Queensland Government Bans IBM from IT Contracts

That didn’t take long.

A day after the Queensland Health Payroll System Commission of Inquiry delivered its 264-page blistering report (pdf) on the Queensland Health payroll system project cock-up, which I have been following for the past few years, Australia’s Queensland Premier Campbell Newman released a statement today in which he banned IBM from entering into “any new contracts with the State Government until it improves its governance and contracting practices.” This comes right on the heels of last week's news that Pennsylvania had opted out of renewing its contract with IBM to modernize the state's unemployment compensation computer system, and yesterday's news that a Credit Suisse analyst cut IBM's stock rating, saying that, “Organically, we believe IBM is effectively in decline.” It's starting to seem like a very bad month for IBM indeed.

Newman cited as a reason for the ban the commission report’s finding that the fiasco—which saw an effort to replace Queensland Health’s legacy payroll system at an expected cost of A$6.19 million (fixed price) explode into one that will cost around A$1.2 billion to develop and operate properly when all is said and done—“must take place in the front rank of failures in public administration in this country. It may be the worst.”

Maybe the scariest thing for Queensland taxpayers reading the report’s conclusion was that the commission wasn’t sure that this farce was the worst in Australian government’s history. Maybe it was unsure because the commission has so many worthy candidates to choose from.

Newman went on to say, “It appears that IBM took the state of Queensland for a ride.”

Newman’s statement warned that before IBM will be allowed to bid again it “must prove it has dealt with past misconduct and will prevent future misconduct.”

Naturally, IBM took exception to the report’s conclusion, saying it was at best only minimally responsible for the project blunder—a major admission for the company which has long insisted it “successfully delivered” what it was contracted for. An IBM spokesperson is quoted in an article today at the Delimiter as saying, “IBM cooperated fully with the Commission of Inquiry into Queensland Health Payroll, and while we will not discuss specifics of the report we do not accept many of these findings as they are contrary to the weight of evidence presented.”

Additionally, the IBM spokesperson stated, “As the prime contractor on a complex project IBM must accept some responsibility for the issues experienced when the system went live in 2010. However, as acknowledged by the Commission’s report, the successful delivery of the project was rendered near impossible by the State failing to properly articulate its requirements or commit to a fixed scope. IBM operated in a complex governance structure to deliver a technically sound system. When the system went live it was hindered primarily through business process and data migration issues outside of IBM’s contractual, and practical, control.”

“Reports that suggest that IBM is accountable for the $1.2 billion costs to remedy the Queensland Health payroll system are completely incorrect. IBM’s fees of $25.7 million accounted for less than 2 percent of the total amount. The balance of costs is made up of work streams which were never part of IBM’s scope.”

In other words, all that money that Queensland has had to spend on those "work streams" to get the payroll system to work correctly since we were kicked out ain’t on us.

IBM’s statement, however, studiously avoided tackling head-on a commission conclusion in the report that: “The only finding possible is that IBM should not have been appointed” to the contract in the first place in part because of “ethical transgressions” on the part of some of its employees, including “the obligation not to use the State’s confidential [bid and proposal] information” that it had somehow couldn't explain came into its possession from a restricted government database along with the apparent privileged insider information from a government consultant to the project who happened to be a former-IBM employee.

The report damningly states that IBM’s “conduct shows such disregard for the responsibilities of a tenderer, and a readiness to take advantage of the State’s lapse in security, as to make it untrustworthy.”

This is not to say that the government was blameless in the shamble, either. The commission report states that:

“a. the scoping of the system (ie its definition) was seriously deficient and remained highly unstable for the duration of the Project. That being so, and although the problem was firmly known to each party, no effective measures were taken to rectify the problem or to reset the Project;

b. the State, who would ultimately bear the risk of a dysfunctional payroll system, gave up several important opportunities to restore the Project to a stable footing and to ensure that the system of which it would ultimately take delivery was functional. [An expert] characterised the approach of both parties as being ‘Plan A or die’;

c. the decision to Go Live miscarried, both because it ought to have been obvious to those with responsibility for making that decision that the system would not be functional and because the decision to Go Live involved no proper and measured assessment of the true risks involved in doing so;

d. the system, when it went live, failed to function in a way in which any payroll system, even one which was interim and to have minimal functionality only, ought to have done.”

The report did “clear” former Premier Anna Bligh, former Health Minister Paul Lucas and former Public Works Minister Robert Schwarten of any wrong doing in the decisions they made during and after the screw-up because the three politicos were merely following the advice given to them by their senior public servants. However, the report did not endorse their decisions as necessarily being correct: it notes that, “Those who read the Report, and have an interest in good government, can judge for themselves” whether the decisions made by the former senior Queensland politicians were “improvident” or not.

The commission report makes for a jolly good read for those students of major government IT project catastrophes. I found nothing in it particularly surprising or what I haven't been writing about for years here at the Risk Factor, and the numerous recommendations for the government for avoiding misadventures in the future can be summed up as, “Don’t take on IT projects that you don’t have the professional competence or capability to ensure you aren’t being taken for a ride.”

Good advice that undoubtedly everyone will agree with but will also be studiously ignored in practice.

Photo: IBM logo/Wikimedia Commons, Denied stamp/iStockphoto

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