IRS, CSC act to right the agency's IT overhaul

IRS Oversight Board gives tax agency 9 marching orders

  • Assign responsibility for modernization projects to the IRS business units that will be most affected.

  • Create trust and teamwork among the business units, the modernization and IT organizations and Prime contractors.

  • Improve IRS' lifecycle methodology for systems development to support accurate estimates of work phases and ensure that it is followed.

  • Enhance the program's contracting process and capabilities.

  • Strengthen the experience and capabilities of the IRS and CSC BSM team.

  • Coordinate oversight of BSM by several federal entities to eliminate duplication.

  • Define and model business rules to ensure CADE's rules engine will work.

  • Reduce the number of IRS' five major modernization projects.

  • Monitor CSC for management and performance improvements.
  • 'The longer modernization takes, the higher the risk it is,' the IRS Oversight Board's Larry Levitan says.

    J. Adam Fenster

    The IRS and Prime contractor Computer Sciences Corp. are racing to demonstrate that they can put the agency's system modernization back on track.

    The IRS this year plans to focus on a handful of modernization initiatives in the hope that the increased attention will yield success. They are:

  • Electronic filing for large businesses and tax-exempt organizations

  • The Integrated Financial System

  • The first release of its new taxpayer database, the Customer Account Data Engine, which will be aimed at EZ tax return filers.


  • The decision has forced the agency to suspend work on some projects.

    Years of missed schedules and budget overruns strained modernization almost to the point of unraveling last summer, the IRS Oversight Board said. After reviewing several studies in the fall analyzing the projects, the board last month made nine recommendations. The board said its goal is to get IRS to set realistic schedules and cost estimates and lead CSC to fix gaps in its systems expertise so it delivers on its contract requirements.

    The board said CSC should be fired as the lead contractor if it cannot get the job done [GCN, Dec. 15, 2003, Page 12]. Although no deadline has been set to determine CSC's fate, the agency 'will be monitoring CSC progress on projects into [2004] and that will determine our measure of the success of their performance,' IRS CIO Todd Grams said.

    Prime perspective

    CSC officials understand the challenges the company faces. 'The program has not made as much progress as they wanted. Our expectation should be to deliver against our commitments. And if we can't, there will be consequences,' said Jim Sheaffer, CSC's general manager of the Prime team of contractors working on modernization.

    In working to right its modernization, the IRS will have to make some difficult decisions. One of the board's recommendations calls for the agency to scale back the number of modernization projects.

    'I believe everything we've taken on has exceeded CSC's capacity to deliver, as well as our capacity to manage,' Grams said. The IRS soon will set a revised list of modernization projects to be done through 2005, Grams said.

    The agency faces a contradiction as it tries to improve a number of systems. 'The longer modernization takes, the higher the risk it is,' said Larry Levitan, chairman of the IRS Oversight Board's Business Transformation Committee. 'They are better doing more, but don't have the capability.'

    Some short-term projects, such as e-services, deliver immediate business benefits but may have to be delayed for CADE's sake. 'If you don't make the foundation deep and wide, the whole thing's going to come tumbling down,' he said.

    CADE, which will replace the tape-based Master File taxpayer database that dates back to the 1960s, is the centerpiece of modernization.

    The IRS and CSC say that they have started to change the obstacles in management and culture that have hampered CADE's development and have hired more-experienced workers to boost results.

    CSC will conduct integration testing and a pilot for a version of CADE for the upcoming tax-filing season, Sheaffer said. The company is testing programs and links between programs and interfaces.

    'Over two and a half months, we organized the system the same way it would run in operations, so all procedures, including an error or out-of-balance condition, would show up so we can know if we have really dealt with all the issues,' Sheaffer said. 'It establishes a foundation of software we know works.'

    The pilot for the upcoming tax season will assure that IRS workers are properly trained to use the system.

    One of the board's recommendations was to make the business units that will use specific modernization projects responsible for the contractor's work on them. Some IRS offices were not involved in planning new systems, but requirements they added on at the back end hampered development, Sheaffer said.

    'Users were involved, but they weren't responsible,' he said. 'Instead, modernization was viewed as the responsibility of IT.'

    The IRS and CSC lack workers with the experience to handle CADE's size and complexity, Levitan said. The agency will hire a search firm to help fill specific management positions that have remained vacant.

    CSC is also hiring workers with deeper knowledge of business functions and broader technology experience, he said.

    'CSC's significant fault was accepting the status quo, accepting an environment that would not be successful. CSC as the prime has got to say no to the IRS,' Levitan said. 'They were the experts. They can't make the agency's decisions, but they could have refused the scope and schedules given them. They were enabling the IRS' bad habits.'

    (Revised Jan. 12, 2004)

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