IBM – Queensland Disaster
In December 2007, Queensland granted a contract to IBM to create an application to manage
payroll for Queensland’s health department. IBM offered $6 million to finish the project by mid-
2008. Following a series of unexpected technical problems, IBM informed the state of
Queensland that the project would cost $27 million. For several years, the project dragged on,
with the payroll platform failing to work correctly. In the meanwhile, thousands of employees
were not paid, while others were overpaid.
Despite its affiliation with a global digital leader, this was IBM Australia's first attempt at delivering a
project of this size. That fact was not helpful considering that Queensland Health was probably the
most complex of the Australian agencies needing the overhaul and was perhaps not the best
candidate for IBM's first go.
By the end of the project, the cost had risen to $1.2 billion, which was 16,000% more than the
original. As a result, the state of Queensland barred IBM from working on any further
government projects and sued IBM to recover its losses. Apparently, Queensland had learnt
that a well-known seller might produce notorious outcomes.
IBM should never have been appointed as the prime contractor in Queensland’s failed health payroll
project, according to the finding of the Commission of Inquiry that investigated the bungled project.
The inquiry, which ran for nearly three months at a cost of AU$5 million, heard from some 50
witnesses, including former premier Anna Bligh, former health minister Paul Lucas, and senior IBM
executive Bill Do.
But perhaps the project's worst failure was caused by the inability of team
leadership to adequately plan and test the system during the development
process. Back in 2010, because of time constraints and cost overruns, it was
determined to let the system go live without testing, which resulted almost
immediately in over 35,000 payroll anomalies. Thousands of workers were
underpaid or didn't receive payment at all, while the system inadvertently
overpaid thousands of other employees by a total of AU $400 M. Queensland
has consequently spent millions more collecting those unearned funds from
their employees; as of July 2017, almost 32,000 QH workers still owed $38 M
in payroll overpayment attributable to the failure of the QHS Payroll Project.
The state paid additional millions of dollars pursuing investigations into
the causes of the failed project, each of which identified the list of
factors cited above, as well as numerous other contributors to the
debacle.
Closing Thoughts
As a consequence of Queensland Health’s disastrous payroll implementation project, the
Queensland Government changed their Information Technology (IT) strategy and governance
procedures.
Furthermore, the Queensland Government IT audit specified a series of constraints that must be
placed on high-risk projects, which include the following:
1) project management personnel must be of the highest quality;
2) rigorous application of the Queensland Government project and program methodology;
3) the project must be approved by numerous chains of command, and
4) a reporting regime is to be established to increase the visibility of the costs associated with IT
projects.
When IBM was selected it was because of the expertise to replace the
Queensland Health payroll system. The government didn't ask IBM about the
complexities," he told the court. They just assumed IBM would do the analysis
to deliver the project. That was the bottom line."
When global IT giant IBM won a $6 million contract off the Queensland
government in 2007, they could hardly have guessed that the project would
snowball into a $1.2 billion nightmare and end up being labelled the worst
failure in the history of public administration in Australia.
The rollout of the health payroll system – which failed so spectacularly that
80,000 doctors, nurses and health professionals were over-paid, under-paid
or not paid at all – is a text-book example of how not to implement a large-
scale IT project.
There can be multiple reasons why projects fail. The combination of
people, processes and technology are a breeding ground for tension
and for projects within major enterprises, these tensions and the
eventual fall out are magnified by the sheer size of the project.
Common causes of project failure include insufficient or
inexperienced and/or inadequate resourcing, poor communication,
misaligned goals and expectations, poor technology selection,
insufficient funding.
Chesterman, in his conclusions to the report, noted that the Queensland Health
payroll systems upgrade would serve the state’s public sector as “an example of
serious failure, both because of the sharp increase in the price paid and the
waste of public sector resources”
Do not rush the requirements: to avoid scope creep or cost blow-out, take the time to define
requirements properly. This will highlight any issues, challenges or risks to the project that can
be solved before they arise. Like architecting a building, well-thought out and detailed
requirements will be the baseline and master document in a successful project.
2. Get watertight contracts with your suppliers: one of the major strengths of large system
integrators is their legal teams and contract management processes. Engage your legal team and
consultants experienced specifically with payroll systems contracts, align the contract with the
scope from the vendor selection process and remain aware of contract breaches. These will
ensure contracts will support a successful conclusion and a positive working relationship
between all parties.
3. Make sure you’ve got the best team working in your interest: The vendors and Systems
Integrators of payroll systems have their own definitions of success for a project – their first
priority will always be to ensure the project makes money for them. In order to ensure that the
client’s best interests are always being looked after, it’s important that the client engages the
most experienced and knowledgeable people to look after their success.
4. Communicate, communicate, communicate: One key failing of the QH payroll disaster was a
lack of stakeholder engagement, evident leadership and a building of department silos
As the prime contractor on a complex project IBM must accept some
responsibility for the issues experienced when the system went live in 2010.
