CSC was originally scheduled to modernize the IRS’ Electronic Fraud Detection System by January 2005, in time for the 2005 filing system, but after concerns that the new EFDS might not be ready in time, the agency opted to use its existing system for 2005, according to a letter from House Ways and Means Committee Chairman Bill Thomas to Treasury Secretary Henry Paulson last week.
CSC planned to have an updated system in place for this year’s filing season, but it couldn’t implement it in time, and the IRS couldn’t get its older, back-up system online either. As a result, no false refunds have been stopped this year, compared with $412m that the exisiting system blocked last year, the letter states.
The committee’s four-month investigation uncovered failures and miscalculations on the part of IRS and CSC, Thomas said. For example, the IRS in 2005 decided no to keep its old EFDS in place despite numerous warnings that the second attempt to redesign the EFDS was in serious trouble, the letter states.
And when it tested an early version of the new CSC-designed version in July 2005, identified numerous performance problems, system defects, and the need for a contingency plan.
Although the IRS clearly should have kept the old system in place as a contingency plan, Thomas also faults CSC with misleading the agency up until January, saying that the new system would be ready for tax season.
The IRS was forced to rely on these representations in its decision-making because it lacked the technical expertise to challenge CSC’s accuracy. Furthermore, on several occasions, the CSC significantly overstated its progress on the EFDS project, the letter states.
The IRS in April told CSC to stop working on the new system, but the department, having paid $18.5m to CSC with nothing to show for it to date, is still contracting with the company to reinstall the old system for next year, Thomas wrote. He urged the Treasury Department to better monitor EFDS implementation for 2007 and insisted that the IRS improve its contract oversight and vendor management.
In a report in June, the Senate Finance Committee expressed similar outrage with the loss of tax revenue, CSC’s performance, and the IRS’ poor management of the contract.
The EFDS project, however, is small change compared with the IRS’s billion-dollar business modernization plan awarded to a CSC-led team of contractors in 1998. The contract could be worth up to $8bn over 15 years and covers infrastructure modernization for new applications, integration, and business planning. Other companies working on the contract are IBM, KPMG, Lucent Technologies, Northrop Grumman, SAIC, and Unisys.
Considering the inability of the CSC in this case to deliver a functional product to the government and its inability to provide accurate information to the IRS, it may be an appropriate time to reexamine the dependence of the IRS on the CSC and determine whether the Federal government is best served by this particular contractor, Thomas wrote.
CSC is not commenting on its contracts with the IRS or the recent accusations from lawmakers, according to spokesperson Richard Venn.
