IRS Takes Contractors To Task For Lengthy Contract Delays

CSC-led database system can't be implemented in time for 2004 tax season.
Mark Everson, the Internal Revenue Service commissioner for less than three months, wants some answers on why a group of tony contractors led by Computer Systems Corp. has taken more than two years to implement a database system known as Customer Account Data Engine, or CADE, to store records on some 200 million tax filers.

The first phase, the transfer of tax data on 6 million 1040EZ filers, was originally to move to the database from a 40-year-old magnetic tape-based system in December 2001. That date was pushed back several times to August, but the contractors, which include BearingPoint, IBM, Northrop Grumman Information Technology, SAIC, and Unisys, recently informed Everson of additional delays in implementing CADE.

With the new delays, the IRS says, agency programmers won't have enough time this fall to make changes for the 2004 tax filing season. "This most recent setback is a serious matter," Everson said in a statement. "These delays are particularly disturbing, especially since the General Accounting Office continues to view modernization as a high-risk area."

The IRS has decided to implement the first phase of CADE next year, minimizing the risk of any potential disruptions. Everson has asked the federally funded Software Engineering Institute at Carnegie Mellon University to conduct a review to evaluate the project's progress and determine within the next 90 days whether changes are needed. The institute, sponsored by the Defense Department, advises other organizations on the technical and managerial aspects of developing large systems.

The institute will evaluate CADE's progress and determine if any midcourse corrections are needed, the commissioner said. The review also will examine contractors' performance since the project began 4-1/2 years ago. Work on CADE will continue during the inquiry. Everson also asked the IRS oversight board to assess CADE and the future of the project, which so far has cost taxpayers $67 million. The government has budgeted $33 million this year and $84 million next year for CADE.

CSC declined to be interviewed about the inquiry, saying its government contract prevents it from discussing the project. However, it said in a statement that it's confident that the first phase of CADE will be implemented next spring, it welcomes the inquiry, and it will cooperate with the Software Engineering Institute. Modernizing IRS IT, CSC said, presents a range of technical and management challenges. The IRS wouldn't describe the specific problems facing the contractors, but transferring such a large amount of data to a state-of-the-art system from some very old databases apparently is causing the contractors problems.

When fully operational, according to the IRS, CADE will replace the antiquated master file system that takes a week to update, creating delays in providing account information to taxpayers. The system will provide a number of benefits, the IRS says, including faster refunds along with daily postings of transactions and updating of accounts.