Why Modernize IRS? Master File is a “Mission Critical Database” that stores the taxpaying histories of 227 million individuals and corporations, including every transaction between taxpayers and the IRS for the past 40 years. The Master File is used to determine if you've paid what you owe, and without it the government would have no way to flag returns for audits, pursue tax evaders or even know how much money is or should be flowing into its coffers. The system is poised for a “FATAL CRASH” that would “SHUT” the government down. It still runs code from 1962, written in an archaic programming language that almost no one alive understands. The intricacies involved in updating this age old database have made it a “Rube Goldberg Machine”. Modernization Project The main objective of the project is to implement centralized database called CADE (Customer Account Data Engine) to replace “Master File”. Apart from replacing “Master File” with “CADE”, the project is also aimed at modernizing 100+ business applications used by IRS. Project Status, April 2004
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First software release planned for the new database is nearly 3 years late and $36.8 million over budget. ‐IRS Oversight Board Eight other major ongoing projects have missed deadlines by at least 3 months. The costs have overrun by more than $200 million. ‐IRS Oversight Board
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Undefined Leadership & Responsibility Matrix 1. Scoping out requirements and getting the projects done was considered IS's responsibility, and business unit leaders were not held accountable for ensuring that new systems were delivered 2. Business managers were involved in approving plans, making deployment decisions and resolving problems, but only as members of large committees—not as accountable individuals. Lack of Executive Leadership 1. IRS did not spearhead the project; there was a very thin IRS team managing the project. It was a mistake to think that CSC, or any vendor for that matter, could manage such a huge undertaking without heavy input from the IRS 2. Three CIOs have come and gone in the seven years since planning began for Business Systems Modernization Entrenched Bureaucracy 1. Agency did not follow its own procedures for developing the new system and
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failed to give consistent direction and oversight to Computer Sciences Corp. (CSC), the vendor it had hired to do the work 2. It took weeks to get approval for something as simple as purchasing equipment. As the delays mounted, so did the costs Lack of Strategic Vision 1. IRS spent billion of dollars on the project but at the same time showed greediness while hiring outsider with domain expertise because they expected higher salaries. 2. Failure has been pointed to the lack of the IRS to have a consistent long‐term strategic vision to guide the project. Scoping Requirements 1. Officials added last‐minute requirements to the online services project and it contradicted with requirements CSC gathered from BIZMO team. Eventually CSC ignored both the data and came up with own solution. Poor Contract Negotiation Expertise 1.CSC continuously failed to meet deadlines leading to cost overruns and delay in project schedule. 2.IRS has barred CSC from working on any future projects due to CSC’s poor performance.
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Shortage of Modern IT & Change Management Experts at IRS 1. IRS CIO did not have the stature to champion the business process changes that modernization required. 2. IRS business units lacked staff experienced in implementing process changes who could oversee “Prime” and make sure it was following procedures. 3. IRS Superstars from operations could not handle the scale of the project. No Tax & Change Management Experts at CSC 1. CSC failed to properly measure project costs, adequately define requirements and fully assess project risks because it lacked subject matter experts. 2. CSC was overwhelmed and under qualified; they didn't fully understand the tax collection business or grasp the complexity of the assignment. Resentment Between IRS and CSC Staff Hampers Knowledge Sharing 1. IRS did not share correct information to CSC on time, CSC as well did not make much effort to reach out to those legacy managers to understand the system. There were Tax experts on IRS’s team and Information Technology experts on CSC’s team; however, because of resentment and communication lapses between the two
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teams synergy could not be established between information and technology leading to IT modernization failure.
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1. Longtime managers of IRS resistant to change undercut CSC and the private‐ sector IT executives who were hired to oversee the program. 2. Despite the fact that the IRS and CSC had agreed that CSC would make most project‐related decisions, midlevel IRS managers never bought into the concept. They were used to doing things themselves, their way. 3. Resentment seethed between the vendor who worked on modernization and the rest of the 8,500‐strong technology workforce that kept the existing systems running.
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Disconnect Between Groups 1. Despite the fact that the modernized systems would eventually replace the legacy applications and infrastructure, managers and users operating those systems were frequently left out of the loop when the new systems were being discussed Lethargy 1. The thinly staffed Bizmo either didn't have the time, or didn't make the time, to educate their peers. Nor, in the IRS's view, did CSC make much effort to reach out to those legacy managers 2. IRS executives approved CADE for development even though CSC had not completed its design work on the balance, control and reconciliation code 3. IRS managers gave the green light without proof it had passed testing No Inputs from Staff & Managers 1. Both the agency and CSC neglected to get input from the staff that runs the Master File at the IRS data center in Martinsburg, W.Va.—who would ultimately run CADE—about how to integrate the two systems. When the Martinsburg staff
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members finally did weigh in, the information they gave CSC conflicted with the information CSC had from Bizmo. Rather than working out the differences, CSC ignored both groups and came up with its own solution altogether
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No Subject Matter Expert 1. No one, not even the CIO, had enough stature within the agency to champion the business process changes that modernization required
No Experience Manager 1. The agency made a mistake in thinking that its "superstars" from operations could be successful without additional help from outsiders 2. IRS required more experienced staff to oversee Prime and make sure it was following procedures No Knowledge Transfer There was a complete disconnect between IRS’s hierarchy (Manager/staff of new system, manager/staff of Legacy System & CSC Team
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Improvement At IRS 1. IRS changed the terms of its agreement with CSC so that most of the work on modernization would be done at a fixed price 2. The agency identified business unit leaders to champion specific projects. For example, John Duder, the deputy commissioner of the Wage and Investment Division, which will be the major user of the CADE system, now spends around 75 percent of his time on the project. 3. IRS co‐located its staff with Prime staff to improve teamwork. More project managers having experience in building big, complicated systems were hired
Improvement At CSC 1. CSC brought in more people at both management and staff levels who understood the tax business or who had worked on public‐sector projects. 2. CSC improved its ability to estimate project costs and schedule.
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1. IRS executives approved CADE for development even though CSC had not completed its design work on the balance, control and reconciliation code 2. CSC and IBM had let slide a critical and complicated piece of middleware, called "balance, control and reconciliation," that was needed to ensure that the data processed by CADE was updated in the Master File, which contains taxpayers' complete account records
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1. At the time, Maine was processing over 100,000 Medicaid claims per week on a Honeywell mainframe that dated back to the 1970s. The system was not capable of supporting HIPAA requirements or the online access that the state wished to implement. The state’s IT department decided that a completely new system would be more cost‐effective and easier to maintain than an upgrade of the old system. 2. The IT staff at the DHS believed a new custom‐built system it would be more flexible because they could make it rule‐based in order to accommodate frequent changes in Medicaid rules.
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1. An advanced system should clear claims faster; track costs better and give providers more accurate information on claims status 2. New end‐to‐end system should be easier and cheaper to maintain 3. Cost saving by cutting down incoming calls to be answered because information is available online
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1. Implementation of completely new rule based system on Java platform taking a clean break from the legacy system
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1. Within a few days of going live with the system, the system was suspending an unusually high number of claims, around 50 percent or 24,000 claims in the very first week. 2. Providers whose claims had been suspended were filing second claims, which were suspended automatically by the system because they were tagged as duplicates. 3. Some providers who weren’t getting paid were forced to turn away Medicaid patients or even shut down their operations. Others sought bank loans to keep their practices fluid. 4. Seven thousand other nonprofits and healthcare service providers had not been compensated properly. Maine began issuing interim payments to providers that were based on their average claims.
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5. The claims system software was error‐prone, even issuing checks to doctors for their total charges for a procedure instead of the amounts that were actually covered by Medicaid. 6. Overpayments eventually recovered by Maine Medicaid totaled $9 million. 7. Providers were having difficulty filling out the new claim forms correctly, which was not a big surprise since some of the forms required 30 to 40 fields of information. 8. Providers calling to complain were rarely able to get through and suffered through seemingly interminable waiting periods on hold when they did.
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1. The 65 members of the DHS/CNSI team worked feverishly to fix software glitches, but their efforts were accompanied by a lack of regard for critical management guidelines. 2. CNSI recommended that all providers re‐enroll so that their information would be complete according to the new system’s requirements. The department chose, instead, to transfer existing information from the old system, which was considered incomplete by the new system.
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1. Lopatosky and XWave both determined that the project suffered from ineffective project management and a dearth of communication among Maine’s IT staff, CNSI, and the end users. Lopatosky worked to improve communications so that workers from the two branches of the team wouldn’t work on the same parts of the system unaware of what the other was doing. He also prioritized the troubleshooting process so that suspended claims could be cleared before less critical work was done. 2. Dick Thompson, who was then head of procurement for the state of Maine, added another significant piece to the puzzle in October 2005 by appointing Dr. Laureen Biczak to be the organization’s Medicaid expert. 3. Beginning in January 2006, questions from providers were filtered to Medicaid specialists working under Biczak if they were business‐process issues or to the IT department if they were hardware or software issues.
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1. CNSI had never before designed a Medicaid claims system. Furthermore, that the state received only two proposals; the one from a firm named Keane asking twice as much money as CNSI’s, should have been a cause for alarm. 2. The weak response to the Request for Proposal (RFP) was a sign that its requirements were unreasonable. Had Maine’s procurement department sensed this at the time, the RFP could have been revised. 3. There was no backup or parallel system to support the deployment because the legacy system was incompatible with the new code numbers (representing provider tax ID numbers and patient social security numbers) and electronic claim forms, and a parallel system was not feasible economically or technically.
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1. Skipping project management basics (including piloting, adequate end‐to‐end testing, staff and user training, etc.) due to looming deadline pressures 2. Despite informing providers of the new system and new provider ID codes, the state did not offer training for providers on the new system; nor did the state properly train the staff that would be responsible for fielding calls from providers with problems. 3. Only 13 people were on staff to handle customer service calls from 7,000 providers 4. CNSI recommended that all providers re‐enroll so that their information would be complete according to the new system’s requirements. The department chose, instead, to transfer existing information from the old system, which was considered incomplete by the new system.
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1. Programming and design problems in the system that limited the size of claim files to an unreasonable 1,000 lines of code 2. The team had difficulty getting consulting time with the Medicaid experts on staff at the Bureau of Medical Services. The DHS IT staffers and CNSI contractors were forced to make judgments about Medicaid rules and requirements without the proper input. 3. Unavailability of Medicaid expert on time resulted into improper judgment about Medicaid rules and requirements by DHS IT staffers and CNSI contractors.
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1. Project management basics including piloting, adequate end‐to‐end testing, staff and user training, etc could have been followed easily. 2. “Big bang” approach to cutover with no contingency or backup should something go wrong could have been avoided.
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Active Project Management 1.Active project management and contractor relationships are critical ‐ especially in scheduling & cost estimations. 2.In case of lack of expertise in contract negotiation, an organization should seek help. Grooming of Future Leaders 1.This is critical given the scope of many government projects and the extent to which they rely on contractors 2.From these managers, the future CIO will emerge who understand how government works , and perhaps accept the trade‐offs of working in public Change in attitude of Managers 1.Public sector managers should be flexible and should provide support towards private sector IT firms and consultants. Employ a resource Capacity Model 1.Employ a resource‐capacity model to create project teams of people familiar with the legacy apps, enterprise operations, and fields such as security. 2.Ensure to have the right talent to start a project from day one.
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Vendor Management 1.Monitor the contractor's activities . 2.Instead of changing requirements at the last moment, decide agreeable milestones and last minute change requirement move to the next milestone. Avoid BIG BANG Approach 1.For a mission‐critical big project, build modular parts of its system and deliver them every six to 12 months. 2. Decide development model based on the size of the model and stick to the model . Smart Goal setting 1.SMART (Specific, Measurable, Attainable, Relevant & Time‐bound) goal process with formal review process Federal agency assistance 1.The federal governments MUST take concrete steps to gain/acquire knowledge and understand the importance of key elements of IT management such as talent development, IT architecture, and contractor and project management
