Queensland Health Payroll System Failure Report

The inquiry headed by Richard Chesterman has released the "Queensland Health Payroll System Commission of Inquiry Report" (31 July 2013). The 264 page report looks into the reasons for the failure of the IT system development for the Queensland Department of Health. The cost of additional manual payroll processing due to the failure of the automated system is $1.2B over eight years. The commissioner recommends that the Queensland Government apply an appropriate structure to oversee future large ICT projects and staff have skills in project management. This document should be required reading for all students of computer systems development.

The building of large corporate computer systems is a complex, high risk endeavor, even where those carrying out the task are honest and competent. When at the Australian Department of Defence one of my first tasks was to review the progress of a personnel system development. Along with other staff I reported the project had little chance of success and it was abandoned. A new project was started, only to be scrapped some years later. A third attempt, using package software, was successful.

Over the last ten years I have been engaged as an expert witness to assess failed IT projects, which have been the subject of court action between the developers and their clients. From reading the documentation for these projects, there is a general pattern: after the initial enthusiasm and wish to do the project properly, there are setbacks about one quarter the way into the project. Rather than make a decision stop at that point and carry out a review (as  project methodology requires), a non-decision is made and the project continues in the hope things can be fixed up. From this point increasingly desperate attempts are made to get the project back on the original track (when the correct procedure would be to devise a new plan, or stop). In every case the matter has been settled out of court and so the evidence of experts is not made public, avoiding embarrassment to the computer company and their client. The Queensland Health Payroll System Report provides a valuable public study of how such computer projects fail.

Chesterman writes of the project:

"Its failure, attended by enormous cost, damage to government and impact on workforce, may be the most spectacular example of all the unsuccessful attempts to impose a uniform solution on a highly complicated and individualised agency. ...

The system did not perform adequately with terrible consequences for the employees of QH and equally serious financial consequences for the State.

After many months of anguished activity during which employees of Queensland Health 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 pays11. It is estimated that it will cost about $1.2B over the next eight years12. ...

The replacement of the QH payroll system must take a place in the front rank of failures in public administration in this country. It may be the worst. ..."

Table of Contents

Introduction 9

1. Procurement 15

1. Introduction .15
2. Reviews of the SS Initiative 16
3. Request for Information (RFI) 36
4. Request for Proposal (RFP) 37
5. Invitation to Tender (ITO) .57
6. Procurement: Conclusions .85

2. Contract and Project Management 90

1. Introduction .90
2. Overview 92
3. The Contract 99
4. Scoping 100
5. The Deficient System and the Opportunities to Redress it ..113
6. The Decision to Go Live 143

3. Settlement 170

1. Introduction 170
2. Preliminary Observations 171
3. The Supplemental Agreement 171
4. Factors that Influenced the Decision ...194
5. Mr Reid 206
6. Mr Grierson 208
7. Conclusions 210

4. Summary 213

5. Recommendations 217

1. Introduction 217
2. Lessons to be Learned 217
3. Project Management for Future Projects 220
4. Future of the Queensland Health Payroll System 220
5. Principles of Project Management 221

Appendicies 225

1. Establishment and Operations 226
2. QH Payroll System Timeline 230
3. Opening Remarks 232
4. Copy of Public Notice 244
5. Acknowledgements 245
6. Inquiry Staff 246
7. Legal Representatives 247
8. Exhibits List 248
9. Report Glossary 258