IRS: What ails modernization?

The Internal Revenue Service has commissioned a series of studies to determine what has gone wrong with its multibillion-dollar modernization program and decide how to get it back on track.

IRS officials expect the results of the four studies by the end of the month and plan to announce a new strategy by the end of December. Agency chief information officer Todd Grams declined to say what options IRS officials are considering.

"There will be changes," Grams said, speaking last week at a breakfast sponsored by Federal Sources Inc. "Without changes, we're going to keep doing what we're doing. We're looking to set the new direction and where we are going by the end of the year."

Despite some successes, the agency's Business Systems Modernization program, in its fifth year, has been plagued by missed deadlines and cost overruns. IRS officials plan to spend more than $429 million on the program in fiscal 2004. Computer Sciences Corp. is the lead contractor on what was expected to be a 15-year program.

But the studies go beyond diagnosing the ailing modernization program. IRS Commissioner Mark Everson also wants a holistic view of the agency's technology operations, experts said.

One study, conducted by Carnegie Mellon University's Software Engineering Institute (SEI), is analyzing the central component of the program, the Customer Account Data Engine (CADE), which stores all taxpayer information gathered by the IRS.

But other studies take a broader perspective, scrutinizing the agency's approach to program management.

If more agencies conducted such regular studies, they would be able to avoid problems before a leader or Congress calls for an emergency evaluation "when the train goes off the tracks," said Brian Gallagher, director of acquisition support programs at SEI.

Such a disaster started the IRS' chain of studies. In July, officials announced that CADE, scheduled to go online in 2002, was delayed yet again and is now slated for 2004, Grams said.

When officials announced the delay, Everson asked SEI researchers to figure out what had gone wrong and how those problems could be fixed. According to several people involved in the program, the study will focus on many common problems within government, primarily program management.

But some observers are concerned about the impact these studies could have on IRS programs and personnel. One former federal official pointed out that these evaluations always affect performance and morale, and Gallagher agreed that the CADE study in particular is disruptive.

In many cases in which a contract is not on schedule, multiple studies aren't necessary, said Bob Welch, a partner at Acquisition Solutions Inc., which is studying IRS procurement practices. At the agency, many problems could be solved by examining the relationship between it and the contractor and moving step by step to improve that relationship, he said.

But these studies probably would be needed sooner or later, said Dave McClure, vice president of e-government at the Council for Excellence in Government.

"The IRS modernization is going to go on for some time," he said. "It's a mammoth task, and it's going to transcend CIOs and probably heads of the IRS, so you're going to see this type of analysis."

Evaluation and benchmarking studies also play a role in the appropriations process, McClure said. "These things actually put an organization in a more powerful position to argue where they should be spending money," he said.

The SEI team is often tapped for what it calls triage studies, trying to help organizations figure out what to do when a project has gone wrong, Gallagher said.

But this type of study is something the institute discourages, Gallagher said. More routine physical evaluations, something also recommended by the Defense Science Board in 2000, would allow agencies to more easily prevent delays and overruns, he said.

That is a best practice, but it is one that few organizations in the public or private sector follow, said McClure, who has worked at the General Accounting Office.

For now, the results of the institute's study are being combined with results from a study by Bain and Co., independently commissioned by CSC, the lead contractor on the Prime contract that supports the modernization program, several sources said. One person involved in the program said the two studies came to many of the same conclusions.

Treasury Department officials are also paying attention to what changes will be made at the IRS as a result of the studies, said Drew Ladner, CIO at the department. "We are collaborating with them closely on [the modernization] and looking for additional improvements," he said.

Gartner Inc.'s benchmarking study on the Business Systems Modernization program will also factor into discussions about how to move forward, Grams said.

That study is focusing on the experiences of private-sector organizations with similar functions to the IRS' mission, and "how we stand in the relative world of product delivery," he said. "We are taking a good hard look at modernization from the ground up."

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Time for a checkup

Internal Revenue Service officials have commissioned several studies to determine how the agency's information technology programs and processes can be improved.

They include:

* The Software Engineering Institute at Carnegie Mellon University is looking at the Customer Account Data Engine, the center of the Business Systems Modernization program.

* Acquisition Solutions Inc. is examining technology procurement processes, particularly how the agency and its contractors balance financial risk.

* Gartner Inc. is performing a benchmarking study on the entire modernization program to determine how IRS efforts compare to similar projects in the private sector.

* The META Group Inc. is studying the IT organization's ability to invest in technology to support the agency's business units.