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.

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. 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.

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