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Thursday, October 24, 2013

Rolling out the (pork?) barrel

As a long time PC user, I forever wonder when the Windows operating system will finally be rolled out. Not to entirely blame the software writers, of course, because the platforms and end-uses are constantly changing but built on that first DOS code. The world of IT is not even planned obsolescence: it is intrinsic obsolescence. 

Yet, our expectations as users are based in now out-dated notions that we can make one production run of a uniform product from assembly line to market to consumer, like flooding the market with Hula-Hoops in time for the 1961 Christmas season sales.  

IT is just not that simple. Beta is now often marketed, but not market ready. As we find out with the roll out of the Affordable Care Act online market scheme.

The problem with IT in general, with my PC as much as with large institutions and new age weaponry, is that we rely on it too much. Given the cost and the proprietary nature of most of the software and hardware, IT "solutions" become mission critical to whatever the mission is.  IT "solutions", as we mostly know them now, hold a monopoly tollbooth on processes that just a generation or two ago were more decentralized, across many desks.

The whole internet, on which most IT solutions are reliant, is designed to spread out the flow, storage and delivery of information, across all platforms and all delivery systems.  But, once that information hits one of those IT monopoly tollbooths, it stops.  

As we look to the limitations of rolling out mass IT solutions, we might consider if our acquisition plans should be modified, to allow more open sourcing cross-platform arrangements that can be farmed out to more competitors, so that if there is a failure at any given point in the web of information delivery, the whole web process does not fail, and we do not pay a monopolist's price at the information tollbooth.

The risk of the mission, and the cost of the monopoly, seem to be unquestioned givens in IT solution acquisitions. Why?

Those are just random thoughts as I read about the political tut-tutting and point scoring surrounding the ACA "Obamacare" online roll-out, such as the following linked articles (please read the article at the link; I have only included bits without context).

Good enough for government work**? The contractors building Obamacare
as head-scratching continues about how a famously web-savvy administration could have flubbed its Internet homework so badly, an examination by the Sunlight Foundation shows the administration turned the task of building its futuristic new health care technology planning and programming over to legacy contractors with deep political pockets. Health and Human Services Department will not release a list of the estimated dozen or more companies tasked with building the site. But Sunlight reviewed contract award information from and, and found 47 organizations that won contracts from Health and Human Services or the Treasury Department to manage, support or service the implementation of the Affordable Care Act. Among them were top contractors like Northrop Grumman, Deloitte LLP, SAIC Inc. General Dynamics and Booz Allen Hamilton. All five of those companies provided information technology services to either the Centers for Medicare and Medicaid Services or the Internal Revenue Service, the two agencies tasked with building back components of the health insurance exchanges.

Because the government provides brief, partial descriptions of contracts in, it is not possible to say which of the contractors with information technology contracts or project management contacts were involved in building the 36 federally run health insurance marketplaces, a responsibility tasked to the Centers for Medicare and Medicaid Services, known by the acronym CMS, or those assigned to develop the federal data hub, which would allow applicants to have their income and family size immediately verified by the Internal Revenue Service. Sunlight's survey does not include awards to contractors that built the 14 state exchanges. For example, Xerox Corp. won a $72 million contract to help build Nevada’s exchange and one for $68 million to do the same in Florida. Not only is Xerox building the online marketplaces for some states, it's also offering insurers the means to “fully take advantage of the nearly 30 million new members that will be shopping for health care on these exchanges.”
Obamacare glitches: Gov't contract for troubled site has swelled; GOP targets Sebelius
The government contract for the company that built the glitch-prone website for Obamacare has ballooned to three times its original cost, and some Republicans are demanding the resignation of the cabinet secretary who oversees it. USA Today, citing technology experts, reported that the site was built using 10-year-old technology and may require constant fixes for the next six months and eventually an overhaul of the whole system. But Gail Wilensky, a former director of Medicare and Medicaid who is now a health care analyst, said that CGI was forced to deal with last-minute design changes ordered by the government, hampering CGI’s ability to test the site. Last June, a GAO report foreshadowed those problems, warning that the website might not be ready to go live, in part because of all the last-minute design changes.
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.
Meet CGI Federal, the company behind the botched launch of
Over the past few weeks, if you've been paying attention at all to the unfolding disaster of people trying and failing to sign up for Obamacare online, one name keeps coming up: CGI Federal, the IT contractor that has orchestrated most of the Web site. By most accounts, it's been a complete train wreck, for reasons both technical and bureaucratic. Here's what you need to know about the company at the center of it all.

CGI Federal is a wholly owned subsidiary of the Canadian firm CGI Group. Growing through scores of acquisitions, and providing outsourced IT services to massive companies such as Bell Canada and Quebec's provincial pension plan, CGI's business model depends on embedding itself deeply within an institution. CGI Federal is a relative newbie on the U.S. government IT contracting scene. It bought the U.S. contractor American Management Systems in 2004, but only started ramping up business after 2008, and accelerated in 2010 with the $1.1 billion acquisition of U.S.-based military IT contractor Stanley Inc. That sent its contracting work through the roof.

Back in 2009, the White House's Recovery Board retained CGI Federal to adapt a well-functioning system it had built for the U.S. Environmental Protection Agency into, another very complex, public-facing and high-volume site that would handle all contracts granted under federal stimulus legislation. This one got built in six weeks, for much less money, and won accolades for its flexibility and reliability.

How did CGI land the contract? CGI Federal's winning bid stretches back to 2007, when it was one of 16 companies to get certified on a $4 billion "indefinite delivery, indefinite quantity" contract for upgrading Medicare and Medicaid's systems. Government-Wide Acquisition Contracts — GWACs, as they're affectionately known — allow agencies to issue task orders to pre-vetted companies without going through the full procurement process, but also tend to lock out companies that didn't get on the bandwagon originally. According to, CGI Federal got a total of $678 million for various services under the contract — including the $93.7 million job, which CGI Federal won over three other companies in late 2011.

CGI is only the 29th largest federal IT contractor, with about $950 million in contracts in 2012, compared to number one Lockheed Martin's $14.9 billion. They also don't make high-profile weapons systems, but rather the guts of government Web sites that rarely bear their names.

That said, they've learned quickly, and see the U.S. federal government as their area of biggest growth.
CGI Federal landed the contract. Here’s how it fights for the ones it loses.
For CGI, the business of handling the low-income housing program started back in 1999, when the Department of Housing and Urban Development -- under pressure to downsize its in-house operations -- started outsourcing the job to public housing authorities around the country. The housing authorities would subcontract with IT providers like CGI Federal, which mopped up more than 25 percent of the $200-300 million or so in fees that came from HUD every year. CGI, the biggest of all the subcontractors, provides the infrastructure and support to route housing subsidies to landlords and monitor for compliance with HUD rules.

The relationship between contractor and subcontractor is very close. At the Assisted Housing Services Corporation of Ohio, California Affordable Housing Initiatives, and North Tampa Housing Development Corporation, many staff actually list themselves on LinkedIn as CGI employees. The Ohio group's state director, for example, identifies himself as a "Manager of Consulting Services in CGI Federal's Healthcare Compliance Group, focused on business process outsourcing for the Department of Housing and Urban Development." The California group's state director calls himself the same thing, adding that he has "quickly adapted staffing strategies to changing industry conditions in order to maintain and improve competitive position," and has experience "analyzing and interpreting Federal policy and managing the impacts on operations." The Columbus Metropolitan Housing Authority executive named as the Ohio group's contract administrator was a CGI director of consulting services until 2011. So while the "instrumentality" set up by the housing authority is a separate legal actor, it effectively functions as a joint venture with CGI.

In 2007 and 2009, however, HUD's inspector general found that contract administrators had been allowed to overbill the program by tens of millions of dollars. In 2011, HUD decided to rebid the contracts, setting a lower standard for the profit margin that recipients would be allowed to take and a cap on the number of units any one contractor could administer. When the new contracts were awarded -- with a savings of about $100 million, or one third over the previous set, -- many of CGI's partners lost out.

Instead of letting the awards stand, the losers complained en masse to the Government Accountability Office, prompting HUD to back off those awards and offer another solicitation. This time around, HUD got rid of the cap on the number of units a subcontractor could administer, but precluded out-of-state entities from landing a Section 8 contracts if there was a qualified local bidder, which cut into CGI's business model -- GAO ruled that the new process was a no-no. HUD decided to ignore the GAO. So the housing authority-affiliated entities appealed again, this time to the Federal Court of Claims. In April, HUD won. But the companies kicked it up yet another notch, to the Federal Court of Appeals, where arguments were held last week.
(Side note: Lydia DePillis, who authored the two prior articles, has become my favored jounalist du jour, with well researched, easily presented and understood writing in this complex and, well, boring, body of work.)

How federal cronies built -- and botched --
It also doesn't help that many of the organizations involved are now distancing themselves from the whole project, which seems wise given the scale of this disaster. Compare that attitude with the pride many of them exhibited before went online, which was being trumpeted as a marvel of cutting-edge Web engineering. Now it's shaping up to be more an example of the efficacy of political connectedness.
CGI Federal: The Company Behind and the Insuing Blame Game

Contractors Assign Blame, but Admit No Faults of Their Own, in Health Site

Insight: As Obamacare tech woes mounted, contractor payments soared
The work on grew out of a contract for open-ended technology services first issued in 2007 with a place-holder value of $1,000. There were 31 bidders. An extension, awarded in September 2011 specifically to build, drew four bidders, the documents show, including CGI Federal.

That 2011 extension is called a "delivery order" rather than a contract because it fell under the original 2007 agreement for CGI Federal to provide IT services to the Centers for Medicare & Medicaid Services, the lead Obamacare agency. CGI Federal reported at the time of the extension that it had received $55.7 million for the first year's work to build

CGI's original 2007 contract was of a type called Indefinite Delivery/Indefinite Quantity, federal records show. ID/IQ contracts allow the government "to write a laundry list of things they can order from the contractor," said Sarah Gleich, an attorney and government procurement expert at Gibson, Dunn & Crutcher. "They'll write incredibly broad descriptions of the work, like 'telecom services,' so you can't tell what they're ordering."

The advantage of an ID/IQ contract, said experts, is that it can be expanded almost indefinitely, without the government having to solicit new bids for additional work. Because "there are very strict regulations on sole-source contracts," an Indefinite Delivery/Indefinite Quantity agreement makes it easier for the government to avoid running afoul of those requirements, said Sajeev Malaveetil, a director at the Berkeley Research Group, a procurement consultant.

IT work is particularly suited to imprecise, open-ended contracts. "Agencies know that at some point they'll need IT services or system implementation," Malaveetil said. "ID/IQ contracts can often be for five or 10 years: the agency just keeps issuing delivery task orders, which fall under the base language of the contract."

CGI spokeswoman Linda Odorisio, there were three one-year options, bringing the total potential value of the contract to $93.7 million. By August 2012, spending on the contract was already close to that limit. This year, the bills skyrocketed. The government spent $27.7 million more in April, an additional $58 million in May and, in its latest outlay, $18.2 million in mid-September. According to the government records, that brought the total spending for CGI's work on to $196 million. Adding in potential options, the contract is now valued at $292 million.

"Why this went from a ceiling of $93.7 million to $292 million is hard to fathom," said Scott Amey, general counsel at the Project on Government Oversight, a Washington, D.C.-based watchdog group that analyzes government contracting. "Something changed. It suggests they ran into problems and knew last spring that they couldn't do it for $93.7 million. They just blew through the original ceiling. Where was the contract oversight?"

Obamacare website woes: another sign of out-of-control private contractors
Government outsourcing to private contractors has exploded in the past few decades. Taxpayers funnel hundreds of billions of dollars a year into the chosen companies' pockets, about $80bn of which goes to tech companies.

While the stereotype is that government workers are incompetent, time-wasters drooling over their Texas Instruments keyboards as they amass outsized pensions, studies show that keeping government services in house saves money. In fact, contractor billing rates average an astonishing 83% more than what it would cost to do the work in-house. Hiring workers directly also keeps jobs here in the US, while contractors, especially in the IT space, can ship taxpayer-funded work overseas.

The revelation here is that an overdependence on outsourcing isn't just risky in terms of national security, extortionate at wartime, or harmful because it expands the ranks of low-wage workers; it's also messing with our ability to carry out basic government functions at a reasonable cost.

If we're not going to insource work – presumably because anti-government types successfully peddle the useless bureaucrat stereotype – we should at least have a better process for picking contractors that benefit from taxpayer largesse to carry out public projects. It may be hard to believe in light of the experience, but there are examples of successful government outsourcing arrangements in IT. One key to their success, a Government Accountability Office study pointed out, is consistent communication with, and monitoring of, contractors. Penalties for cost overruns, failing to deliver by agreed-upon deadlines and other forms of mismanagement would help, too.

**  Good enough for government work?

James F. Nagle writes in his book, History of Government Contracting, that this pejorative term did not mean what you think it means.

In the early days of the US government, the federal government became dissatisfied with the products they were buying and decided to build them itself, and adopted and implemented strict  standards.  As Professor Nagle put it (p 114 of second edition):

"The rigorous inspection standards gave way to a saying still in use today but with vastly different meaning.  The saying was "close enough for government work."  Originally the saying was a boast by contractors to would-be commercial customers, that their products were so well manufactured that the government would accept them even with its known high standards."
Another government contracting feature of the day noted by Prof. Nagle (on the same page) was,
"an implicit understanding with all arms contractors that they had to share their inventions with the national armories on a royalty-free basis if they wished to continue receiving government contracts. This procedure, exemplifying the public service orientation of the Ordnance Department, allowed novel metal and woodworking techniques [i.e., "information technology"] that had originated in private armories to become part of the public domain."

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