Cost of US disaster soars to $904m

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Cost of US disaster soars to $904m

Bad management, oversight forces cost overruns.

The US Government has been forced to fork out much more than expected on its health insurance enrolment website after bad managment practices and oversight resulted in cost overruns to the tune of US$840 million (A$904 million).

The Obama administration's launch of its website in October last year was plagued by technical glitches, meaning customers were unable to sign up for health insurance plans for around two months while the government undertook a massive rectification effort, with the system stabilised in January this year.

The government fired its initial contractor CGI in January and signed Accenture to fix the systems issues under a one-year, US$91 million contract, which has since grown to cost around US$175 million.

A report released today by the US Government Accountability Office (GAO) [pdf], which was tasked with investigating the bungled launch, found the process had been destined for disaster from its inception in October 2011, thanks to management, oversight and contracting problems.

It found the system rectification efforts from the botched launch last year had resulted in cost overruns of US$150 million alone, and warned if the US Department of Health and Human Services did not address structural issues with the way it manages its contracts and spending, it would continue to face similar problems.

The report found numerous issues with the project, including contractors failing to complete a data hub which would verify customer identities, income and eligibility by the time the website went live; and federal officials delaying the assessment of the website's readiness for launch until just weeks before it went live.

Federal officials similarly opted not to withhold funds from CGI when it became clear the rollout was struggling, and instead approved additional funding of up to US$30 million.

The GAO also found the agency in charge of the rollout, the Centers for Medicare and Medicaid Services, had entered into the project without effective planning or oversight, and had issued task orders when key technical requirements were still unknown.

The cost of building the first phase of the website skyrocketed from US$56 million to over US$209 million between September 2011 and February 2014, and the cost of building the data hub alone grew by US$55 million to US$85 million.

The US Government committed to spending US$840 million on the site and its associated systems in March this year.

Despite the system rectification efforts, a significant portion of the system's back-end is still not complete - specifically the financial management module, which will calculate financial interactions with users.

The module was initially scheduled to go live at the end of last year, but the department is now working towards incremental implementations, to be completed by December 2014.

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