A report criticizing an ongoing IT modernization effort at the U.S. Internal Revenue Service (IRS) offers a peek into a properly planned project marred by poor execution.

The scathing report, done by the IRS Oversight Board and announced Thursday, faults both the project's lead contractor Computer Sciences Corp. (CSC) and the IRS for a laundry list of IT project management and execution no-nos, including:

-- distrust and animosity between the client and the contractor;

-- lack of involvement of the client's affected business units in the IT project;

-- poor governance by the client;

-- unsatisfactory work by the contractor due to lack of skills and experience;

-- unrealistic schedules and deadlines.

"The IRS and its Prime contractor cannot continue to operate in a business-as-usual manner," the report states tersely.

The subject of the report is the IRS' troubled Business Systems Modernization (BSM) project, a multiyear and wide-ranging effort to significantly revamp the tax agency's IT infrastructure, allowing the IRS to operate more efficiently and provide better service.

The project's stakes are very high. Should this modernization effort fail, the IRS' ability to administer the country's tax system will be "in grave danger" because the agency's existing systems will eventually become impossible to maintain, according to the report.

"We remain convinced that the overall Modernization plan is sound and well-designed. The challenge is executing that plan. The IRS and the Prime (contractor) must get it right this time," reads the report, which supports removing CSC as principal contractor if significant improvements aren't made soon.

CSC, in El Segundo, California, leads the alliance that won the contract back in December 1998. Other members of the alliance include IBM Corp., BearingPoint Inc., Northrop Grumman Corp., Unisys Corp. and Science Applications International Corp., said Mike Dickerson, a CSC spokesman. This CSC-led alliance is officially called the Prime Systems Integration Services Contractor, or more commonly just Prime.

"The Prime alliance is making considerable progress and continues to deliver and implement a joint action plan with the IRS which includes recommendations from several studies into the modernization program," Dickerson said, reading from a prepared statement. He also highlighted several successful applications and services that the alliance has delivered, and which are acknowledged as such in the report as well.

However, the report makes clear that the problems overwhelmingly overshadow the successes. The project seemed close to unraveling during this year's third quarter, when "virtually all of the projects with a major impact on improving customer service and IRS' internal operations and productivity were experiencing serious delays and cost overruns," the report reads.

For example, a key piece called the Customer Account Data Engine (CADE), meant to replace the IRS Master Files with a modern database system and serve as foundation for modernized applications, is late. Its Release 1 version was due in August, but it wasn't delivered.

"The CSC-led Prime alliance continues to implement the first phase of CADE and is confident that this significant project will be in place during 2004," CSC's Dickerson said. "CSC and the companies supporting the modernization are committed to successfully delivering CADE and we fully anticipate continuing these efforts in partnership with the IRS."

Another piece, called the Integrated Financial System, which will replace the IRS' old financial systems, is also late and running $50 million over its original cost estimate. It was supposed to go live in October, but now Release 1 has been pushed back to the second quarter of 2004, according to the report. Several other pieces are also late and over budget.

The IRS is taken to task in the report for insufficient involvement on the part of business units with the IT projects. The IRS also gets blamed for putting in place an internal governance team lacking the skills and experience to manage both the project and the contractors. The IRS didn't immediately respond to a request for comment on the report.

Meanwhile, the report states that CSC lacks the leadership and experience to carry out its responsibilities, which has caused continuous delays, blown deadlines and overrun budgets.

Both the IRS and CSC get blamed for failing to establish an environment of trust, confidence and teamwork between themselves, leading to a tense and inefficient working environment and regular finger pointing. The report also criticizes the IRS and CSC for laying down an unrealistic program schedule.

IDG News Service

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