CSC vows success on troubled IRS contract

Cofoni: 'No one's giving up'

Computer Sciences Corp.

Headquarters: El Segundo, Calif.

Leadership: Van Honeycutt, chairman and CEO; and Michael Laphen, president and COO

www.csc.com

2003 revenue: $13.8 billion for year ended Jan. 2

2003 Washington Technology Top 100 rank: 5

Employees: 90,000

Lines of business: Aerospace and defense, chemical and energy, communications and high tech, consumer products, financial services, government, health services and retail

Major federal customers: Defense, State and Veterans Affairs departments, Environmental Protection Agency, FBI, IRS, National Institutes of Health, U.S. Postal Service

"There is no doubt in my mind" that CSC will meet its deadlines on the IRS modernization project." ?Paul Cofoni, president of CSC's federal sector

Henrik G. de Gyor

"We believe that as long as we can deliver and perform, we have no reason to expect that our contract would not be extended."? James Sheaffer, general manager of the CSC alliance overseeing work on the IRS project

Henrik G. de Gyor

Many taxpayers dread the month of April when they must file their annual income-tax returns. But perhaps no one has more cause to shrink from the Internal Revenue Service these days than Computer Sciences Corp.

The El Segundo, Calif., IT services company has been on the wrong side of the federal tax agency for several years since it won a megacontract worth an estimated $5 billion to $7 billion in 1998 to modernize IRS' antiquated IT systems. The systems hold more than 150 million taxpayer records and collect and process about $2 trillion in revenue each year.

IRS selected the company as prime contractor for 15 years to install the so-called business modernization system that will allow the IRS to better serve taxpayers and enforce tax laws.

But CSC fell off track by missing deadlines and accumulating huge cost overruns, prompting an IRS oversight board in December to say it would consider removing CSC from the project if no improvements were made soon.

For the most part, CSC has stoically accepted the public criticism as the lot of a government contractor, but recently the company has started to speak up about its IRS woes to counter the negative reports, stop questions flowing in from other clients and get back on the right track with IRS. CSC officials said the company's relationship with the tax agency now is heading in the right direction.

"Everyone at the senior levels at IRS and CSC is working very hard at trying to make this succeed still," said Paul Cofoni, president of CSC's federal sector. "No one's giving up."

As proof, Cofoni pointed out that IRS recently gave CSC a $27 million contract extension to add tax law changes from 2003 into the new system, which "reflects the confidence that the IRS continues to have in us."

James Sheaffer, a CSC vice president and general manager of the alliance overseeing work on the IRS project, said CSC last June promised the IRS it would deliver on time seven e-services applications that allow agencies to validate taxpayer identification numbers in real time. One application that allows registered users to compare tax identification numbers and names of customers has been running for about a month now, he said.

"We believe that as long as we can deliver and perform, we have no reason to expect that our contract would not be extended," Sheaffer said.

[IMGCAP(2)]Complaints about CSC aside, IRS has a long history of problems in trying to modernize its aging computer systems over the last three decades. The agency reported several technical and management failings with its previous Tax Systems Modernization program that started in the late 1980s.

But the government hasn't cut CSC much slack.

Case in point is the Customer Account Data Engine (CADE), the centerpiece of IRS' new system that will replace the taxpayer records master file. The value for the IRS contract was $905 million at the end of December, according to CSC.

An IRS Oversight Board in December issued a special report blasting what it said were unrealistic timetables and release dates for CADE and inappropriate shortcuts taken by CSC to meet the unrealistic target dates. Although the board was highly critical of IRS' performance, it also called into question CSC's ability to lead a team of companies working on the project.

Meanwhile, the General Accounting Office said the estimated cost for full deployment of CADE's first release had increased by almost $37 million and was delayed by 30 months.

Dissatisfied with the delays, IRS Commissioner Mark Everson told members of the House Ways and Means Oversight Subcommittee in February that IRS and CSC shared blame for the problems, but said the tax agency would open the next phase of the Integrated Financial System to other competitors and that CSC would need to demonstrate success on existing work in order to participate in new IRS modernization projects.

"We will carefully assess CSC's performance on current projects and the results of CSC's overall program management and integration efforts before awarding any follow-on work for existing projects," Everson wrote in a letter to CSC President and Chief Operating Officer Michael Laphen.

CSC accepts some of the blame for the IRS project, but Cofoni identified other sources of trouble as well, such as the tax agency's numerous change orders, the existing system's sheer size and complexity, its obsolete computer languages and poor documentation, and resistance to change from IRS' lower ranks.

Cofoni said he is confident that CSC's relationship with IRS is back on track, and that the company will stick to its delivery schedule for the rest of the contract.

"We'll be a very successful partner with the IRS for a very long time," Cofoni said.

When asked whether CSC could miss further delivery dates for CADE, Cofoni said: "Based on what we know today, there is no doubt in my mind" that CSC will meet its deadlines. *

Staff Writer Roseanne Gerin can be reached at rgerin@postnews

weektech.com.

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