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Cost of Obamacare Contract Has at Least Quintupled

Ricardo Reitmeyer/

The cost of the computer cloud that supports back-end data sharing for and state Obamacare marketplaces grew to $60 million, more than five times its original value, by the time the troubled site was declared fully functional on Nov. 30, 2013, contracting documents show.

While the site has performed generally well since that date, the massive cost increase is further evidence that officials were ill-prepared for’s launch and drastically underestimated the amount of technology and storage the site would require.

The government’s contract with Terremark, Verizon’s cloud division, had already quadrupled from $11 million when it was first awarded in 2011 to $46 million at the time of’s disastrous launch in October 2013. That included a $9 million adjustment just days before launch when testing revealed the cloud could only support 10,000 concurrent users rather than the expected 50,000.

CMS ordered an additional $15.2 worth of cloud services from Terramark between the launch date, when most users were unable to access key portions of the site, and Nov. 30, when officials declared the site was performing at an acceptable level, according to a justification for other than full and open competition document posted on Thursday.

That contract adjustment paid for added cloud storage plus firewall upgrades, additional software and various other services.

The actual contract value only increased by about $13.9 million between those dates because CMS also docked Terremark $1.3 million for a service outage on Oct. 13, the document stated. There have been no additional imodifications to the cloud contract since November, a CMS official told Nextgov.

It’s not clear precisely when the additional funds were paid.

“CMS learned through system performance after the Oct. 1 Go Live for Open Enrollment that the Terremark cloud would not be able to handle expected traffic to the website,” the document stated. “The modifications were needed to meet the need to improve the user experience by Nov. 30, 2013.”

For each of the 12 modifications to its original Terramark contract, CMS has ordered the services directly from the cloud provider, stating it would take too long to competitively bid for the services and that could hurt health insurance seekers.

“CMS believed if the additional services were not added urgently, the exchanges would not function as designed and citizens would continue to have issues using the marketplace,” the agency said.

CMS originally ordered the services from Terramark using the General Services Administration schedule for information technology services. A GSA schedule is a slate of companies that the government has already vetted and found capable of providing certain services. 

This story has been updated to include details from CMS. 

(Image via Ricardo Reitmeyer/

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