“Abomination”: Qld Health payroll needs $837m more


news A KMPG audit into Queensland Health’s payroll disaster has found the project has already cost $417 million and will need some $837 million to fix over the next five years, in a finding which the state’s new LNP Health Minister Lawrence Springborg said in Parliament this week illustrated that the project was an “abomination”.

The project was first kicked off in late 2007, when Queensland Health 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 have gone without pay, or were overpaid, at various periods from early 2010, when the system went live.

An Auditor-General’s report filed in 2010 found that all concerned in the implementation — prime contractor IBM, Queensland Health and CorpTech — significantly underestimated the necessary scope of the project. IBM had initially told the Government that a “relatively small” amount of functionality would be required to implement a similar new payroll system at Queenland Health as a previous build at Queensland Housing — despite the fact that the Housing rollout only catered for 1200-1300 staff, compared with Health’s then-78,000.

In a new audit into the project commissioned by the new LNP State Government in Queensland and published this week, consulting and auditing firm KPMG has estimated that it will cost a further $836.9 million for the project to be overhauled over the next five years, adding to a total of $416.6 million which has already been spent on it since 2010. Just over $1 billion of that will relate to funds needed to keep the payroll system functioning. Currently, the platform requires just over 1,000 staff performing some 200,000 manual processes on an average of 92,000 forms to make sure Queensland Health’s staff are paid the approximately $250 million they are owed each fortnight.

Another $245.5 million will go into fixing the key issues which the system still has, and undertaking a systems analysis to determine the long-term future of the platform. And KPMG also noted that the total of $1.2 billion in funding did not include any costs associated with a potential reimplementation or upgrade of the system, any contingencies associated with the implementation of fixed, or any additional fringe benefit tax costs which could arise from waiving overpayments, rather than recovering them.

Speaking in Parliament on Wednesday, Springborg was scathing of the way the previous Bligh Labor Government had implemented the payroll system. “This was a rogue contractual arrangement, untended by Labor, that engulfed the valued workforce of Queensland Health,” Springborg said. “Queenslanders are angry. As a parliamentarian I am angry at the consequences visited on Health employees and the taxpayers of Queensland. Even today, 27 months after the Labor payroll went live, unavoidable costs continue to escalate.”

“KPMG links this abomination to Labor’s centralised control and its lack of due diligence. This is the system Labor commissioned, without so much as a business case, to pay every public servant in every department in Health in the state. It fell at the first hurdle and the implications continue to emerge. Even today this fragile system cannot calculate the basic leave entitlements of the workers it was installed to serve.”

“This is a damning report. It is a shocking citation of failure and bad faith by the former Government.”

The future
Queensland Health has developed a forward plan to address the issues with its payroll platform. Some of the various initiatives which it will undertake to resolve the situation include: Carrying out a payroll hub restructure, to better link payroll staff with the districts they serve; moving the pay date by seven days to allow sufficient time for submission and processing of payroll forms; establishing a project to focus on recovering overpayments; setting up an electronic rostering system; setting up a payroll self-service portal; and establishing a series of payroll portfolio governance and projects program.

However, KPMG noted in its audit that the payroll system still remained unstable, and there were also further problems on the horizon.

“It is important to recognise that, even though significant progress has been made in stabilising the Queensland Health payroll system, the system remains ‘fragile’ in the sense that any system changes that are introduced have the potential to impact on pay outcomes,” the auditor noted in its report. “The degree of customisation of the current payroll and award interpretation systems has created complexity that makes the potential impacts of new releases and system changes difficult to predict.”

In addition, KPMG noted that support for the versions of SAP and Workbrain used for the implementation are due to expire in late 2014 and early 2015. “As such, there will be a requirement for a further investment in either a system upgrade or a system reimplementation before 2014,” the auditor wrote. Queensland Health has a current project focused on assessing and planning an SAP upgrade, with part of that project to consider options for moving some of the functions in Workbrain into SAP.

And even further long-range plans still need to be considered.

“As part of this process it would be prudent for QH to make a targeted approach to the external market to understand the range of system solutions and payroll operating models that may be available,” the auditor wrote. “Such a ‘request for information’ process could be included in the $25m currently set aside for the upgrade planning project.”

KPMG’s report contains a wide swathe of additional information which it was not feasible to include in this article — including the original reasons why the Queensland Health payroll systems implementation went off the rails so disastrously in the first place. If you are interested, Delimiter recommends you download the report directly (PDF) and go through it, for a fascinating and extremely detailed glimpse into one of Australia’s worst ever IT disasters.

Delimiter has covered this topic exhaustively already, and I don’t want to go too much further into analysis of it; the facts kind of speak for themselves. However, I do want to note that at this point, with some 1,000 staff carrying out 200,000 fortnightly manual modifications to 92,000 forums, it would likely be more efficient, more accurate and much less expensive for Queensland Health to be running manual payroll systems for its 85,000 staff … on paper.

Think about it … it shouldn’t be too big a task for each of those 1,000 staff to process the payroll for 85 staff each per fortnight on paper. That would only be 8.5 forms and 8.5 bank transfers per day. You could probably get the number of staff required down to only a few hundred over time. Seems like paper processing of payroll may just be the best and most cost-effective solution for Queensland Health at this point.

Furthermore, it seems clear that Australia has a new contender for most disastrous IT project ever. Our previous winner had been Customs’ Integrated Cargo System, which went so badly wrong in 2005 that cargo started piling up on wharves around the nation during Christmas that year, with the platform unable to process imported goods in a timely manner. However, for sheer amounts of money thrown down the toilet and incredibly poor governance and hubris, it seems you just can’t go past Queensland Health’s payroll system these days. It’s already had a bunch of audits conducted into it, and I bet there are a lot more coming.


  1. Holly sheep shit…

    Another $800 mil will go down the gurgler and who knows if the “system” (I use that word loosely) will be fixed?

    You have to ask yourself:
    1. How complicated are those state awards?
    2. Why the hell wasn’t this found out earlier?
    3. How much for the “DO NOTHING” solution?

    • Why the hell wasn’t this found out earlier?

      Ass covering that’s why.
      Now we have a new Government in QLD who will quite rightly try to find all the skeletons in the closet.

  2. Put in the context of the size of the payroll it doesn’t seem quite so abominable – 250 million a fortnight means this boondoggle is eventually going to cost the equivelant of ~3 months pay for the QH workforce.

    Still over a billion of MY TAX DOLLARS though, so I should be outraged or something I guess.

  3. It will eventually be scrapped. I said this in an earlier thread. As hoped the new Health Minister has taken direct action to put it out there in full view – which is something all the previous government’s Health Ministers were incapable of doing or didn’t want to do. However he is probably too abstracted from the operational aspects of the system at this point.

    This audit was by KPMG and come up with $1.2Billion (over 5 years). The last government’s audit was by PCW not long ago and come up with another $200million required. Notice the difference? Neither have a grasp as they are both too external to the system itself, lack understanding, or were mislead. Ultimately though I believe both were doing the “legal” out of looking for a middle ground so as to not offend.

    But it is time to offend. Hopefully Springborg will bring on some IT advice directly – and not advice from government employed IT management. All these reviewers have to do is review the system’s operation, the resources involved and their current and future capacity, the excuriating Queensland pay award structure itself, the operation of the Workbrain award interpreter, and how the QLD government architectual designers tried to impose their contract system over the top of all this using by bending and twisting it into place. It would take no more than a couple of hours of insightful digging and these reviwers will get the picture. I’d previously been involved in a 2 hour overview session with one of the designers and it was obvious it would never work. Have learnt even more since.

    If this is reviewed independently the advice would be to yank the system wholely or, as a minimum the WorkBrain product (award interpreter) only, and then simultaniously re-negotiate the award systems in place. The previous governments have just given in to Health Services unions in the past for political gain and now the Award Structures are a mess and needing to be made logical and simple to implement.

    Only then people will get paid the right amount each time.

  4. I think the primary failure of the payroll system is with the absurdly complex and impractical business rules in place for calculating payroll in the first place.

    Something I’d imagine is totally impossible to replicate just on paper (certainly not with accuracy and consistency)

  5. To make another point. That $1.2 billion is huge incentive for the Unions and HR staff to simplify the payroll rules.

    Thats money that could’ve directly been used for payrises instead being wasted on building a monstrous payroll system

    • This is one of the problems. The people invovled in developing the new Payroll system didn’t understand the scope or complexity of pay schedules. Payroll is not a simple as number of hours worked multiples by pay rate. As I understand it, there and hundrends of different pay types and schedules to take into account. The system IBM based this development after has less than 1,300 employees with 1 award structure. Queensland Health is far more complex than that.

      There are government regulations on what employees get paid and their benefits (at least in the US). For example, Police offices work shift work and do not get paid overtime just because they reach 40 hours in one week. Most officers work a swing schedule and during their long week may work upwards of 60+ hours, while their short week can be less than 20 hours. Because of this, they have to work a total of 175+ hours in a month before getting overtime. (Understand these are arbitrary numbers, I don’t have the actual figures in front of me).

      On top of this, employees can be Hourly, Excempt (Salary), shift workers, part-time, seasonal, and not to mention those that have special provision written into their contracts. There are several main reasons this project failed miserably. First, IBM did not take into account the scope of complexity of the Queensland current payroll system. Sencond, IBM tried to take a short cut and use a model based off the Department of Housing’s SAP payroll system that was specifically designed for a smaller, simplier pay schedule. Finally, a lot of the blame can also be placed on the project oversight team from Queensland Health. Since the separate departments could never agree on a singular focus, the project objectives kept changing and IBM has to make changes on the fly.

      There is plenty of blame to go around with this fiasco. But to completely understand why this project went terriblely wrong, you must also understand the complexity of payroll. The problem is the group that undertook this project did not have full understanding before they began. It’s sad that Queensland will have to waste over $1.2 miilion or more before this issue can be resolved.

  6. SAP is is the biggest pyramid scheme in the world. Execs get told that SAP will come in and solve all their problems. No need for an architecture, requirements, design, and any thought.

    Just use SAP and they will magically solve all your problems.

    What’s the difference between Amway and SAP? At least Amway delivers a product you can use.

  7. How can a project due in 2008 go live four years late? Talk about EPIC disaster! Other reports state that the IBM cost to date is around 500 million, and a total of 1.2 Billion will be required to fix this disaster? These are the figures reported in the press, and most likely don’t include a view of the real sunk costs: infrastructure, lost time, corptec staff working on the project, staff under/overpay.

    SAP are reporting they can fix the mess for about 120 million. One question I will ask. Do you believe them?

    If there’s one company that can lie with a straight face, I’ll let you make up your own mind.

    “Just remember, no CIO got fired for buying SAP”, doesn’t mean it actually needs to be delivered.

    Would be interesting to see a statistic of the number of failed SAP projects vrs ones that have gone live on time and on budget?

    • Spot on Mike.

      I see endless press releases when someone signs up for SAP, but very few success stories of a happy customer at the end of the project.

      The Consulting models used by all the big SAP implementation partners is designed to extract maximum payola from the incompetent execs. It’s not designed to deliver the project to the initial lowball quote.

      Once an exec has made the dumb decision to sign up for SAP, they have no choice but to continue to lie to protect their initial stupidity…. and “fact finding” first class trips to Europe.

  8. can any one say exactly what went wrong in the implementation of the new payroll system ? is there communication gap with the high level to low level , or any other cases , can any one say the conclusion and the recommendations so that to overcome the problems faced by QH department . please say me its a bit urgent

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