Computer Sciences Corp. is no stranger to monumental challenges.
When the royal family of Saudi Arabia wanted to set up a computer system for tracking the millions of foreign Muslims who make pilgrimages to mecca every year, it turned to CSC. And when the Federal Aviation Administration needed a new program that would enable air-traffic controllers to guide 60 million planes through U.S. airspace, it too called on the low-profile firm based in El Segundo.
But the information technology company is embarking on the most daunting project in its 40-year history: redressing a long legacy of failure in modernizing the federal tax system by overhauling the technology that enables the Internal Revenue Service to collect $1.7 trillion in taxes.
This is no typical consulting contract--even for one of the top three IT consulting firms in the country. Modernizing the IRS' 200 computer systems is expected to take between 10 and 15 years at a cost of $5 billion to $7.5 billion. Some analysts predict it could be the largest civilian technology contract ever, although it's too soon to say how many millions of dollars will flow to CSC.
The IRS contract instantly raises the company's profile in an industry that is used to working behind the scenes.
Such high stakes don't come without substantial risk. All previous efforts to bring the IRS out of its technological time warp have failed, despite years of work and billions of dollars. Should CSC and its six partner companies follow suit, their failure would be difficult to hide. It also could reduce earnings for CSC--which made $341 million on revenue of $7.7 billion last year--by 5% to 10%, according to analysts who track the company. Even so, the contract won't significantly affect CSC's earnings for a few years.
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Van Honeycutt, CSC's president, chairman and chief executive, acknowledges "it would hurt us a lot" if the contract went awry. But he is confident in his company's ability to succeed.
"People say, 'My God, how can you expect to manage a big job like the IRS?' " Honeycutt said. "We say, 'That's all we do.' "
But most observers agree that the CSC-led team--known as the Prime Alliance--stands a better chance of success than previous efforts to modernize the agency, which is seen as a critical component of IRS Commissioner Charles Rossotti's drive to improve customer service and collect more tax. A key reason is that for the first time, the IRS is willing to go to the private sector for help.
Over the last five months, CSC and the companies it leads in the Prime Alliance--Northrop Grumman, IBM, Lucent Technologies, Science Applications International, Unisys and KPMG Peat Marwick--have been developing a plan of attack with the IRS and its advisors, Booz Allen Hamilton and Mitre Corp. The first stages of the implementation are scheduled to begin Oct. 1. At its peak, CSC expects several thousand of its 45,000 employees to be devoted to the project.
When the overhaul is complete, IRS officials say, more taxpayers will be able to file their returns over the phone--and some, perhaps, on the Internet. Refunds will be processed in days instead of weeks, with the money deposited directly into bank accounts. When IRS employees take calls from taxpayers, they will be able to give accurate answers by tapping into databases with up-to-date records. The computer systems will flag potential tax evaders, and the streamlined processes will give tax collectors more time to track down cheaters and make sure they pay.
That vision represents a dramatic change from the hodgepodge of computer systems that store taxpayer records today.
"This is the worst I've ever seen," said Rossotti, who spent 27 years leading a successful technology consulting firm before joining the tax agency in 1997. "It's like being a bank and not knowing how much money is in your customer's account. A company couldn't exist this way and keep its customers happy."
The need for change is more obvious than the method for implementing it. Rossotti is fond of comparing the challenge to rebuilding New York City--from the skyscrapers to the subway system--while 7.5 million New Yorkers are still living there.
The Computer Sciences team plans to do its work through a series of projects that each will take 18 to 24 months to complete, with two or three going on at any given time. Projects that will do the most to improve customer service--and thereby encourage taxpayer compliance--will be tackled first. These include projects designed to increase electronic-filing capabilities, increase the security of taxpayer more some,,records and expand the use of telephones for customer service and filing of returns, said Don Brown, CSC's program manager for the IRS contract and vice president of the company's federal sector in Falls Church, Va.
As the companies decide which problems to fix, they will solicit bids from the private sector. Computer Sciences will then evaluate the bids and make recommendations to the IRS.
