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Deal reached on botched Mass. health site

State will pay developer CGI additional $35m; Coakley is investigating company’s actions

Massachusetts agreed Friday to pay $35 million to the Canadian technology developer that created the botched health insurance website, which the state abandoned last month.

Counting $17 million already paid last year to the company, CGI, the state’s bill will total $52 million for a site that malfunctioned from the start when it launched last October.

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State officials said the deal will ensure an orderly end to CGI’s work for the state, avoid litigation, and pay for the company’s assistance in recent months and its contributions to a replacement website.

“This is a pragmatic way to wind up a frustrating relationship,” Governor Deval Patrick said in a statement. “CGI has been a disappointing partner. This agreement resolves intellectual property issues so that we can move forward in building a website that works.”

Meanwhile, Attorney General Martha Coakley said Friday that her office had opened an investigation of CGI under the state’s Fair Claims Act. The agreement with CGI allows her office to seek up to $12 million, depending on the findings of an investigation into whether the company sought payment for services it did not deliver.

“The failings of the CGI-developed website have been unacceptable,” said Coakley’s spokesman, Brad Puffer, “and we are conducting an investigation into their actions to seek to recover money back for taxpayers.”

The troubles with the Massachusetts Health Connector’s website prevented thousands of consumers from enrolling in subsidized health plans last fall and winter, though many were later given temporary coverage through the state Medicaid program.

The Connector announced in March that it planned to terminate its contract with CGI and hire another health technology firm, Optum, to repair the website. But last month it scrapped the effort to fix the site, saying it would take too long, and instead decided to buy off-the-shelf software from another company.

The state’s original contract with CGI, plus supplemental work orders, called for it to pay the company $89 million to build the Connector website, $37 million more than the company will now get.

The agreement with CGI, signed Friday, set a transition period through Sept. 12 during which CGI will continue work on eligibility and enrollment software for MassHealth, the state’s Medicaid program, share its knowledge, and consult on maintaining, improving, and running the new system.

CGI kept intellectual property rights to its work but freed its employees from any restrictions on going to work for the Connector. Neither side admitted to wrongdoing, and both agreed not to sue.

Linda Odorisio, CGI’s vice president of global communications, said in a statement, “This agreement recognizes the important contributions made by CGI throughout the project and during the past three months, when hundreds of CGI professionals stayed on the job to help the Commonwealth clear its [enrollment] backlog, improve functionality, and prepare for a new deployment plan.”

Joshua Archambault — a senior fellow at the Pioneer Institute, a Boston public policy think tank — called the agreement “a political deal, more than anything else.”

“CGI will remain, the state can hire any of CGI’s workers, and they’re going to continue to work at MassHealth,” he said. “Taxpayers will pay an additional $52 million with little to show for it, and there’s no public accountability.”

In a conference call Friday, Maydad Cohen, a special adviser to the governor who is leading the website repairs, said that $20 million of the CGI payment would go for “services rendered since November,” including still-needed software components that CGI built and its continuing work with Optum. “They’ve been working for free for nearly eight months,” Cohen said.

The remaining $15 million will pay for “work they’ve done keeping the lights on” at the Connector since March, as well as knowledge CGI has agreed to share over the next few weeks. Those payments will be made only as tasks are completed.

“There were deficiencies and shortcomings on our part and on CGI’s part,” Cohen said. “Today’s agreement allows us to close a difficult chapter.”

All the money is drawn from $174 million in federal grants the state received to retool its existing site to meet requirements of the Affordable Care Act. The state had spent $65 million of that money, and Friday’s agreement will bring expenditures to $90 million.

But the agreement does little to clarify how much it will cost the state to dig out from the website debacle. Doubting the site could be fixed in time for this fall’s sign-up period for 2015 coverage, the Connector announced last month that it would pursue a “dual track,” adapting off-the-shelf software from a Virginia firm while preparing to use the federal HealthCare.gov site for one year.

The cost of the dual track was estimated at roughly $121 million by state officials. Connector board chairman Glen Shor said last week that the Connector had identified $40 million in federal grant money that could be “repurposed” to pay for website repairs. On Friday, he said the $37 million savings from the CGI contract had been included in that amount.

Senator James T. Welch, a West Springfield Democrat who chairs the Legislature’s Joint Committee on Health Care Financing, said he could not immediately assess whether the contract buyout was worth the price, but he welcomed this milestone in the process.

“It’s a positive step in terms of finally being able to move forward,” he said.

Felice J. Freyer can be reached at felice.freyer@globe.com.
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