800 IT staffers still face RIFs under IRS plan

Although IRS avoided the large overall systems budget cut first sought by Congress for
this fiscal year, it has informed a federal union that it still must reduce its systems
work force by 800 starting in June.

IRS also notified the National Treasury Employees Union that it will begin a reduction
in force of 800 headquarters employees and an unknown number of field personnel on March
2, NTEU officials said. That's just one day after the agency is required by law to justify
any RIF plans to Congress.

IRS had considered layoffs of 2,500 employees--1,500 of them in systems jobs--to start
this fiscal year. But the fiscal 1997 omnibus spending package postponed them, directing
IRS to review its RIF plan and submit it to Congress by March 1 [GCN, Oct. 7, Page 1].

IRS officials always had said that the agency's layoff plans were driven not only by
anticipated budget cuts but by continuing field office consolidations, IRS spokeswoman
Jodi Patterson said.

The appropriations law does not restrict the service from moving ahead with the
consolidations. But there is a caveat: IRS must maintain the current level of taxpayer
services. "This proviso is included due to concerns which have been raised about the
potential effects of the proposed IRS restructuring on customer service," the report
accompanying the bill signed by the president said.

Congress also instructed IRS to provide the report on any layoff plans as well as a
cost-benefit analysis for the reorganization.

Patterson pointed out that Congress did not require IRS to seek congressional approval
for its plans but merely requested a justification. "We have to submit a
report," she said. "Then after the report is submitted, we can go ahead with

Patterson said the service plans to shift employees to new jobs when possible to avoid

NTEU president Robert M. Tobias said the IRS plans are inconsistent with the
appropriations bill.

IRS never has RIF'd employees. Agency and NTEU officials will negotiate how the process
will be carried out. So far, the two sides are at an impasse. They are scheduled to meet
with a mediator this week, Tobias said.

Lisa McHenry, spokeswoman for the congressional Commission on Restructuring of the IRS,
said the members of the blue-ribbon panel had been pushing IRS to postpone layoffs until
the commission completes its review of IRS operations and issues a report late next year.
But McHenry said the agency had not agreed to this scenario.

The latest RIF plans come on the heels of IRS' cancellation of a contract with Lockheed
Martin Corp. for the $1.3 billion Document Processing System. Faced with cuts in funding
for its Tax Systems Modernization program and demands that it overhaul TSM, IRS opted to
do away with the imaging systems to convert forms to a digital format.

The DPS contract cancellation is technically called a "partial termination for
convenience" that gives IRS the option to reinstitute the contract later.

The program has been a sticky issue for IRS, attracting criticism from Congress and GAO
as an example of slow progress on TSM. In a Treasury Department TSM progress report sent
to Congress in May, IRS refused to provide details about the DPS program and its schedule
but noted that it ranked DPS in the bottom third of its systems investments.

DPS had not been rolled out for production use. At the time of the program's
termination, IRS was testing a prototype at its returns processing center in Austin,
Texas. Ultimately, IRS had planned that DPS would convert images of all 285 IRS forms to
digital data.

In the report on the appropriations bill, Congress noted that IRS had spent $289
million on DPS. "IRS is now re-examining its basic requirement for document
processing," the bill added.

Although imaging technologies have lost some momentum generally, IRS Commissioner
Margaret Milner Richardson said she approved the plan to kill DPS because of budget
considerations more than technical flaws.

"Although the first phase of the contract has been concluded, given the revised
priorities and budget realities for the next several years, the IRS has decided not to
invest additional resources in DPS," Richardson said. "Lockheed Martin's
performance was not a factor in making this decision."

Thad Madden, spokesman for Lockheed Martin Federal Systems in Bethesda, Md., said,
"Performance, at least from our point of view, was not a factor." He also
suggested IRS likely would need some imaging systems in the future and had left open the
option to renew the contract.

One IRS official, who spoke on the condition of anonymity, said the nearly 100 IRS
employees who worked on DPS already have been reassigned to other projects.

Some House sources suggested that IRS soon might kill other projects or put them on
long-term hold. One reason: Congress was explicit in demanding that IRS respect the
distinctions in the appropriations bill about maintaining existing systems, rolling out
completed TSM systems and developing new TSM systems.

During hearings earlier this year, GAO auditors and lawmakers suggested that IRS often
spends money earmarked for existing systems on TSM and vice versa. In the appropriations
report, lawmakers expressed concern that IRS had postponed work on the Corporate Account
Processing System, an integrated database of taxpayer account information.

The bill said Congress is concerned that "CAPS is being pushed off into a future
development scenario. IRS seems determined to continue to fund TSM projects that appear
necessary to "feed the beast' at IRS, not to modernize the process. This is

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