THE BLOG

ObamaCare: A Crisis of Crony Contracting

01/09/2014 11:32 am ET | Updated Mar 11, 2014

Our investigations uncover new crony contracting schemes at the national and state level

Scrutiny of ObamaCare IT processes illustrates government at its worst. Billions of dollars' worth of contracts are rife with potential scandal. Some were no-bid plumbs with no competition. Others were dealt to White House insiders, friends, and campaign donors. Some of the contracts were dished to companies with troubled track records. In some cases, contractors and sub-contractors are even outsourcing IT jobs to H-1B visa workers from India at a higher taxpayer cost than domestic-based workers.

Whether it's Washington, DC or state patronage systems, the "mode of operation" for IT contracting is to stonewall and delay transparency.

The national ObamaCare website, healthcare.gov, was implemented with an insider driven $93 million contract paid to CGI Federal, a Canadian company. A USA Today report suggests 10-year old technology was used and the site may need a complete over-haul. According to the Washington Examiner, this same company ran into trouble doing work in Canada: the Montreal-based CGI Group was officially terminated by an Ontario government health agency after the firm missed three years of deadlines and failed to deliver the province's flagship online medical registry.

Michele Obama's classmate at Princeton is a senior vice-president at CGI. The idea that this had nothing to do with using CGI stretches credulity, but the patronage parade isn't over.

Designing the national healthcare site is Teal Media, founded by the Design Manager of Obama's 2008 Presidential campaign, Jessica Teal. Teal has alternated between claiming credit for their work on the site, and removing all online references to their work regarding healthcare.gov.

Our investigation has uncovered that the HealthCare.gov user interface contract went to a small "garage startup" company, Development Seed. Their general manager is Dave Cole who is the former Obama administration executive in charge of Whitehouse.gov. Our sources say Development Seed needed the insider connections of Cole to land the plum healthcare website contract.

While in the Obama administration, Cole was in-charge of WhiteHouse.gov. The site was successfully launched soon after the inauguration for less than $1 million. Cole then brought in a new vendor, Acquia, Inc and expensively revamped the already working site. According to federal checkbook data posted at openthebooks.com, just in 2012, the Executive Office of the President paid $6.4 million to this company and 2013 payments totaled $5.3 million.

None of these schemes would surprise Illinois residents. The state may be the poster child for turning IT contracts into lucrative, opaque deals. The state's last "successful" GOP governor, the revered Jim Edgar, was chased out of Springfield before an IT contracting scheme could potentially cost him his career. The fact is, Obama learned the lessons of Illinois' legalized-money-laundering-schemes well, and has grafted them onto his administration. The problems confronting the Federal Government's rollout of Obama are mirrored in Illinois experience.

The Federal government funds 90% of IT costs of implementing state-level ObamaCare plans. The contracting schemes to upgrade state Medicaid Management Information Systems (MMIS) tend to mirror those being found at the national level.

In President Obama's home state, the FOX News Channel nationally highlighted our investigation that Illinois circumvented its own procurement law and implemented ObamaCare with up to $190 million of no-bid IT contracts and "extensions." The primary vendor to Illinois was just terminated in Louisiana and is now subject of federal criminal investigation. In fact, a key ObamaCare advisor to Illinois and other states, James Gorman, may have a significant conflict of interest in this case...

James Gorman is a key ObamaCare advisor in CMS- Center for Medicare & Medicaid Services- to the states. Gorman founded and sold HWT Services- now a subsidiary of OptimumInsight and United Healthcare. Gorman lends advice, crafts plans and is part of a team that provides 90-10 federal funding to the states. States like Illinois are awarding no-bid contracts and contract extensions to the very company who purchased Gorman's original company.

OpenTheBooks.com requested Gorman's federal financial disclosures and was rejected. The Openness, Transparency and Accountability Group of Central Medicare & Medicaid Services (CMS) said "Yes, we have 36 pages of information, but no, we won't show you." This from an administration that crows about being transparent as it stonewalls watchdogs.

Why does a top "gatekeeper" for billions in ObamaCare MMIS contracts have financial connections to contractors he is responsible for vetting?

National Review's subsequent follow-on investigation with our whistleblowers turned up hard evidence that vendors gave Illinois executives Cuban cigars, wine baskets, and solicited with open-bar Boston Harbor boat cruises, and Bollywood performers. Magically, the vendors received contracts outside of a procurement process.

In a another contract case, Illinois Governor Pat Quinn attempted to use two Healthcare and Family Services Directors, Julie Hamos and Kelly Jakebek, to clout the Huffington Post into removing our articles exposing contracting irregularities in Illinois. The website resisted the strong-arming and these columns highlight Cognizant Technology Solutions, Inc. and their recruiting efforts in India. The contract allows expensive billing of up to a quarter million dollars per position per year for up to 100 H-1B visa IT workers.

Various commentators have begun using the term "the Chicago Way" or "the Illinois Way" to describe the Obama Administrations behavior. With the failed rollout of ObamaCare, we see the costs of rewarding political insiders and their substandard IT companies with plumb projects. Being from Illinois, we've seen this all before. Barack Obama has merely let the cancer metastasize to the Federal level.

Adam Andrzejewski is the Founder of OpenTheBooks.com and a former 2010 candidate for Governor of Illinois