View: Unraveling how HealthCare.gov went so, so wrong

The contract people that CMS put in charge also seem to have had no idea what they were doing. Deliverables were not delivered, or were delivered after deadline, and the contractors don’t even seem to have known who to update about all of this until well after the work had started. The inspector faults CMS for this, and thinks the agency should have managed the paperwork better. But badly managed projects don’t generally suffer from a lack of paper. They suffer from a lack of good managers who know what is supposed to happen, and who closely monitor whether it actually is.

Which brings me to: The federal government contracting process is insane. Over and over, the inspector faults people for not having gotten the paperwork that might have allowed them to detect some problem. For example, on one contract folks at CMS who were not authorized to modify the contract added budget-blowing work before they got authorization to spend the extra money, and the contract folks don’t even seem to have realized this was happening, because the contractor was only reporting billings in its monthly report, not forecasted total cost.

Wow. I’m not saying that private-sector contracting relationships never go wrong — they do, all the time — but this is crazy.

As an IT consultant back in the day, I never added work without making it clear that this would add cost, and making sure the person in charge of the budget had signed off on the extra cost. No one had to force me to do this, or even ask; it was simple self-preservation. Adding work hours and then handing your client a surprise bill for more than your contract specified is a good way to ensure that client never hires you again, and also badmouths you to all their friends in the industry. A client is a long-term relationship; you want to preserve that.

But the federal contracting system specifically discourages these sorts of relationships, because relationships might lead to something unfair happening. (In fact, the report specifically faults CMS for not documenting that one of the people involved in the process had previously worked for a firm that was bidding.)

Instead the process tries to use rules and paperwork to substitute for reputation and trust. There’s a reason that private companies do not try to make this substitution, which is that it’s doomed.

Yes, you end up with some self-dealing; people with the authority to spend money on outside vendors dine very well, can count on a nice fruit basket or bottle of liquor at Christmas, and sometimes abuse their power in other less savory ways. But the alternative is worse, because relying entirely on rules kills trust, and trust is what helps you get the best out of your vendors.

Trust is open-ended: You do your best for me, I do my best for you. That means that people will go above and beyond when necessary, because they hope you’ll be grateful and reciprocate in the future. Rules, by contrast, are both a floor and a ceiling; people do the minimum, which is also the maximum, because what do they get out of doing more?

The federal contracting system is of course also incredibly slow and unwieldy. It’s designed to be, the better to frustrate anyone trying to slip a fast one by the American taxpayer. But if you have a three-year deadline to deliver a complicated technology project, then a system that slows everything down, while encouraging clock-punching, is really not the system you would expect to produce it.

The report is very useful in its way. But ultimately, it focuses on side issues. Neither inadequate paperwork nor disclosure problems are why the exchange contracts went wrong. They went wrong because they could not do anything else: The task was too large, and the law’s architects didn’t understand how big it was. The holes in the legislation created an impossible management structure. And the federal contracting system was optimized to prevent corruption rather than deliver working systems on time and on budget.

See also: HHS watchdogs to focus on PPACA, other health programs

It’s hard to see how spending more hours creating and reading reports would have fixed any of these problems. At best, it would just have provided slightly better documentation of the disaster in progress.