Reports slam Cyberfile award

The Internal Revenue Service admitted last week that it mishandled development of its Cyberfile system agreeing with a General Accounting Office report that said the agency had not properly managed the $22 million project.

Meanwhile the Commerce Department's inspector general in a separate report released the same day echoed charges made by GAO that the National Technical Information Service had improperly awarded Digicon Inc. Bethesda Md. a contract that was used to build Cyberfile a computer system for filing tax returns on-line.

Among its findings the Commerce IG reported that the contracting officer overseeing the Digicon contract allowed it to be used as a "pass-through" to large businesses in violation of federal procurement regulations. The report did not name the subcontractors and noted that planned increases to three subtasks assigned to them had been put on hold.

Robert Davis the Cyberfile program manager with Digicon said the company had not been interviewed by the Commerce IG during its investigation. If auditors had asked Davis said Digicon would have told them that the company had been directed to give work to Intuit Inc. a vendor of tax preparation software and to the integrator BTG Inc. based upon an assessment by NTIS that these firms were needed to do the work.

"We are familiar with procurement regulations and at no time would act to short circuit or circumvent any regulations " Davis said adding that vendors NTIS and IRS officials "acted in good faith."Davis said the distribution of work on the contract shifted as the project grew from a prototype to a "limited" production system. "Work was begun last summer and the size of the project grew and the complexity of the project grew " he said. "Some of the technical requirements were handled by some of the directed subs which caused a shift in the labor distribution."

He added that "steps were made by all parties not to circumvent rules" that require an 8(a) contractor to perform at least half of the work under a contract.

The IG charged that the "procurement abuses" it uncovered "have been exacerbated by the collapse of management oversight and quality control in the procurement process " which the report attributed to Commerce's recent efforts to streamline its procurement operations. Senior managers didn't properly monitor staff performance the report said relying instead on legal reviews that contracting officers never obtained.

In the spring of 1995 the IRS signed an interagency agreement with NTIS to field Cyberfile which was intended to let taxpayers file returns using a modem or the Internet. A year ago NTIS hired Digicon to do the work under a sole-source 8(a) contract that GAO and the Commerce IG charge was improper.

In May the IRS suspended the project which was late and over budget.

Appearing before the Senate Governmental Affairs Committee last week IRS deputy commissioner Michael Dolan said the IRS should have treated its arrangement with NTIS "as more of a contract. One of the things we clearly did not do that correctly is go after the interagency agreement...the way we would an arm's-length contract."

GAO in the final version of its report on Cyberfile released last week said the project failed in part because the IRS did not adequately plan the project or monitor NTIS' progress.

Dolan told the committee that the IRS had selected NTIS to do the work because NTIS had done a good job providing tax forms to the public over the Internet. "In retrospect I will tell you that [Cyberfile] was substantially different " Dolan said in response to a GAO charge that the IRS had not adequately analyzed NTIS' capabilities to field a more complex system.

The Commerce IG report focused on NTIS procurement practices for Cyberfile and another unrelated system. It reported that two contracts the $4.3 million Cyberfile contract held by Digicon and a separate contract held by Pragmatics Inc. "disregarded a number of procurement-related statutes and regulations resulting in waste and abuse of government resources."

The contracts were administered initially by Commerce's Office of Acquisition Management (OAM) though both were transferred last November to the National Institute of Standards and Technology. The IG report criticized actions by OAM not NIST.

Concerning Cyberfile the IG concluded "there are clear indications" that Commerce allowed Digicon to begin work on Cyberfile before the tasks were authorized.

NTIS did not prepare an independent estimate of how much Cyberfile would cost which may have prevented the agency from learning that it was too big to award without competition the report said. Concluding as GAO did the IG report alleged that NTIS and Commerce improperly expanded the Digicon contract so that it exceeded the legal sole-source threshold of $3 million.

NTIS officials declined to comment on any details in the report.

The IG report noted that Commerce officials "acknowledged the problems and concerns that we have highlighted " which the officials attributed to a lack of understanding of the 8(a) contracting process by the procurement officials involved "inadequate record management" and insufficient communications between OAM and NIST.

But the report said initial actions planned to remedy the problems "do not address our specific recommendations to hold the responsible procurement officials accountable."

The report recommends among other remedies that "disciplinary action" be taken against contracting officers who "knowingly violated their responsibilities and laws and regulation.