Draft RFP puts TSM at Phase 1

Although IRS this month released a draft request for proposals for its souped-up Tax
Systems Modernization program, it laid out details for only the first of five phases.

IRS will use the bids to refine its requirements and seek vendor proposals for the
following four phases, according to the draft RFP.

Except for reiterating a general outline for a mainframe-centric computing environment
that will integrate all agency operations, the five-volume draft solicitation deals
entirely with what IRS wants in the first phase of its modernization project.

During Phase 1, the new TSM prime contractor will create the nationwide systems
infrastructure upon which it and IRS will layer the numerous systems that support tax
processing and collection.

Bidders are asked to include specific projects, timetables and cost estimates for the
following four phases when they offer proposals in the first round.

The agency expects to choose a prime contractor by next October.

During Phase 1, the prime contractor will build three of the five major databases IRS
will use for all operations: the Tax Return Database, the Pay Information Database and the
Information Return Database.

IRS has not decided where it will host the databases, agency officials said. The
existing systems will continue to operate until IRS migrates them into the new systems
during the third phase of TSM.

IRS processes tax returns in 10 centers nationwide. The data is then downloaded to
magnetic tape and uploaded to master files on mainframes at computing centers in
Martinsburg, W.Va., Memphis, Tenn., and Detroit.

Under the new plan, Memphis and Martinsburg will serve as the mainframe data hubs for a
larger client-server operation. IRS will use the Detroit center for processing
administrative files and as a systems development and test site.

IRS officials have attached great importance to Phase 1, which will let customer
service staff access tax law data and nonaccount information so the agency can handle many
taxpayer responses via telephone or the Internet in a single interaction.

The draft RFP said Phase 1 includes 40 percent of the TSM blueprint's total business
requirements and 51 percent of the customer service and compliance requirements. It said
the agency will be able to handle 75 percent of the customer service requirements by the
end of Phase 1.

The draft put the development, operations and maintenance costs of Phase 1 at $431
million for fiscal years 1997 to 2004. IRS expects to spend another $208 million on
operations and maintenance until 2013, putting the total cost for Phase 1 at $639 million.
There is no breakdown for how much each of the five subportions in Phase I will cost.

The ultimate TSM price tag is unclear, too. IRS officials had initially said the entire
project could cost as much as $8 billion. But the word on the street from vendors quoting
unnamed sources close to IRS chief information officer Arthur Gross have put the figure
closer to $5 billion.

The Automated Self-Service Application System, the first increment of Phase 1 and the
system that will support most customer service applications, is scheduled for completion
by March 2001. IRS will test it until that October and roll it out shortly afterward.

The second increment calls for enhancing security in IRS' centralized Tax Account
Database. The third will give employees access to more of the agency's legacy systems
through a single PC interface. The last two increments will replace standalone databases,
implement call routing and improve IRS' telecommunications infrastructure.

Two teams, led by Lockheed Martin Corp. and Computer Sciences Corp., have emerged as
the likely contenders for the contract.

IRS last month issued a draft RFP for electronic filing, but the blueprint has pushed
the project to TSM's final round.

"It is yet unclear to what extent the IRS will be capable of generating
significant increases in the electronic filing," the draft RFP said. Gross has said
the agency might move electronic filing forward.

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