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N.C. Revenue Dept. Clashes With Contractor Over New Computer System Deadlines


We’re learning more about the state’s decision earlier this month to terminate an $85 million contract for a new tax return processing system. Documents released today show the state and the company it hired to build the system didn’t agree on how close the final phase of the system was to being ready. WFAE’s Duncan McFadyen talks about the story with "All Things Considered" Host Mark Rumsey.  

MR: Duncan, give us a little re-cap here; how far along was the new tax processing system?

DM: The state signed a contract back in 2008 with a company called CGI  to develop a new tax system to replace one that was implemented in the late 1990s. CGI was implementing it in phases, so parts of it are up and running, but the final release has been delayed repeatedly. And this last phase includes the systems for the largest chunk of state revenue by far; individual income tax, corporate and franchise taxes, and sales and use taxes.

MR: So how far behind schedule was it?

DM: Initially, this final part of the system was supposed to be implemented by July of 2012. The most recent deadline was this past October. It still wasn’t finished a few weeks ago when Revenue Secretary Lyons Gray sent CGI a strongly worded notice of termination, which we requested a copy of. The letter complained of “significant obstacles ,” including “defects and performance issues, empty assurances and guarantees, and poor performance.” And the secretary said that these problems aren’t limited to the part of the system that wasn’t released.

MR: How does CGI respond?

DM: The company says that the last phase of the project was a few weeks away from being ready, and it points out that the parts of the system that are in place helped the state recover $321 million  in revenue it wouldn’t have otherwise been able to collect. CGI has developed similar revenue systems for other states. It’s also the company that built the federal healthcare website.

The two sides reached a mutual agreement January 16th to stop work on the project. CGI was paid $5 million, and they both agreed only to make positive or neutral statements about the system.

MR: So what’s the state’s next step? Will it be running two separate computer systems?

DM: Technically yes, but the revenue department has been operating this way since 2011. It says it has plans for a new system to replace the parts of this project that were never completed.