CADE 2: An IRS Success Story

Published: May 15, 2013

Government PerformanceTREAS

With so much talk of failed IT projects and waste in federal spending, it’s occasionally nice to celebrate federal IT success stories, such as the IRS Customer Account Data Engine 2 (CADE 2) initiative.

The CADE project was meant to convert taxpayer data from the old Individual Master File (IMF), which was based on 1960s era software, to a modernized relational database.  However by 2008 the CADE 1 project was years behind schedule and tens of millions of dollars over budget.  That year, IRS’ new commission Doug Shulman brought in Terry Mulholland, with IT experience from Boeing and Visa, as CIO to get the project back on track. 

Some experts might say that converting a flat file to a relational database was possible one to two decades ago, but the complexity and size of the IRS’ databases presented challenges, as well as the difficulty of working within federal government parameters. 

According to a 2004 GAO report, CADE 1 was 30 months behind schedule and $37 million over budget.  GAO cited a number of problems, such as inadequate definitions of systems requirements, project scope creep, and inaccurate cost and schedule projections.  CADE 1 was an instrumental part of the overall IRS Business Systems Modernization (BSM) program.

When Shulman became commission, he and his team decided to scale back the BSM program and focus on the CADE portion, and to bring management of the program in-house.   Milholland believed IRS had become too dependent on outside contractors.  They needed to be accountable for their own technology and processes.

Four years later, GAO listed CADE 2 on its 2011 listing of successful major IT acquisitions across government.  GAO attributes the turn-around to strong management and oversight, and executive-level attention and leadership.

Since the implementation of CADE 2, the IRS has increased electronic filing and processing to 78% which improves accuracy and speeds up the time it takes for taxpayers to receive their refunds, while also saving the IRS money. 

The IT Dashboard shows a CIO project rating of five for CADE 2 from October 2012 to date, up from a score of four in August of that year.  CADE 2’s Exhibit 300 indicates that in 2013 the project will deliver a database feed to the Integrated Data Retrieval Systems (IDRS) which will allow online updates to taxpayer account data by customer service representatives, more current and timely account balance information and improved opportunities for compliance.  The IRS is requesting funds to design and develop a number of applications that expand the capabilities of the CADE 2 relational database in 2014.

With appropriate leadership and oversight, the correct balance of in-house vs. outsourced management and development, adequate performance measures and business metrics, along with stakeholder involvement, other struggling federal IT projects have a chance at success.