US revenue service IT project comes under fire

A report criticising the IT modernisation at the US Internal Revenue Service has faulted both the IRS and the project's lead...

A report criticising the IT modernisation at the US Internal Revenue Service has faulted both the IRS and the project's lead contractor Computer Sciences (CSC).

The subject of the report is the IRS' troubled Business Systems Modernisation (BSM) project, a multiyear and wide-ranging effort to significantly revamp the tax agency's IT infrastructure, allowing the IRS to operate more efficiently and provide better service.

It cited:

  • distrust and animosity between the client and the contractor

  • lack of involvement of the client's affected business units in the IT project

  • poor governance by the client

  • unsatisfactory work by the contractor because of lack of skills and experience

  • unrealistic schedules and deadlines.

The project's stakes are very high. Should this modernisation effort fail, the IRS' ability to administer the US tax system will be "in grave danger" because the agency's existing systems will eventually become impossible to maintain, the report warned.

"We remain convinced that the overall modernisation plan is sound and well designed. The challenge is executing that plan. The IRS and the Prime [contractor] must get it right this time," report said. It supports removing CSC as principal contractor if significant improvements are not made soon.

CSC leads the alliance that won the contract in December 1998. Other members of the alliance include IBM, BearingPoint, Northrop Grumman, Unisys and Science Applications International. This CSC-led alliance is officially called the Prime Systems Integration Services Contractor or, more commonly, just Prime.

"The Prime alliance is making considerable progress and continues to deliver and implement a joint action plan with the IRS which includes recommendations from several studies into the modernisation program," said CSC spokesman Mike Dickerson. He also highlighted several successful applications and services that the alliance has delivered, and which are acknowledged as such in the report.

However, the report makes clear that the problems overwhelmingly overshadow the successes. The project seemed close to unravelling earlier this year, when "virtually all of the projects with a major impact on improving customer service and IRS' internal operations and productivity were experiencing serious delays and cost overruns", the report said.

A key piece called the Customer Account Data Engine (Cade), meant to replace the IRS Master Files with a modern database system and serve as foundation for modernised applications, is late. Its Release 1 version was due in August, but was not delivered.

"The CSC-led Prime alliance continues to implement the first phase of Cade and is confident that this significant project will be in place during 2004," CSC's Dickerson said.

"CSC and the companies supporting the modernisation are committed to successfully delivering Cade and we fully anticipate continuing these efforts in partnership with the IRS."

Another piece, called the Integrated Financial System, which will replace IRS's old financial systems, is also late and running $50m over its original cost estimate. It was supposed to go live in October, but now Release 1 has been pushed back to the second quarter of 2004. Several other pieces are also late and over budget.

The IRS is taken to task for insufficient involvement on the part of business units with the IT projects. The IRS also gets blamed for putting in place an internal governance team lacking the skills and experience to manage both the project and the contractors. The IRS did not respond to a request for comment on the report.

Meanwhile, the report stated that CSC lacks the leadership and experience to carry out its responsibilities, which has caused continuous delays, blown deadlines and overrun budgets.

The report also criticises both the IRS and CSC for laying down an unrealistic programme schedule.

Juan Carlos Perez writes for IDG News Service

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