fter five years, a project to replace the Internal Revenue Service's aging file-keeping computer system with modern technology is so far behind schedule that the I.R.S. has told the prime contractor that unless it improves its performance by the end of the month, the government may have no choice but to fire it.
The project, which was expected to cost $8 billion when completed, has spent less than $1 billion so far, but it is already 40 percent over budget for what it has done, according to the I.R.S. Oversight Board, an independent watchdog body that Congress created in 1998.
Most taxpayers are younger than the computer system that the I.R.S. relies on to maintain its master files on individuals and businesses - all the records of who they are, where they are, their income, taxes paid, and the amounts they still owe or are owed as refunds.
The I.R.S. says it can still process returns and send out refunds on time, but its dependence on the 1960's-era Assembler and Cobol computer languages makes it difficult to investigate and resolve taxpayers' problems. Finding a record using the existing system can take a week; the new system is supposed to do the job in seconds.
"This is not about a one-time delay," said Larry Levitan, chairman of the Oversight Board. "Every single major project under way experienced a significant delay in time and overrun in budget - not two or three out of five, but five out of five. What we have here is a five-year track record of absolute consistency of cost overruns and delayed deliveries."
Big computer modernization projects often run late and cost more than anticipated. But even given the size of a system for the I.R.S. - one that must keep track of 200 million taxpayers and an increasingly complex tax code - the project is not succeeding, according to the board and to senior I.R.S. executives. The contractor, the Computer Sciences Corporation of El Segundo, Calif., must show improvement before the end of the year or face losing the contract, they said.
"If they don't produce we will make a change," Mark W. Everson, the I.R.S. commissioner, said of the contractor, even though experts at Carnegie Mellon University in Pittsburgh said that starting over with a new company would "probably result in different but no fewer problems along the way" - and delay the new system, which is called the Customer Account Data Engine, by two or three years.
"I would not enter lightly into rupturing the relationship," Mr. Everson said. "It is not a desirable outcome to abandon the relationship, but that does not mean we won't do that if we have to."
Paul M. Cofoni, president of the Computer Sciences unit running the project, CSC Federal Sector, said "in the early part of the program we did a poor job of defining" what needed to be done. But that was in large measure because the I.R.S. had no records of many changes to its old system, he said, and was reluctant to approve specifications for the new system until it could be sure the system would be able to find and display all the old information.
Mr. Cofoni said that many of those problems were being addressed.
"I can actually see daylight now," he said in a telephone interview. "We were given an action list of 46 items to be done in 30 days, and 85 percent of them were. We're at the point where we are starting to deliver, and when we're done people are going to say this is an outstanding, award-winning system."
In a report being distributed to the Bush administration and Congress, the Oversight Board said that it had not seen improvement in three years, and added that Computer Sciences' performance "must be monitored very closely and if significant improvements are not demonstrated quickly a change should and must be made."
Mr. Levitan of the Oversight Board said that the project was "losing credibility with Treasury, with the Office of Management and Budget and with Congress."
Five years into the project, some aspects are as much as 27 months behind schedule.
While the project to modernize the main file-keeping computer has encountered serious problems, other technology projects have worked, including a system developed by Computer Sciences that tracks the status of refunds and quickly routes calls from taxpayers to appropriate people to answer questions. Mr. Everson said this had allowed him to put more I.R.S. executives on the troubled project, although, as a result, the agency had to set aside ancillary modernization projects.
Mr. Levitan and others said that Congress needed to let the I.R.S. hire more executives who understand computers. Mr. Levitan said the agency relied too heavily on a single executive, Fred L. Forman, for computer management expertise. Dr. Forman, a former executive with American Management Systems, joined the I.R.S. in the middle of 2001 as an adviser to the modernization project and now serves as an associate commissioner.
"The I.R.S. needs 10 to 15 Fred Formans," Mr. Levitan said. "They have got some good people, but they don't have nearly enough to manage the program."
Major corporations often upgrade their systems as technology improves. The I.R.S. went four decades with the same system because two previous modernization attempts, the most recent in the mid-1990's, failed, costing taxpayers $4 billion. Much of the problem involves the risks associated with moving from one system to another. The current plan, begun in 1998, was to build the new system, import data and then turn off the old system.
But Charles O. Rossotti, the tax commissioner from 1997 through 2002, found that approach fraught with danger. Mr. Rossotti, the founder of American Management Systems, who was brought into the agency after the earlier modernization efforts failed, wanted to keep the old system going as data was moved to the new system in segments, beginning with the simplest tax returns, the one-page Form 1040EZ's, to insure reliable access to taxpayer records.
Mr. Levitan said that Mr. Rossotti brought technological coherence that has averted disaster. But he also says a collapse is inevitable without a new system, because the few people who could keep the old system functioning are close to retiring.
Delay in F.B.I. System
WASHINGTON, Dec. 10 (AP) - The F.B.I. is facing serious delays and cost overruns as it struggles to upgrade a computer system so agents can better share intelligence information and investigative files.
A key system component developed by the Computer Sciences Corporation, known as the Virtual Case File, was originally expected to be running by Saturday. Now, officials say, it will likely be several months into 2004 before agents have access to it.
In addition, the F.B.I. acknowledged that the price tag for the overall system could top $626 million, far above the original projected cost of $380 million.
The delay and higher cost figures were reported Wednesday by The Chicago Tribune.
