I welcome your findings, and commit to full cooperation with your review so that we can gain a full understanding of what led to the failed launch of Healthcare.gov, and take concrete action to avoid such problems in the future.

Kathleen Sebelius, writing to the HHS IG on December 10[1]

How about that? We’re actually starting a blog with a topical quote from a current political figure. They’ll be no 17the Century wisdom this time around. Why not? Well, we’re going to deal with a serious matter, i.e. the Patient Protection and Affordable Care Act[2]. Everybody’s talking about it and we like our quotes fresh if they’re available. It’s like eating. Suppose tonight you had a choice between leftovers or something fresh for dinner. Which would you go for? [Actually, I expect your answer might depend on the cook.]

Anyway, the Affordable Care Act is supposed to open the private insurance markets to millions of people who don’t have health insurance or are under-insured. As we all know, the grand opening of Act was not auspicious. The specially constructed web site, designed to process tens of thousands of customers an hour, didn’t work, and even now limps along at less than an ideal rate. Congress is outraged (we talked about that last week) and the public is alarmed. Could it be that the procurement system somehow was at fault, or, horror of horrors, did the people who worked on the program actually make some mistakes?

Inquiring minds in Congress want to know and so does the Secretary of HHS. So last week she decided to call for help. She wrote the HHS IG[3] and basically asked him to review everything, from the principal contractor’s “performance and program management structure” to the “acquisition process,” from beginning to end. She also said she would appoint a “chief risk officer” i.e. a bureaucrat, to oversee risky programs in the future,[4] and increase training for the procurement workforce[5].

I don’t know much about “chief risk officers,” but I’ll bet that somewhere in HHS there’s already somebody responsible for managing technically risky programs. So it doesn’t seem like a bold move to create a new position, especially if you haven’t already rooted out the dunderheads who made the current mistakes. And as far as training goes, most likely the HHS training contractors are eagerly waiting for a slew of new contracts.  Will more training change anything? Who can say? But I would think HHS would wait to find out what went wrong before approving a bunch of new courses. Ideally new training should be targeted to correct current mistakes. There’s no point to being surprised a second time by the same problem, if you can avoid it.

On the other hand, it’s a serious thing to turn an IG loose on a matter. The Inspectors General have been with us in their present form since 1978. They’re set up to be independent of, yet exist within various federal agencies, and their function is to audit and investigate agency programs. Section 12 of the law[6] specifically identifies which agencies [the law calls them federal “establishments”] must have an IG Office. These include the Departments of Agriculture, Defense, Health and Human Services, Justice, Homeland Defense, and many, many others. IGs are appointed by the President and can only be removed by him.[7] Agency heads can’t do it.

So you see, IG investigations are not easily controlled by management, and obviously Secretary Sebelius recognizes that. Look at the quotation at the head of this piece. She’s promised “full cooperation” with the IG. Granted she suggested some management areas the IG might look at, but it doesn’t look as though she intends to restrict his activities to those. If she did, that would be a very odd form of “full cooperation.”

This is important, because the IG wears more than one hat in any investigation. He can be a management consultant, an audit supervisor and all the rest, but at the same time, he’s also a criminal investigator. Section 4 of the law says that an IG must keep the head of his agency and the Congress “fully and currently informed … concerning fraud and other serious problems, abuses, and deficiencies relating to [agency programs.]”[8] And more to the point, the various IGs have developed a list of “tells” that might indicate hanky-panky in the Government. The IGs call these indicators of fraud.[9] See one, and take a further look.

So what kinds of contract actions can attract an IG’s attention? Well, suppose an agency dispenses with competition and awards an important contract to a single source. This is permissible under certain circumstances, but such actions inevitably raise questions. What justification was given? Is it in fact true? Did the appropriate people sign it? What efforts were made to contact other sources? Was information about the Government’s requirements distributed widely to industry, or was it restricted only to the favored source? Were other potential sources offered an opportunity to comment on the requirements and whether they could meet them?[10] And so forth.

How about another example? Well, suppose you have a contract, and contract performance turns out to be an absolute mess. The Government changes its mind about what it wants; the contractor seems all at sea; costs grow; and the end product is very much unsatisfactory. Is there any fraud there?

It depends. To an IG, there are lots of possibilities. The Government is permitted to change its contract requirements after it awards them[11], but it has to “equitably” adjust the contract price if it does. In my experience, generally the adjustment is upward. If there are lots of changes and cost growth, the IG probably will probably take a close look at the circumstances. If there aren’t adequate contract files to support the actions taken, your average investigator will be very suspicious.[12] He (or she) probably will dig in, ask questions, and look for misstatements or falsifications.

This is not to say that anything illegal has happened at HHS or with its implementation of the Affordable Care Act. Nobody here at Elemental Zoo Two has enough facts to allow us to form an opinion (one way or the other) on that. But when Secretary Sebelius invited the HHS IG to take a look at the procurement, she invited a group of people whose job description is to be suspicious. No doubt they’ll ask lots of questions, and anyone who answers needs to understand that it’s not nice to lie to the Government.[13] Anyone pressed for answers, who’s not sure what to say, should call a lawyer.

The rest of us can wait to see what develops. It might be a little, or it might be a lot. Only time will tell.


[1] See HHS letter from Karen Sebelius, Secretary, HHS, to D.Levinson, HHS IG, no subject, (dated December 10, 2013). The letter is available at http://www.hhs.gov/healthcare/facts/blog/2013/12/letter-to-inspector-general.pdf

[2] For those of you who want to know, that’s Pub. Law No. 111-148 (March 23, 2010), 124 Stat. 119 – 1025. You can get a [free] copy from the Government Printing Office at http://www.gpo.gov/fdsys/pkg/PLAW-111publ148/content-detail.html  Henceforth we’ll call it the Affordable Care Act.

[3] Who’s that? To find out, See Office of the Inspector General, HHS, About OIG, available at http://oig.hhs.gov/about-oig/index.asp

[4] See HHS.gov/Health Care, Sebelius, Building On Our Progress and Moving Forward: Three Initial Steps (December 11, 2013, available at http://www.hhs.gov/healthcare/facts/blog/2013/12/three-initial-steps.html

[5] See Federal Times, Medici, HHS IG to investigate Healthcare.gov development (Dec. 11, 2013) available at: http://www.federaltimes.com/article/20131211/IT/312110008/Sebelius-HHS-IG-investigate-Healthcare-gov-development

[6] The original version of the Act appears as Pub. Law 95–452, §1, Oct. 12, 1978, 92 Stat. 1101 et. seq. It’s been amended many times. It’s codified at Title 5, Appendix, of the U.S. Code. You can find an up-to-date version of it law at http://www.ignet.gov/pande/leg/igactasof1010.pdf .

[7] That’s in §3(b) of the Act. “An Inspector General may be removed from office by the President. If an Inspector General is removed from office or is transferred to another position or location within an establishment, the President shall communicate in writing the reasons for any such removal or transfer to both Houses of Congress, not later than 30 days before the removal or transfer. Nothing in this subsection shall prohibit a personnel action otherwise authorized by law, other than transfer or removal.”

[8] The full quote, from §4(a)(5) is that the IG must: “… keep the head of such establishment and the Congress fully and currently informed, by means of the reports required by section 5 and otherwise, concerning fraud and other serious problems, abuses, and deficiencies relating to the administration of programs and operations administered or financed by such establishment, to recommend corrective action concerning such problems, abuses, and deficiencies, and to report on the progress made in implementing such corrective action.”

[9] I first ran into this kind of list back in the early 1990’s. See, e.g., Handbook for Fraud Indicators for Contract Auditors (IGDH 7600.3) (March 31, 1993), available at  http://www.dodig.mil/resources/audit/pdfs/igdh7600.pdf These things are periodically updated. See, e.g., The Washington Post, O’Harrow, Fraud Indicators (Nov. 12, 2008), available at http://voices.washingtonpost.com/government-inc/2008/11/fraud_indicators.html Today the DoD posts this kind of material on that IG’s website. See Office of the Inspector General, DoD, Fraud Investigation Resources, available at http://www.dodig.mil/resources/fraud/index.html

[10] These questions are patterned on a list developed by the IG for USAID. See Office of the Inspector General, Investigations, USAID, Fraud Indicators (no date), available at http://oig.usaid.gov/sites/default/files/fraud_awareness_handbook_052201.PDF

[11] Most federal contracts have some form of a “Changes” clause that allows the Government to do this. See, e.g., Federal Acquisition Regulation (FAR) 43-2, Change Orders. You can get a good copy of the  FAR at https://acquisition.gov/far/

[12] Why can’t we all just trust one another? Consider the following scenario from page 25 of the USAID IG Manual: “Scheme: A company bidding on a contract, in collusion with personnel from the requesting organization submits a low bid to ensure receiving the contract award. However, the company has been assured that change orders will be issued during the life of the contract to more than compensate for the low bid. After the contract is awarded, the contractor and the procuring official share in the excessive reimbursements resulting from the numerous and/or high dollar value change orders issued against the contract.” See note 9. From the IG viewpoint, it pays to be suspicious.

[13] See, e.g., 18 U.S.C. . You can find a more or less up-to-date copy of this statute at http://www.law.cornell.edu/uscode/text/18/1001