Obamacare Contractors Plagued by Previous Failures, Fines, Fraud

Monday, 25 Nov 2013 12:24 PM

By Jennifer G. Hickey

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Companies working on the disastrous Obamacare rollout received contracts despite having histories of failure, fines, and even fraud allegations in previous contracting work with the federal government and other entities.

In addition to the well-publicized problems with the work done by lead Obamacare website contractor CGI Federal, other companies chosen by the Department of Health and Human Services to work on the rollout have also had dubious track records.

Seedco, a nonprofit organization, received seven grants from HHS totaling $12.76 million despite several fraud investigations.

Another main contractor on the Healthcare.gov project, Virginia-based Computer Sciences Corp., received a $4 million contract from HHS despite a well-publicized failure on another high-profile contract.

And Verizon Communications, whose Terremark division is handling cloud computing services for HHS, has been cited for 24 instances of misconduct in contracts, according to the Project on Government Oversight (POGO). The firm reached a $93.5 million settlement to resolve allegations that it overcharged the General Services Administration on telecommunications contracts.

CGI Federal, the lead contractor on the Obamacare website, secured a $678 million no-bid contract to build the Obamacare exchange web portal. Yet the company had consistently failed to meet deadlines and experienced botched launches similar to that seen with Healthcare.gov.

It has also come under scrutiny for ties between senior executives and the Obama administration.

"In projects stretching from Canada to Hawaii, parent company CGI Group and its subsidiaries ran into complaints about its performance," Fox News reported.

In 2012, Ontario's electronic health records agency terminated a contract with a CGI subsidiary to set up a diabetes registry, saying the company regularly missed deadlines and the resulting delays rendered the system obsolete, according to POGO.

Congressional investigators tell Newsmax that the Seedco grants exemplify the security concerns they have about Obamacare navigators, who have access to individuals' tax information. Seedco was given a grant of $3.38 million to "Support navigators in Federally-facilitated and State Partnership Exchanges," according to USASpending.gov.

In 2009, Denver cancelled a contract it had with Seedco to provide economic development services after the city auditor released a highly critical report on Seedco. In addition to examples of fraud, the report stated Seedco had failed to comply with terms of the contract.

In 2012, federal prosecutors filed a suit against Seedco after it was learned that the organization, which had been awarded $8 million in federal money to operate job-placement centers in New York City, had committed fraud by reporting false figures for the number of successful placements. The government agreed to a $1.7 million settlement last December.

Obamacare contractor Computer Sciences Corp. was one of three contractors hired by the Internal Revenue Service to modernize its tax-filing system. CSC told the IRS it would meet a January 2006 deadline, but failed to do so, leaving the IRS with no system capable of detecting fraud, reported Computerworld.

In 2006, House Ways and Means Committee Chairman Bill Thomas called for the Treasury secretary to review the IRS contract, saying that because of CSC's inability "to deliver a functional product to the government and its inability to provide accurate information to the IRS, it may be an appropriate time to reexamine the dependence of the IRS on CSC and determine whether the federal government is best served by this particular contractor," according to MarketWatch.

CSC's failure to meet the delivery deadline for developing an automated refund fraud detection system cost the IRS between $200 million and $300 million.

CSC's problems have continued. In May, the company was forced to pay $97.5 million as a result of a class-action lawsuit. Investors had sued the company claiming it made false statements about its performance on a $5.4 billion electronic patient records contract with Britain's National Health Service. Bloomberg Businessweek reported that CSC also has been under investigation by the Securities and Exchange Commission for accounting issues in that contract.

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