IRS seeks prime to take TSM's reins

In an effort to rescue the Tax Systems Modernization, the Internal Revenue Service plans to hire, within the next two years, a prime contractor to take charge of the beleaguered multibillion-dollar program.

In the meantime, the IRS said it will delegate the technical work for TSM to TRW Inc., which holds the $300 million Integration Support Contract, and to a dozen vendors hired last year to provide software development and support services. By next year, contractors will perform more than two-thirds of TSM's work.

The strategy, outlined in a report from the Treasury Department to the House and Senate Appropriations committees, reflects lawmakers' demands that the agency cease trying to build the collection of TSM systems mostly by itself.

But the report does not appear to have satisfied IRS critics, who say the agency still has much work to do to prove it has a coherent plan for the program.

Rep. Jim Lightfoot (R-Iowa), who chairs the House Appropriations subcommittee that controls the IRS' budget, said the report is merely "a big step in the right direction" and does not provide enough information to ensure that TSM is funded next year. Lightfoot also said he would not agree to release an additional $100 million in fiscal 1996 funding for the program because the IRS has not shown how it would spend the money.

He added that the agency has not said what will happen to some 2,000 employees who have been working on TSM as contractors take over. "They don't address any reductions in staff over there," he said.

The IRS referred questions about the report to Treasury. A Treasury press officer said the designated spokesman for the report, deputy assistant secretary for finance and management W. Scott Gould, was ill and unavailable to answer questions.

IRS vendors, who requested anonymity, expressed relief that the agency had taken steps to address three years' worth of recommendations by the General Accounting Office, the National Research Council and the contractors themselves.

"Everyone knows that the IRS is putting so much attention into reporting to Congress that it is detracting from the progress of the program," one said.

But with billions of dollars in revenue at stake, vendors remain skeptical as to whether the agency is choosing the most aggressive course it can to revamp the program. "They have finally come to grips with the fundamental problem: They're in over their heads. But I don't think they know yet how to get out of it" and hand it off to an integrator, another industry source said.

Critics have urged the IRS to better define its priorities for TSM, to supply detailed systems architecture plans and to centralize its management of the program. The report describes some steps the IRS has taken to comply with these recommendations, but it acknowledges that the agency still needs to make critical decisions about how to develop and manage TSM.

For example, the report says that although the IRS has a "structural architecture" and a "target" security architecture, "more detailed system design and interface documents" will have to be written to support future systems development. In addition, the agency needs to develop "interface specifications" so that multiple TSM components can be integrated. Meanwhile, the report said, the IRS is reviewing how well systems under development comply with the existing architecture and standards.

Centralized Management

To centralize the management of TSM, the IRS plans to establish a new Government Program Management Office, which will be responsible for day-to-day decisions about TSM and oversee its contracts. The agency has also begun to define procedures for reviewing its systems plans and setting priorities for development.

Finally, although the report describes a new schedule for rolling out more than two dozen TSM components over the next four years, those plans are subject to change. The IRS is reviewing its "business cases," and the results of these reviews could change deployment decisions.

The agency will not decide how to proceed with the most expensive piece of TSM, the $1.3 billion Document Processing System for imaging paper tax documents, at least until October, at which time a new re-engineering study of its submissions processing procedures is supposed to be completed.

Nonetheless, based on its initial investment review, the IRS has decided to speed up some projects, revise others and terminate a few more, the report says. For example, it will accelerate the installation of mainframes needed to support key database applications and launch a new project to develop an agencywide security system.

The agency has decided to place more emphasis on "self-service" applications, such as the current application that provides tax forms over the Internet, and eliminate plans to expand an existing imaging system, the Service Center Recognition/Image Processing System built by Northrop Grumman Data Systems. Instead of completing a system that would automate work for auditors and revenue agents, the IRS plans to buy tax examiners new laptop computers.

The report says the IRS will complete by August a new strategy to expand electronic filing by taxpayers. Next year the agency expects to expand use of its Telefile telephone filing system and pilot Cyberfile, a new system for filing tax returns over the Internet or using an 800 number.