By Jerry Markon And Alice Crites
The Washington Post
WASHINGTON — Accenture, the contractor urgently tapped to help fix the federal health-insurance website, is a favorite of corporate America but has a record that includes troubled projects and allegations of ethical lapses, a review of the consulting giant’s history shows.
At the University of Michigan, students and faculty members are protesting the school’s use of Accenture to help cut costs, citing a report by a committee of alumni and graduate students that said the firm has “a disturbing pattern of problematic past performance.” In North Carolina, glitches in an Accenture-configured computer system contributed to massive backlogs for food-stamp recipients, leading the Obama administration last month to threaten to withdraw the state’s food-stamp funding.
Federal officials have also on occasion criticized the company’s integrity. The U.S. Postal Service Inspector General’s Office wrote in June that Accenture had “demonstrated an absence of business ethics” and said that the agency should consider terminating the firm’s more than $200 million in contracts. The office cited in part a 2011 settlement with the Justice Department in which Accenture paid $63 million to resolve allegations of what the government called “kickbacks” and “bid-rigging” in numerous federal contracts. The company denied wrongdoing in the case.
The Obama administration decided last month to select Accenture for the Affordable Care Act contract, perhaps the firm’s highest-profile job yet. Although the website has improved since its disastrous Oct. 1 launch, federal officials concluded that the previous contractor, CGI Federal, had not been effective enough in fixing the intricate computer system that underpins it, according to government documents and interviews.
Administration officials say that Accenture is uniquely qualified for the estimated $91 million, one-year contract because of its breadth of resources and experience in building major online systems for federal agencies such as the Census Bureau and the Education Department. The officials also cited the firm’s work on the California health-insurance marketplace, which has enrolled large numbers of residents in health plans despite suffering technical glitches.
“Accenture was selected to help us maintain the site’s high performance and make important enhancements as we prepare for next year’s open-enrollment period,” said Tasha Bradley, a spokeswoman for the Centers for Medicare and Medicaid Services (CMS).
Accenture, which is based in Ireland and operates throughout the United States, is a consulting and technology powerhouse with $28 billion in annual revenue. It works with more than three-quarters of Fortune 500 companies, maintains a thriving U.S. government practice and has a generally solid reputation, analysts and IT experts say.
Accenture officials defended their past performance and commitment to ethics, pointing out that the firm has received strong ratings from industry analysts. In the United States alone, they said, the company has successfully worked on more than 1,000 federal, state and local projects in the past year.
“Accenture is known for taking on the most complex and mission-critical assignments and getting the job done,” said Jim McAvoy, a company spokesman. “We have long-term relationships with the world’s leading companies and our clients value our capabilities and our track record, and the quality of our work has been recognized.”
The firm’s federal subsidiary, Accenture Federal Services, was chosen by CMS over three other companies for HealthCare.gov in what one CMS document described as an “abbreviated” process. A CMS official said that the agency did a thorough analysis of Accenture’s record.
“Past performance was a key criteria when evaluating Accenture’s potential to serve as the new contractor,” said the official, who spoke on the condition of anonymity to discuss internal decision making.
But during the past decade, nearly 30 Accenture projects in the United States and abroad have encountered problems, including technical malfunctions and cost overruns, according to interviews, media accounts, government audits and other records.
Accenture officials declined to answer questions about specific projects the company has previously performed.
“There is nobody in the government-contracting space with an unblemished record,” said Steven Schooner, a former senior federal procurement official who co-directs the government procurement law program at George Washington University. “You assume everyone comes with baggage. The fundamental issue is, I hope the government did sufficient research to find out who the most qualified firms were and to weigh the positives and negatives.”
John Belden, a senior executive at UpperEdge, a Boston firm that advises companies on major IT projects, agreed that Accenture is “at the top of the stack” in the IT industry.
But, he said, Accenture is at a disadvantage on a project as politically sensitive as HealthCare.gov, because the company lacks experience in federal health care. Less than half of 1 percent of Accenture’s $10 billion in U.S. federal contracts since 2000 have involved CMS, according to data compiled by USAspending.gov.
“Understanding those systems rapidly – that’s going to be an issue,” Belden said.
Company officials said the firm has substantial experience with health-care projects at the state and local levels.
Accenture is descended from the onetime venerable accounting firm Arthur Andersen. In 1989, a group of Andersen partners resigned to form Andersen Consulting, which was legally separate but under the same umbrella organization.
In 2001, Andersen Consulting changed its name to Accenture. Arthur Andersen went out of business the following year because of its role in the Enron accounting scandal; Accenture had no role in that scandal.
By then, Accenture was an industry giant and experiencing problems with some of its projects.
Between 2004 and 2007, the Pentagon and four states canceled Accenture contracts to develop online voting or voter-registration systems, citing problems such as software flaws and inadequate computer security. At the time, Accenture defended its work on the projects, and in some instances blamed state officials or workers for the difficulties.
In Texas, state officials encountered difficulties with an Accenture contract to operate call centers to process social-service benefits applications. The system led to “massive delays” in access to food stamps and health care for hundreds of thousands of low-income residents, said Anne Dunkelberg, associate director of the Texas-based Center for Public Policy Priorities.
In the District of Columbia, an Accenture-developed city tax office computer system often incorrectly calculated penalties and interest for tax bills, according to a 2006 report by the Wendell Group, an outside IT firm. “Accenture has provided a poorly designed tax accounting system and mismanaged this poor design,” said the report, which also blamed District officials for poor oversight.
Accenture’s occasional problems also extended to the federal level. A 2007 report by the Interior Department’s inspector general blasted the firm’s work on a computer system for the Minerals Management Service, which regulated the oil industry. One accountant told auditors that the system took 15 times as long as the one it replaced.
The inspector general at the time, Earl Devaney, recalled in an interview that he “could not understand why Accenture had not been thrown out the door. Millions of dollars, and they still hadn’t gotten this up and running after all that time.”
Some experts in federal contracting warn that Accenture’s record is worrisome, while others say there is no better firm to take on the troubles of HealthCare.gov.
Daniel Gordon, who headed government procurement policy earlier in the Obama administration and is now associate dean for government procurement law studies at George Washington University, said: “There is a real concern. This company has problems in their past performance that are relevant and recent… . The real question is whether the government did its due diligence.”
In contrast, Larry Allen, president of McLean, Va.-based Allen Federal Business Partners and a 24-year federal IT professional, called Accenture “a very solid firm” and said that all major contractors have some problems, because large IT projects are so complex.
“I think their error rate is pretty consistent with other large firms,” Allen said. “Does that excuse things they did wrong? No, but it does put it into context.”
David Grossman, an analyst at Baltimore-based Stifel, Nicolaus, who follows Accenture, said that it “has a very good reputation. From the government’s standpoint, they were probably the best choice.”