IRS purchased $11.6M in software that it never used

[Adam]

IRS Wasted $11.6 Million of Computer Software

The Internal Revenue Service (IRS) bought $11.6 million worth of computer software the agency never used, according to the Treasury Inspector General for Tax Administration (TIGTA).

TIGTA attributed the error to poor management and a lack of inventory of more than $200 million in software purchased by the IRS, according to an audit released Thursday.

“Software license management at the IRS is not being adequately performed,” the audit said. “Efficient and cost-effective management of the IRS’s software assets is crucial to ensuring that information technology services continue to support the IRS’s business operations and help it to provide services to taxpayers efficiently.”

Upon reviewing the IRS’ software contracts, TIGTA found 11 products that were bought by the IRS but never installed.

“The original compliance review determined that the IRS did not deploy, i.e., purchased but did not use, mainframe licenses and software support, resulting in the IRS wasting an estimated $11.6 million,” the audit said.

The $11.6 million in wasted software was part of a 5-year contract with IBM worth $239 million, which was awarded in September 2007.

Sadly, $11.6M is pretty much a rounding error in this absurdly bloated federal government.

[scott]

I'd be interested in seeing how they came up with that number. Would their final bill from IBM actually be lower if they had not purchased the licenses? Did they actually use $239 Million in software from that contract or did most of it get installed and not used?

[Adam]

I'd be interested in seeing how they came up with that number. Would their final bill from IBM actually be lower if they had not purchased the licenses? Did they actually use $239 Million in software from that contract or did most of it get installed and not used?

Here's the IG's report. I haven't combed through it, but at least according to the news article:

In response to the audit, the IRS argued it did not waste $11.6 million. The agency admitted it did not use 5 of the 11 products, and said it had “no obligation to pay for them.”

However, TIGTA reported that when discussing the products with the agency, IRS management “agreed that these 11 products were paid for and were never deployed.”

The IRS could not provide documentation to back up their claim, TIGTA said.

So it sounds to me like they ordered a bunch of stuff from IBM, didn't use some of it, and rather than sending it back for a refund, these boxes just sat on a shelf somewhere collecting dust while some bureaucrat just paid the invoice without checking to see if they had actually used the stuff.

[scott]

Here's the IG's report. I haven't combed through it, but at least according to the news article:



So it sounds to me like they ordered a bunch of stuff from IBM, didn't use some of it, and rather than sending it back for a refund, these boxes just sat on a shelf somewhere collecting dust while some bureaucrat just paid the invoice without checking to see if they had actually used the stuff.

That's now how mainframe licenses and software support work, there aren't physical products that get delivered and installed. Usually the contract is agreed and paid and then a subsequent reconciliation identifies credits to be applied to future bills.

[scott]

From the report:

The IRS does not use asset discovery, network scanning, license management, and license
metering tools to identify current usage, deployment, and inventory of mainframe software and
related licenses. Without these tools and a software asset and license management structure in
place, the IRS cannot effectively determine if the software contracts it enters into are reflective
of its current or future projected mainframe software license and support needs. In addition, the
IRS cannot, from an enterprisewide level, effectively manage its mainframe software and
license compliance to the contract option-year renewals

This $11.6 Million is just the tip of the iceberg if they are that far behind the times. The amount is only out of IBM's 5 year contract for mainframes.

The conditions identified in the compliance review of the IBM mainframe software could exist in other mainframe software contracts. The IRS has 11 mainframe software contracts in addition to the IBM contract. If the IRS had the software asset and license management policies, procedures, and tools in place, the other mainframe software contracts could be analyzed for additional cost savings and license compliance.

WOW!

[Adam]

That's now how mainframe licenses and software support work, there aren't physical products that get delivered and installed. Usually the contract is agreed and paid and then a subsequent reconciliation identifies credits to be applied to future bills.

I was deliberately over-simplifying to make the point about the back-end follow-through, but your post above kind of renders that moot anyway.