Managing a modernization

The IRS is rebuilding its systems on the fly

There's only one way to modernize a government computer system: Break everything

into pieces and rebuild around it.

That's the operating philosophy of Paul Cosgrave, the chief information

officer at the oft-maligned Internal Revenue Service. He's at the helm of

a $5 billion, 15-year project that is still in its infancy and will be

built while the existing system keeps operating.

"It feels like we're flying in an airplane we're rebuilding," Cosgrave

said.

That's about the only way to put it as the IRS returns to Congress

each year to beg for more money to modernize and replace a system that was

put in place during the Kennedy administration.

The rebuilding is known as IRS Prime (Prime Systems Integration Services

contract), and the lead contractor is Computer Sciences Corp. But the project

is so massive that CSC has the help of partners, including Science Applications

International Corp., IBM Corp., KPMG LLP, Logicon Inc. and Unisys Corp.

Among Prime's features will be electronic filing systems, data stored digitally

instead of on tape, a new structure for the organization and better customer

service, including 24-hour automation to answer taxpayer questions.

But all this is somewhere in the future. It will take money and lots

of it. The cost: unclear. The benefits: too numerous to count.

"Modernizing the IRS is a massive undertaking and will take years to

complete and depends upon changes in the organization and technology," IRS

Commissioner Charles Rossotti has warned.

In the most recent development in the modernization program, Congress

released $148.4 million for the second and largest phase of a system that

is being built piece by piece. Last year, the IRS received $68 million

for overhauling its computers, but the price tag will be far into the billions

before it is completed.

"Although modernizing the IRS is not "Mission Impossible,' it's also not

"Fantasy Island,' " Treasury Secretary Lawrence Summers said at a modernization

conference in January. "It's not surprising that there are risks and setbacks.

It's not surprising that we've encountered obstacles that must be overcome."

With a mandate from Congress to restructure the way the IRS operates

and relates to its customers, Cosgrave is faced with transforming a system

from the bottom up. And there is not much time to fill that mandate.

The latest infusion of money won't move any furniture or displace any

staff. Instead, the money is being used for the design of individual proj-

ects — security technology and customer services — on drawing boards and

in computer systems. "We are laying the blueprint for the midterm period,"

Cosgrave said.

The project will take so long that the 50-year-old Cosgrave said there

is no way he will be there when it is finished.

"Overall, it is a 10-plus-year program, and we have not even begun to

plan beyond years five and six," he said.

In the meantime, he is working toward 2008, the target date for when

the IRS hopes to have 80 percent of all taxpayers filing tax returns online.

In September, the IRS will release its blueprint for the next few years

and its plans to improve customer services. Next year, it will be back asking

Congress for more money.

In the meantime, tax returns are still filed by mail, clerks still input

information by typing, and a tax return takes four to six weeks to process

the old-fashioned way.

Over the horizon is 48-hour processing for e-filers and customized case

resolutions.

"The overall issue here is getting Congress comfortable so they start

putting trust in the IRS. The release of $148 million shows Congress' increasing

trust in our ability to manage the modernization," Cosgrave said.

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