BANNED: Qld Govt outlaws new IBM contracts


news The Queensland Government has explicitly banned its departments and agencies from entering into any new contracts with diversified IT products and services company IBM until the company demonstrates that it has improved its governance and contracting practices, in an extraordinary move taking place in the wake of the Queensland Health payroll disaster which IBM held a key role in.

Queensland Health’s payroll systems upgrade project was first kicked off in late 2007, when the department determined there was a need to look at a new payroll platform to replace the previous platform, based on Lattice and ESP software, which had been progressively implemented from 1996. Partially as a result of the fact that the state had decided to standardise on SAP’s ECC5 and Infor’s Workbrain software across its whole of government operations, those same platforms were picked for the Queensland Health implementation.

However, the project, implemented by prime contractor IBM, Queensland Health itself and government shared services provider Corptech — quickly went off the rails as poor governance and the complexity of Queensland Health’s award system kicked in, with the result that many of Queensland Health’s 85,000 workers went without pay for a period, or were overpaid, at various periods from early 2010, when the system went live. The LNP administration in Queensland recently announced additional funding of the project of $384 million, taking total project costs to an estimated $1.25 billion.

A series of audits and inquiries into the project, the latest being a Commission of Inquiry Investigation conducted by a former Supreme Court Justice and published yesterday, has found that the the project’s difficulties were caused by woeful project scope definition at the project’s commencements, as well as poor governance throughout, with all three key parties involved — Queensland Health, Corptech and IBM — significantly underestimating the scope of the work required.

The Commission of Inquiry report delivered new findings specifically dealing with IBM’s role in the debacle. Specifically, it found that IBM received favourable information during the contract procurement process that helped it win the initial contract unfairly, that the company may have low-balled its bid based on that information, that the company’s executives breached its own ethics policy in the bid, and that the Government should never have settled the case in a legal sense with IBM. IBM was paid just $25.7 million for its role.

IBM issued a statement this afternoon pushing back on the findings, and putting most of the blame for the situation on the Queensland Government. However, in his own statement, Queensland Premier Campbell Newman announced dramatic action that appears set to severely impact on IBM’s operations in the state.

“IBM will not be allowed to enter any new contracts with the State Government until it improves its governance and contracting practices,” the statement read. Newman said the company must prove it has dealt with past misconduct and will prevent future misconduct.

“It appears that IBM took the state of Queensland for a ride,” Newman said. “The Commission of Inquiry found ‘The replacement of the Queensland Health payroll system must take place in the front rank of failures in public administration in this country. It may be the worst’.”

“The Labor Government was the other party to this major bungle. Labor may be comfortable with the Health Payroll failure, but we are determined that something similar doesn’t happen in Queensland again.” Newman said that as well as not allowing contracts with IBM he expected the company to deal with employees adversely named in the report. As Queensland has already settled in a legal sense with IBM over the issue, the Commission of Inquiry report found no further legal action could be taken against IBM to obtain damages to help compensate Queensland for the payroll disaster.

Queensland will also take a number of other actions as a result of the delivery of the Commission of Inquiry report.

The CEO of the state’s Public Service Commission will consider any action that may be taken against public sector employees who are adversely named. The state’s Crown Law division will provide advice on what actions could and should be taken in relation to former public servants named. The CEO of the Public Service Commission will review the Public Service Code of Conduct and provide recommendations for its amendment.

In addition, the state’s Integrity Commissioner will review the absence of a probity adviser or a conflicts register on the payroll project; Unions active in the state public sector will be asked for information about the oversight of representatives who failed to act to protect rank and file members; and the Government would detail its response to the report’s recommendations at the next session of parliament.

“I again call on the Labor [opposition] leader to apologise on behalf of the former Government for the actions that directly affected 80,000 Queenslanders and cost taxpayers $1.2 billion,” said Newman. “That is the least Annastacia Palaszczuk can do for the lack of interest shown by her and the unions and for months of covering up the true extent of the disaster.”

The ban is not the first time Big Blue has been blocked from signing new contracts with a major government. In April 2008, for example, the entire US Government blocked new contracts with IBM, after an investigation by the Environmental Protection Agency found IBM had violated procurement laws while negotiating a contract with the agency. However, the ban lasted only a little over a week, after a settlement was made between the two sides.

The case had remarkable similarities with the situation with Queensland Health, in that in the EPA case, several IBM employees involved in the procurement process reportedly obtained information from EPA employees which other competing firms did not have, that would have given IBM an advantage during the procurement process.

Any medium to long-term ban on IBM competing for work with the Queensland Government is likely to have a major impact on the company’s operations in the state, given that the state government is the state’s major consumer of enterprise IT products services. IBM is the largest supplier of such products and services in Australia, with major rivals including HP, Fujitsu, CSC and others.


  1. I doubt the Qld Government has many contracts with IBM of any value, so this is water off a ducks back. This one was only worth $27m to IBM, despite the Il-informed QLD premier throwing around numbers like $1.2b.

    Newman better hope IBM doesn’t take its bat and ball and pull out of QLD entirely, there would be a lot of job losses and R&D investment go walking if they did, on the back of all the public servant job losses the QLD government has recently caused, wouldn’t be popular.

    • To the contrary IBM are knee deep in big contracts with the queensland governmment, as they are with basically every government. Some big education ones for starters along with the normal expensive bandaids littered throughout government systems.

      This could potentially be a good move but no idea who the competition is. Accenture is just as bad (probably worse) and they are the Big 2 in this area.

  2. Well that’s that then – Queensland won’t have any troubles with IT projects ever again!

  3. IBM has not done any significant project work with the QLD govt for a few years. They have already been penalised.

  4. After all that equates to a “free kick”, timed perfectly to lessen the blow of outsourcing with the punch line “Do you realise because of the previous Govts neglect we’re going to have to change the procurement process and give our mates 7 billion to fix their mess, 7 billion to private industry our lobbyists and constituents geez terrible that previous lot sheesh”.

  5. Hopefully this finally puts an end to the QLNP “It’s all Labors fault” blame game and they get on with doing something about the massive increase in unemployment in Qld…

    • Oh too late for that Tinman_au. Newmans already blamed labor.

      Yeah I know. Maybe Labor used telepathy to cunningly sabotage it or something. God knows what sort of absurd nonsense runs through that crank Newmans mind.

  6. I’ve heard first hand from people at Qld health. They ran the project outside of IT, they kept changing scope/requirements constantly and would push things forward into production with little testing. Also heard a few other things about the bloated buearacrcy that is QLD health, whatever IBM did wrong they would not be the main ones at fault.

  7. It’s not extraordinary, it’s the normal way they do things. Screw up a government contract and the leverage they hold over you is a black listing.

    I’m not pretending I know who was really at fault here (quite likely it doesn’t matter), but I’ve seen this approach used before.

    The ban is not the first time Big Blue has been blocked from signing new contracts with a major government. In April 2008, for example, the entire US Government blocked new contracts with IBM, after an investigation by the Environmental Protection Agency found IBM had violated procurement laws while negotiating a contract with the agency. However, the ban lasted only a little over a week, after a settlement was made between the two sides.

    Exactly, the big corporations are dependent on continuous government aid, and all parties know this, so generally they “settle” when some pressure is applied.

  8. I bet if the Contractor – not the public – had to pay the cost overruns the quotes would come in right on the money and management would kick ass to keep project costs down. But that would make too much sense for a government operation, huh?

  9. Unbelievable that IBM should blame QLD health for the failure. IBM should not allowed themselves to be part of a project that they were not able to control the management of the project. I am sure that IBM knew about the bloated out of control bureaucracy in QLD health and figured that they could cash in.

    • You obviously don’t know QHealth, their IT complexity is legendary in Qld IT circles…

  10. Why is it that every time the Health Payroll bungle is brought up, they keep missing the root cause of this whole debacle, and that is that governments, and in this case the Queensland government keep running whatever IT systems they have (be it Win XP, SAP, and in this case Lattice) so far into the ground and beyond life support, before they do anything to upgrade or transition it?

    If the complexity and extreme urgency of replacing Lattice was not a driving factor in the first place, a better procurement process may have been put in place, the desperation to find a quick solution even though it may not be the best could have been avoided.

    If there is one lesson to be learnt, it is this. There is no point harping about poor implementation if a system implementation is already set up from the start to be a potential failure due to increased complexity and urgency by years of bad system maintenance and operations.

    SAP 4.6C in many government departments is going to lose support by 2015/2016. Is Newman and his government, and the IT minister going to get started on planning the transition? Last I heard, SAP consultants are already shaking their heads at the slow (possible non existent pace) of this transition.

  11. I think this is another prime example of why Project Management should be a regulated field. There are two many of these people with a 6 week course who have no ability to properly manage projects of this size and complexity yet even understand the technology implications. If an engineer did a job such as these projects managers their listing as a professional engineer would be struck of the list, why should project manager be exempt from having their incompetence exposed. I think this will happen under either political party as jobs for mates never examines qualifications and credentials.

    • But there is. Project managers within QLD Government should have professional qualifications such as PMP & PRINCE2 that provide a degree of quality control that you mentioned. However being qualified does not mean that it is a total guarantee. PMP and PRINCE2 provides you a project manager with credentials and experience to follow a methodology, but that methodology does not teach you how to solve complex problems that arise from such large scale implementations – that is down to how experienced your manager is with the specific implementation requirements of that particular project (how many previous implementation they have done on the same platform) and the business complexity of the business you’re delivering to. Even if you follow a strict process that has been tried and tested, a project can still fail for a myriad of reasons. If you read the inquiry findings, it was stated that Health & IBM did not have past experience with this specific implementation of that system, let alone within a massive organisation like Qhealth which adds huge complexities into the work.

    • Agree – if these people built bridges the bitumen would be on the water. When engineers make mistakes it’s blatantly obvious, when “I.T” makes mistakes throwing more money at it fixes it but it’s hard to not notice a billion dollars. There’s almost incentives to make some minor mistakes and don’t know how many projects I’ve seen run by contractors that never end.

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