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The Glitches of Outsourcing IT Services

The launch is a debacle for those who believe that we should outsource public services to for-profit companies without adequate planning and oversight. Sadly, when it comes to outsourcing government IT services, the example is par for the course.
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The launch is a debacle for those who believe that we should outsource public services to for-profit companies without adequate planning and oversight. Sadly, when it comes to outsourcing government IT services, the example is par for the course.

Fifty-five separate for-profit companies built on a $400 million government contract. And that only counts the contractors creating the federal exchange. Seventeen states created their own exchanges.

The recent firing of CGI Federal, the principal contractor behind the federal website as well as several similarly troubled state exchange sites around the country, coincides with many officials noting the same contractor's failure at the state level as well. Massachusetts Attorney General Martha Coakley is considering suing CGI. Vermont has withheld more than $5 million in payments to CGI Federal, noting that the contractor and others who worked on that state's online portal have "underperformed at every turn." (It is also worth noting the CGI Federal and its acquired companies have a history of cost overruns, delays, and failure to deliver products as promised.)

But the problem isn't limited to CGI and oversight. Concern over other health care exchange contractors has also been expressed by Minnesota Governor Mark Dayton, North Carolina Senator Kay Hagan, and Health and Human Services Secretary Kathleen Sebelius.

And we are only now realizing how little transparency came with these lucrative contracts. National Public Radio recently reported that outsourcing giant Maximus had contracts to run Affordable Care Act call centers in Hawaii, Connecticut and Vermont.

NPR was unable to get a copy of the Maximus contract with Hawaii because it is exempt from open records laws. In Connecticut however, NPR was able to obtain the contract but all of the language about pricing had been redacted. Maximus said disclosing its pricing information would "significantly weaken its competitive position in the marketplace." Such concerns, however, did not prevent Maximus from signing a contract with Vermont, where the state publicly posted a complete copy of the contract on its website. What is public information in Vermont should not be considered "proprietary" in Connecticut and Hawaii.

Nor is the problem confined to Outsourced IT work has led to glitches, hiccups and snafus that have cost taxpayers millions. According to the National Employment Law Project, unemployed Floridians may have been denied more than $22 million in benefits in October and November after the state's online unemployment system, known as CONNECT, launched. That system was built by Deloitte Consulting, one of America's largest government contracting firms. Deloitte built similar systems for California, and Pennsylvania that have been plagued by similar glitches and cost overruns. In Massachusetts, the Deloitte-built system came in two-years behind schedule and $6 million over budget.

When an online benefits system first launched in Colorado, it only granted food stamps to applicants with a driver's license from Guam. And in Massachusetts, just last month, a contractor deactivated food stamp cards for thousands of beneficiaries, many elderly or disabled, without ensuring new cards had arrived. Similar IT glitches with food stamp programs occurred in Massachusetts and 16 other states last fall.

It is important to note that these boondoggles are not exceptions, but the rule when it comes to outsourcing. According to a study conducted by the Standish Group, 41.4 percent of IT projects with over $10 million in labor costs and contracted to the private sector were failures over the last 11 years.

One positive sign that governments are thinking twice before outsourcing IT: California Governor Jerry Brown's budget proposal contains language that would bring IT expertise back in house: "The state has at times relied on contractors to provide services, particularly in the areas of information technology ...In recognition that these contracted services can be more costly, and that there is value and utility in training and developing state employees to perform ongoing tasks, the Administration continues to identify ways that the state can reduce its reliance on contractors."

The New York Times recently editorialized that we aren't getting much bang for the taxpayer buck, stating that "It is hard to argue that Americans are getting their money's worth." The Times was speaking about outsourcing at all levels, not just the project. The roll out of that website is just the latest example that for-profit corporations run public services slower, costlier and worse than the government. Taxpayers deserve better.

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