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Report (OEI-03-14-00230)

Federal Marketplace: Inadequacies in Contract Planning and Procurement


The Federal Marketplace at was designed to enable millions of Americans to select health insurance in a "one-stop shop" environment. A project of this magnitude and complexity required the development, integration, and operation of multiple information technology (IT) systems and Government databases. The Centers for Medicare & Medicaid Services' (CMS) acquisition planning and procurement activities were among the first steps critical to ensuring the success of this project. CMS awarded 60 contracts across 33 companies to perform this work. The troubled launch of the Federal Marketplace at in October 2013 raised a number of concerns, including questions about the adequacy of CMS's planning and procurement efforts for this key project under the Affordable Care Act.


We conducted a detailed review of documentation provided by CMS for the 60 Federal Marketplace contracts, selected 6 key contracts for indepth review, and interviewed Department of Health and Human Services (HHS) and CMS officials involved with contracting for the Federal Marketplace. We also reviewed procurement regulations, manuals, guides, and procedures provided by both HHS and CMS for acquisition planning, contractor selection, and contracting oversight processes.


When awarding the Federal Marketplace contracts, CMS did not always meet contracting requirements. For example, CMS did not develop an overarching acquisition strategy for the Federal Marketplace or perform all required oversight activities. Moreover, for a project of this size and importance, CMS missed opportunities to leverage all available acquisition planning tools and contracting approaches to identify and mitigate risks. Specifically, CMS did not exercise the option to plan for a lead systems integrator to coordinate all contractors' efforts prior to the launch of the Federal Marketplace. The complexity of the Federal Marketplace underscored the need for CMS to select the most qualified contractors. However, CMS did not perform thorough reviews of contractor past performance when awarding two key contracts. CMS also made contracting decisions that may have limited the number of acceptable proposals for much of the key Federal Marketplace work. In addition, CMS selected contract types that placed the risk of cost increases for this work solely on the Government.


We recommend that (1) CMS ensure that acquisition strategies are completed as required by regulation, (2) CMS assess whether to assign a lead systems integrator for complex IT projects, (3) CMS ensure that contract actions are properly documented, (4) CMS ensure that all contracts subject to oversight review requirements undergo those reviews, (5) HHS limit or eliminate regulatory exceptions to acquisition planning requirements, and (6) HHS revise its acquisition guidance to include specific standards for conducting past performance reviews. HHS and CMS concur with all of our recommendations.

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