Disgraced Firm Ensnared In New Jersey Sandy Recovery Flimflam

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Mark Tapscott Executive Editor, Chief of Investigative Group
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A federal watchdog is throwing a red flag on a $60.2 million Hurricane Sandy Recovery contract New Jersey officials awarded to the Canadian firm behind the disastrous Obamacare web site.

CGI Federal lost its $93 million contract for after it crashed within hours of going live in 2013 and contained so many design flaws the Obama administration had to assemble an emergency team to make the Obamacare website minimally operable.

Five months before that widely publicized digital disaster, CGI won the New Jersey contract in a procurement process that the Department of Housing and Urban Development’s inspector general now says was rife with serious flaws.

New Jersey officials were required to comply with federal procurement rules because the $60.2 million was awarded as part of Washington’s $1.5 billion disaster recovery assistance to the state in the wake of Hurricane Sandy.

The contract was to design and operate the Sandy Integrated Recovery Operations and Management System for administering the federal funds. New Jersey officials claimed they complied with all applicable federal requirements in their selection of CGI.

But state officials “did not procure services and products for its system in accordance with federal procurement standards or comply with all federal cost principle requirements for supporting salary and wage compensation,” the IG said in a report made public late Friday.

“Specifically, it did not prepare an independent cost estimate and analysis before awarding the system contract to the only responsive bidder. It also did not ensure that option years were awarded competitively and included provisions in its request for quotation that restricted competition,” the report said.

“Further, it did not ensure that software was purchased competitively and that the winning contractor had adequate documentation to support labor costs charged by its employees,” it said.

The process appeared to have been designed to ensure CGI would win the contract. The state’s request for bids “required potential contractors to complete a rate schedule that had predetermined labor categories matching those of CGI Federal and had predetermined labor hours, which restricted competition,” the IG said.

“Of the 26 predetermined labor categories included in the State’s schedule, 22 of them matched the exact wording of labor category titles from CGI Federal’s authorized price-list on the U.S. General Services Administration’s web site.”

Similar problems marked the process by which CGI won the contract. The Washington Examiner reported in 2014 that federal officials were “tight-lipped about why CGI was chosen or how it happened. They also refuse to say if other firms competed with CGI, or if there was ever a public solicitation for building, the backbone of Obamacare’s problem-plagued web portal.”

The contract went to CGI because federal officials “used what amounts to a federal procurement system loophole to award the work to the Canadian firm,” the Examiner said.

CGI also lost a major contract from a Canadian province in 2012 after missing multiple deadlines in designing an online medical registry.

The New Jersey contract may be the next big government contract at risk for CGI because the IG recommended that HUD’s deputy assistant secretary for grant programs determine whether the entire award should be cancelled and bidding re-opened.

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