A complaint has been lodged with the Government Accountability Office that could again stall the Internal Revenue Service's plan to subcontract cases to private debt collection firms.

G.C. Services Ltd Partnership of Houston, and Diversified Collection Services Inc. of San Leandro, Calif., have protested that the IRS was prejudiced in awarding contracts for the first phase of the project to a trio of firms on March 9, though no further details were available.

The GAO has said that it is unlikely it will make any determination before late June on the matter. The IRS had hoped to already begin assigning uncollected liabilities to the firms beginning this summer.

Different industry publications reported on the complaint filings with the GAO, which reviews whether government agencies properly follow procurement rules. G.C. Services filed first, on March 17, while Diversified filed March 20.

The two companies were among 33 that bid for the contract, which was created as part of the 2004 American Jobs Creation Act. Another debt collection company, Universal Fidelity, went to court in 2005 and delayed the start of the project by six months after bidders for the first phase of the project was restricted to companies that already had contracts with the federal government.

In the second phase of the project, scheduled for 2008, the IRS plans to contract with up to 10 firms. Over the course of 10 years, the agency expects the private firms will help it collect an additional $1.4 billion in outstanding taxes.

The selected firms are:

  • The CBE Group Inc., of Waterloo, Iowa;
  • Linebarger Goggan Blair & Sampson LLP, of Austin, Texas; and,
  • Pioneer Credit Recovery Inc., of Arcade, N.Y.

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