Report to the Chairman and Ranking

Minority Member, Committee on

Finance, U.S. Senate

United States General Accounting Office

GAO

December 2002 IRS CONTRACTING

New Procedure Adds

Price or Cost as a

Selection Factor for

Task Order Awards

GAO-03-218
TIPSS-2 is IRS’s largest service contracting program, obligating $543 million

to 18 contracts from its beginning in June 2000 to June 20, 2002. Through the

award of TIPSS-2 task orders, IRS obtains needed services in the areas of

information systems, telecommunications, organizational/management, and

operational support. IRS can continue ordering services under TIPSS-2

contracts into 2005.

GAO found that IRS’s procedures used in the award of competitive task

orders under the TIPSS-2 program did not require contracting officers to

consider price or cost as a selection factor in the award of task orders.

Although contracting officers could have considered price or cost at their

discretion, they did not for 5 of 6 competitive task orders GAO reviewed.

IRS’s procedures conformed to the version of the Federal Acquisition

Regulation (FAR) that was in effect at the time the TIPSS-2 solicitation was

issued. However, since then the FAR was changed. As the timeline below

explains, TIPSS-2 procedures conformed to the regulation in effect in 1999,

but were not required to conform to the revised regulation.

During our review, IRS developed and implemented a new procedure that

provides for the consideration of price or cost as a selection factor for

competitive task order awards. Additionally, the TIPSS-2 contract was

changed to state that price or cost is a selection factor in the award of

competitive task orders.

Timeline of TIPSS-2 program and policy events

Date Item Significance

August 1999 Federal Acquisition

Regulation (FAR)

Contracting officers should consider price or cost

as a selection factor, but are not required to.

September 1999 TIPSS-2 program

solicitation

Timing of solicitation issuance places TIPSS-2

under August 1999 regulation.

April 2000 Revised FAR Contracting officers must consider price or cost as

a selection factor.

Source: GAO’s analysis.

IRS CONTRACTING

New Procedure Adds Price Or Cost as a

Selection Factor for Task Order Awards

www.gao.gov/cgi-bin/getrpt?GAO-03-218.

To view the full report, including the scope

and methodology, click on the link above.

For more information, contact Michael

Brostek, Director, Tax Issues, at (202) 512-

9039 or brostekm@gao.gov .

Highlights of GAO-03-218, a report to the

Senate Committee on Finance

December 2002

The Internal Revenue Service (IRS)

is in the midst of a massive effort to

reorganize its structure and

modernize its technology. To help

with this effort, IRS obtains

services through task orders under

its Treasury Information

Processing Support Services

(TIPSS-2) contracting program. In

this study, GAO reviewed the

6 largest competitive task orders

that IRS awarded between July 1,

2001 and December 31, 2001 to

determine if IRS used price or cost

as a selection factor in the award of

these task orders.
Page i GAO-03-218 IRS Contracting

Letter 1

Results in Brief 2

Background 3

Scope and Methodology 3

TIPSS-2 Task Orders Were Awarded Using Procedures That Did

Not Require Considering Price or Cost as a Selection Factor 4

Conclusions 8

Agency Comments and Our Evaluation 8

Appendix I Information on IRS’s and the Federal Government’s

Contract Obligations for Fiscal Years 1995

Through 2001 10

Appendix II Comments from the Internal Revenue Service 17

Tables

Table 1: Competitive Selection Process Used, June 2000 through

June 20, 2002 5

Table 2: Selection Factors and Obligations for Competitive Task

Orders 6

Table 3: IRS Contract Obligations by Service Category for Fiscal

Year 2001 14

Table 4: IRS Contract Obligations by Supplies and Equipment

Category for Fiscal Year 2001 15

Table 5: Total IRS TIPSS-2 Obligations by Contractor from June

2000 through June 2002 16

Figures

Figure 1: IRS Contract Obligations for Fiscal Years 1995 through

2001 10

Figure 2: Total Federal Government Contract Obligations for Fiscal

Years 1995 Through 2001 12

Figure 3: Comparison of IRS to Total Federal Government Contract

Obligations on a Percentage Basis, Fiscal Years 1995

through 2001 13

Contents
Page ii GAO-03-218 IRS Contracting

Abbreviations

FAR Federal Acquisition Regulation

FASA Federal Acquisition Streamlining Act of 1994

FPDS Federal Procurement Data System

IRS Internal Revenue Service

RFI request for information

TIPSS Treasury Information Processing Support Services
Page 1 GAO-03-218 IRS Contracting

December 10, 2002

The Honorable Max Baucus

Chairman

The Honorable Charles E. Grassley

Ranking Minority Member

Committee on Finance

United States Senate

The Internal Revenue Service (IRS) is in the midst of a massive and

multifaceted effort to reorganize its structure and modernize its

technology. Reorganization and modernization is intended to lay the

foundation for IRS to respond to taxpayers faster and more accurately. To

help with this effort, IRS obtains needed services through contracts that

were awarded under its Treasury Information Processing Support Services

(TIPSS-2) program. TIPSS-2 is a multiple award, task order contracting

program through which 18 contractors provide IRS with information

systems, telecommunications, organizational/management, and

operational support services under 18 contracts. Successor to a similar

program called TIPSS, TIPSS-2 covers contracts awarded in 2000 under

which task orders can be issued until 2005. Once IRS identifies a need for

services, it can ask the contractors to compete for the specific task or, if a

statutory exception applies,1

 it can award the task on a sole-source basis.

From the beginning of the program in June 2000 through June 20, 2002,

IRS obligated $543 million to TIPSS-2 contracts.

Given the importance of these services to the management and

administration of the tax system and a change in the Federal Acquisition

Regulation (FAR) regarding the consideration of price or cost that

occurred after the TIPSS-2 solicitation was issued, you asked us to provide

information on whether IRS used price or cost as a selection factor in

TIPSS-2 task order awards and how its use of these factors compares to

federal contracting regulation. You also asked us to provide information

on IRS’s overall contracting and how IRS’s data compare with

governmentwide contracting. These data appear in appendix I. To report

 1

Exceptions for sole-source awards involve unusually urgent needs; unique or highly

specialized requirements; the promotion of economy and efficiency because the order is a

logical follow-on to a previous order; and satisfaction of a required minimum guarantee

amount. 41 U.S.C. 253j(b).

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-03-218 IRS Contracting

on IRS’s use of price or cost as a selection factor, we reviewed IRS’s

procedures for issuing task orders under TIPSS-2 and federal policy on

task order competitions and interviewed IRS officials. To provide data on

contracting trends, we obtained data from the Federal Procurement Data

System (FPDS) and from IRS’s TIPSS-2 program office.

At the time of our review, IRS’s procedures for issuing competitive task

orders under the TIPSS-2 contracts did not require contracting officers to

consider price or cost in selecting a contractor. Under these procedures,

contracting officers could have considered cost or price if they chose to

do so. We reviewed the six largest competitive task orders awarded in the

final 6 months of calendar year 2001 and found that contracting officers

did not consider price or cost as a selection factor for five of the six task

orders.

IRS’s procedures and the task orders we reviewed conformed with the

FAR that was applicable at the time the TIPSS-2 solicitation was issued.

That version of the FAR stated that price or cost should be considered as a

selection factor but did not specifically require consideration of price or

cost. After the solicitation was issued, the FAR was revised to state that

price or cost must be considered as a selection factor for awarding task

orders under contracts awarded through solicitations issued on or after

April 25, 2000. Therefore, TIPSS-2 is covered by the earlier version of the

FAR which states that contracting officers should consider rather than

must consider price or cost as a selection factor.

During our review, IRS developed and implemented a new TIPSS-2

competitive procedure that provides for the consideration of price or cost

as a selection factor. Additionally, IRS modified the TIPSS-2 contract so

that cost will be a selection factor in the award of competitive task orders.

In a November 27, 2002, letter, the Acting Commissioner of Internal

Revenue generally agreed with the observations in our draft report but

said that our recommendation to make IRS’s procedure final was

unnecessary because new procedures have been adopted. Since IRS

finalized its procedure for including price or cost as a selection while

developing its comments on our draft report, we agree the

recommendation is no longer necessary and have revised the report

accordingly.

Results in Brief
Page 3 GAO-03-218 IRS Contracting

TIPSS-2 is IRS’s largest service contracting program. Through 18 task

order contracts, IRS obtains needed services in four broad areas:

(1) information systems, (2) telecommunications,

(3) organizational/management, and (4) operational support. Information

systems covers software, security, training, and quality assurance.

Telecommunications includes network traffic and trend analysis, systems

design, and related disciplines. Organizational/management involves

business process reengineering, process analysis, and project management

support. Last, operational support relates to main frames, personal

computers, local area networks, file servers, installation, and training and

help desk support.

To determine whether IRS used price or cost as a selection factor in the

issuance of TIPSS-2 task orders, we first obtained and reviewed IRS’s

TIPSS-2 contract and award procedures. For each of the three procedures

for competitive task orders under TIPSS-2, we also obtained data on the

frequency with which each procedure was used in issuing TIPSS-2 task

orders from the beginning of TIPSS-2 in June 2000 through June 20, 2002.

Second, from the 51 task orders that IRS issued between July 1 and

December 31, 2001, we selected the six competitive task orders that had

the largest dollar value obligations. These six task orders had $21.4 million

obligated and represented 29 percent of dollar obligations for the period.2

We selected the last 6 months of calendar year 2001 as our universe

because that was the most recent data available at the time of our work.

We reviewed documentation for these six awards to determine the extent

that IRS considered price or cost as a selection factor.

Third, we discussed the task order award process with TIPSS-2 program

office staff and IRS contracting officials responsible for the TIPSS-2

program. We did not assess whether there would be an impact resulting

from contracting officers considering price or cost as a selection factor for

awarding task orders.

To compare IRS’s procedures for awarding task orders under TIPSS-2 with

federal contracting policy, we reviewed applicable laws and regulations

 2

Although these task orders account for a large value, we cannot project our findings to the

overall TIPSS-2 contracts because it is a judgmental sample.

Background

Scope and

Methodology
Page 4 GAO-03-218 IRS Contracting

and analyzed how IRS’s procedures compared to the requirements in

them.

At your request, we limited our work to the price or cost issue because of

its importance to the task order selection process and because of a change

in the FAR since the issuance of the TIPSS-2 solicitation that now requires

consideration of price or cost as a selection factor.

To compile the contracting information found in appendix I, we obtained

data from FPDS and from IRS’s TIPSS-2 program office. We discussed

these data with officials in IRS’s TIPSS-2 program office. Our analysis uses

current dollar obligations for the year in which funds were obligated. We

did not apply any index to normalize the obligated amounts.

Our work was performed between May and November 2002 in accordance

with generally accepted government auditing standards.

At the time of our review, IRS’s competitive procedures for awarding task

orders under the TIPSS-2 contracts did not require contracting officers to

consider price or cost in selecting a contractor. Contracting officers could

have considered price or cost at their discretion but did not for five of six

large task orders that we reviewed. IRS’s TIPSS-2 procedures conformed

with the applicable federal regulation at the time the TIPSS-2 solicitation

was issued. However, that regulation was revised after the issuance of the

TIPSS-2 solicitation to state that price or cost must be considered for the

award of task orders issued under contracts that were awarded through

solicitations issued on or after April 25, 2000.

For the competitive task order awards we reviewed, the TIPSS-2 contract

stated that selection factors may include, but are not limited to, such

factors as past performance, quality of deliverables, cost control, price,

cost, or other factors that the contracting officer believes are relevant to

the task order. In addition, the contract stated that the contracting officer

shall select one of the following three procedures, or any combination of

these procedures, for any requirement under the contract. As described in

the contract and program documents, the three procedures are:

• Standard: generally used for relatively simple, low dollar value items.

Contracting officers make a selection from an assessment of some or all of

the selection factors listed above.

TIPSS-2 Task Orders

Were Awarded Using

Procedures That Did

Not Require

Considering Price or

Cost as a Selection

Factor
Page 5 GAO-03-218 IRS Contracting

• Request for information (RFI): generally used for items of moderate

complexity and estimated dollar value. The RFI is sent to all contractors

qualified to provide services under a task area, and the selection is based

on go/no-go or pass/fail factors stated in the RFI. If more than one

competitor meets all factors, the contracting officer makes the selection

using the Standard procedure mentioned previously.

• Best value: generally used for complex items with higher dollar estimates.

Formal proposals will usually be requested and more formal source

selection factors may be used. The TIPSS-2 contract states that price

competition might be warranted for best value acquisitions and that this

methodology may be used in conjunction with an RFI.

TIPSS-2 competitive procedures did not require that the contracting

officer consider price or cost in selecting a contractor for a task order. The

procedures left the use of price or cost to the discretion of the contracting

officer. Table 1 shows that most competitive task orders from the

beginning of TIPSS-2 in June 2000 to June 20, 2002, were issued under the

RFI procedure.

Table 1: Competitive Selection Process Used, June 2000 through June 20, 2002

Competitive awards

ProcedureaTasks PercentbObligations

Standard 6 6 $4,351,544

RFI 86 86 $207,893,874

Best value 9 8 $15,039,417

a

One task order with obligations of $29,990 was classified as unknown.

b

The calculation of the percentages included the one task order that was classified as unknown and

the percentages do not equal 100 because of rounding.

Source: GAO’s analysis of data from IRS.

IRS had developed internal standard selection factors for the RFI

procedure, including: (1) demonstrating work similar in type and scope as

the task order, (2) demonstrating successful management of similar tasks,

and (3) ability to obtain employees or subcontractors with the special

skills and experience to perform the work.

All six of the competitive task orders we reviewed used the RFI procedure.

On the basis of our review of the task order files, the contracting officer

did not choose to use price or cost as a selection factor in five of the six

task orders. The contracting officer considered price and cost as a

selection factor for the task order in which IRS acquired services and
Page 6 GAO-03-218 IRS Contracting

equipment for its website—The Digital Daily. This task order appears in

the first row of table 2. Table 2 shows the selection factors and the dollar

obligations for the task orders.

Table 2: Selection Factors and Obligations for Competitive Task Orders

Obligations on each task ordera Selection Factors

$8,500,000 • Completeness in answering all statement of work (SOW) tasks.

• Thoroughness in addressing requirements analysis task in SOW.

• Thoroughness of implementation plan and correlation between plan and

requirements analysis.

• Design and documentation of architecture, operating system, scalability, and

systems support.

• Physical and system security plan.

• Service performance testing procedures.

• Cost and price analysis.

$4,495,000 • Demonstrates work similar in type and scope.

• Demonstrates successful management of similar tasks.

• Demonstrates contractor’s ability to obtain employees or subcontractors based in

the Washington D.C., area with special skills and required experience on date of

award.

$2,398,363 • Demonstrates work similar in type and scope.

• Demonstrates successful management of similar tasks.

• Demonstrates contractor’s ability to obtain employees with skills and experience.

$2,307,532 • Demonstrates work similar in type and scope.

• Demonstrates successful management of similar tasks.

• Demonstrates contractor’s ability to obtain employees or subcontractors.

• Demonstrates ability to adapt new and emerging technologies in

telecommunication and enterprise information processing.

• Demonstrates capability to design, implement, and maintain a security envelope

for telecommunication and enterprise information processing infrastructure.

$1,883,000 • Demonstrates understanding and use of commercial e-learning software and

ability to integrate such into a system.

• Demonstrates successful management of similar tasks.

• Demonstrates the ability to establish a test environment in the Washington D.C.,

area.

$1,780,590 • Demonstrates work similar in type and scope.

• Demonstrates successful management of similar tasks.

• Demonstrates contractor’s ability to obtain employees or subcontractors with

special skills and required experience.

a

These obligations include obligations that were made during our sample period from July 1 through

December 31, 2001. The actual obligations to these task orders may be higher when they are

completed.

Source: GAO’s analysis of data from IRS.

To preserve simplicity and flexibility, the Congress provided contracting

officers with broad discretion to define evaluation and selection

procedures for placing orders. The Federal Acquisition Streamlining Act
Page 7 GAO-03-218 IRS Contracting

(FASA) of 19943 authorizes the use of multiple award task order contracts

like TIPSS-2. The FAR further describes the fair opportunity process for

competitive task order awards. The August 1999 version of the FAR,

applicable to the TIPSS-2 contracts, states that

• contracting officers should consider factors such as past performance on

earlier tasks, quality of deliverables, cost control, price, cost, or other

factors that the contracting officer believes are relevant to the award of a

task order; and

• procedures and selection factors that an agency uses to provide a fair

opportunity to be considered for award must be set forth in the

solicitation and contract.4

Although the August 1999 FAR language states that agencies should

consider the selection factors listed, including price or cost, agencies were

not required to do so. The solicitation for the award of the 18 contracts

under TIPSS-2 was issued on September 13, 1999, and fell under these

provisions. Thus, the TIPSS-2 procedures and the specific task orders we

reviewed are acceptable under the applicable FAR provision. However, the

FAR was changed to state that contracting officers must consider price or

cost as a selection factor for competitive task orders. All multiple award

task order contract programs, like TIPSS-2, that had solicitations for

contracts issued on or after April 25, 2000, are required to consider price

or cost as selection factors for competitive task orders.5

 Since the TIPSS-2

solicitation was issued before April 25, 2000, TIPSS-2 is covered by the

earlier version of the FAR.

We discussed the lack of price or cost as a standard selection factor in the

task order awards with IRS’s TIPSS-2 program officials, IRS’s contracting

officials responsible for the TIPSS-2 program, and IRS contracting officials

responsible for IRS contracting policy. These officials recognized the

benefit of considering price or cost as a selection factor. During our

review, IRS developed and implemented a new procedure that uses price

or cost as a selection factor in competitive task orders under TIPSS-2.

 3

P.L. 103-355 (Oct. 13, 1994).

4

FAR 16.505(b)(1), (3) (FAC 97-12).

5

FAR 16.505(b)(1)(ii)(E). See Competition Under Multiple Award Contracts, 65 Fed. Reg.

24317 (2000).
Page 8 GAO-03-218 IRS Contracting

Additionally, the TIPSS-2 contract was modified so that cost will be a

selection factor in competitive task orders awards.

The competitive task order awards under TIPSS-2 from its beginning in

June 2000 through June 20, 2002, were awarded using procedures that did

not require price or cost as a selection factor but left this to contracting

officers’ discretion. In five of six cases we reviewed, contracting officers

did not use that discretion to consider price or cost in making selections.

Because consideration of price or cost helps agencies to ensure that they

obtain the best value in awarding contracts, the FAR now requires that

price or cost must be used as a selection factor in awarding task orders.

Although this provision does not apply to the TIPSS-2 program because

the TIPSS-2 solicitation was issued before the regulation was effective, the

FAR provision applicable to the TIPSS-2 program states that the

contracting officer should consider factors such as price or cost in

awarding a task order. IRS recognized that including price or cost as a

selection factor would improve the task order selection process and

developed and implemented new procedures that consider price or cost as

a selection factor in the award of task orders.

On November 27, 2002, we received written comments on a draft of this

report from the Acting Commissioner of Internal Revenue (see appendix

II). The Acting Commissioner said that IRS generally agreed with the draft

report but believed our recommendation that IRS finalize procedures for

including price or cost as a selection factor was unnecessary.

Specifically, the Acting Commissioner said that IRS’s contracting officials

agreed with our observations in the draft report about the value of

considering price or cost as a selection factor for competitive task order

awards. He explained that, during our review, IRS had taken steps to

include price or cost as a selection factor in TIPSS-2 task order awards

and that IRS issued its final procedure on November 19, 2002. Since IRS

finalized the procedure while commenting on our draft, we agree that this

action made our recommendation unnecessary, and we deleted it from this

report.

As agreed with your offices, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days from its

issue date. At that time, we will send copies of this report to the Chairman

and Ranking Minority Member of the House Committee on Ways and

Conclusions

Agency Comments

and Our Evaluation
Page 9 GAO-03-218 IRS Contracting

Means and the Chairman and Ranking Minority Member of the

Subcommittee on Oversight, House Committee on Ways and Means. We

are also sending copies to the Secretary of the Treasury; the Acting

Commissioner of Internal Revenue; the Administrator of Federal

Procurement Policy; and other interested parties. We will make copies

available to others on request. In addition, the report will be available at

no charge on GAO’s Web site at http://www.gao.gov.

If you have any questions or would like additional information, please call

me at (202) 512-9039 or Joseph Jozefczyk at (202) 512-9053. Key

contributors to this report are Michael Kassack, Christine Davis, and

Katherine Davis.

Michael Brostek

Director, Tax Issues
Appendix I: Information on IRS’s and the

Federal Government’s Contract Obligations

for Fiscal Years 1995 Through 2001

Page 10 GAO-03-218 IRS Contracting

The Internal Revenue Service (IRS) contract obligations increased, with

some fluctuation, from about $735 million in fiscal year 1995 to about $1.4

billion in fiscal year 2001—an increase of almost 86 percent. This increase,

particularly that occurring after 1997, may be at least partially attributable

to the systems and organizational changes resulting from IRS’s

Restructuring and Reform Act of 1998.1

Figure 1: IRS Contract Obligations for Fiscal Years 1995 through 2001

Note: Only includes funds newly obligated in the given fiscal year.

a

Service obligations include funding for TIPSS-2 contracts task orders since their inception in June

2000.

Source: GAO’s analysis of data from the Federal Procurement Data System.

 1

P.L. 105-206 (July 22, 1998)

Appendix I: Information on IRS’s and the

Federal Government’s Contract Obligations

for Fiscal Years 1995 Through 2001

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

0

25

1995 1996 1997 1998 1999 2000 2001

Dollars in millions

Services

Supplies and equipment

Research and development

$17.0 $23.0 $0.0 $0.0 $9.9 $23.5 $12.0

$392.2

$455.9 $484.6

$767.6

$879.2

$692.7

$787.8

$326.2

$268.9 $175.1

$252.0

$339.7

$289.3

$578.6
Appendix I: Information on IRS’s and the

Federal Government’s Contract Obligations

for Fiscal Years 1995 Through 2001

Page 11 GAO-03-218 IRS Contracting

Figure 1 also shows that from fiscal years 1995 through 2001, IRS

contracts for services consistently represented the largest proportion of

dollar obligations—increasing from $392.2 million in fiscal year 1995 to

$879.2 million in fiscal year 1999 and declining somewhat to $787.8 million

in fiscal year 2001. The overall increase between fiscal years 1995 and 2001

was almost 101 percent. Key services purchased by IRS include automatic

data processing (ADP) and telecommunications; professional,

administrative, and management support; and utilities and housekeeping.

Total federal government contract obligations grew from $176.2 billion in

fiscal year 1995 to $217.7 billion in fiscal year 2001—an increase of about

23.6 percent. Figure 2 shows that on a year-to-year basis, total federal

government contract obligations increased every year, with the exception

of fiscal years 1996 and 1997, when obligations decreased by about 1.3

percent. As with IRS, the purchase of services represented the largest

proportion of federal government contract obligations from fiscal years

1995 to 2001.
Appendix I: Information on IRS’s and the

Federal Government’s Contract Obligations

for Fiscal Years 1995 Through 2001

Page 12 GAO-03-218 IRS Contracting

Figure 2: Total Federal Government Contract Obligations for Fiscal Years 1995

Through 2001

Notes: Executive branch only, including IRS.

Only includes funds newly obligated in the given fiscal year.

Source: GAO’s analysis of data from the Federal Procurement Data System.

Figure 3 shows that when compared with total federal government

contract obligations on a proportional basis for fiscal years 1995 to 2001,

IRS’s percentages fluctuate more than they do for the federal government

as a whole. For the total federal government, supplies and equipment

contract obligations only range from a low of 35 percent of the total in

fiscal year 1999 to a high of 37.7 percent in fiscal year 2000. IRS supply and

equipment contract obligations range from a low of 24.5 percent of the

total in fiscal year 1998 to a high of 44.4 percent in fiscal year 1995.

Likewise, total federal government contract obligations for services

ranged from a low of 48.3 percent of the total in 1995, to a high of 52

0

50

100

150

200

250

1995 1996 1997 1998 1999 2000 2001

Dollars in billions

Services

Supplies and equipment

Research and development

$27.3 $28.2 $26.1 $27.0 $25.8 $24.6 $23.8

$85.1 $89.0 $89.3 $93.1 $98.0 $105.2 $110.1

$63.8

$64.4 $63.9 $65.4 $65.9

$78.0

$80.6
Appendix I: Information on IRS’s and the

Federal Government’s Contract Obligations

for Fiscal Years 1995 Through 2001

Page 13 GAO-03-218 IRS Contracting

percent in fiscal year 1999. On the other hand, IRS contract obligations for

service contracts range from a low of 53.3 percent of the total in fiscal year

1995 to a high of 74.6 percent in fiscal year 1998.

Figure 3: Comparison of IRS to Total Federal Government Contract Obligations on a Percentage Basis, Fiscal Years 1995

through 2001

Source: GAO’s analysis of data from the Federal Procurement Data System.

Notes: Only includes funds newly obligated in the given fiscal year.

Percentages may not add to 100 due to rounding.

a

The supply and equipment category includes funds obligated for the purchase of items ranging from

ADP equipment and software; to books, maps, and other publications; and to office supplies and

furniture.

b

The services category includes funds obligated for the purchase of services ranging from ADP and

telecommunications; to professional, administrative, and management support; to transportation,

travel, and relocation; and to education and training.

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

85

90

95

100

0

5

1995 1996 1997 1998 1999 2000 2001 1995 1996 1997 1998 1999 2000 2001

2.3 3.1 0 1.0

1.9

1.2 0

Servicesb

Supplies and equipmenta

Research and developmentc

IRS Total federal government

(Executive branch only, including IRS)

15.5 15.5 14.6 14.0 13.1 11.5 12.4

53.3

61.0

73.5

74.6 70.8 69.7

57.7

48.3 49.0 49.8 50.5

52.0 50.8 50.6

44.4

36.0

26.5 24.5 27.3 29.1

42.3

36.2 35.5 35.6 35.5 35.0 37.7 37.0

Percentage
Appendix I: Information on IRS’s and the

Federal Government’s Contract Obligations

for Fiscal Years 1995 Through 2001

Page 14 GAO-03-218 IRS Contracting

c

The research and development category includes funds obligated for any of the six R&D phases and

is classified in areas ranging from agriculture and defense through transportation, social services, and

space. Only a small proportion of IRS contract obligations were for R&D.

Table 3 identifies the major types of contractual services for which IRS

obligated funds in fiscal year 2001, the most current year for which

complete data are available. IRS’s five largest service contract categories

combined represent about 95 percent of the total service dollar

obligations. Automatic data processing and telecommunications services

alone represented 70.7 percent of the total obligations of about $788

million.

Table 3: IRS Contract Obligations by Service Category for Fiscal Year 2001

Dollars in thousands

Service category Dollars obligated

Automatic data processing and telecommunications services $557,233

Professional, administrative and management support services 98,279

Utilities and housekeeping services 59,410

Maintain, repair, and rebuilding of equipment 20,543

Education and training services 13,734

Other 38,641

Total $787,840

Source: GAO’s analysis of data from the Federal Procurement Data System.

Table 4 identifies the major types of contractual supplies and equipment

purchases for which IRS obligated funds in fiscal year 2001, the most

current year for which complete data are available. IRS’s contract dollar

obligations for its five largest supply and equipment purchase categories

combined represent about 98.6 percent of the total supplies and equipment

obligations of about $579 million. Contractual obligations for ADP

equipment, software, supplies and support equipment alone accounted for

about 81.2 percent of the total.
Appendix I: Information on IRS’s and the

Federal Government’s Contract Obligations

for Fiscal Years 1995 Through 2001

Page 15 GAO-03-218 IRS Contracting

Table 4: IRS Contract Obligations by Supplies and Equipment Category for Fiscal

Year 2001

Dollars in thousands

Supplies and equipment category Dollars obligated

Automatic data processing equipment (including firmware),

software, supplies and support equipment $469,836

Communication, detection, and coherent radiation equipment 90,743

Special industry machinery 5,418

Training aids and devices 2,280

Books, maps, and other publications 1,931

Other 8,365

Total $578,573

Source: GAO’s analysis of data from the Federal Procurement Data System.

Table 5 lists the prime contractors for all 18 of the IRS TIPSS-2 contracts

and the funds that IRS has obligated to each of these contractors under the

TIPSS-2 program.2

 Earlier in this report, we discuss our review of six

competitive task order awards under IRS’s TIPSS-2 program. In terms of

dollar obligations, Booz, Allen & Hamilton is the largest of the 18 TIPSS-2

contractors, with about 34 percent of the total contract dollars. Systems

Research and Applications Corp.; Northrup Grumman Information

Technology, Inc.; and Accenture LLP also have significant proportions—

10.9 percent, 10 percent, and 9.2 percent, respectively.

 2

Eighteen TIPSS-2 contracts were awarded in the mid-2000 timeframe. TIPSS-2 task orders

can be awarded through June 2005 and are categorized in four principal task service

areas—information systems, telecommunications support, organizational management, and

operational support. TIPSS-2 obligations are classified as ADP and telecommunications

services when reported in the Federal Procurement Data System. As such, TIPSS-2

obligations are also included in figures 1, 2, and 3 as a portion of IRS’s and the federal

government’s obligations for services for fiscal years 2000 and 2001. Likewise, TIPSS-2

obligations are included as a portion of the ADP and Telecommunications Services

category in table 3 and as a portion of IRS’s obligations associated with the corresponding

contractors in table 5.
Appendix I: Information on IRS’s and the

Federal Government’s Contract Obligations

for Fiscal Years 1995 Through 2001

Page 16 GAO-03-218 IRS Contracting

Table 5: Total IRS TIPSS-2 Obligations by Contractor from June 2000 through June

2002

Dollars in thousands

Contractor TIPSS-2 obligations

Booz, Allen & Hamilton $184,329

Systems Research and Applications Corp. 59,256

Northrop Grumman Information Technology, Inc. 54,318

Accenture LLP 49,984

Science Applications International Corp. 40,412

DynCorp Systems & Solutions, LLC 34,255

Dynamics Research Corp. 27,664

Unisys Corp. 21,598

Management Systems Designers 18,328

IBM Global Services 13,256

TRW Federal Enterprises Solutions Division 12,483

Vector Research, Inc. 10,640

Computer & Hi-Tech Management, Inc. 4,794

Dichroma, Inc. 3,385

ITS Services, Inc. 2,714

Data Source, Inc. 2,673

Electronic Data Systems 1,944

Pragmatics Corp. 1,107

Total IRS TIPSS-2 contract obligations $543,140

Source: IRS’s TIPSS Program Office’s Contract Management System.
Appendix II: Comments from the Internal

Revenue Service

Page 17 GAO-03-218 IRS Contracting

Appendix II: Comments from the Internal

Revenue Service

(440097)
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