National Bank’s Mr. Thompson, who said he spoke to the company about the issue recently, said the problems were related to “integration” work after CGI had finished the project and handed it off to a federal agency called the Centers for Medicare & Medicaid Services. “I don’t think CGI should be taking the blame for this,” Mr. Thompson said. “They built the application to the spec. The spec was approved and they’ve been paid. And they weren’t in charge of the integration work.”
Obamacare woes threaten CGI's stature
Monday, October 21, 2013
IAIN MARLOW and BERTRAND MAROTTE
TORONTO and MONTREAL — The U.S. President is not happy with Canada’s largest technology company.
A U.S. unit of Montreal-based CGI Group Inc., a global technology services giant with annual revenues of $10-billion, is the main contractor behind the problem-plagued, Web-based insurance exchange that plays a key role in the Affordable Care Act, commonly known as Obamacare.
The website, which is meant to help uninsured Americans search for medical coverage at decent rates, has lagged and crashed as millions of people try to search through and sign up for plans. The crisis, if it continues, could deliver a reputational hit to CGI, as well as illustrates the complicated nature of the large, complicated government contracts that make up a sizable share of the company’s business.
U.S. President Barack Obama said Monday there is “no excuse” for the technical problems that have plagued the site.
“The problem has been that the website that’s supposed to make it easy to apply for, and purchase, the insurance is not working the way it should for everybody,” Mr. Obama said at a news conference at the White House. “There’s no sugar-coating it. The website has been too slow, people have been getting stuck during the application process ... Nobody’s more frustrated by that than I am, precisely because the product is good.”
CGI Group has so far managed to avoid much of the blame, but it could eventually suffer reputational damage if these high profile problems continue, Raymond James analyst Steven Li said in an interview. Another analyst, National Bank Financial’s Kris Thompson, said he thinks many in the technology services industry would be aware that CGI Group built the product to the proper “specs,” and that the current problems do not indicate broader problems within the Canadian company – which has grown sizably over the past couple of years through acquisitions.
Government contracts, such as the project for Mr. Obama’s health-insurance marketplace, constitute a large part of CGI’s business: As of July, 2013, CGI said on its website that it supported more than 2,000 government organizations and that it had worked with 95 federal government departments, agencies and crown corporations – and partnered with “most” of Canada’s provinces. A spokesman for CGI did not return multiple requests for comment.
Mr. Li, in an interview, said CGI has not suffered any serious damage since the system went live on Oct. 1, but added that public goodwill may not last. “The longer it drags on, the higher the risk that CGI will take a reputational hit,” he said. “But it would take a month or two for that to happen. If this is fixed in the next couple of weeks, there will be no issue for CGI.”
National Bank’s Mr. Thompson, who said he spoke to the company about the issue recently, said the problems were related to “integration” work after CGI had finished the project and handed it off to a federal agency called the Centers for Medicare & Medicaid Services. “I don’t think CGI should be taking the blame for this,” Mr. Thompson said. “They built the application to the spec. The spec was approved and they’ve been paid. And they weren’t in charge of the integration work.”
Mr. Obama said about half-a-million people so far have applied for heath care on federal and state exchanges. He did not mention by name CGI or any other service providers that worked on setting up the exchange. “No one is madder than me about the fact the website isn’t working as it should, which means it’s going to get fixed,” he joked.
CGI won the contract for designing and developing the technology architecture of the new marketplace. The platform, to which several other companies have also contributed, is managed by an arm of the U.S. Department for Health and Human Services.
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