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Despite its reputation for operating old systems, the IRS is also a leader in new technology deployment and modernization. In conjunction with the nonprofit Advanced Technology Academic Research Center, or ATARC, the IRS recently hosted a technology day. To explain how they’re updating systems and business operations, the IRS chief procurement officer Shanna Webbers and Harrison Smith, co-director for the Enterprise Digitalization and Case Management Office, joined Federal Drive with Tom Temin.

Interview transcript:

Tom Temin: And everybody says how procurement and information technology has to work together to get modernising done in federal agencies. It sounds like that’s what you’re doing. Tell us how you are working together. Shanna?

Shanna Webbers: Yeah. Thanks, Tom. You know, really, it has to be a strong collaboration, right? As the technology team is looking at what is available in the marketplace, we in procurement are a critical mission enabler to helping bring those insights from industry to the collective IT team, as well as looking at what are their procurement options that provide some flexibility. And so moving from the technology, how it was completed in the past to that waterfall where we figured out all the answers before we actually implemented the solution. Moving over to agile and sprint, we at procurement are also looking at opportunities where we can use that agile sprint method within procurement again, to identify, to test, deploy and procure emerging technologies at a lower cost in smaller increments to ensure that we’re getting it right over time.

Tom Temin: Harrison, do you find that with what looks like classic types of applications – some of them have been running for many, many years at the IRS – nevertheless, like almost the military, you are on the hunt for new and innovative technologies from non-traditional vendors that you may not have worked with before?

Harrison Smith: You know, Tom, that’s a great point. And I have to start off with an apology because I think Shanna and I cheat a little bit because she used to be my boss. Right, I used to be the deputy chief procurement officer so Shanna and I have a great relationship. And I’m perhaps more familiar than some others might be within the IRS about what can be done within the procurement arena. And what Shanna and her great team over at the Office of the Chief Procurement Officer can accomplish. But you’re right, we frequently talk about balance within the Office of the Enterprise Digitalization and Case Management. We talk about the balance between, “Hey, there’s some systems and some activities and some information, we’re just not going to touch right now.” We’re not going to go in and start messing with applications and processes and architecture. You know, on April 1, that just doesn’t make a whole lot of sense, right? But there are other opportunities to pursue new and different ways of solving problems. And so again, as Shanna mentioned, we take these targeted, risk-based and informed shots at what could actually work going forward in the future. So whether or not it’s in the area of low rez images that we want to glean information from, whether or not it’s in the area of using automation, machine learning and AI to respond to and guide taxpayers when they reach out to us. There’s a lot of different ways where we can take a look at what might actually be possible. Again, Shanna really called on the point that I want to emphasize, which is our ability to try things out first, before we actually scaled them and deploy them on mass is something frankly, the federal government is not always very good at. And you look at the empirical data from the GAO, or really many other oversight organizations is you want to be able to deploy the smallest minimal product, like the minimum viable product, right? You want to be able to pursue that MVP, find out whether or not it works, right? Find out whether or not the user benefits from it and find out frankly, whether or not it works within our architecture. We don’t want to spend 6, 12, 18, 24 months before we have our first test, right? Because then we’ve got a lot of sunk cost. And there’s frequently a sunk cost bias within within the federal government. So we want to strike that balance of when we have an opportunity to pursue something in a different manner, that we test out things, we try things differently. We see if it works. And this is a really important part: If it doesn’t work, stop doing it. If you run into a hiccup, or hurdle, and you can get around it, or you can get over it, or you can address the issue, and the return on investment might be there – great! Let’s pursue that. But if it doesn’t work, shut it down and own that decision. It’s not wasteful to learn from something in the near term. Use it as you move ahead, as long as you’re looking at different things and how do I ultimately get to the end goal. So there’s a couple areas that we really focus on.

Tom Temin: Shanna?

Shanna Webbers: Yeah, Tom, if I can emphasize your reading is really focused on what Harrison and I are talking about. And in his opening remarks on the industry event, he basically said we’re open for business, we need help with our private sector partners to make us better and more importantly, he emphasized that the IRS is swinging for the fences and we want to be on the front edge of things. We don’t have all the ideas and we can’t do it alone. But really we want to be out front and leading where other industries private industry, they’re at actually looking to the IRS on how we did our operations and how we were able to take things much further. And really that empowerment is really important, right? When you have that top cover from your leaders, it really is empowering to say, “Hey, let’s try this.” And let’s be bold and brave enough to say, “Okay, yeah, that didn’t work,” knowing that we’re going to potentially be criticized for that example. But really, if we don’t actually swing for the fences, then our ability to move forward is going to be much slower and less incremental pace than what the commissioner is really pushing all of us, not just on the technology side, but also on the business process, right? So technology is an enabler for our business processes and modernizing those business processes. And so it’s really a whole collaborative effort. And the event that we held the emerging technology day, was really just an example of procurement as well as the IRS’ commitment to using collaboration, information sharing and transparency, to build strong partnerships with our customers, as well as industry experts.

Tom Temin: And of course, the IRS is big, it’s complicated. You have different divisions dealing with different classes of taxpayers and so there are hundreds and hundreds of actual applications when it gets down to the cellular level here. How do you keep track of the big picture as you pursue all of these modernizations and all of these business processes, and pursue better customer service and helping your call centers have a unified view of information? I mean, the list goes on and on. Is there somewhere tacked up on the wall? Some kind of an architecture diagram that everyone refers to so that everyone stays in the same field of play here?

Harrison Smith: Tom, that’s a great question. And the long and the short of it is we do have overarching foundational documents for what our strategy is to be, right, or is – I mean, you can start for instance, with the IRS strategic plan. And it’s something that the leadership – Commissioner [Chuck] Rettig, [Deputy Commissioner for Operations Support Jeff] Tribiano, [Deputy Commissioner for Services and Enforcement Sunita] Lough – have worked to, and appropriately so, emphasize the importance of us being comfortable with that document. And I can tell you, I believe it’s page 13, of a document that highlights the importance of the IRS pursuing emergent technology. And it specifically calls out automation and AI. So there’s those types of documents. There’s the IT business modernization plan, which lays out a multi-year path forward for how we’re pursuing things. There’s the Treasury Cloud Acquisition Roadmap, right? There’s these types of things. We also have internal areas of focus to make sure that we’re aligning to these overarching areas. You make a very good point about there’s disparate sort of goals that are right in front of our face, but we are one IRS, and we are all pushing towards the same goal. We are all pushing towards the same mission statement. And I want to turn this a little bit on its head because some of the areas where we can see the this as more “complicated things,” because we have complicated processes and different processes, I really want to – two things: Most of the public, and perhaps most of your audience, your listeners here, see the IRS as primarily or even solely a tax revenue and collection entity. And what I think a lot of them don’t necessarily realize is the breadth and depth of what the IRS gets into. For instance, during national emergencies, FEMA call centers are frequently staffed with IRS personnel. We support that effort, we support the country, frankly. Another example is the IRS has work, especially from the Criminal Investigation Division, within cryptocurrency. There have been two major instances in the past year and a half where CI has led – Criminal Investigation – has led an activity across multiple jurisdictional areas, across multiple nations where they help shut down the world’s largest child pornography ring. And that’s that’s something that’s wildly important, because they work to de-anonymize the bitcoin and the DLT transactions to find out where these people were. They did it more recently, I believe, in the terrorist financing arena. And so what the IRS is involved in, it’s not just the day-to-day aspects of gathering the revenue that helps fund the business of America, right, because that’s clearly part of it. But these other areas, it’s really amazing to see what the IRS personnel can do. Again, to go back to why this is also a strength is because it allows us to try things in very tactical areas and pursue things in a very particular way to find out whether or not it works, learn from that activity, and then scale it into a related but slightly different area. And that’s what we want to be able to do, we want to be able to find those things like how do we improve our ability to glean information from scanned files that we could start with a very specific office, learn from that and then scale because we deal with a lot of paper, right? And so we can use that across the enterprise. So again, there are the foundational documents totally reference and we lean on on an ongoing basis. But there’s also the ability to leverage a different type of effort in different types of mission within the office.

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Tom Temin: Shanna?

Shanna Webbers: We in procurement are actually doing something different as well. We’ve embarked on a game-changing transformation within our organization and really focused on, I’ll say historical pain points, and trying to address those long-seeming gaps or issues that we’ve experienced. And one area that we are embarking on through our transformation is trying to take an acquisition portfolio approach to how we help the program offices such as Harrison’s, the digitization as well as the Enterprse Case Management, how they implement their program, right? So the expectation is, it will take many contracts over a period of time for us to fully implement a large program across the IRS. Historically, we in procurement, manage one procurement at a time. As soon as we got the requirement, we developed an acquisition strategy for that one particular aspect, we awarded the contract and then we moved on to the next one. We really want to change that paradigm, where we work closely a partner with the program offices so that we in procurement, have a better picture – that strategic picture like what you were talking about, of what is the full set or portfolio of contracts that are needed to implement that program. So we can make program-level acquisition strategy decisions, as well as that we will have a better understanding of the sequencing of how those contracts need to be in place, as well as the dependencies of those contracts. And it will allow us to ensure that we are capturing potentially knowledge transfer requirements, and that we’re very deliberate on how we are transitioning from one contract to the next, do that strategic picture via a portfolio approach. So again, just trying to tap back to that strategic view, and how do we keep everybody on the same page. That’s an area of procurement where we are doing something different that we’ve just started.

Tom Temin: And earlier, we talked about having non-traditional types of contractors with new and innovative technologies coming in, and like DoD again, they have had to do special programs to try to enable those people to do business with the government. Many of them say, “I don’t want to bother, because it’s too complicated.” What are you doing to make it easier for innovative contractors, short of sending them to become subs to some of your primes, but that they could help the IRS directly with their injected technology?

Harrison Smith: I think there’s a balance here. There’s the ability to really help folks understand what the IRS does, and to be more overt and transparent. And you see that with the emerging technology day, and activities like that. But it’s also about establishing a relationship. Shanna and I had a joke within the Office of Chief Procurement Officer when we worked together, that for being in an organization that buys things, we sell quite a bit, right? We sell the business of the government, we sell the IRS as a potential customer and a partner to folks. And that’s something that we really epitomized when we established an industry liaison office. We created these types of activities engagements, we get to understand why industry partners who might not necessarily do business with the IRS or with the federal government in general. What were their pain points. And a lot of it came down to we don’t know what you work on. We can’t get in and understand the underlying goals of your office, or what’s trying to go on or what’s a new contract versus what’s a recompete of an existing effort where there’s an incumbent firm. So we really tackled a lot of those things, and it came down to a couple of very discrete points. One of them was the time required to get feedback. It wasn’t necessarily the dollar amounts associated with contract efforts. But it was more timing the sequence in the cadence. And so the team in procurement developed something called pilot IRS, which really takes a fairly complex problem, breaks it down into very, very simple chunks of desired outcomes. And then says we are going to award multiple contracts, small contracts, to the tune of $25,000 and 30 days, or something akin to that, ask you to prove that your approach is worthwhile. And then after 30 days, you’ll come back we’ll ask you questions, we’ll have the conversation and say what would you do for the next 45 days or 60 days or 90 days, if we gave you another small chunk of money if we gave you $50,000 as opposed to $25,000? And that model has really increased the level of interest from the non-traditional partners. There’s two or three instances already of this pilot IRS approach. And I believe the one last year that we did for improvements to FPDS and GE, in response to the DATA Act, of the five initial Awards, two or three of them had never had a prime federal contract before ever, ever. And so the proof to me is really in the pudding there, is when we get folks who don’t necessarily play in that space, and we establish, again, it’s sort of a we’re selling the business of the IRS. We are open for business, we want to engage with you, we want you to look at us as a partner. And that comes from tactical and concerted and consistent effort. And I think that’s something that we’ve absolutely demonstrated.

Tom Temin: It’s almost like you’re doing a modified challenge-competition type of approach.

Harrison Smith: Yeah. And if you want to get precise about it, the issue with challenge is scale, right? Challenges have scale. I mean, you go back to – we talked a little bit about DoD. DoD and there’s been several articles out there about how DoD even though the army I think has tripled their use of other transaction authority from FY 2019 to FY 2020, I believe the use of OTAs in Army tripled. There’s still the issue of scale. There’s still this technology valley of death that folks can’t get through. And that’s one of the great parts about what the procurement team has developed and created is that it allows us to be nimble enough to say, “Hey, we thought we were gonna solve the problem this way. That doesn’t quite work. Let me shift it this way. Government, are you okay with that?” And the government and the IRS has the flexibility say “Wonderful, that’s exactly what I want you to do because it aligns to the goals and where we want to go.” Again, it’s what we were able to do, again, in improving the data. That’s the appropriation obligation data that’s contained within FPDS and G. The solicitation said we want you to improve the data in the system. We want you to limit manual work. And we want you to do it in 90 days. And Tom, I’m not exaggerating, that was pretty much it. There may have been two or three more sentences in the requirements statement, but frequently things that we would take 75 or 100 pages to talk about with a series of thou shalt do this, thou shalt do that, we said, “this is our desired end goal.” And I’ll say that, although you know, and I will certainly take the hit for that, because it was under my portfolio when I was supporting the procurement team, we did not meet the 90 day. We didn’t make it. But it was 97 days. And so if you talk to anybody in the federal community, and say, we want to get automations into a federal government system in 90 days, I think they’d say you were crazy. And so making 97, as opposed to 90, I think that’s still definitely knocks it out of the park.

Shanna Webbers: So you know, Tom, we started out talking about the collaboration between technology partners, and procurement and looking at the strategic picture. And as a leader in the procurement side, one of the things I worry about is the rate and pace of change, right? And so as we are trying to change different models, different approaches, different methodologies of how we do our business, we need to ensure that there is some kind of a, “battle rhythm,” a standard beat for our staff, right, so it doesn’t create chaos, so that the team understands exactly what they’re supposed to do. They understand why they’re doing it, they understand what is the best approach for each requirement as we’re looking at different ways of doing things. And so we recently established Innovative Contract Lab under a procurement innovation branch. And the focus of that team is really to be our pilot of trying new procurement techniques and methodologies. And so the approach that Harrison just described, which we call pilot IRS, is one that we have tried a couple of different times under that innovative contract lab team. We took lessons learned. As we did it the first time, we incorporated that in the second attempt that we did it. Now that we’ve done it several times and we’ve proven that it is a methodology we want to continue using and using it more broadly, we’re now in the process for this fiscal year, of then training our larger operational divisions on how they would actually do that. Again, in a very deliberate approach of how we are now rolling it from this pilot stage, this prototype team for them to see if it actually works, we want to use it and then taking it more broadly for the operational divisions as a whole. And so that the procurement innovation branch is also in the process of developing a roadmap of what challenges do they want to tackle? What are those sticking points in the procurement field where we find it difficult across the board? And then how can we actually use that, so again, that we have a very set drumbeat of what we are going to try and how we’re going to try it? Along with then a paced rate of change of validating it’s good, and that we want to continue it and then rolling that out more broadly in our operating divisions. So that’s another way for us strategically to stay focused on what we’re doing internally with just our office and validating that the approach does work with our business partners, whether it is IT, whether it is criminal investigation, whether it is the facilities and maintenance team, regardless of who that customer is just validating that it actually works.

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Tom Temin: Shanna Webbers is chief procurement officer and Harrison Smith, co-director for Enterprise Digitalization and Case Management at the IRS. Find this interview in its entirety at FederalNewsNetwork.com/FederalDrive. Hear the Federal Drive on demand Subscribe at Podcastone or wherever you get your podcasts.

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