By David Francis

The Federal Tech Mess Is Costing Taxpayers Billions

The Federal Tech Mess Is Costing by David Francis

February 24th, 2015

The website meant to deliver President Barack Obama’s signature health care bill launched on October 1, 2013 with much fanfare and high expectations. Within days, it was clear that’s infrastructure, the key to connecting consumers looking to buy health care on federal or state marketplaces, was broken.

The website was supposed to be able to register users, process hundreds of thousands of claims, and verify the tax subsidies to those who qualified. It was able to handle only a few hundred.

More than a year later, the problems with the marketplace have largely been fixed. But it has cost the president a major failure, the head of Health and Human Services her job and American taxpayers more than $2 billion in technical fees, according to Bloomberg Government. The original price tag charged by CGI Federal, the failed contractor, was $251 million.

“The way in which Obamacare has been rolled out has been very messy,” said Peter Gosselin, a senior health care analyst and lead author of the Bloomberg study. “One of the reasons it has been implemented in the way it has been financially is precisely to deny opponents of the law a clear target.”

The disastrous rollout of the health care site laid bare a simple fact: The federal government is horrible at developing technology.

There are numerous reasons for this. First —and perhaps the biggest problem — is that the government has created a system that rewards failure. If deadlines are missed, or the final product isn’t up to snuff, the government simply shells out more money to the contractor who failed in the first place.

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The amount of money the federal government has wasted on bad technology is astounding. According to a study by the Standish Group, from 2003 to 2012 only 6 percent of federal IT projects costing more than $10 million were a success. The group also found that 52 percent of large projects were “challenged,” meaning they ran late, were over budget or failed to meet expectations. The remaining 42 percent? They were out-and-out failures.

But this is just one of the problems. The government’s relentless obsession with hiring outside firms often hides the fact that some problems are better solved internally. The FBI paid $170 million to the Science Applications International Corporation (now known as Leidos) for Virtual Case File software that was so bad the FBI had to kill the project. Eventually the bureau created a system in-house.

From 2003 to 2012, only 6 percent of federal IT projects costing more than $10 million were a success.

Finally, those making decisions about technology often aren’t qualified to assess whether tech solutions offered by outside firms are feasible for the government’s tech problems. Most lawmakers are, at best, barely familiar with tech devices. They don’t have the expertise needed to determine if the projects are viable.

The good news is there are solutions to the government’s technology woes. But it’s going to take a lot of political will and an overhaul of the federal government’s procurement process to do it.

The Solutions

The federal government needs to stop rewarding failure. To do this, it would require bids from multiple companies based on a detailed Request for Proposal. The RFP is a fairly complete overview of the project’s requirements, including who would be using it, who it would serve, and how it should function.

Companies send their written proposals based on the RFP; then a few are selected to present more information in person, meet with the IT staff and other stakeholders, and revise their proposals based on clear deliverables, a project timetable, and a budget. The client pays as each benchmark  is met – not before, and certainly not if those benchmarks are not met.

This is common practice in the private contracting world. The supplier agrees to meet project milestones while tracking progress in a project document. This way, it’s easy to determine if a contractor delivers on the work that was promised at the outset.

Right now, tech contracts within the federal government are too vague; they don’t list clear definitions of success. This allows contractors to extend agreements beyond their original scope while keeping the federal government’s pocketbooks wide open.

Luke Chung is president and founder of FMS, a software development firm based in Virginia. He was propelled to the national stage during the Obamacare rollout as one of the first and most spot-on critics of what went wrong. He said his views have now changed.

“As I got more involved with the fiasco, my views changed from basic programmer incompetence to purposeful, systemic problems in the procurement system, which incentivizes large government contractors to make the mess they’ve made,” he said. “As we saw with CGI Federal, they got paid extra for delivering a failed product. In the end, HHS moved the contract to Accenture.”

Chung also suggested the appointment of a federal technology czar to oversee all federal IT projects. This takes politics out of contracting decisions — lawmakers won’t be able to send pet projects back to their home districts — while putting IT decisions into the hands of people who understand technology.

“Policymakers are totally outgunned and incapable of managing this,” Chung said. “They don’t know if a tech project should cost a million dollars, or a hundred million. There needs to be a GAO for technology – a TAO,” he said, referring to a “technology accountability office” idea. “This agency could provide the governance to make sure these things are reasonable.”

There is precedent for this kind of oversight. Fairfax County in Northern Virginia has a tech council that advises the local government on emerging trends in IT and helps improve government effectiveness and efficiency.

One counterintuitive solution: Pay more for tech. Right now, projects often go to the lowest bidder. If the federal government was willing to pay more with demands for clear deliverables, better quality companies would step up. It’s not an accident that engineers from Oracle and Google were rushed in to help save the federal health marketplace.

And instead of always looking for outside help, the federal government should look to its own workers to solve IT problems, as the FBI notably did. After a private company failed to build the FBI’s database, the bureau had its own tech workers finish the job.

“They took a small team of 15 engineers, went into the basement of the FBI building, and they figured about 15 percent was built [by the contractor]. They came out with the project done. It wasn’t a contractor. It was tech people who worked for the FBI,” Standish’s Johnson said.

That doesn’t solve a basic problem of the federal tech mess, though. is one piece of the federal puzzle when it comes to implementing the Affordable Care Act online. The other piece is the IRS, which has to verify tax credits. In case you haven’t heard, the IRS has just hired CGI to build its new website. The contract is for $250 million – the same initial fee that HHS paid for But HHS and the IRS are in two different silos building two different information systems that don’t necessarily “talk” to one another.

So instead of being able to check tax returns instantly for anyone who signs up for Obamacare, a more tedious process requires an additional 9,000 hires at the IRS. Mandating that all government IT infrastructure will be built on the same backbone, or at least share the same cloud services, could help different agencies communicate with one another – especially when it comes to fighting terrorism.

Maybe Chung’s TAO could make this a reality.