by Ken Rankin

Washington — The gremlins that have bedeviled the Internal Revenue Service’s attempts to modernize its antiquated 1960s-era computer system for nearly a generation continue to undermine those efforts, government and industry insiders recently told Congress.

In testimony before the House Ways and Means Oversight Subcommittee, IRS Commissioner Mark Everson suggested that his agency may have bitten off more than it could chew.

“We expected to achieve some key milestones in the summer and fall, such as the initial delivery of the system that would start to replace our antiquated tax accounting system, called the Customer Account Data Engine,” he explained. “Before the summer was through, it became clear that two very significant modernization projects, CADE and the Integrated Financial System, would experience substantial delays.”

Calling both failures major setbacks for the IRS, Everson attributed at least part of the problem to the fact that “the scope of the projects was far too large” for the IRS and the PRIME industry contractors responsible for spearheading the modernization effort.

“The IRS management team and the PRIME contractors had taken on too much and been stretched too thin,” acknowledged Everson. “We did not have the capacity to properly manage such a large portfolio,” and “the result is that we have been unable to devote the resources, energy and attention to meeting our primary goals.”

One of the key contractors involved in the project also told Congress that they had underestimated the complexities associated with modernizing the IRS’s computer system.

Computer Sciences Corp. vice president Paul Cofoni testified that his company “did not understand the complexity of the current systems environment; nor did we understand what it would take to build a new database platform for the IRS.”

During “my 30 years of working in the technology field, I have never encountered any program of the size and complexity as the business systems modernization program at the IRS,” Cofoni said.

Both Subcommittee chairman Rep. Amo Houghton, R-N.Y., and the panel’s ranking Democrat, North Dakota Congressman Earl Pomeroy, expressed deep concerns about the problems that continue to haunt the tax service’s modernization effort. While these and other witnesses acknowledged that the IRS has made progress over the past five years toward improving customer service and developing enhanced technology, the two Ways and Means Committee leaders made it clear that they were worried about the continuing difficulties associated with bringing the IRS into the 21st century.

Houghton said that it is “troubling that some of the key elements of the modernization program have experienced significant delays and cost over-runs. To date,” he said, “These additional costs amount to $290 million, a sizable percentage of the $1.7 billion appropriated for computer modernization through fiscal year 2004.”

Pomeroy voiced concerns of his own regarding “the IRS’s apparent inability to deliver on the ‘big computer projects’ involving the master file of IRS records and system-wide infrastructure systems.”

Among the specific problems that he cited at the hearing were inadequate performance by contractors, overly ambitious project portfolios designed by IRS management, and insufficient direct participation by IRS employees in the management of technology programs.

In part, at least, the concerns raised by Pomeroy reflected the findings of an independent review of the modernization effort that blamed many of the current difficulties on top officials at the IRS and its outside contractors.

That review, conducted for the IRS by Carnegie Mellon University’s Software Engineering Institute, cited ineffective “management discipline” by both tax service officials and execs at the agency’s industry partners.

Not all of their activities are “effectively executed, and many are not backed by sufficient technical expertise and experience,” SEI chief engineer Steve Palmquist told the subcommittee. “Risk management, requirements management, staffing and talent retention, communications management and creating accurate budgets and schedules all remain areas of concern.”

According to Palmquist, a number of CADE’s problems can be attributed to lapses in the industry partners’ software development processes. Although recent improvements in performance have convinced the SEI that these contractors can deliver quality software, problems remain in this area, he told Congress. Several “key development processes are still not effectively integrated, and there is no clear chain of command for technical decision-making” in the development of software for the IRS, he said.

Another serious concern involves the ability of the IRS to integrate its own business rules into the emerging software systems — a process that Palmquist described as “harvesting.”

The SEI’s review determined that “the IRS does not know the number of business rules in CADE with any reasonable degree of certainty,” he explained. “Therefore, no one knows how long rule harvesting will take, how many people will be required, the background, training and experience of the people required, or how much it will cost.”

On the basis of “anecdotal information presented to us,” he told Congress, “we believe the time will be measured in years and the cost will be measured in the tens of millions of dollars.”

Exactly how much the IRS business system modernization program will cost is far from certain, a witness from the General Accounting Office testified.
“Based on the IRS’s expenditure plans, BSM projects have consistently cost more and taken longer to complete than originally estimated,” GAO accounting and information management division director Robert F. Dacey said.

“These schedule delays and cost overruns impair the IRS’s ability to make appropriate decisions about investing in new projects, delay delivery of benefits to taxpayers, and postpone resolution of material weaknesses affecting other program areas,” he said.

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