Not Being Kathleen Sebelius: Minimizing Risk in High-Risk, High-Stakes Technology Projects

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Introduction

Are you concerned that a major technology rollout under your watch will fail and that your Board of Directors will ask you the same questions members of Congress have been asking Secretary Sebelius? If so, there is good reason for your concern. More than 60% of all major system development and implementation projects experience serious technical issues and/or come in materially late and substantially over budget.[1] The failure of the rollout of the federal healthcare exchange (the “Exchange”) is merely the most public illustration that a major technology rollout is a high-risk activity.

Politicians, pundits and the press are all trying to understand what went wrong and no one knows for sure. Simply put, none of us has sufficient access to the system, Department of Health and Human Services (“HHS”) personnel, contractor personnel, contracts between HHS and its contractors (the “Implementation Services Agreements” or “ISAs”) and documentation to perform a forensic investigation. Nonetheless, publicly available documents and statements point to several key reasons for the failure of the Exchange.

First, development and implementation of complex systems require the sponsor to determine priorities and balance potentially conflicting objectives, including, among others, cost, timeline, flexibility (including the sponsor’s flexibility to make changes to its requirements as the system is being built), functionality, system quality and project risk. While HHS’s priorities and objectives are not entirely clear to us, it is clear that minimizing project risk was not at the top of HHS’s list.

Second, a common denominator of successful projects is the appointment and empowerment by the sponsor of a project executive with sufficient (a) expertise and experience to track project progress, manage the timeline, communicate status to all interested parties on a regular basis, and to make difficult tradeoffs (e.g., extend the timeline to ensure that there is sufficient working functionality to at least minimally achieve project objectives); and (b) gravitas to address problems when they arise, including making, and persuading the sponsor’s executive management to agree to, major changes to the project timeline if required. Apparently, HHS failed to put in place, or empower, such a project executive. Public testimony suggests that the project executive failed to successfully manage the timeline and make the proper tradeoffs. Moreover, she didn’t (or wasn’t able to) extend the project timeline to complete testing. After all, who is going to tell the President of the United States to announce to the country that the rollout of his signature project must be delayed due to technical glitches?

In this article we examine the lessons that sponsors developing and implementing complex systems and seeking to minimize project risk can learn from the failure of the Exchange. If sponsors keep these lessons in mind, they may be able to avoid having their Boards of Directors ask “How did this happen?” and “Who is responsible?”

About the Authors

Allen Klein, Esq., is a globally recognized commercial, outsourcing and technology transactions lawyer. Mr. Klein is highly ranked by many top legal industry publications and rating services including, Chambers USA, Chambers Global, The Legal 500 US and Martindale-Hubbell. Before starting his own firm, Mr. Klein was a senior equity partner a leading global law firm where he was a prominent figure in its top-ranked Outsourcing and Technology Transactions Practices. Mr. Klein can be reached at allen@kleincommerciallaw.com.

Anne Ackerman assists DisputeSoft on cases related to software failure. She has researched the legal issues regarding failed software projects and has helped to prepare documents in software failure cases. Prior to joining DisputeSoft, Ms. Ackerman was a co-founder of a midtown Manhattan general law practice where her work included litigation, arbitration, contract negotiations and settlement negotiations. She also spent 8 years as a legal recruiter, working closely with AmLaw 100 firms to negotiate the placement of individual partners, as well as practice groups. Ms. Ackerman can be reached at aackerman@disputesoft.com.


For more information about Allen J. Klein, PLLC, please call (202) 885-5556 or send an email to allen@kleincommerciallaw.com.

For more information about DisputeSoft, please contact us at (301)-765-9674 or email us at inquiries@disputesoft.com.

 

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