Queensland’s Auditor-General has published a landmark report into the disastrous payroll systems overhaul at Queensland Health, broadly lambasting the project’s governance structures and pointing out that all concerned — including prime contractor IBM — significantly underestimated the necessary scope of the project.

The project — which aims to replace Qld Health’s ageing LATTICE payroll system, and has been dubbed the Continuity Project — has now cost the state $101.96 million in total since its inception, according to a report published by Queensland Auditor-General Glenn Poole this afternoon (PDF).

A large number of Queensland Health staff have received little or no pay in some periods since the new platform was introduced in March this year, although the situation is gradually improving. It serves some 78,000 of the department’s staff every fortnight, with the total payroll amount being $210 million.

The implementation of the new payroll system was broadly to follow a model set earlier by Queensland’s Department of Housing, with the state’s IT shared services agency CorpTech to work with IBM and Queensland Health on the project. An initial, $6.91 million contract with IBM over the deal was signed in December 2007, with system completion scheduled for August 2008.

However, the Auditor-General noted in its report that all three parties significantly underestimated how large the project would need to be right from the start.

IBM had initially prepared a statement of scope for the replacement of the project, providing an estimate of $6.13 million to replace the previous LATTICE system. The assumption at the time was that the company would be able to provide a ‘like for like’ replacement system, using Housing’s existing SAP implementation with very little customisation.

IBM stated the following in its initial statement of scope regarding the project: “Our understanding is that there is a relatively small amount of functionality required as a minimum to make the interim software functional for Queensland Health that is relatively small in nature.”

However, the auditor-general noted that Housing’s SAP implementation involved only 1200-1300 employees, compared with about 78,000 employees at Health, including multiple award structures, meaning that the size and complexity of the project was completely different from the Housing implementation.

The auditor-general also noted that the assumption that it would be possible to build a ‘like for like’ replacement for LATTICE was also wrong.

“This assumption proved invalid, as the foundation business rules of both systems are different,” the report states. “For example, more rigour and discipline is required in ensuring all rosters are uplaoded into SAP HR before payments are made.”

A number of workarounds in processing pays through LATTICE also existed, associated with peripheral systems — but these were not included in the ‘like for like’ system replacement proposal.
In the end, the Auditor-General noted that it was not until September 2009 — some 20 months after the commencement of the project — that the scope definition was formally approved by Queensland Health.

It gets worse
The Auditor-General also found other problems with the project.
The governance structure between CorpTech, IBM and Queensland Health was not clear, causing confusion, thre was no periodic review of the business needs of the project, and system and process testing before the new system went live had not identified a number of “significant implementation risks”.

The auditor notes that system usability testing and the validation of new processes “was not performed”. “As a result, Queensland Health had not determined whether systems, processes and infrastructure were in place for the effective operation of the new system,” the report states.

Continuity plans — to be put in place in the event the new system failed — were “not available” and could not be implemented to meet issues as they emerged. And when the project went live, several other changes to payroll administration practices — such as “a new fax server” and the re-allocation of processing duties — were being simultaneously introduced.

The budget for the project blew out substantially — with the Auditor-General noting “there was no one entity or officer monitoring and managing total project budget versus costs being incurred by all of the various stakeholders for the LATTICE payroll system replacement implementation”.

SAP itself recommended that a full parallel pay run implementation comparison between the old LATTICE system and the new platform be planned and implemented prior to the go-live date. “This recommendation was not accepted by the project board due to the size and complexity of undertaking this task,” the auditor wrote.

A payroll stabilisation project has been established by the Queensland Government to identify and correct irregularities in the system — action is expected to continue on this front for some time, the Auditor-General wrote. IBM comments in relation to the report were received by the Auditor-General, but were not published in the report itself.

Image credits: United States Geological Survey, public domain, Qld Auditor-General’s Office

Related posts:

1. KPMG waffle obscures Qld’s payroll disaster
2. Qld may kill IBM payroll contract, seek damages
3. Qld Health payroll ‘stabilised’, claims Govt
4. Payroll problems overshadow Queensland budget
5. QLD Health payroll still “a mess”: Opposition

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1. Anton
   Posted 01/07/2010 at 10:59 pm | Permalink | Reply

   Typical.

   Having worked on large implementations myself (not for IBM) I’ve first-hand witnessed the “off-hands” approach that some private companies take in their approach. Taking short cuts, or not willing to get their hands dirty with the business politics to get the job done is all happening all too often with these large consultancy firms.

2. Jane
   Posted 02/07/2010 at 10:17 am | Permalink | Reply

   My understanding is that IBM was brought in after 2-3 years of CorpTech being unable to progress the replacement systems. Effectively, they were the clean-up crew for the ineffectiveness of the government departments who should be held accountable. I don’t believe IBM should be sullied as much in this instance without looking at the lack of deliverables pre-IBM from Queensland Health and Corptech.