IRS Releases Computer Sciences From Project
Computer Sciences Corp. learned Thursday that it has been stripped of a $40-million piece of a $3-billion contract to upgrade the computer system of the Internal Revenue Service after missing too many deadlines. The company’s shares fell 8%.
IRS Commissioner Mark Everson, speaking at a House Ways and Means subcommittee hearing in Washington, said he notified Computer Sciences President Michael Laphen that another contractor would take over that part of the project, which is designed to prioritize tax-collection cases.
Computer Sciences, which also is helping to train Iraq’s new police force, is at risk of losing more programs and must show success in other projects before the IRS will award any follow-on work, Everson said. In the quarter ended Jan. 2, the El Segundo-based company got 40% of its revenue from defense and civil agencies.
“While no doubt unwelcome to CSC, I hope that this decision will lead to a sharpened focus and discipline, and will in fact enhance the prospects for successful and timely delivery of other modernization projects by CSC,” Everson wrote in a letter to the company that was released at the hearing.
Shares of Computer Sciences fell $3.75 to $42.87 on the New York Stock Exchange. They rose 28% in 2003.
Computer Sciences Vice President Paul Cofoni, who heads the company’s Washington office, said the IRS contract “is at the top of my company’s watch list of projects.”
He told the House subcommittee that the company has made “significant progress” on a variety of projects in the contract in the last six months.
Computer Sciences and a team of subcontractors beat out a group led by Lockheed Martin Corp., the second-largest U.S. defense and aerospace company, for the 15-year contract in 1998. Computer Sciences’ team included Lucent Technologies Inc., IBM Corp., Northrop Grumman Corp. and Science Applications International Corp.
Computer Sciences helps the IRS design new computer systems and identify contractors to perform software development and other tasks, according to a hearing notice on the Ways and Means Committee website.
“The fact is we have delivered significant business value to our American taxpayers and to the IRS,” Cofoni said.
Everson said the IRS was partly to blame because it didn’t do enough to oversee progress. “There was a joint failure here to deliver,” he said.
Laphen, in a conference call Wednesday, had been upbeat about the IRS contract.
“It’s very clear that the IRS does not intend to cancel those programs,” he said. “They may adjust in some way, but they have no intent to cancel this program and we expect to move forward with them as their major partner for modernization.”
