over the initial $93 million contract, according to government documents.

The project was never put out to a full and open bidding process, but was limited to 16 candidates pre-qualified to do IT business for the government under what they call a “Indefinite Delivery and Indefinite Quantity” or ID/IQ, contracting vehicle. According to those same government documents, CGI was one of four that bid on the health exchange project.

Despite CGI’s problems in other states, the company has been doing big business with multiple agencies of the federal government since 2000 (in 2004 CGI, acquired American Management Systems, which has been a government contractor since the late 1960’s). With that history, it was a virtual shoo-in for the job, experts said.

“I think this is a huge problem with contracting in general — the federal government is so dependent on these companies doing IT. Once you’ve got your foot in the door, even if they don’t do a great job, you end up getting relied upon because (the government) has no one else to turn to,” said Bill Allison, an investigator with the Sunlight Foundation, a non-profit watchdog group in Washington.

The Centers for Medicare and Medicaid Services (CMS), which is part of the Department of Health and Human Services (HHS) in charge of the health care exchange, did not return requests by for comment.

The question arises whether the government was aware of the Hawaii or even the Canada issues when they hired CGI for the job.

“They might not even have known,” said Scott Amey, general counsel for the Project on Government Oversight, a Washington-based non-profit watchdog group. By all official accounts, CGI’s performance record at the federal level is “clean.” Contracting officers don’t always dig through local, state or international records to surmise a bidder’s performance. And if they do, records aren’t always so transparent.

“They should be aware of such cases, but generally they are not.”

Bagnola suggested that CGI has been shrewd politically, giving to both Democrats and Republicans at both the state and federal levels. In the case of Hawaii, Bagnola said the company was able to continue to work on the DOTAX contract despite repeated complaints from management and a “corrosive” environment in which government employees felt pitted against CGI staff. This was noted in the final 2010 audit.

“I don’t have an ax to grind here, except I was just trying to do my job for this team and stop the state of Hawaii from being ripped off,” he said.

According to campaign records at, CGI Group contributed $345,600 to federal candidates and parties — both Democratic and Republican — during the 2011-12 cycle. Some $147,000 went to the Republican Governors Association; and $35,000 to the Democratic Governors Association. The company spent $400,000 in lobbying expenditures between 2011 and 2012.