IRS commissioner bars CSC from upcoming projects

The tax collection agency is unhappy with CSC's work on an IT modernization effort

The U.S. Internal Revenue Service will keep two upcoming IT projects off-limits to computer services provider Computer Sciences Corp. (CSC) because the tax collection agency has been dissatisfied with the vendor's performance in an ongoing IT modernization effort, IRS Commissioner Mark Everson said yesterday.

Everson told a U.S. House of Representatives subcommittee that he sent a letter on Wednesday to CSC President and Chief Operating Officer Mike Laphen informing him of the decision. In the letter, which Everson read at the hearing, he also wrote that the IRS will carefully assess CSC's performance on current projects "before awarding any follow-on work for existing projects."

In December, the IRS Oversight Board blasted both the IRS and CSC for problems with the IT modernization effort, including poor planning, poor execution and blown deadlines (see story). CSC is the primary contractor for the Business Systems Modernization (BSM) project, a multiyear and wide-ranging effort to significantly revamp the tax agency's infrastructure and allow the IRS to operate more efficiently and provide better service.

The Oversight Board warned that if the BSM project fails, the IRS's ability to administer the country's tax system will be "in grave danger" because the agency's existing systems will eventually become impossible to maintain. The report recommended removing CSC as the project's primary contractor if improvements aren't made soon.

Everson said in his letter that the IRS and CSC have made progress in recent months, but he expressed disappointment at CSC's announcement that it would be unable to deliver the Integrated Financial System (IFS) portion of the project by April, an already revised date, since the IFS was originally due last October.

It was that delay, which Everson described as "unsettling," that prompted him to decide against considering CSC for two upcoming IT projects, a step he isn't taking lightly, he wrote in his letter. The IFS, which is to replace the IRS's old financial systems, is not only late but also running about $50 million over its original cost estimate, according to the December report.

An IRS spokesman said it isn't immediately clear how the IRS will prevent CSC from nabbing those projects, but he added that bids can be structured in a variety of ways.

Everson said he expects his decision to lead to "a sharpened focus and discipline, and will in fact enhance the prospects for successful and timely delivery of other modernization projects by CSC."

Paul Cofoni, president of CSC's Federal Sector unit and a corporate vice president, also testified at the hearing, saying the IRS modernization program is at the top of his company's watch list of projects.

"Our CEO is briefed periodically on the progress we make in modernizing the IRS as well as the challenges we face in delivery performance. COO Mike Laphen, Jim Sheaffer, the general manager, and myself are personally committed to program success and we will do what it takes to deliver," Cofoni said.

"While I know that more challenges lie ahead, I also know that the CSC team in place can successfully meet those challenges," he said.

The CSC-led alliance won the BSM contract in December 1998. Other members of the alliance include IBM, BearingPoint Inc., Northrop Grumman Corp., Unisys Corp. and Science Applications International Corp., CSC officials have said.

Copyright © 2004 IDG Communications, Inc.

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