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NC pulls plug on $90 million tax computer system

By J. Andrew Curliss
acurliss@newsobserver.com

State officials have agreed to pull the plug after spending $85 million on a tax computer system project that was supposed to handle the processing of tax forms and other tax information for years ahead.

A contract between the state and the CGI Group was canceled Friday.

The state and CGI “mutually agreed” to a final $5 million payment for unbilled work not yet paid and that will close out the contract, according to Trevor Johnson, a Revenue Department spokesman.

CGI had previously received $63.8 million for its work on the tax software project, which had been handling some aspects of the state’s tax processing but not the major ones. The state had spent about another $22 million on hardware, maintenance and other services related to the contract.

But the major part of the system – to be used for processing tax returns – had been delayed. State revenue and information technology officials said the project hadn’t worked and they made a “tough call” to halt more work on the system.

With deadlines missed and a system that couldn’t be used as needed, officials had to look at whether to continue, said Jeffrey Epstein, Revenue Department chief operating officer.

“It was something where we did not make the progress we needed,” he said.

Attempts to reach officials from CGI were unsuccessful. In a news release, the company emphasized that portions of the tax software in place now had allowed the state to collect money it would not otherwise have received.

CGI and state officials credit that piece of the system with identifying taxes to be collected that the old system would not have found. Since 2010, those additional collections have amounted to about a net gain of $230 million, officials said. Those collections will continue because that piece of the system is in place.

CGI built healthcare.gov

CGI, headquartered in Montreal, has been in the national news lately as the computer contractor that built the failed healthcare.gov site that was part of the launch of the national health care plan.

North Carolina officials already had planned to go through this year’s tax season without the full components of the new tax system, which is known as the Tax Information Management System, or TIMS.

Still, the news only adds to questions about the state’s information technology efforts. Lawmakers and others have been questioning leaders about other troubled computer systems, particularly in the Department of Health and Human Services.

Started in 2008, the TIMS system was never fully functional and had been beset by delays over the years. Officials said the major tax schedules for the state had not been switched from the old system to the new one and several deadlines had come and gone.

Johnson said that “after considerable review” of the TIMS system, state officials have decided “a new direction was needed.”

Johnson said it wasn’t yet clear what the state will do to replace its current system, which dates to the 1990s.

Stephanie Hawco, a spokeswoman for the state’s information technology office, said the office will seek to avoid a “big bang” approach – launching software projects all at once – such as was attempted with TIMS.

In the future, she said, IT systems will be rolled out incrementally and the state is using a “try before you buy” approach on new technology.

Curliss: 919-829-4840; Twitter: @acurliss
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