Tax Systems Modernization: Update on Critical Issues Facing IRS

GAO discussed the Internal Revenue Service's (IRS) Tax Systems Modernization Program. GAO noted that: (1) although IRS has published its final Design Master Plan, it has made limited progress in completing other crucial planning, such as developing a strategy for integrating all modernization projects and preparing a transition plan to automate business functions under the Tax Systems Modernization Program; (2) IRS has strengthened its performance in systems development and procurement by increasing its procurement staff from 170 to 239, completing initiatives that strengthen controls to ensure compliance with procurement policies and procedures, and increasing staff in the systems development area; (3) IRS has had difficulty in awarding the Treasury Multi-User Acquisition Contract (TMAC), the largest of all the modernization procurements of $1.4 billion, primarily because the IRS price-technical tradeoff analysis was insufficient to support award to a bidder whose price were $700 million more than the low bid; (4) IRS has cancelled the Check Handling Enhancements and Expert System (CHEXS) solicitation, but plans to issue a new solicitation with changed requirements and rename CHEXS the Integrated Cash Management System; and (5) IRS has had problems in managing the CHEXS project, because indecision hampered requirements development, IRS decided not to issue a request for comments on the CHEXS procurement, and IRS did not timely evaluate the benefits of proceeding with the project despite cost increases.