IRS grabs higher power

Agency reins in outside executives for modernization expertise

Much like it takes a village to raise a child, it's going to take corporate America to help modernize the Internal Revenue Service.

With the appointment of John Reece, a former information technology executive at Time Warner Inc., as the agency's chief information officer, the tax agency already had signaled that it is looking to the private sector to handle its business modernization project.

And now Reece — on the job since March — is bringing in a staff with experience in some of America's biggest corporations. "We're now coming into the period of time when you are going to see major stuff happen," Reece said in a recent interview.

To help him, Reece has tapped several executives, some from the private sector and some with high-level government experience. "We really haven't had the need for all this until now," he said. "And now we're in a position where we really do need it."

The idea of bringing industry executives into government is not new. But the federal government often has had trouble attracting private- sector executives because the pay isn't as attractive.

"I think that this is great news because government employees are always leaving and going to industry and providing their insights to the private sector," said Olga Grkavac, executive vice president of the Enterprise Solutions Division at the Information Technology Association of America. "It's encouraging to see that it is now more a two-way direction instead of one way."

Among Reece's new hires are executives from American Management Systems Inc., AOL Time Warner Inc., TRW Inc. and Marriott International (see box).

His plan: "Get greater control of the fiscal world. Leverage the best resources we have across the organization. Get consolidated strategy and planning. And make sure we have a closer identification with end-user customers and are more responsive to their needs."

Paul Light, government policy expert at the Brookings Institution, said industry know-how may help turn around the IRS, but it's no guarantee. "Business.people always have good ideas but can get very impatient with the pace of change in government," Light said. "To the extent they build on what is already being done, all to the good. To the extent they change directions precipitously, IRS could lose past gains."

Whatever the approach, it's high time the IRS attacks its management problems, Light said. "Ultimately, at IRS, I'm not sure how much of anything could hurt right now. The organization is desperate for improvement."

Industry/government partnership makes sense, said Art Gross, former IRS CIO who left the position in 1998 and now is executive vice president and CIO at the Albany Medical Center in New York. "The strategy we employed when we were with the service was to blend the expertise of the IRS management staff with the private sector in the form of a partnership," he said. "We promoted people internally and recruited from the outside as well. We also sought to partner through contractual relationships."

Meanwhile, the IRS' Business Systems Modernization plan is well on its way. "We're now at the point where there's a tremendous amount of stuff starting to roll off the business line," Reece said.

The projects include:

* Improved customer service access from a new phone routing system that became operational at the end of July.

* Improving the accuracy of answers for taxpayers who call the IRS.

* In December, begin replacing the 1960s tape data repository with a new standardized database system.

* Laying the groundwork for secure Internet communications.

* Developing a Web portal that will allow tax professionals to access client records.

Reece said he wants to improve communications between the IRS and its industry partners on the IRS Prime Alliance, led by Computer Sciences Corp. The modernization project is expected to cost billions of dollars and take 15 years to complete. If it works as designed, it will streamline interactions between taxpayers and the agency.

But as the IRS rolls out its projects one-by-one, Reece said the agency is focused on making sure that customers are satisfied and that IRS units are accountable for their work.

"Some of these major milestones in the life cycle are months, months, months long," he said. "So every four to six weeks, we are looking at every one of our projects to make sure [they are] deliverable in that kind of time frame. So people can come and say, "Look, they are hitting these schedules. They are making these deadlines.' "

If history is any indication, the IRS will face an uphill struggle in the next few years. Officials tried and failed to modernize the system in the late 1970s. In the 1990s, they spent $3 billion trying to come up with a modernization plan, but Congress forced them to pull the plug when it became apparent that little progress was being made.

Reece, however, said all was not wasted by those failures. "Had those two initiatives not been done, I think we would not be collecting taxes today," he said. "While they were not the success they were intended to be, nonetheless they put new technology in here that we absolutely couldn't succeed [without]. So it was not all wasted."

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