Tax Systems Modernization

The Internal Revenue Service (IRS) violated the Competition in Contracting Act when it awarded a $4.5 million noncompetitive contract to the MITRE Corporation in May 1990 to help design the Tax Systems Modernization program. The act prohibits agencies from justifying noncompetitive contracts because of a lack of advance planning. In the case of the MITRE award, IRS knew at least as early as February 1989 that the existing contract with MITRE likely would end in April 1990. IRS should have known that planning for Tax Systems Modernization would be disrupted unless it found another way to obtain the engineering services then being provided by MITRE. The agency, however, made no effort to acquire interim engineering services until November 1989, at which time IRS concentrated on justifying a sole-source award to MITRE, despite the existence of at least one other capable firm. The noncompetitive award to MITRE might have been avoided had IRS done timely advance planning.

GAO found that: (1) IRS violated CICA, since it untimely initiated procurement planning after it became aware that the General Services Administration would not likely renew its contract with the awardee and its plan to competitively award a long-term contract could not be carried out in time to avoid awarding an interim contract; (2) although IRS justified the interim award by citing unusual and compelling urgency as its basis for avoiding full and open competition, the actual urgency resulted from its failure to conduct timely advance planning; (3) although at least one firm other than the awardee was capable of providing the services, IRS focused its efforts on justifying a sole-source interim contract award; (4) IRS originally planned to replace the interim sole-source contract with an integration support contract, but in mid-1990, it decided to establish a federally funded research and development center to conduct research and provide technical advice free from actual or potential conflicts of interest; and (5) once IRS establishes a relationship with the center, it plans to discontinue the current interim contract.