The public health system of the Australian state of Queensland required a new payroll system. In 2007, a contract was issued to IBM to provide a new system for $6.19 million Australian dollars.

The resulting system did not work, and went over budget by $1.1 billion. Yes, read that again.

Jeebus.

43 thoughts on “Splutter”

  1. $1.1bn (AUD) is the estimate cost to the taxpayer, not how much it went overbudget.

    I imagine this cost includes the legal wrangling and payments to sort out the mess of workers not being paid and such, along side something that was likely well over budget too.

    Still a humongous failure. Promotions and state gongs for all those involved

  2. Always easiest to budget when you are spending some elses money and hold no real skin in the game. Amaxing how in the US election the massive debt, government waste and unfunded pension liabilities are not even a topic of discussion. Of course here in Canada our pm believes that budgets balance themselves. Makes the cost of projects easier to plan as things will just happen to work out on a long enough time line.

  3. I don’t get it. If you make a deal for something to cost x and then the contractor sends you a bill for 200x then you tell them to fuck off. It’s like the Wembley stadium fiasco. Hundreds of millions more than the agreed cost. Why didn’t the government just tell the contractors to fuck off and get someone else in after demanding any payments back? It makes a mockery of bidding for a contract when you can just increase the cost as you please later.

    Maybe I’m missing something but it’s how it seems to a layman like me.

  4. Easily done in the absence of accountability, as is typical of the Public Sector across the globe (maybe excepting the Nordics?)

    Meanwhile over on TRUk, fertile ground for some commentary me thinks – two ‘gissa job’ columns to the Labour party and ongoing spats with Mcdonnell over his exalted status not being guaranteed. A bizarre but not uncharacteristic ‘pause for reflection’ on how ‘much was different in May’ things were, and also an anecdote that apparently a 31% swing in a Sheffield by-election signifies the Libdems are back. Seriously, I can well understand why Murphy Richards gave it up – how can you satirise the real thing?

  5. ElReg coverage (from early April) : http://www.theregister.co.uk/2016/04/07/court_drops_ibms_costs_on_queensland_government/

    The project seems to have started back in 2007, with various disputes since then (and a settlement in 2010). Seems that although the project spec from the Queensland government was “overly flexible”, so probably utter bollocks, and their project management was shit, IBM, and the bloke responsible for appointing them as prime contractor seem to have wildly taken the piss (and possibly skirted close to outright corruption, tho’ they can’t seem to work out how he would have benefited).

    But the real problem seems to be politics, ‘cos the Angels in the health service didn’t get paid properly.

    I don’t understand why any firm would want to get involved with any government project at all, given the history of these things. Unless some of the overrun costs are basically danger money for reputational risk.

  6. Rob: If the original budget was $6m, then it’s a rounding error in the eventual cost so $1.1bn can be both the amount over budget and the eventual cost…

  7. Dongguan John:“I don’t get it. If you make a deal for something to cost x and then the contractor sends you a bill for 200x then you tell them to fuck off. I”

    Ah, but this is a public sector procurement, so you need to allow for the fact that the original spec will have been tossed out the window as more and more demands are made of the system and the bill is increased exponentially, because, hey, it’s not OUR money, is it?

  8. $6 million to manage payroll for not very many people in a not very populous state.
    Seems a lot to me.
    Whatever did they do before computers were invented?

  9. @Custard Cream

    But, can it handle inflationary pay rises, millions of discretional bonuses and excessive compensation if/when laid off??

    And there would be no need for a commissioning committee nor room for kick-backs (or at least 100 expensive lunches).

  10. > I don’t understand why any firm would want to get involved with any government project at all, given the history of these things.

    The opportunity to bill $1100m for $6m of work sounds well worth it to me.

  11. I think Julia’s right – a lot of the time, the people bidding for the contracts have dealt with the state before so know to make sure the contract specifies exactly what the initial estimate covers. When the state decides it needs more features added or things changed, there is a commensurate charge.

    What we really need is whoever on the state side of this approved the cost increases to be shot personally liable for the overrun? They need to get the specs for what they need in place before they open it up for bidding, then not change it without good reason.

  12. Old system not supported beyond June 2008.

    Govt decide to do something about it in 2006. Choose IBM in late 2007.

    What could possibly go wrong?

    Incidentally, I remember a DOS program written in the late 80s which worked out your tax.

    Perhaps Big Blue used that one.

  13. I have no idea how much over budget the public sector project I’ve recently been laid off from went.

    It was a huge amount. And I billed a perfectly reasonable share of it.

    The specification was dreadful, the project management was inept, the partner selection was horrific (as a clue, one of the Big 4 were involved and they were by far and above the most competent people in the room – this gives you an idea how bad it all was.)

    And, this was a GDS Exemplar project (although I now see it has mysteriously disappeared from the relevant gov.uk pages. Hmm.)

    Although, maybe to your relief, there have been sackings. Not necessarily branded as “for extreme incompetence” but people moved on and not into another arm of government service.

  14. JuliaM is spot on. I’m not going to defend IBM (I’ve dealt with them), but these are rarely “contractor overruns”. They’re about spec changes.

    What’s baffling is that Payroll is normally pretty much off-the-shelf and has been for decades. There’s a load of companies out there that do a software-as-a-service payroll from like £5/employee/month and cover bonus pay, overtime etc etc.

    I did a bit of work in local government recently. Actually, generally quite well run in the software area. And I’m convinced it’s because budgets have been slashed. So, instead of people going to some fancy agency with smart offices, Macbooks and Aeron chairs, they hired in a small little company (who hired me) and they kept things pretty simple. They had budget of about £20K. So, they went with a lot of stuff where I told them they could have 95% of what they wanted for 10% of the cost. And they were like “OK, we’re not that bothered about xyz”. If they’d had 10 times that budget, they’d have gone with all the pointless little features.

  15. “they’d have gone with all the pointless little features”

    And then spent a fortune in configuration and BPR trying to amend processes internally to use said pointless feature.

  16. Why didn’t they just employ an outside agency to do the payroll? Someone like Accenture? Given that employment taxes are fiddly and constantly changing, why not use a bureau who does this for hundreds of companies rather than try to recruit and retain the expertise themselves?

  17. I’m reminded of the despair.com poster on consulting:

    “If you’re not part of the solution, there’s good money to be made prolonging the problem”.

  18. @SJQ A billion dollars on staff just to make sure other staff get paid?

    I CBA to find that in the report but – if true – it must warm the stoney cockles of your little SJW heart, Paul.

    I like this:

    ‘QH was the largest single department of government with the most complex workforce arrangements.
    About 80,000 staff (the numbers varied over time) were employed under two different Acts of Parliament,
    were covered by 12 different industrial awards and were affected by six different industrial agreements.
    These together created more than 200 separate allowances and as many as 24,000 different combinations
    of pay. Of all departments it was the most difficult for which to design a payroll system’

    But of course, there is no waste in the state sector.

  19. BiW: “What’s baffling is that Payroll is normally pretty much off-the-shelf and has been for decades. “

    Yes, and it works very well for off the shelf private companies. Being they all (mostly) have the same requirements for paying their staff.

    But then you look at all the HR requirements that the public sector demand – the Byzantine regulations and special categories, etc – and you begin to see why no off the shelf package will ever work…

  20. BiW: “And they were like “OK, we’re not that bothered about xyz”. “

    Translation: “Oh, thank gawd! There’s no department of x, y or z who will demand to stick their oar in and ensure their requirements are met!”

  21. The contracts I have been involved with had clauses with additional fees for changes, plus the cost of whatever needed changing had to be added in, plus shortfall penalties if one party didn’t do as promised etc.
    Admittedly have to be a right idiot to decide to move a project after the work has already started on the foundations and parts have already started being cast…. the UK government managed it.
    Civil servants and MPs, people who should not be allowed to change anything in the specifications once contract is signed. Instead leave it to grownups.

  22. Yep- spec changes because the client couldn’t be bothered to articulate what their problem was, what they needed to fix it, and define the areas that were to be agreed post signature and the rates that were to be paid to deliver the additional work for those grey areas.

    Classic, classic public sector shenanigans.

    From the NHS system to the BBC DMI (a storming NAO write up on that one, well worth the read) this has happened so often, I am no longer surprised.

    The big 4 are clever buggers at the contracts bit- speccing a project isn’t that hard, but it has to be done right- its the foundation for all that follows. The wonder is that governments can so frequently fuck it up.

  23. SJW,

    > “The 1.1bn AUD (or more) is mainly the cost of staff to operate the dysfunctional system over some number of years.”

    The link you supplied is to a report published in 2013. The initial contract was signed in late 2007, so let’s assume a five-year time period. That means $200m a year, which you say is mainly the cost of staff. Let’s assume each employee costs the organisation $125k a year (including pension, benefits, employer’s taxes, desk space, etc.). That adds up to 1,600 people a year. It doesn’t take that many people to operate a payroll computer. Even 10% of that figure would be too much. Something else is going on. (Unfortunately I don’t have time to read the whole report.)

  24. ” After many months of anguished activity during which employees of QH endured hardship and uncertainty, a functioning payroll system was developed, but it is very costly. It required about 1,000 employees to process data in order to deliver fortnightly pays. It is estimated that it will cost about $1.2B over the next eight years”

    They’re not operating a payroll computer, they’re doing stuff manually. More information here.

    (I’m not defending any of this, just offering information)

  25. ‘Why didn’t they just employ an outside agency to do the payroll? Someone like Accenture?’

    Or Computer Sciences Corporation?

    ‘Classic, classic public sector shenanigans.’

    Zactly. My former company put in SAP. It didn’t do a lot of good things we did with our proprietary systems. Management said, too bad, start doing things the way SAP has them programmed. Instead of government adapting to existing software, they tried to program their mess.

  26. Gamecock – spot on. I was once on a team designing a re-implementation of Oracle Financials. Every departure from what could be supplied by vanilla Oracle had to be justified to a board of individuals tasked with bringing the project in on or under budget. It meant changing a couple of processes but the effort was worthwhile because we ended up with an implementation that was easily supported and didn’t depend on a mass of our IT staff supporting bespoke add-ons. The implementation we were moving away from, for example, had its own payslip format, rather than one of the dozen or so available from standard Oracle.

  27. “They’re about spec changes.”, as BiW says.

    Big IT consultancy arrives, looks at the half-baked spec, licks its lips and quietly inserts mega-charges into the contract for spec changes. Civil servants are hopeless at writing specs for anything.

  28. This QHD report may just have edged the BBC DMI one from the top spot of Public Sector IT inquests.

    It’s a fucking horror show. The procurement bit alone is worse than anything else I’ve seen. Shit, the selection of the consultants to review the previous fuckups (that the IBM appointment was supposed to resolve) is far more cowboy than you’d get away with* in your averaged developed country (insert joke about Australia here).

    To reiterate, the average man on the street could have done a better job selecting the prime contractor. Shit, you would have been better off just picking one at random (or maybe not- that seems to be how they hired the unfortunately evocative Mr Burns, who did much of the shenannigans that followed). At least if you pulled a random IT company out of the hat the selection process would have been understandable.
    Fuck knows what they were playing at.

    Oh, yeah, Aus had a lefty government at the time, right?

    *Normalisation for public sector behaviours taken into account

  29. Seem to recall there were s number of allegations of corruption, ex-employees of IBM being involved in process, conflict of interest stuff, etc.

  30. “Queensland Health is a department of the Government of Queensland which operates and administers the state’s public health system. The Minister for Health and Ambulance Services Cameron Dick is responsible for the department,[4] which consists of the Department of Health and 16 Health and Hospital Services.[1][5] Queensland Health had 64,192 employees and a budget of $11.05 billion in the 2012-2013 fiscal year.[1]”

    So it requires 1000 people to calculate the wages of 64000 other people every week? 12.8 calculations per wages dept employee per day each day of a 5 day week?

    Don’t put another shrimp on the Barbie SJW–the smoke is getting in your eyes.

  31. Tim in yyc,

    “Amaxing how in the US election the massive debt, government waste and unfunded pension liabilities are not even a topic of discussion.”

    While bathrooms and wedding cakes draw a lot of attention people are still discussing economic issues. The big problem is the lack of intelligent thought in most of the economic debates. Usually the conversation devolves into the Blame Obama Drink Game™.

  32. Surreptitious Evil:

    as a clue, one of the Big 4 were involved and they were by far and above the most competent people in the room

    One could take this to mean the Big 4 are more competent than you. :-p

    (Well, it does fit your handle.)

  33. ‘The big problem is the lack of intelligent thought in most of the economic debates.’

    No, the problem is ignorance. Finance and economics for the inexperienced cannot be rationalized by ‘intelligent thought.’

  34. >Oh, yeah, Aus had a lefty government at the time, right?

    Australia is a federation. There are six state governments as well as a federal (national) government. These vary in terms of politics, customs, and competence. Australia’s political parties are essentially state parties that are federated at the national level to various degrees to fight national elections. Left and right don’t necessarily mean the same things in Australia as they do in the UK.

    The federal government had nothing to do with this debacle – it was the state government of Queensland. Out of the states, Queensland is known as one of the more corrupt.

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