Obamacare Failure to Screen Contractors Cost Taxpayers $400M+

Published February 10, 2015

An internal investigation into how the federal government awarded contracts for developing and building the Affordable Care Act’s online exchanges has found the process was fraught with expensive errors.

The U.S. Department of Health and Human Services (HHS) failed to conduct background checks on prior work by companies awarded many of the Obamacare contracts and failed to require those companies to be accountable for cost overruns, according to a report published on January 22 by the Office of the Inspector General for HHS.

The report concludes those mistakes led to more than $400 million in unexpected costs, nearly doubling the expected cost to build the federal exchange. Five of six major contracts handed out by the department were written as cost reimbursement contracts, meaning taxpayers would cover any unexpected expenses and cost overruns.

One contract, with CGI Federal, more than tripled during the period, from $58 million to $207 million, the inspector general reported.

“In the private sector, if you don’t do due diligence, you can lose millions of your own money or you can be fired,” said David Hogberg, a health care policy analyst at the National Center for Public Policy Research. “But it’s very difficult to fire government employees, and those employees don’t have their own money on the line. With those incentives, why would anyone expect anything other than incompetence?”

Eric Boehm ([email protected]) writes for Watchdog.org, where an earlier version of this article first appeared. Reprinted with permission.