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OIA docs: Ministry considered dumping Novopay five months before launch; evaluation factors revealed

Five months before Novopay went live, the Ministry of Education considered dumping the troubled payroll system, a confidential memo reveals. It also says the Ministry was concerned about a veiled threat of legal action from the software's creator, Talent2, if its contract did get terminated.

The memo, dated April 19, 2012, is from Ministry of Education chief information officer Leanne Gibson to deputy secretary of schools Anne Jackson and Ministry of Education secretary and then chief executive Lesley Longstone, with Novopay's board CC'd.

RAW DATA: Read the full memo (PDF)

It details problems with the development of the new system, then recommends options including terminating Talent2's contract, and moving to a hybrid system incorporating elements of Talent2's Novopay and that of the previous system, Datacom's Datapay.

However, it also expresses concern about a veiled threat from Talent2 to take legal action if its contract is terminated.

"Talent2's warning letter hints at the litigation strategy that they may employ should a material breach notice be issued," the memo says, referring to correspondence from the Novopay developer.

The memo was posted to a public section of the Ministry's site, along with hundreds of other documents as some files were released under the Official Information Act. But it seemed the Ministry spilled more than it intended as some files were soon removed from the site - including some that allowed redacted (censored) information to be accessed via a simple copy and paste.

The first - or one of the first - to spot the so-called #novodump was Tony Meyer, who lists himself on Twitter as a "developer, teacher, dad."

A briefing document to Ms Longstone has also emerged. Dated September 18, 2012, it says a "KPI [key performance indicator] holiday" is being negotiated with Novopay.

Penalties in the contract would not be enforced until November 2. But it also notes the Ministry proposes withholding payments because of "outstanding software defects."

It notes "Talent2 has not yet agreed the variation".

Documents released under the OIA say the Ministry owes teachers and other staff $12 million after non-payments or under-payments via Novopay.

And that schools have sent 125 invoices to the Ministry for a total of $1.2 million for admistrative costs incurred because of the Novopay fiasco.

The system had 147 known defects when signed off by ministers Hekia Parata, Bill English and Craig Foss.

Novopay documents flood onto the web
After Mr Meyer and others stumbled on the #novodump files, and started spreadhing the word, the Ministry removed many of the files from its website over the hour or so.

But not before more than a dozen sensitive Talent2-related files were copied, and spread around the web, with several people making them public via Dropbox and Kim Dotcom's Mega. They include William Leith (@williamleith), and one-time Datacom employee turned concerned observer Ben Gracewood (@nzben).

The Ministry has now removed many from its site, or at least public areas of its site.

It did not immediately respond to a request for clarification on which documents had been released intentionally.

ABOVE: Among the documents leaked today was this table (of unknown date) that ranks three contenders for the Ministry' payroll contract: 1. Talent2. 2 EDS (now owned by HP) and 3. Datacom. Talent2 was alwarded the contract in 2005. Click to enlarge.

On Thursday, Economic Development Steven Joyce announced a ministrial inquiry into the Novopay fiasco.

The Novopay system, developed by Talent2 at a cost of around $30 million, is also now the subject of a technical audit led by Deloitte chairman Murray Jack (although the volume of documents that has spilled onto social media today is such that any concerned citizen can now mount their own inquiry).

Mr Joyce also revealed the acting secretary of education has also re-opened dialogue with previous payroll provider Datacom.

More by Chris Keall

Comments and questions

This strongly suggests the three ministers who signed off on the start date of the Nova pay system on the advise of officials were very poorly advised. Ministry "heads" should roll.

Just as well the ministry had the negotiating nous to include a non-performance penalty clause in Talent2's contract, so the taxpayer won't be out of pocket.

Ministry deferred rather than avoided decisive action.

Is this problem caused by software bugs, data entry errors, or both? If data entry, what country is doing this?

Good question!

It's actually both !

147 defects with Novopay...why did the minister fail to read the report?

Summary. Comprehensively out-sold by an Australian. Datacom probably arrogant re keeping the business and are never particularly sales smart upfront.

What does "overall payroll costs are on edge of current funding envelope" mean? Pay more, for less?

Ministry of Education appears like a bunch of n00bs.

No surprise that ministry officials and civil servants have been outsmarted by a fast talking (in this case Australian) vendor but what makes it even worse is their gutless behaviour in being frightened off taking what appears like a totally reasonable course of action because of "veiled threats of litigation" from the vendor.

The correct response would have been "bring it on". The course taken is just pathetic.

Wouldn't take much to outsmart any civil servant. But when it comes to Gladwrapped cut sammies, these guys are kings.

147 as a number doesn't mean much.

As a developer, if I believe another developers code needs to be one pixel to the left, or have a better debug message then I'll file an issue in the issue tracker against it to make sure it gets done at some point. What really matters is the severity of those147 issues are whether they should have been show stoppers or not. What also matters is the end result and how many issues were missed by the QA/dev process and not even included in that 147.

"What also matters is the end result" - spot on, and it's a fiasco.

I suspect some major concept and design defects. These wouldn't even show in the bug count but are probably show-stoppers operationally.

When it comes to the education sector I'm amazed anything works.

Who is on the Novopay board that they mention?