1. The Health and Human Services Commission (HHSC) has substantially understated the state's costs for Integrated Eligibility and Enrollment (IEE) system.
In a June 30, 2005 news release, HHSC estimated the IEE contract would cost the state $899 million over five years. This figure is both understated and misleading. In addition to the $899 million cost of the base contract, other costs will bring the total five-year price of the IEE project to more than $1 billion (Exhibit 4).
While the contract was being negotiated, HHSC removed certain "pass-through" expense items from the RFP; Accenture estimated the value of these items at an additional $95 million over five years. These expenses, which HHSC will pay directly on Accenture's behalf, include costs for postage, printing and hardware and software maintenance. [1]
The review team could not determine why HHSC removed these costs from Accenture's contract during negotiations, since these costs were clearly included in the RFP for all bidders. The outcome of this change was to understate the total cost for Accenture to perform IEE services.
Exhibit 4
Current Estimated Costs for the IEE Project over Five Years
| Estimated Total Contract Value | $898,939,874 |
|---|---|
| Pass-Through Expenses Outside Contract | $94,740,361 |
| Accenture Amendment 1 (additional technology services for TIERS) | $5,883,425 |
| Deloitte Amendment 16 (TIERS enhancement and transitional assistance) | $2,261,076 |
| Deloitte One Year Extension 10/31/05-10/31/06 | $39,112,000 |
| Total Estimated Cost | $1,040,936,736 |
Source: Health and Human Services Commission.
In December 2005, HHSC amended the contract to add additional technology services for modifying TIERS. This amendment pays Accenture an additional $5.9 million for Accenture and Deloitte staff hours (with Deloitte, the previous prime contractor for TIERS, acting as subcontractor to Accenture). At roughly the same time, HHSC added nearly $2.3 million to its contract with Deloitte Consulting, to hire Deloitte to make additional enhancements to TIERS and provide technical and training teams for the shifting of the system to Accenture. This cost came in addition to the $29.8 million HHSC paid to Accenture for the TIERS transition.
Within the same Deloitte amendment, HHSC reserved the right to extend Deloitte's services for another year for an additional $39,112,000. In March 2006, HHSC notified the federal Food and Nutrition Services (FNS) that the cost of the one-year extension would be incurred "if and when fully exercised," and sought funding approval from FNS for the $39 million. [2]
In an April 2006 letter to FNS, HHSC said that "since we do not believe there will be a need to exercise this one-year extension, we are not requesting that the baseline budget be increased by that cost." [3]Nevertheless, the contract amendment states that "HHSC elects to renew the contract with Deloitte Consulting for an additional period of up to one year." [4] Appendix 5 provides Accenture's price summary for the total contract.
Endnotes
[1]Accenture, Integrated Eligibility and Enrollment Services Proposal, Cost Submission 9 (Austin, Texas, September 30, 2004), Appendix A-3, Price Summary Sheet 6.
[2]Health and Human Services Commission, "TIERS Implementation Advance Planning Document Update As Needed: TIERS/IE 2006-02," Austin, Texas, March 2006.
[3]Letter from Gary Gumbert, chief information officer, Health and Human Services Commission, to William Ludwig, regional administrator, U.S. Department of Agriculture, Food and Nutrition Service, and Harvey Heyman, U.S. Department of Health and Human Services, Centers for Medicaid and Medicare Services, April 5, 2006; and Health and Human Services Commission, "TIERS Implementation Advance Planning Document Update As Needed: TIERS/IE 2006-02," Austin, Texas, March 2006.
[4]Letter from Gary Gumbert, Health and Human Services Commission, to William Ludwig, Food and Nutrition Service, and Harvey Heyman, Centers for Medicaid and Medicare Services, April 5, 2006; and TIERS IAPDU As Needed, March 2006.