CMS Did Not Identify All Federal Marketplace Contract Costs and Did Not Properly Validate the Amount To Withhold for Defect Resolution on the Principal Federal Marketplace Contract

Beginning on October 1, 2013, the Federal marketplace offered private insurance plans, known as qualified health plans, and enrolled individuals in those plans through its HealthCare.gov Web site or through other means. We reviewed the 62 contracts that CMS identified as awarded for the development, implementation, and operation of the Federal marketplace to determine the contract requirements for the processing and payment of contractor invoices.

CMS did not accurately identify all obligations and expenditures related to the Federal marketplace. For 6 of the 62 contracts, CMS recorded $24.3 million of obligations and $22.9 million of expenditures in the Healthcare Integrated General Ledger Accounting System (HIGLAS) but did not identify them as being related to the Federal marketplace. Specifically, CMS either recorded some transactions in HIGLAS without the necessary project codes or recorded transactions related to Federal marketplace work using project codes that CMS did not identify in HIGLAS as being related to the Federal marketplace. Consequently, CMS is unable to accurately account for and report to interested stakeholders the amount spent on the development, implementation, and operation of the Federal marketplace.

Generally, contractors invoiced and CMS paid Federal marketplace contracts correctly. Although CMS withheld fixed fees that CGI Federal identified as being related to defect resolution and rework, CMS did not validate the accuracy of the amount ($267,000). CGI Federal did not agree that the work was related to correcting defects or rework, and CMS had not made a final decision about the fixed-fee payment that it withheld. At the time of our review, CGI Federal had not filed a certified claim under the Contract Disputes Act.

We recommended that CMS (1) include all relevant contract costs when it identifies total obligations and expenditures related to the design, development, and operation of the Federal marketplace and (2) review all charges submitted by CGI Federal for the federally facilitated marketplace contract and make a final determination on the appropriate amount to withhold for correcting defects by validating the $267,000 withheld for the fixed fee.

CMS agreed with our recommendation that all relevant costs should be identified but said that the additional obligations and expenditures identified by the audit "were not for services directly related to the operation of the Federal Marketplaces, but rather were services for the broader implementation of [the Affordable Care Act], including support for Medicaid technology systems and existing CMS data systems." CMS stated that our recommendation related to dispute resolution for withheld fees was not applicable because the draft report inaccurately described the content of the cited clause from the Federal Acquisition Regulation. CMS also disagreed with our characterization of the Contract Disputes Act in resolving the withholding of payments to contractors.

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