January 23, 2007

Rob Marchant, President Albion, Inc. 340 Interstate North Parkway, SE Suite 340 Atlanta, GA 30339 Dear Mr. Marchant As you know, the HealthMatch project continues to experience repeated delays in system development activities. Minnesota Department of Human Services (DHS) management has concerns about Albions ability to bring HealthMatch to a successful conclusion. Recently, Albion staff have maintained that DHS should expend additional monies on HealthMatch change orders to Albion. Before DHS staff could enter into conversations with Albion regarding change orders, Albion must first demonstrate their ability to meet deadlines related to completion of all design, construction and testing activities, and must show that the quality of code delivered will meet previously agreed-upon acceptance criteria. In meeting these deadlines and standards, Albion must also resolve the overarching project issues outlined below. Delays in delivery of builds While Albion has made assertions that the timing of DHS design decisions has negatively impacted project timelines, the history of recent builds shows that delays in the delivery of code are in no way related to DHS staff activities. As you are aware, Albion experienced significant delays in the completion of builds 8 through 11. These delays were related solely to Albion construction processes and a resulting lack of quality in system code. Despite Albions numerous assurances that the issue of code quality was being addressed and would be solved in subsequent builds, the four week delivery cycle proposed by Albion in the most recently-approved project plan (D117, which was incorporated as attachment H-2 of the HealthMatch contract amendment dated 12/16/2005) has not been achieved. For example, build 11, which was scheduled to have been delivered on 8/30/06, still was not able to be promoted to User Acceptance Test (UAT) as of 1/18/07. This is a 20 week delay in the delivery cycle, and has resulted in more than three months delay in testing activities. The implementation of an on-site SWAT team was presented to Department staff as another solution to problems with the quality of Albions code. While SWAT has clearly made some improvements in processes, Albion staff continue to struggle to successfully move builds through integration test in a timely manner. SWAT was to have permitted Albion to pass builds on to UAT without significant level one and two defects; unfortunately, staff continue to see high levels of defects that have not been caught in either unit test or integration test. Albion has attempted to shorten the integration test timeframe by running code
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2 through on-site smoke testing; however, it is difficult to determine if smoke testing has been effective because of the continued delays in code delivery. I request that you define the steps that Albion will take to meet deadlines and achieve quality standards in the delivery of all remaining builds

Level of effort and staffing estimations In November of 2006, DHS initiated a collaborative effort with Albion staff to document and prioritize outstanding design, coding, and testing tasks. As part of that analysis, DHS defined the minimum functionality required to implement a bare bones system. The purpose of that exercise was to determine if further timeline slippages could be mitigated by scaling back on scope, identifying design that could potentially be postponed until a subsequent system release. Prior to this exercise, Jim Olson, the Albion Project Manager, assured DHS leadership that Albion was sufficiently resourced to deliver full system scope functionality in time for spring UAT activities. In December, 2006, the collaborative analysis of the level of effort needed in order to implement a preliminary, bare bones system release determined that approximately 40,000 staff hours were required to get HealthMatch code ready for UAT activities. At that time, Mr. Olson informed us that only 18,000 hours of Albion staff time were available in the period leading up to UAT. On 1/19/07, we were informed that further analysis revealed that some development activities would call for additional time, and at least 15,000 additional Albion staff hours are required to bring code through integration test. These repeated exercises aimed at determining a realistic level of effort have failed to achieve our basic goal of establishing a reasonable project schedule. It would appear that either Albion chooses not to be forthcoming in their planning estimations, or is incapable of accurately determining the amount of work still outstanding and the corresponding resource needs. Albion must develop plans to mitigate this serious shortcoming in staff resources, and must develop and deliver accurate, achievable timelines that correlate with level of effort and resource availability.

Impact of delays on DHS test activities In May of 2006, Mike Harkins of Albion committed to providing a five month interim UAT period to help mitigate the risk being passed onto DHS staff during full UAT. Interim UAT was part of the project schedule Albion committed to under D117. It is now apparent that because of Albions delays in the delivery of code, interim UAT is no longer a possibility. At this time, Albion must present DHS with a plan that summarizes how Albion will work in partnership with the State to ensure that entrance and exit criteria for full UAT will be met without additional delays to the project and without jeopardizing the quality of the system.

Albion staff issues Despite Albions agreement to enhance their staffing efforts per the contract amendment of 12/16/05, the HealthMatch project continues to be negatively impacted by issues with Albion staffing. On April 25, 2006, DHS requested that Albion replace Raj Pichamuthu as quality assurance manager. To date, Albion still has not found a suitable replacement for this position. It is the Departments contention that the lack of leadership in quality assurance has continued to negatively impact development activities. The Department requests that Albion fulfill their commitment to find a qualified QA manager without further delay.

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3 The unavailability of key Albion staff continues to have a serious negative impact on project activities. Key Albion personnel have been inaccessible to project staff at times when their expertise is critical, and Albion staff absence from meetings has delayed numerous decision-making processes. Albion personnel must demonstrate an acceptable level of responsiveness to critical project communications. This includes ensuring that Albion staff check their voice mail and e-mail regularly, and that they respond to requests in a timely manner.

Project management and communications Another condition of the contract amendment dated 12/16/2005 was that the HealthMatch project schedule was to be updated on a weekly basis. However, the schedule has not been updated since September of 2006. To the best of our knowledge, project activities are being run by sprint plans. Dating back to May of 2006, DHS staff have requested but not received copies of those sprint plans. Documentation of SWAT activities has been inconsistently shared, and the quality of communications in general is sporadic. A lack of communication across Albion teams continues to negatively impact project activities. An example of this is the fact that poor coordination between the Albion development teams has resulted in a database that is out of synch with the code. Albion must adhere to the terms of the HealthMatch contract and its amendments for project management, and must specify the steps they will take to show marked improvement in project communications both internally and with DHS staff.

Clearly, the future of the HealthMatch project is at an unacceptable level of risk. I ask that you quickly remedy the situations outlined above. I remain hopeful that together we can make progress on the project, and that Albion can prove to DHS that their team is able to deliver a quality system. Thank you for your continued attention to the HealthMatch project.

Sincerely,

Brian Osberg Assistant Commissioner of Health Care Minnesota Department of Human Services

Cc

Linda Davis-Johnson Kathie Henry Jim Olson Larry Woods

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