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Lockheed, Computer Sciences Await Word on $3 Bln IRS Contract
Bloomberg News
December 7, 1998, 4:33 p.m. PT
Lockheed, Computer Sciences Await Word on $3 Bln IRS Contract
Washington, Dec. 7 (Bloomberg) -- Lockheed Martin Corp., the
second-largest defense and aerospace company, and Computer
Sciences Corp., the third-biggest U.S. provider of computer
consulting and maintenance services, are expected to know this
week which of them will win a $3 billion contract to overhaul the
Internal Revenue Service's computer systems.
Over the past 10 years, the IRS spent $3.3 billion in an
unsuccessful effort to modernize its far-flung computer system,
which serves a central function in the U.S. government by
processing about $1.5 trillion in tax payments annually and
issuing $131 billion in refunds.
The project failed because of lack of an overall system
blueprint, weak IRS oversight and shifting priorities from
congress, according to a congressional panel that examined the
issue, and led Congress to increase its oversight of the IRS.
The contract is probably more important to El Segundo,
California-based Computer Sciences, which hasn't won many
contracts in recent months, said Moshe Katri, an analyst with
Warburg Dillon Read LLC in New York with a ''hold'' rating on the
stock.
''Their win rates have been pretty weak lately,'' he said.
New business is expected to pick up at Computer Sciences,
though. Last week, Merrill Lynch named the company as its top
high-tech stock pick for 1999, predicting annual revenue will
rise by as much as 22 percent.
Lockheed Martin, based in Bethesda, Maryland, may have an
edge in the competition because it's the biggest systems
integrator for the U.S. government. In addition, Lockheed's team
includes Electronic Data Systems Corp., which has an extensive
history of government work.
Teams
The two companies represent teams that will do perform the
work. Lockheed Martin's team includes Electronic Data and
Andersen Consulting. Computer Sciences' team consists of Lucent
Technologies Corp., International Business Machines Corp.,
Northrop Grumman Corp., Sciences Applications International
Corp., Federal Systems Division of Unisys Corp. and KPMG Peat
Marwick.
The IRS calls the new modernization effort, which has been
planned for more than two years, ''the single-largest systems
integration undertaking in the world.''
Judy Gan, spokeswoman for Lockheed Martin, said the company
expects to hear from the IRS this week. She had no further
comment.
The winning team initially will help oversee the development
of a new system of computers and telephone systems designed to
give the public greater access to the IRS. They also will work on
a system that gives IRS employees quick access to taxpayers' data
so they can quickly resolve any problems.
--Loren Steffy in Dallas (214)855-5103, Rob Wells in Washington
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