House proceeds with TSM overhaul

The House last week approved an appropriations bill that reduces funding for the Internal Revenue Service's Tax Systems Modernization by $776 million and fences off all funding pending a move by the agency to "restructure" the contract. The bill would reduce the Clinton administration's funding request to $424.5 million.

"We are not out to destroy the TSM program but save it," said Rep. Jim Lightfoot (R-Iowa), chairman of the House Appropriations subcommittee on Treasury, Postal Service and General Government. "To do that, we must take the IRS out of the business of designing and building their own computer system and put it into the hands of folks who know how to get the job done. It's clear after eight years and almost $4 billion spent [that] IRS cannot handle the job."

A subcommittee staff member said the bill does not require the IRS to award new contracts and that Lightfoot would be satisfied to let the agency modify existing ones. "He is going to keep an open mind," the staff member said.

The bill drew immediate criticism from administration officials, who said it would impair the ability of the IRS to manage the 1997 return-filing season.

John Koskinen, deputy director of management at the Office of Management and Budget, said he has been satisfied with steps already taken by Treasury Department officials to correct problems with TSM, including the appointment of a modernization board to oversee the project.

"We are satisfied that progress has been made," Koskinen said. "We think these funding cuts are just going to slow us down."

Replying to Democrats' concerns, Lightfoot said last week that he would decrease the funding cuts to avoid negative effects on operational portions of TSM and other IRS legacy systems needed to successfully manage next year's filing season. He invited Treasury officials to present a list of operational TSM systems that he said would receive funding.

The bill reflects Lightfoot's resolve to remove TSM contracting operations from Treasury.

Although Lightfoot has considered moving TSM contracting operations to the Defense Department, he said in a colloquy last week with the subcommittee's ranking minority member, Rep. Steny Hoyer (D-Md.), that he was not wedded to the idea. Lightfoot said he would negotiate with Treasury about where contracting duties should reside.

"I am very clearly willing to negotiate on this point," he told Hoyer. "But there is one point that I will not negotiate, and that is simply this: The IRS is out of the business of TSM contracting."

However, Koskinen said the administration would oppose moving procurement duties away from the IRS, asserting that the program's difficulties center around design issues and not problems with contracting.

"The procurement people at the Treasury Department and IRS do very well," Koskinen said. "We think the contract management per se and the procurement shop are some of the better ones in the government."

The bill also included a $179 million reduction from fiscal 1996 levels for non-TSM computer operations.

In an exchange last week with Rep. Nancy Johnson (R-Conn.), Lightfoot said most of the reduction will result from cutting 2,000 TSM employees. He said computer work will not be affected by the proposed decrease.