We're Looking

Agency Profile: Treasury

'We're Looking for Partners'

Treasury Department's Candor, Commercial Streak Dazzles Industry

By Heather B. Hayes

James R. Tourtellotte
"We now encourage our contractors to tell us what they truly think. We want them to give us their ideas for saving money, for modernizing systems, for making things work more efficient. If they do that, we'll find ways to reward them for it."

James Flyzik
Treasury Department

The Treasury Department is fast becoming the information technology's most-favored IT partner. That is because of its steady and ongoing evolution from a traditional, taciturn purchasing agency to one in which communication and commercial-like practices are the rule.

These days, the agency is more about performance-based contracting, risk sharing, gain sharing and reward-fee arrangements. But perhaps most importantly, it is about open dialogue.

The Treasury Department encourages its contractors "to tell us what they truly think," says James Flyzik, the agency's chief information officer. "We want them to give us their ideas for saving money, modernizing systems and making things more efficient. If they do that, we'll find ways to reward them."

All of this comes at a critical juncture for the Treasury Department, which is struggling to modernize its information technology infrastructure, keep its year 2000 compliance efforts on course and manage a number of high-risk and high-profile contracts.

But Flyzik says the agency is poised to make a quantum leap in its information technology management efforts.

Last fall, when the Treasury Department released its new five-year strategic business plan, agency IT officials were able to develop an overall technology architecture that would help support the business needs, rather than define them.

"It's historic because, for the first time, we're able to tie our IT programs directly into the Treasury strategic plan," Flyzik explains. "So we hope to demonstrate how IT can support the overall business mission of the agency. That's different for government."

Of course, managing information technology investments and changing the culture for procuring such products and services are not new concepts, but rather ones spelled out in the Clinger-Cohen Act of 1996. Putting the theories into practice is another story altogether, though, and Treasury, like other agencies, is struggling to change the course of its heavy, bureaucratic ship.

The recent architectural blueprint laid out by agency officials is a strong first step.

"If we can begin to have all of our bureaus working toward a common architectural framework, then decisions we make on individual systems will all move toward a common end point. And we'll be able to make decisions based upon compliance with architecture and standards," Flyzik says.

The poster child for Treasury's new take on information technology management is the pending IRS Prime Integration Services contract, valued at $8 billion. This 15-year opportunity, slated for award in late 1998, has shaken up industry with its radical approach.

The project includes more risk sharing between government and industry, opportunities for gain sharing, permission for subcontractors to chime in with their ideas, and a modular approach that will break this multibillion-dollar effort down into several manageable steps.

"We think it's an excellent plan, especially the modular concept, because then you're able to lay out a game plan that allows you to make course corrections as you go along," says Ron Vucurevich, vice president for Information System Integration Programs at Lockheed Martin Mission Systems, Bethesda, Md.

Lockheed Martin was the prime contractor on the IRS' previous modernization attempt, the Document Processing System, a billion-dollar behemoth contract that government and industry officials agree was flawed from the beginning. The contract was awarded in 1994 and canceled in 1996.

Within the grand scheme of the overall IRS information technology infrastructure, DPS was only one subsystem, Vucurevich explains. But as it went along, he says, "we realized that no one had taken a total system view or properly orchestrated all of the other subsystem implementation activities needed to properly integrate DPS into the overall infrastructure."

Greg Rothwell
Despite its high-profile role on that effort, Lockheed Martin, along with Electronic Data Systems Corp. of Plano, Texas, and Chicago-based Arthur Andersen, will compete for IRS Prime against a Computer Sciences Corp.-led team that includes IBM Corp., Armonk, N.Y.; Unisys Corp., Blue Bell, Pa.; Northrop Grumman Corp., Los Angeles; Science Applications International Corp., San Diego; and KPMG Peat Marwick, New York.

Greg Rothwell, IRS assistant commissioner for procurement, says the agency's new approach requires a different breed of contractor.

The agency wants companies that have demonstrated a willingness to work with the government and stick it out even when things aren't going so well, he says. It's important to look at how companies have dealt with problems in the past because it is unrealistic to think that a contract of this magnitude will be without any difficulties, he says.

In fact, most contractors - especially those taking a stab at the IRS Prime contract - are enthusiastic about Treasury's new approach.

Dondie McNickle
"The changes that are taking place are refreshing because there's so much more communication, and now we're able to get involved with the end user at the front end of the solution," says Dondie McNickle, director of imaging and information systems for Northrop Grumman, which is prime contractor for the IRS Service Center Recognition/Image Processing Systems, an $88 million contract to automate tax form processing.

"We're no longer just plugging in some information technology solution. We're actively involved in the whole life cycle of the project, from defining the business problem all the way through," McNickle says.

Although the company originally was skeptical of the IRS Prime contract's competition clause, Computer Sciences Corp. has since changed its tune, according to Donald Brown, lead executive on the CSC IRS Prime opportunity.

Donald Brown
The IRS Prime effort will require the winning prime contractor to run competitions among subcontractors for task orders throughout the contract.

"We like all of their changes now," he says. "And the whole idea of performance-based contracting and 'build a little, test a little, deploy a little' are philosophies that we've preached for years, because it's really the way things are done on the commercial side."

Whether a government agency is capable of performing like a commercial partner remains to be seen, but already Treasury's new approach can be witnessed in long-standing traditional contracts.

For example, the Treasury Information Processing Support System, a five-year, $900 million contract to provide the IRS with integration, engineering and telecommunications services, has begun scoring the performance of Northrop Grumman and 13 other contractors in deciding which company will get follow-on opportunities.

Within its enterprisewide effort to render all mission-critical systems year 2000 compliant, Treasury is also encouraging contractors to optimize and modernize wherever they see the chance, such as eliminating or upgrading outdated systems.

Meanwhile, the Treasury Communications System, a $426 million contract to integrate all of the agency's data, voice and wireless communications systems, is already providing incentives to Cleveland-based TRW Inc. and its subcontractors to modernize the environment and save the agency money.

"If by earning more profits, the contractor has more incentive to do a better job for me, and I am saving money, then why would I care what motivates them?" Flyzik asks. "To me, a win-win situation is what we really want."

Flyzik says the new strategies will be implemented in other major Treasury contracts, including ambitious programs to improve debt collection processes, to modernize the U.S. Customs Service, and to re-engineer and integrate all human resource systems into one standard, commercial solution.

But the new rules aren't going to apply to every contract. Like other agencies, Treasury is also relying more on blanket purchase agreements for quick and painless commodity purchases and outsourcing of information technology functions where applicable.

The bottom line, Flyzik says, is that no idea is off limits.

"We're always on the lookout for new ways to work with industry and new ways to save money and make everything work a little more effectively and efficiently," he explains. "We're looking for partners, and we want to be true partners."

Major Treasury Department Contracts

Treasury Distributed Processing Infrastructure
Size: $1.4 billion
Prime Contractor: Sylvest Management Systems
Treasury Multi-User Acquisition Contract
Size: $1.4 billion
Prime Contractor: AT&T
Treasury Information Processing Support System
Size: $900 million
Prime Contractor: 14 different vendors
Service Center Support System
Size: $520 million
Prime Contractor: Unisys Corp.
Treasury Communications System
Size: $426 million
Prime Contractor: TRW Inc.
Source: Input

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