CGI takes hit after Obamacare website contract won’t be renewed

MONTREAL – CGI Group’s role in President Barack Obama’s defining political achievement is ending prematurely after the U.S. administration decided not to renew the Montreal-based IT firm’s contract for the government’s problem-plagued health insurance website.

Obama administration lead contractor CGI Federal said Friday that it and the administration had mutually agreed to part ways on HealthCare.gov.

The Washington Post and Bloomberg, citing unnamed sources, said Friday that the U.S. government was preparing to make the change and would sign a 12-month contract, worth about US$90 million, with Accenture.

Accenture declined to comment on the reports.

The Centers for Medicare and Medicaid Services referred to impending changes, saying: “We are working with our contract partners to make a mutually agreed upon transition.”

CGI Federal’s contract is slated to expire in February but could have been renewed for one or two years. It was selected in September 2011 as the lead contractor and was awarded a US$93.7-million contract over two years to design and build the government’s health insurance website, HealthCare.gov.

CGI spokeswoman Linda Odorisio said in a statement that the company played a key role in turning the website around and that it remains a federal contractor on other health-care projects.

“We are proud that more than 400 CGI employees worked around the clock from October through December to deliver a consumer experience that works for a vast majority of Americans,” she said.

After initial technical problems with the October launch of the website that delayed or prevented people from enrolling in private health insurance plans, the U.S. administration said last month that many of the problems had been fixed, with more than two million people signed up.

But the reports say the website is not yet able to automatically register people eligible for Medicaid in state programs, compute exact amounts to be sent to insurers for their customers’ federal subsidies and tabulate precisely how many consumers have paid for their insurance premiums and are therefore actually covered.

The Post said the government concluded that CGI had not been effective in fixing the problems, and leaders of the Centers for Medicare and Medicaid Services “became frustrated with the pace and quality of CGI’s work on the repairs.”

Obama’s political support has taken a beating over what he described in a year-end interview as “fumbles” with the website while Health and Human Services Secretary Kathleen Sebelius called it a “debacle.”

A Canadian industry analyst said CGI (TSX:GIB.A) is a convenient political fall guy for an administration eager to put the issue behind it.

“This was an easy case where the contract was up, so you didn’t have to rock the boat and yet, from a political standpoint, you could say that you were taking action,” said the analyst, who spoke on condition of not being named.

The analyst said CGI is probably happy to get rid of the contract, given the negative media attention it has generated.

“Ultimately you’d like to have a functioning product and everybody be happy,” he said. “But I think they’d be more than happy given that it’s not a big impact on their business, and yet it’s become a pretty big impact just perceptually, . . . to just put it behind them.”

The rollout disaster saw people struggling to load web pages and enter their personal information.

Obama’s allies feared that it would be more than a simple temporary glitch and might torpedo his legacy achievement. The president’s health reform depends on young, healthy people signing onto the insurance exchanges. Their involvement is key to keeping insurance prices low.

With the website down for extended periods and the target of political foes and late-night comedians, they were worried that the young and healthy might simply take a pass.

The value of the contract is minuscule for CGI, which takes in more than $10 billion a year in revenues. Of potential concern, however, is whether the administration’s decision could hamper CGI Federal’s other business, which accounts for about 14 per cent of the parent company’s annual revenues.

The analyst doubts there will be any impact.

“I think this is enough of a unique situation and a unique contract that everybody knew was especially complex, that I don’t think it should have any impact on a broader sense.”

In November, CGI said that its customers haven’t been spooked by media reports linking the company to the troubled launch of the program.

CEO Michael Roach told analysts that clients “clearly understand” the complexity and uniqueness of the project, which is a key part of the president’s health insurance strategy.

“This is not a simple website but rather a very complex integrated technology platform that, for the first time, combines the process of selecting, enrolling in insurance and determining insurance eligibility for government subsidies all in one place and in real time,” he said.

Industry analysts have said CGI’s reputation has taken a hit, but the information technology company’s long-term outlook is strong because of its blockbuster acquisition in 2012 of Logica, a multinational IT and management consultancy company based in the U.K.

A senior vice-president of CGI Federal testified before Congress that it was the government’s responsibility — not the contractor’s — to test the website and make sure it worked.

CGI shares closed down 2.5 per cent, losing 88 cents to $34.37 in Friday trading on the Toronto Stock Exchange.




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CGI takes hit after Obamacare website contract won’t be renewed

  1. After getting an idea of the scale of the contracts from conservative governments in Canada that CGI has won I was stunned to see that the Whitehouse would approve of CGI for Obamacare. Maybe it’s only me, though, I just can’t see CGI as a politically neutral organization.

    • Canada’s largest IT contractor has a partisan bent? Like inserting some Conservative or Liberal code somewhere in there?

      I think this might be the dumbest comment I have read on here all day, and some of these are truly, truly dumb.

      • Next you’re going to tell me that they don’t have lobbyists they don’t participate in PACs either?

        In 2012 Mitt Romney was the top individual candidate recipient and the Republican Governors Association recieved 122,700 vs the Democratic Governors Association getting 35,000. I’d say that is PARTISAN!

        • Politics is the same as religion: People CHOOSE what parts of the story they “want to believe” and ignore the parts of the story that “don’t fit their personal choices, at that specific time, but can always use those snippets of text later, when they DO fit their then-current position.”

          • Actually, I googled it when my comment was insulted. I choose 2012 because those were the stats available when Obamacare was being initiated.

            My position changes as information changes. I posted a suspicion NOT a position. I prefer to keep an open mind until things unfold completely.

          • I made a simple statement, without any “hidden meanings” that you may have read into it. If you chose to take that as an insult, that is your choice, and there is nothing I can do about that.

            Politics and religion are both (currently) systems based entirely on “belief”, and as such, those who are ignorant, and especially the wilfully ignorant, are easily led to do the bidding of the knowledgeable ones behind the curtain pulling the strings.

            Just the facts. Self-offend and self-insult as you see fit. d;o)

            Hope and Change. Uhmm…”Whoops! Shoulda prayed harder!”

          • Alright, I do not understand what “people saving snippets that support their beliefs” has to do with my comment, that you replied to? Claim it as a fact all you like.

      • And then Jimmy sez…

        I think this might be the dumbest comment I have read on here all day, and some of these are truly, truly dumb.

        You set the bar pretty high yourself Jimmy. Thanks for that contribution.

    • There would be a snowballs chance in h&ll that CGI Canada had ANY influence on CGI US Government group. They are typically independent of each other with each having it’s own leadership and teams to support their respective client base.

      no one in the US company would be on board with screwing up their reputation for some quick political hit on Obama for Harper, that’s seriously deranged thinking

      • At one time I might have believed that. I also would have thought that countries would not be spying on the leaders of friendly countries either. Or, that some corporations could be “too big to fail.”

        Corporations are now citizens and their shareholders could very well have their own political motives when directing their organization.

        Things have changed in the world.

  2. Typical Democrats, they cause the massive screw up and then punish the company they gave impossible demands to.

    • It’s a glorified ecommerce store Home Depot IT could likely have handled it better and would have been done long ago…LOL.

      • Give credit where it’s due, this is not a simple e-commerce site. I’ve supported HD site, they don’t have internal people building it they have an external vendor who builds/supports it. and while it’s simple i can assure you the current vendors would not have the capability to build this system :) and that’s not a knock against them.

        anyways, the number of subsystems, the security around who can access what/when/how, the various vendors with their own code/security, the accessing of information with in government. the privacy concerns, the keeping hackers out, getting the right citizen to access their data.

        Then there’s the infrastructure behind it, the security into everyone’s systems again, the networks behind the scenes, not sure if they did any load balancing network wise but multiple data centers to be sure.

        this must have been a pretty complex site from the beginning. I’ve worked on these kinds of things, getting anyone to agree on stuff, and having everyone deliver on time would’ve been a challenge

        I saw something about they only got all the vendors final systems weeks before release, so QA, and other stuff would’ve been quick and only high level bugs addressed in a couple of weeks

        it’s certainly not an eCommerce site

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