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IRS To Modernize Computer Systems

December 10, 1998

WASHINGTON (AP) _ For a decade, the IRS has tried and failed to modernize its gigantic computer system, some of which dates to President Kennedy’s administration. In the process, the agency spent an estimated $3.3 billion.

Now, a new contract for the latest attempt _ a daunting project that could last 15 years _ has been awarded to a consortium led by Computer Sciences Corp.

Top Internal Revenue Service officials, company executives and even skeptical Republicans in Congress say things are going to be different this time. One reason: new IRS Commissioner Charles Rossotti and other new top managers have long experience in technology from their days in the private sector.

``We heard increasingly about the management breakdowns at the IRS that had caused the technology problems,″ said Rep. Rob Portman, R-Ohio, who was co-chairman of an IRS restructuring commission. ``Rossotti’s background has given me hope.″

Computer Sciences, based in El Segundo, Calif., beat out a team led by Bethesda, Md.-based Lockheed Martin Corp. for the contract, which was announced Wednesday and is worth $516.5 million initially and probably several times that over time.

``To improve service, the IRS needs to break out of its technological time warp,″ Rossotti said. ``In many areas, improved service hinges directly on replacing outdated technology.″

That technology, some from the 1960s, still keeps taxpayer records on tape files that can only be updated once a week. And those files are among the world’s largest, making them even more unwieldy.

Often, taxpayers can’t get updated information on their accounts and are unable to get prompt answers to many tax questions over the telephone, to name just two of the many problems.

Paul Cosgrave, the new IRS chief information officer, said initial work in 1999 and 2000 will focus on improving response to these simple telephone queries.

``We need to improve the whole process where we can handle some of those inquiries on a much more efficient basis, including giving taxpayers some basic answers,″ he said.

Other immediate priorities include expanding electronic tax filing and designing new work stations to permit IRS employees to quickly retrieve individual tax records. Eventually, the entire core computer system will be overhauled.

The IRS has spent an estimated $3.3 billion over the past decade in failed efforts at modernizing its system. The most recent effort was led by Lockheed Martin, but Cosgrave said that didn’t play into its rejection as the prime contractor this time and noted it holds other IRS contracts.

Computer Sciences, which had total sales of $6.6 billion in fiscal 1998, already gets about one-quarter of its business from the U.S. government. Its federal sector president, Michael W. Laphen, said the IRS designed this contract differently because Rossotti and Cosgrave both have long private sector experience in business technology.

Members of the Computer Sciences-led group include IBM Corp., Northrup Grumman, KPMG Peat Marwick, Unisys, Lucent Technologies and Science Applications International Corp.

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