CSC barred from tax-compliance work

The Internal Revenue Service delivered bad news this week to the prime contractor responsible for the agency's systems modernization project. Computer Sciences Corp. won't be permitted to work on upcoming projects to modernize the IRS tax-compliance and enforcement systems.

IRS Commissioner Mark Everson told lawmakers today that he made the decision after CSC disclosed that it would miss its April deadline for the initial release of the Integrated Financial System. The new general ledger and accounting system, based on commercial software from SAP, is designed to help the IRS account for the $2.4 trillion annual tax revenue stream that flows through its systems.

In a hearing before the Ways and Means Committee's Oversight Subcommittee, Everson noted that the decision to exclude CSC from the new work "is the first time there has been a real consequence" imposed on the prime contractor for missed deadlines on a project that began five years ago.

The tax-compliance and enforcement work will be worth about $40 million, Everson said. CSC will get some of that money as the prime vendor for the overall business systems modernization project, but the company will be shut out of the work specifically targeted for tax compliance and enforcement, he said. That work will go to other contractors.

"This is not a small step," Everson said.

Receiving pointed questions from Chairman Amo Houghton (R-N.Y.) and other members of the oversight subcommittee, Everson laid the blame for the financial accounting system delay on the complex linkages that must be made to 1960s-era systems. Many changes made in those systems over the years were insufficiently documented. "This has been one huge stumbling block that has affected both projects," Everson said, referring to both the Integrated Financial System and the taxpayer-account database that the IRS calls the Customer Account Data Engine.

Everson told the lawmakers that revised deadlines for both projects must be met before the end of this calendar year. "If not, we'll take further action that will be even more draconian than the action we took yesterday," Everson said.

A General Accounting Office report on IRS modernization released today faulted the IRS and CSC for poor management that has produced a combined $290 million in cost overruns and more than 83 months of delays on 11 key modernization programs. IRS officials have begun taking corrective action by putting IRS business managers in charge of the modernization project, which previously had been managed by technical employees.

But that did not happen fast enough in the view of Larry Levitan, a member of the IRS Oversight Board, an independent group that advises the IRS. Levitan testified that the board has lost confidence in the leadership of CSC.

Steve Palmquist, a panel member from Carnegie Mellon University's Software Engineering Institute, testified said that fixing the modernization project will require going back to the basics. Palmquist, who participated in an earlier technical review of the taxpayer database portion of the modernization effort, recommended that the IRS create a separate project with a separate budget to manage and oversee the modernization project.

CSC, represented at the hearing by Paul Cofoni, president of the company's federal sector, told lawmakers that the project missed schedules and exceeded cost estimates because CSC often started work before it fully understood IRS requirements. During one period, there were 1,100 change orders to 140 task orders under the contract, he said. In the future, Cofoni vowed, CSC will not begin any work until the IRS completely defines requirements.