Raleigh, N.C. — When North Carolina's Department of Revenue fired software maker CGI, state officials agreed not to criticize the company's efforts to build a new revenue collection system, despite the fact it could not carry out one of its principal functions.
The state terminated CGI's contract for the TIMS tax-processing system earlier this month, paradoxically both praising its purported successes in finding unpaid tax revenue while abruptly ending a years-long effort to build the system. The state hired CGI in 2008.
A separation agreement between the state and the company obtained through an open records request shows that revenue officials are legally bound not to talk smack about the company.
"Both CGI and DOR agree not to disparage the other and agree to make only positive or neutral references regarding the other, the contract, the TIMS Project, and the reasons for the mutual termination of the contract," reads a provision in the separation agreement.
CGI is the same company responsible for the defect-riddled rollout of the federal HealthCare.gov website used to enroll people for health coverage under the Affordable Care Act.
Both the Revenue Department and CGI took pains to tell reporters that CGI had helped spot $320 million in under-collected taxes during its run. But total spending on the system will top $95 million, and spotting gaps in tax payments is only one of its jobs.
The contract's termination leaves the state paying to operate two different large computer systems. TIMS is carrying out some functions, while a computer system known as ITAS, which is more than 20 years old, handles the bulk of the department's workload.
Several documents obtained through open records requests detail the system's problems.
One of the TIMS system's main tasks was processing various sorts of tax returns, including individual income taxes.
"The full implementation of TIMS will enable the Department to more quickly respond to legislative changes, mandates, and requests for information, expand e-Services offerings to taxpayers, take advantage of new data sources, and stay current with technology through version updates," reads a presentation by Revenue Secretary Lyons Gray from March 2013.
However, while the system could process some types of returns, CGI never delivered a final update that would have allowed it to process individual income taxes, corporate income taxes or sales taxes, which combine to account for 89 percent of the state's tax revenue.
"TIMS is the latest example of why the state can't afford to keep doing business as usual," reads a talking point developed by officials in the Office of Information Technology Services, North Carolina's central agency for overseeing IT projects. Officials at ITS deferred to Revenue Department officials when speaking about the contract's termination earlier this month.
"We aren't going to throw good money after bad once it's clear that a vendor can't deliver as promised. The decision to terminate a contract isn't an easy one, but it's the right thing to do when even more tax dollars – and the quality of the services the state provides to its citizens – are at stake," reads another line in the ITS talking points.
Memos regarding the TIMS system released by ITS show that the contract had been amended 13 times. The final contract amendment specified that a major update to the system was due on Oct. 31, 2013. That update – known as "Release 5" – was supposed to integrate the ability to process individual returns.
"To date, Release 5 remains incomplete and has not been implemented according to the requirements and specifications of the contract," reads the Revenue Department's letter to the company terminating the contract. "As of the date of this letter, CGI has failed to deliver TIMS as required by the Contract."