The Internal Revenue Service canceled 344 contracts as part of last year's federal effort to reduce overall spending — but what effect it will have on taxpayer services is yet to be seen.
The Treasury Inspector General for Tax Administration identified in a
Canceling these contracts — which included taxpayer-facing elements such as updates to tax filing systems, interpreter support and expert witness testimony — may create service gaps, delay assistance and require the IRS to adjust its resources, according to TIGTA. The report only provided information; it did not make any recommendations to the IRS.
The IRS Procurement Hub user guide included a number of factors the agency should consider when cancelling contracts, including whether the contract will impact taxpayer support.
Of its over 3,000 active contracts, the IRS initially identified 501 contracts for potential cancelation. It canceled 344 of those contracts (69%), potentially saving a total of $605 million, comprising $440 million in avoided costs and $205 million in open obligations saved. (An open obligation is the difference between how much the IRS has committed to spending and how much has been spent to date.)
By category, canceled contracts that avoided the highest costs involved:
- Multiple categories (45 contracts totaling $295 million);
- Operations support (110 contracts, $210 million);
- Enforcement (111 contracts, $43.5 million);
- Business systems modernizations (32 contracts, $77 million); and,
- Taxpayer services (12 contracts, $9 million).
Canceled contracts that avoided the highest costs included:
- E-file updates ($119 million);
- Information returns updates ($21 million);
- Taxpayer 180 support services ($18 million); and,
- Taxpayer First Act initiative support ($14 million).
Small-business vendors were party to 251 (87%) of the 322 cancelled contracts, with $234 million in avoided costs and $147 million in open obligations saved. Small disadvantaged businesses had the most canceled contracts (113 contracts totaling $271 million), followed by women-owned businesses (69 contracts, $104 million), HUBZone businesses (34 contracts, $96 million), veteran-owned businesses (33 contracts, $48 million) and service-disabled veteran-owned businesses (28 contracts, $40 million).
It is important to note that cost savings could only be estimated on 322 of the 344 canceled contracts because of their contract type. The remaining 22 contracts make up 89% of the total value of cancelled contracts, representing a potential $11 billion in savings, according to TIGTA.
