Queensland health payroll system commission of inquiry

This is the author’s version of a work that was submitted/accepted for pub- lication in the following source:

Eden, Rebekah & Sedera, Darshana (2014) The largest admitted IT project failure in the Southern Hemisphere: A teaching case. In Proceedings of the 35th International Conference on Information Systems : Building a Better World Through Information Systems, AISeL, Auckland, New Zealand.

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Thirty Fifth International Conference on Information Systems, Auckland 2014 1

The Largest Admitted IT Project Failure in the Southern Hemisphere: A Teaching Case

Teaching Case

Rebekah Eden

Information Systems School, Queensland University of Technology 2 George Street, Brisbane, QLD,

Australia, 4000 rg.eden@qut.edu.au

Darshana Sedera Information Systems School,

Queensland University of Technology 2 George Street, Brisbane, QLD,

Australia, 4000 d.sedera@qut.edu.au

Abstract

The Queensland Health implementation project failure is the largest IS failure in the southern hemisphere to date, costing $1.25 billion AUD. This case highlights the importance of systematically analysing project failure. It examines the case organization details, royal commission report, auditor general report and 118 witness statements pertaining to the Queensland Health implementation project. The objective of this teaching case is (1) to illustrate the factors that contributed to Queensland Health’s disastrous implementation project and (2) to understand the broader applications of this project failure on state and national legislations as well as industry sectors. The case narrative and teaching notes are appropriate for both undergraduate and postgraduate students studying IS and project management subjects.

Keywords: Teaching case, success and failure, failure case, case study, health IS

The Background

There is a wealth of literature on the implementation of large IS implementation projects (Eden et al. 2012). Such studies focus on critical success factors (Francoise et al. 2009), project management issues (Bernroider 2008), and in general, the antecedents of successful IS implementations (Tsai et al. 2011). Cases of IT failure are not uncommon in practice. For example, Bridgestone, the world’s largest tire company (Bridgestone 2014) experienced system failures upon going live with an Enterprise Resource Planning (ERP) system, which disrupted key business processes, ultimately resulting in a purported $200 million USD in lost revenue (Krigsman 2013). Additionally, Marin County in California experienced total implementation failure, which resulted in abandoning the implementation project. This project is said to have cost approximately $30 million USD (Krigsman 2010). Consequently, large IS implementation failure is estimated to cost three trillion dollars per year (Krigsman 2012). Panorama Consulting (2013) reports that 53% of ERP systems implementation projects exceed their budgets, and 61% exceed their allotted timelines.

The objective of this teaching case is to demonstrate project governance and policy issues pertaining to Information Systems (IS) implementation projects. The teaching case observes the largest IS failure in the southern hemisphere, which cost Australians $1.25 Billion AUD ($245 million AUD has been allocated for fixing the system, and it is estimated to cost $1,000 million AUD to maintain and operate the system,

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which is $530 million AUD greater than anticipated prior to going live). The case narrative has been developed using the Royal Commission hearing transcripts, the Auditor-General’s Report and the Royal Commission’s report, in which 118 witnesses were interviewed. Hence, the approach used in this study is inductive, as opposed to theory driven deduction. This teaching case is appropriate for technology and project management subjects for both bachelors and postgraduate students within management and IS disciplines. 1

Introduction

The health department of the state of Queensland in Australia (henceforth referred to as Queensland Health) payroll system failure is said to be the most spectacular Information Systems (IS) implementation failure in the Southern Hemisphere. It was 18 months behind schedule and 300% over budget. Additionally, upon going live a large number of Queensland Health employees, including doctors and nurses, were either incorrectly paid or not paid at all. The total project costs including implementation, stabilization and maintenance is estimated to be approximately $1.25 billion AUD (KPMG 2012). There were heavy casualties for the failure, including the resignation of the minister of health, industrial strike action and in some cases, loss of staff members to other employers. The state government of Queensland embarked upon the highest judicial form of enquiry in Australia (Royal Commission) to examine the cause of the failure and to provide a series of recommendations to be applied to future large governmental IS projects. Findings of the Auditor General and Royal Commission reports highlight issues pertaining to project management and governance.

“Those causes were: unwarranted urgency and a lack of diligence on the part of State officials. That lack of diligence manifested itself in the poor decisions which those officials made in scoping the Interim Solution; in their governance of the Project; and in failing to hold IBM to account to deliver a functional payroll system.”

The Honourable Richard N Chesterman (2013, p. 217), Commissioner

“Whilst the accountability for payment of staff within Queensland Health ultimately lies with the Director-General, Queensland Health, I consider that the governance of the project was unclear between his responsibilities and the responsibilities of the Director-General, Department of Public Works as the Accountable Officer responsible for the management of CorpTech and its responsibility for the implementation of the whole of government HR solution.”

Glenn Poole (2010, p. 2), Auditor General

This teaching case further examines the reasons for the disastrous Queensland Health IS implementation project. Included in this teaching case are: (1) an overview of the environmental and technological project drivers; (2) the roles and responsibilities of the key stakeholders involved in the project; (3) the implementation approach; (4) the outcome of the implementation project; and (5) a discussion into the reasons for the implementation failure.

The Organization and its Systems

The Queensland Government consists of predominantly three types of organizations: (1) Government agencies and departments; (2) Government owned corporations; and (3) General statutory bodies. All of which report to both the Queensland State Treasury and their respective ministers in the Queensland Parliament. With Queensland state government elections occurring every three years, ministers and corporate goals ultimately change to be reflective of the strategies of the political party in power. Hence government organizations are turbulent in nature due to the shifting power and embedded bureaucracy.

Queensland Health is the public sector health care provider for the Australian state of Queensland. It provides dental, medical and aged-care facilities in Queensland, which has the most geographically dispersed population of all Australian States. Therefore, Queensland Health needs to ensure that

1 Contact Rebekah Eden for a copy of the teaching notes.

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adequate healthcare services can be provided in the most remote areas of the state (Queensland Health 2013a). Everyday Queensland Health provides hospital services to approximately 40,000 people throughout Queensland. Consequently, Queensland Health is responsible for approximately eighty-five thousand employees (85,000) across 300 sites (Queensland Health 2013b). Furthermore, being a state government department in the healthcare industry, Queensland Health is riddled with substantial layers of bureaucracy (Dunbar et al. 2011), thus adding to the complexity and increasing the difficulties associated with decision making, visibility and accountability. Due to the vast number of employees and their diverse skill sets there are a substantial amount of complexities inherent in the payment of staff. With, the existing payroll structures yielding more than 24,000 payroll calculation combinations (Poole 2010).

In order for Queensland Health to pay their employees, the disparate payroll system, LATTICE and the ESP (Environment for Scheduling Personnel) rostering engine, was utilized. The LATTICE and ESP solution was rolled out progressively over six years from 1996 to 2002. However, the LATTICE solution required a substantial amount of manual interventions to accommodate the complex award and incentive structures evident within Queensland Health (Poole 2010). Yet, in 2005, just three years after the progressive rollout was completed, Queensland Health received notification from the LATTICE system vendor, Talent2, that their existing LATTICE system was becoming obsolete and was no longer going to be supported, with services and updates ceasing on the 30th June 2008 (Chesterman 2013). Consequently, in order to continue paying their employees Queensland Health needed to consider appropriate software to replace the obsolete LATTICE system.

Additionally, in 2003 the Queensland State government formally established a whole of government Shared Services Initiative (SSI) mandating that all state government departments replace their existing legacy system with a standardized software solution that incorporates SAP HR and SAP Finance (Chesterman 2013). The overarching objective of the SSI was to consolidate technology and resources through delivering a high quality solution with standardized business processes (Queensland Government 2006). The SSI was expected to deliver the following benefits: (1) increased opportunities through enabling workforce mobility; (2) increased visibility into the cost of services; (3) reduced data duplication through the consolidation of systems; (4) reduction in costs associated with licensing agreements; (5) reduction of personnel; (6) achieve economies of scale; (7) enables the government organizations to focus on their core competencies, thus increasing the standard of service; and (8) consistency of HR and finance information across all government agencies (Chesterman 2013; Queensland Government 2006).

As part of the SSI the Queensland Government established CorpTech within the Queensland Treasury to oversee the standardized implementation across all state government departments (Poole 2010). Therefore CorpTech was responsible for overseeing the consultant selection process (Request for Information, Request for Proposals, and Invitation to Offer) and managing the consultant organizations. CorpTech sent out a Request for Information (i.e. document used to gather information and shortlist potential consultant firms) on the 2nd of July 2007, in which four consultant firms responded, Accenture, IBM, Logica, and SAP (Chesterman 2013). CorpTech then requested detailed proposals (i.e. document used to determine the appropriateness of the consultant firm based on specific organizational requirements) from the aforementioned consultant firms on the 25th of July 2007 (Chesterman 2013). However, prior to the RFI being issued, CorpTech had managed the implementation of SAP HR at the Department of Housing, and SAP Finance at the Department of Justice (Poole 2010). These implementations proved to be quite costly as a substantial number of consultant firms and private consultants had been utilized. Due to the large expense associated with the multiple consultant firms, the consultant methodology for the SSI was changed to the prime contractor model on the 16th of August 2007 (Chesterman 2013). Subsequently, on the 12th of September 2007 CorpTech released an Invitation to Offer (i.e. document used to gather bids from perspective consultant firms), where IBM, Accenture and Logica responded. Ultimately on the 5th of December 2007 IBM officially signed the contract to be the prime contractor of the SSI (Chesterman 2013).

During the tender process IBM put forth the use of “Workbrain” rostering system to be utilized to perform the award interpretation and rostering of staff members (Chesterman 2013). Workbrain is a best-of-breed solution for awards interpretation. If Workbrain was not utilized the awards would have needed to be hardcoded into SAP using the ABAP programming language, which is a complex, time consuming, and

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labour intensive process (Bloomfield 2013). Hence, future SSI projects were to utilize SAP HR, SAP Finance and the “Workbrain” rostering system.

Whilst the government had formed the SSI prior to LATTICE notifying Queensland Health of the discontinuation of support; the unsupported LATTICE system was the predominant project driver as ongoing support was critical. Therefore to mitigate the risks inherent with an obsolete and unsupported system, Queensland Health undertook the SSI, thus alongside CorpTech and IBM replaced their system with SAP HR, SAP Finance, and the “Workbrain” rostering solution. Thus, the purpose of the WorkBrain system was to process the timesheets and transport them to the SAP system. SAP was then used to further process the timesheets into a format that was acceptable to the appropriate financial institutions, so that employees could be paid. The focus of this case narrative is on the SAP HR and WorkBrain rostering solution. The 85000 employees and the complex award structures within Queensland Health resulted in a complex and challenging implementation project.

Implementation Team

The project to standardize Payroll and Finance Systems was mandated for all government departments. Therefore a specialized unit of the government (referred to as CorpTech) was responsible for managing all Payroll and Finance implementation projects for the relevant government departments. As a result the implementation at Queensland Health involved three primary stakeholder teams: (1) Queensland Health staff members were the eventual end use