RD13 - Review of the Management Agreement Between CGI and Department of Taxation as of November 2013

Executive Summary:
Pursuant to Chapter 806, 2013 Acts of Assembly, this report provides the results of a financial and operational review of CGI and its subcontractors related to the Enterprise Applications Master Services Agreement (PPEA). We have reviewed the management agreements between CGI and state agencies and institutions pursuant to the PPEA’s Statements of Work Six and Seven and the performance of CGI and its subcontractors with regard to measured service levels.

Statements of Work Six and Seven (Statements) were designed to provide a funding mechanism to defray the cost of the implementing enterprise systems. CGI currently has no other revenue producing work under the PPEA other than the Department of Taxation’s (Tax) use of the Statements to support CGI’s performance of outside collection services, and this is not producing meaningful revenue to offset the Commonwealth’s costs of enterprise systems. As such, the PPEA and Statements no longer serve the purpose for which they were intended.

Tax has not instituted effective performance monitoring techniques, nor are they completing annual documented contract evaluations over CGI, a best practice in contract management. Additionally, CGI’s management of outside collection agencies, whose collections represent about seven percent of Tax’s total annual delinquent account collections, carries higher fees than when Tax managed outside collections services themselves. We estimate the Commonwealth may save more than $1 million annually by returning the management of the outside collection services to Tax, or competitively procuring these collection services independent from the PPEA.

While the Commonwealth expected to use the Statements as a means to pay for enterprise systems, as of June 30, 2013, only $394,453 has been recouped since the Statements inception in 2008. A recent contract modification initiated by Tax in 2012 resulted in the deposit of those funds, but still the Commonwealth is paying fees well above the costs when Tax managed the collection agencies internally; resulting in a decrease in net revenue from outside collection activities when compared to net revenue achieved prior to CGI.