The IRS declares urgency!

There’s a scene in The Office where Michael Scott walks into the office and publicly declares “BANKRUPTCY”. Afterward, Oscar Martinez stops by Michael’s office and explains: “you can’t just say the word bankruptcy and expect anything to happen.” To which Michael responds: “I didn’t say it, I declared it.”

You can sort of understand where Michael is coming from. Yes, there is actually a process you must go through to accomplish bankruptcy. Then again, Michael had just heard from Creed Bratton that declaring bankruptcy is a simple solution to money problems: “You declare bankruptcy, all your problems go away.” When you’re in a crisis, like Michael was, you might not be interested in procedural nuances.

I bring up this scene for two reasons: (1) The Office is about a paper company; and (2) it’s a perfect setup for why government agencies sometimes treat process as optional. Case in point: a recent Court of Federal Claims opinion entitled GovCIO v. United States.

Back in 2021, during the fallout of serious COVID-induced backlogs, the Internal Revenue Service decided it needed to “digitalize” and move its operations away from paper-based processing. By 2022, the then-Taxpayer Advocate was blunt:

Paper is the IRS’s Kryptonite and the IRS is buried in it. The reason paper returns are so challenging is that the IRS still has not implemented technology to machine read them, so each digit on every paper return must be manually keystroked into IRS systems by an employee.

Paper = bad for IRS.

So, starting in 2021 and through multiple procurements in 2023 and 2024, the IRS began buying scanning services. By 2024, the IRS was promising that, by tax season 2025, it would digitally process all paper-filed tax and information returns.

Then, on March 25, 2025, the President issued an Executive Order that required “Modernizing Payments To and From America’s Bank Account” and directing the IRS to “transition to electronic payments for all Federal disbursements and receipts by digitizing payments to the extent permissible under applicable law.” In the purpose section, the EO noted that “[m]aintaining the physical infrastructure and specialized technology for digitizing paper records cost the American taxpayer over $657 million in Fiscal Year 2024 alone.”

A couple of weeks later — less than two weeks from tax day — the IRS issued an RFI asking for vendors who could help with this transition to “zero paper.” GovCIO, 22nd Century, and Iron Mountain all responded that they could handle the work.

And yet — almost immediately — the IRS decided to skip competition altogether and sole-source a bridge contract to Iron Mountain. The justification? That Executive Order.

Unsurprisingly, the other vendors weren’t thrilled. GovCIO filed a bid protest at GAO, and when the IRS overrode the automatic CICA stay and doubled down on its sole-source decision, GovCIO went to the Court of Federal Claims. Shortly after, 22nd Century filed its own protest, and the two cases were consolidated.

But there was a problem: the Executive Order wasn’t actually about scanning tax documents. It was about digital payments. And while paper may indeed be the IRS’s kryptonite, the agency still has to comply with the Competition in Contracting Act (CICA) and the Federal Acquisition Regulation.

Sole-source awards are only allowed in narrow circumstances: when there’s an urgent and compelling need, when only one source is capable, or when it’s a logical follow-on. Even then, agencies must publish a justification that ties the facts of the procurement to one of those exceptions. 

The IRS’s justification didn’t really do that. It simply pointed to the Executive Order, without explaining why the payments mandate created an urgent and compelling need for digitizing paper returns. Like Michael, the IRS felt that citing authority was enough. But procurement law requires more than just a declaration

Despite the lack of process, the IRS didn’t really lose, though. In fact, the court acknowledged that the Executive Order could have created urgency and justified the sole source, if the agency had only explained the connection. The court didn’t say the IRS was wrong about the urgency; rather, the court said that the IRS failed to explain why it was urgent.

In other words, you can’t just point to an EO and assume it carries the day. You have to show your work.

After all, just because paper is the IRS’s kryptonite, that doesn’t mean paperwork is optional. In federal procurement, it's indispensable.