Two Buying Lessons from Healthcare.gov

It seems like many books may be written about the Obamacare rollout, from all points of the ideological spectrum. My goal in this article is to underline a couple of takeaways that might help you in your business, politics aside.

Lesson 1: Buy Results, not Resources

According to numerous media accounts, HHS acted as the “general contractor” of the Obamacare website. They hired dozens of companies to work on the project, without any single firm designated as the overall lead.

A more common approach to a complex technical project would be to award it to one prime contractor. The customer then would have just “one neck to choke,” to put it crudely, which tends to produce better accountability.

But when a buyer in-sources project management, it means that the buyer is the expert and the owner. Companies hired to perform functions are resources, not experts.

Which would you rather hear from your vendor?

  1. “we did what you told us to do” or
  2. “we delivered the results you wanted”

Unfortunately, when the Healthcare.gov contractors testified before congress we heard a lot of response A. These firms were simply following instructions, apparently without sufficient visibility or ownership.

There are many ways to structure consulting projects so that they are Results-based and not simply Resource-based. (Ian Altman and I speak to this in Same Side Selling – sign up for an advance chapter.) In most cases, it requires the buyer to define clear goals and measurable outcomes. That piece isn’t always easy… but shouldn’t you know your goals and outcomes before starting a major project?

Lesson 2: Beware of Hourly Billing

You may have been surprised to hear that some of the firms hired to fix the acknowledged errors in the healthcare website were the very firms who were part of the initial project. The original problems led to more work for those companies.

As someone who has led projects for several government clients, I have empathy for the contractors involved in implementing Obamacare. I don’t envy their task, and I believe they are generally honest and competent. But it is worth spelling this out: most of them will benefit from the problems in the site.

Seven_Curses_Hourly_Billing-v2

Our government overwhelmingly pays for time spent working on projects rather than for finished products. So a project delivered with flaws – that then lead to cleanup work – can generate far more revenue for a contractor than a job done right the first time.

This moral hazard tops the list of pitfalls associated with time-based billing. Paying your vendors by the hour:

  1. Rewards Inefficency
  2. Punishes Innovation
  3. Dilutes Focus
  4. Promotes Mediocrity
  5. Strains Relationships
  6. Enables Procrastination
  7. Leaves risk with the Buyer

These impacts are explained in the video The Seven Curses of Hourly Billing. While it often seems like time-based billing is the only option, there are other choices that can work. If you’d like a one-pager sharing Eleven Cures to Hourly Billing, send me a note (Jack at BuyingExcellence dot com) and ask for “11 cures” – I’ll send it over. Or if you want to talk about it give me a call… it’s actually one of my favorite subjects.

We’ve spent a lot on these health care efforts, so the least we can do is learn from them. Let’s hope our leaders will, too!

Get your free Savings Kit and additional resources:

Get Your Free Savings Kit!

Includes 25 Savings Tactics, Video Tutorial, and spreadsheet with template.

JackSignUp