IRS Stalls $8 Billion Prime Program

IRS Stalls $8 Billion Prime Program

By Nick Wakeman
Staff Writer

The Internal Revenue Service's lucrative modernization contract has been delayed again as the agency's new commissioner, Charles Rossotti, seeks more time to review the project.

A request for proposals for the $8 billion-plus IRS Prime Integration project originally had been slated for release in December. The revised target was Jan. 15; agency officials said last week that no new date has been set.

However, industry officials familiar with the project said last week that they expect the RFP to hit the street by late February. These officials also expect the May 1 deadline for proposals to stay the same.

IRS commissioner Charles Rossotti

The latest delay stems from concerns about how the prime contractor will maintain competition among the many subcontractors expected to win roles in the effort, industry officials said. Rossotti also wants the industry teams competing for the contract to clarify the steps they will take to refresh technology throughout the 15-year contract.

The winning contractor will be required to stage competitions throughout the project among its subcontractors to perform a wide range of tasks so that the government can get the best bang for its buck.

Computer Sciences Corp., El Segundo, Calif., and Lockheed Martin Corp., Bethesda, Md., are the prime contractors heading the teams vying for the contract to update IRS computer systems and revamp tax collection processes and other internal procedures.

Rossotti, a founder and former chairman of American Management Systems Inc., Fairfax, Va., became IRS commissioner Nov. 23. The Clinton administration hailed his appointment as the cure for an agency that has mishandled key IT procurements in the last decade.

Rossotti's hands-on approach came as no surprise to industry officials and has won some praise in Congress. One Republican staffer said the delays are "in all likelihood a good thing. There has been a congenital problem at IRS with rushing projects and not having a specific and coherent blueprint."

As part of his review, Rossotti has asked the competing teams whether subcontractor competitions should be held during the requirements development phase and for the design specification work, said Ron Vucurevich, vice president of Lockheed Martin's information system integration programs.

While Rossotti continues to review the contract, he is committed to keeping the contract a performance-based vehicle, industry officials said. Under this type of contract, companies are paid according to how well the new systems operate, industry officials said.

Neither Rossotti nor Arthur Gross, the IRS' chief information officer and architect of the project, were available to comment on the delay, according to IRS spokeswoman Jody Patterson.

IRS Prime Rosters

Lockheed Martin Team
  • Electronic Data Systems
  • Andersen Consulting
  • Computer Sciences Corp. Team
  • IBM
  • Northrop Grumman
  • Unisys
  • Science Applications
  • International Corp.
  • KPMG Peat Marwick
  • Source: CSC and Lockheed Martin
    Industry officials said the May 1 deadline for submitting proposals is a crucial factor in the current timetable for the project. That date ensures that an initial award can be made by the end of September and that work can start in fiscal 1999, which begins Oct. 1.

    According to Patterson, the agency has about $320 million set aside for work in the first year of the contract.

    Gross told Washington Technology late last year that the IRS is looking for a "strategic partner" and not just a contractor to help the agency modernize its tax systems.

    The partner also will "have some skin in the game," Gross said, meaning that the winner of the contract will be expected to begin building the tax system before getting paid by the government.

    Thus, the winning contractor might not see a return for a year or more, until parts of the system begin to operate, Gross said.

    Most of Rossotti's concerns, which have been communicated to the competing teams, deal with the role and responsibilities of the prime contractor, said Don Brown, a CSC vice president who is leading that company's team.

    The delays are not necessarily bad, Brown said. "Mr. Rossotti is still trying to understand all the parameters [of the project], and that is a good thing because he is the one who will ultimately be responsible," Brown said.

    Vucurevich agreed. "We had an expectation that [Rossotti] would want to get his arms around the project and that is what he is doing," he said.

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