2007 PRICE INSight
Treasury Audit Commends IRS Use of TruePlanning® to Validate Analysis of Alternatives Decision
The IRS has a significant challenge to upgrade its multi-million dollar revenue collection system without impacting daily operations. If something goes wrong, the US taxpayer complains, Congress complains, and several oversight boards investigate.
Two years ago, the IRS partnered with PRICE Systems to perform independent assessments and revalidation of internal cost estimates for their modernization projects. The US Treasury Office of the Inspector General for Tax Administration, an IRS oversight board, did an independent analysis of the value of this partnership. A final audit report recently released discusses the IRS' use of PRICE services and TruePlanning® to revalidate earlier but insufficiently substantiated Analysis of Alternatives estimates. According to the audit report:
Based on our [Treasury Inspector General for Tax Administration] recommendation, the IRS hired a contractor, PRICE Systems, to estimate the acquisition cost for the Build Alternative. The contractor used the PRICE TruePlanning® applications and specific information provided by IRS employees to develop the estimate. We believe this was a solid first step for the IRS, as the PRICE TruePlanning® applications consist of industry-specific cost models, benchmarks, and experience obtained from previous projects and research. The IRS reported that another contractor, MITRE Corporation, reviewed the quality of the documentation developed to support the estimates. The IRS reported all corrective actions related to our recommendation were complete in August 2006.
TruePlanning Improves Transparency of Audit Process
The auditors then go on to report that they take exception with two assumptions made transparent by the TruePlanning estimate, saying: "While we believe the preparation of estimates for the Build Alternative using industry cost models and benchmarks was a positive first step to responding to our recommendation, we identified two issues that could cause the estimated acquisition costs to be overstated."
The two issues involve code growth (believed by auditors to have been overestimated by the IRS) and experience of the projected software-build team (believed to have been underestimated). Both items are cost drivers and inputs to PRICE models. They are based on a variety of factors including historical results, code complexity, and other related items. It is of particular importance that TruePlanning enabled auditors to easily identify these elements as critical so that further analyses could assess their impact.
Lessons Learned
Among the positives the IRS has experienced with TruePlanning:
- Favorable recognition from auditors for using TruePlanning's industry cost models and benchmarks and the expertise of PRICE consultants
- TruePlanning estimates and accepted documentation that made all estimate assumptions transparent, allowing auditors to focus on exceptions. Auditors did not have to debate the method of estimating, just the sizing and judging of cost drivers.
This case example—applicable to other government agencies and commercial industry, not just the IRS—demonstrates the value of TruePlanning to provide a standard estimating model and common language for users, stakeholders and independent oversight groups. Thank you, IRS, for having confidence in PRICE Systems, our models, and our consultants, and for helping to show the value of standardizing on TruePlanning.
