How can anyone spend $392M for a website that doesn’t work? That is the question many Americans including congressmen, senators and the president are asking about the botched launch of the new national health insurance exchange website. There are really two parts to this question – 1) why doesn’t it work? And 2) why has it cost so much?
Most of the debate has focused on the first question, which is actually the easier one to answer. HHS, the government agency that oversaw the development, and its contractors simply didn’t allow enough time to thoroughly test the system before the October 1st deadline. The first full test of the system was delayed until just two weeks before the launch date, when it should have happened at least two months prior. Ultimately the glitches will be fixed, the web site will work properly and the bumpy start of the program will be long forgotten.
However, the American taxpayer will still have spent $400M or more on a website that was originally budgeted at $94M! Granted, the Healthcare.gov website is complex with a lot of connections to other government systems, but it’s nowhere near as complex as Facebook which took 6 years to spend $500M, or LinkedIn which has lasted on $200M in funding since its inception. I sell custom software, so maybe my indignation at this government excess is really just me channeling my jealousy of the government contractors who walked away from this deal with a huge bundle of cash. I would have been happy to take on the assignment for a mere $50M and we’d all be better off 
.
Rather than trying to explain how our government can burn through so much of our hard earned taxes on a website, let me offer a few tips on how you can avoid overpaying for custom software:
- Get quotes from multiple vendors – The cheapest bidder isn’t always the best choice, but be wary of any vendors who are significantly more expensive than the rest.
- Ask each vendor for their average hourly rate – A high rate may be indicative of better programmers, but it may also mean you are paying for excessive overhead or profit.
- Hire an expert – If you don’t have the internal expertise to evaluate technical proposals from different vendors, hire someone who does. You will save you money in the long run.
- Invest in documenting your requirements upfront – Vendors will be in a better position to quote a fixed price, with fewer conditions, if they know what you want.
- Schedule payments based on measurable milestones – If the selected vendor fails to deliver as promised on the earliest phases, consider ending the relationship before the project gets completely derailed.
