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Washington, D.C.—The ongoing saga regarding who will perform the sensitive work of managing taxpayers' files at the Internal Revenue Service (IRS) has taken yet another troubling turn with last week’s announcement by the agency that the outside contractor is unable to perform the work on the schedule originally agreed to.

This failure by the contractor comes after IRS employees originally won the public-private competition for the work only to have the agency yank the win from them and hold an unprecedented second competition which resulted in the work being awarded to a company that cannot deliver.

“Once again the administration’s zeal to send the work of the federal government to private sector contractors is failing America’s taxpayers,” said National Treasury Employees Union (NTEU) President Colleen M. Kelley.

In 2003 the IRS began the process of putting out for bid the work of federal employees responsible for the receiving, filing and maintaining all tax returns and related documents. These private taxpayer files, containing financial information and Social Security numbers for million of taxpayers, were kept for up to one year at one of the 10 IRS Campus sites across the country before being transferred to a central federal facility.

In 2005, the work was awarded to the employees only to have a protest filed by a losing private sector company. That protest resulted in the IRS reexamining the bids and ultimately awarding the work to IAP Worldwide Services under a 5-year, $103 million contract.

Last week the IRS told employees that IAP will not be able to meet its start date of Dec. 1 for taking over the operation at the seven sites called for under the agreement. Instead, the contractor will only begin to perform work at two IRS sites on Dec. 1, leaving the IRS to manage the remaining five sites for at least another six months. The IRS is now scrambling to staff this function after months of transitioning its own employees out of this work.

“This is not the first time that IRS employees will be expected to clean up behind a contractor that has not fulfilled its agreed-upon duties,” President Kelley said. In another high-profile and sensitive failure Mellon Bank was unable to process lock-box items resulting in its employees destroying tens of thousands of tax documents and some $1 billion in tax payments.

“The IRS has treated its own employees with disdain through this entire process simply to line the pockets of a large government contractor,” Kelley added. “I will be asking the IRS to explain the failure of this contractor and to publicly disclose the penalty the agency plans to impose on IAP Worldwide Services for breaking the agreement.”

This IRS contractor failure also comes in the midst of the agency moving forward with private sector tax debt collection. Under this risky program, the IRS has started to hand over taxpayer files to three private-sector debt collection companies. NTEU has been leading the fight against this initiative which is attracting significant congressional and public opposition.

“As I have said before, given the resources there is no one who performs the work of the federal government better than federal employees. Last week’s announcement of another contractor failure is further evidence of that truth,” President Kelley said.

As the largest independent federal union, NTEU represents some 150,000 employees in 30 agencies and departments, including 94,000 in the IRS.