TREASURY INSPECTOR GENERAL
FOR TAX ADMINISTRATION
The Telecommunications Modernization Project Provided Some Benefits, But Process Improvements Are Needed for Future Projects
Reference No. 2001-20-143
The Internal Revenue Service (IRS) Restructuring and Reform Act of 1998 (RRA 98) directed the IRS to do a better job in meeting the needs of taxpayers. To accomplish its goals, the IRS must modernize its existing technology base, which was installed in piecemeal fashion over many years. A new infrastructure for voice, video, and data telecommunications must be developed as part of the foundation for the new IRS business environment.
The Telecommunications Enterprise Strategic Program (TESP) project was started in July 1999 to address the fact that the current IRS telecommunications infrastructure would not be able to accommodate the increasing levels of demand placed upon it. The mission of the TESP project team was to develop an all-inclusive telecommunications strategy to provide cost-effective, secure solutions throughout the IRS for the foreseeable future. The project team was also responsible for providing the telecommunications needs for the near-term modernization projects. The IRS worked with a contractor, Computer Sciences Corporation (CSC), to develop the TESP project.
The objective of our audit was to determine whether the TESP project team was effectively developing and implementing the IRSí enterprise-wide telecommunications program. To accomplish this objective, we reviewed the CSCís delivery of goods and services and evaluated the project teamís compliance with critical processes established to enable project success.
In January 2001, while our audit was in process, the IRS decided to cancel the TESP project. IRS executives made this decision because funds for modernization projects were limited and the IRSí immediate focus was on those projects with more specific business benefits. The IRS decided to move the support for near-term projects under the control of a different project and rely upon the Department of the Treasury to provide the IRSí strategic telecommunications needs.
The TESP project provided some worthwhile benefits during its 18-month life, but more effective controls would have avoided delays and cost overruns. The TESP project team had developed a preliminary vision for the IRSí future telecommunications program and was working towards adding detail to that vision and supporting other projects when the project was cancelled. The IRS Business Systems Modernization Office (BSMO) had established some processes to assist this project and others in achieving their goals. For example, the BSMO established a quality review process for each modernization project to evaluate, at the end of each major set of tasks, the products provided by the CSC to determine if they met required standards. The TESP project team provided support to other near-term modernization projects by performing complex analyses of their telecommunications requirements using computer-modeling tools. In addition to supporting near-term projects, the project team provided direction for the IRS in upgrading and consolidating its current telecommunications environment.
However, we identified conditions that resulted in inaccurate funding requests, increased project costs, project delays, and inconsistencies in project quality and management. Although the TESP project is not continuing, we believe the issues identified in our report will be applicable to and should be addressed in other ongoing and future modernization projects.
The Third Expenditure Plan Could Have Provided More Detail About the Projectís Funding and Progress
Our review identified two significant facts that were not properly disclosed, we believe unintentionally, in the TESP portion of the September 2000 Information Technology Investment Account Expenditure Plan which was provided to the Congress for funding approval. First, it did not disclose that $6.8 million of the TESP project funding was used to purchase hardware and software for a separate project. Instead, the funding was reported as TESP project labor costs. Secondly, the Plan indicated that material progress had been made towards the development of the Preliminary Business Case, a key product to be developed as the project team approaches the completion of its second phase. However, work on this product did not begin until January 2001, several months after the Expenditure Plan was prepared. It is important that expenditure plans be as clear and accurate as possible so that the Congress can make informed decisions about funding the various projects.
Delays in Finalizing Contract Negotiations Resulted in Increased Project Costs
A preliminary contract had been signed to allow the CSC to begin work on the system concept phase (also called the Architecture phase) of the project, but neither the requirements nor the full dollar amount to complete the phase had been negotiated. The IRS paid for hours worked by the CSC, rather than a specific amount for each completed product. The payments for the hourly work increased over 5 months to nearly $3.9 million by the time the project was cancelled.
Because this project was cancelled, the tasks included in the proposal received from the CSC were only partially completed. Approximately $1.1 million of the $3.9 million had been spent on these incomplete products at the time the decision was made to cancel the project. In addition, documentation indicates that the IRS paid nearly $300,000 more to the CSC than would have been expected if the CSCís initial contract proposal had been accepted as submitted.
Increased Focus on the Quality of Deliverables Is Needed
The BSMO has recently begun to focus heavily on ensuring payments to contractors are based on performance. This increased focus should help to ensure payments are associated with the work products that are produced according to IRS quality standards. The BSMO identified quality problems with the products the CSC provided during the business vision phase of the project. For example, the BSMO identified 18 conditions in the business vision documents that the CSC needed to address and requested the CSC to provide more details. This additional work resulted in a 1-month delay in full approval to move on to the next project phase.
Project Tracking Measures Should Be Expanded and Validated to Provide Greater Value to Program Management Personnel
The project team used earned value measurements to track project progress by individual phase. Although earned value is an appropriate project tracking approach, measures that cover each individual phase are too limited to measure the overall progress of a project that covers five phases. Earned value techniques are designed to measure against a total budgeted amount, not just a current project phase. In addition, no validation of the project measures had been conducted at the time we completed our audit work. The data could be more useful and reliable if changes are made to the manner in which these measures are developed and a validation process is established.
Configuration Management Processes Were Not Consistently Followed
The TESP project team had developed a configuration management plan that addressed the key items required by the Enterprise Life Cycle (ELC). The plan outlined proper controls over project documentation and indicated that a project document repository would be established to ensure version control over documentation and system modules.
However, the CSC was not following the configuration management plan. The project document repository, where critical project documentation is maintained, was accessible to anyone on any of the project teams. This repository included both baselined documents and those that were still in process. There was no control over the various versions of key documents that had been accepted and signed by the BSMO, and these accepted documents were not easily identified in this repository. Without this control, it is difficult to determine which documents are final and baselined. This could lead to project team members following the wrong set of requirements or agreements while developing the project. During our audit, the BSMO and the CSC initiated corrective actions regarding configuration management processes.
Risk Management Processes Were Not Effectively Followed
Although the TESP project team was using the correct forms and processes to document risks to the project, we believe it should have reported additional risks that affected completion time periods and costs.
We evaluated the risks that had been identified during the project. Although the project completion dates were delayed for several months, there were no documented risks for the cause of the delays, nor were there any indications of what the project team was doing to reduce the potential impact of the delays.
For example, delays in negotiating the TESP task order with the CSC resulted in additional costs to the IRS and a lack of quality standards associated with the deliverables. This contract delay, along with the additional costs and lack of standards, was not identified as a potential risk or issue to the project. The BSMO and the CSC have begun initiating corrective actions regarding risk management processes.
Project Management Processes Can Be Improved
The TESP Project Manager was using a Work Breakdown Structure (WBS) to manage the project teamís tasks. The WBS listed the tasks that were required to be completed by the project team. Each task was identified with a specific WBS identification number and had an assigned start date, finish date, and estimated duration. However, near-term tasks were not assigned to individual team members, and the WBS did not factor in or allow for reserve or recovery time in the schedules.
Summary of Recommendations
This audit was performed in conjunction with several other modernization project audits. The conditions described above were also identified in the other audits. Because these conditions were identified in multiple projects, we believe that corrective actions should be taken by the BSMO at the program level rather than by the individual project teams. Consequently, we are not making any recommendations in this audit report. We plan to issue a separate report later this year with recommendations for corrective actions that the BSMO can take at the program level to address the conditions identified.
Managementís Response: Managementís response was due on August 22, 2001. As of August 23, 2001, management had not responded to the draft report.