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Novopay blowout of $23.9m as Talent2, ministry ‘overwhelmed’

IT firm Talent2 and the Ministry of Education were "unprepared and overwhelmed" by escalating problems with the Novopay payroll system for teachers.

The ministerial inquiry into the Novopay project paints a picture of departmental failures across the state sector, including the State Services Commission, the Department of Prime Minister and Cabinet, and the Education Ministry.

Authors Murray Jack and Maarten Wevers assessed a project which had its genesis in 1999 and has been through the hands of eight ministers since then.

They found it was signed off with Talent2 "with significant schedules incomplete". There was project creep to the extent the original strategy was eclipsed. Milestones were missed and the ministry tried to negotiate solutions instead of calling Talent2 on the breaches.

Most damning, the report found that ministers were given over-optimistic, inconsistent information that sometimes misrepresented the situation. The authors expressed surprise that financial management of the project did not get more attention.

Costs of the 10-year funding envelope for the project blew out by $23.9 million to $206.4 million, not including indirect costs to departments and schools and Talent2's own cost overruns.

Steven Joyce, minister responsible for Novopay, says he expects the cost over-runs to grow by the time the project is completed.

Among the 15 recommendations the report says the government's approach to major projects should be overhauled to increase scrutiny and improve project management.

Mr Joyce told a media conference in Wellington that a series of papers are likely to go to cabinet in coming weeks in response to the wider recommendations for management of major projects in the state sector.

Last month, Mr Joyce let Talent2 keep the contract to provide New Zealand's public education payroll service after deciding bringing back Datacom would simply exchange one set of risks for another.

The Novopay contract saw Talent2 paid $29.4 million to build the system and $12.5 million a year to run it until 2018.

Penalty clauses in its contract are likely to be invoked to compensate for the botched implementation and Talent2 had already committed significant unplanned resource to try and placate angry educational workers.


Comments and questions

Isn't the truth that this was not caused by Hekia Parata and that the issues span many government departments, ministers and also originate from the last Labour government.

In fact, the current Labour education spokeperson who keeps chirping on like a parrot actually was directly involved in this debacle in the last Labour government.

Parata and Joyce are just confronting and fixing the problem. Labour should be held to account.

Of course others were involved.
I am sorry but it was they who knowingly allowed the flawed programme to go ahead

I blame neither National or Labour but the IT consultants who would have served them both as advisers. The IT gravy train is freaking ridiculous.

Next massive IT scandal is the IRD upgrade.

Totally agree.

I understand the biggest issue was Talent2 and MoE relying on the 80/20 rule - thinking that 80% of issues would be communicated via email / online.

With NZ having our average age of teachers at 55 y/o - most elected to fax or call in errors, meaning both the MoE and Talent2 were not geared up to handle massive amounts of faxes / phone calls and then they got totally swamped in a tsunami of error faxes they weren't equipped to deal with.

Then their "slippage" from original starting point only got worse the more errors that were found / uncovered and, due to volumes, they simply never got ahead of the issue.

Yet, even with all the errors, for a payroll of this size it's still within approx. 2% error rate - comparable to similar-sized payrolls - and certainly similar, if not better, than the last system. Once again, another MSM beat-up on a really big, juicy target?

Certainly, though, plenty of errors and penalty clauses need to be invoked so the taxpayer doesn't hand out corporate welfare.

Amazing! We do not have money to give well-deserved teachers a pay raise but have money to pay for this problem.

The teachers are well paid and should be grateful for what they receive. There are many more deserving industries or employment sectors who should get a pay rise before teachers - and who don't get 12 weeks paid leave a year.

Most people now work extended hours in their jobs as part of their job so teachers bleating that they work after hours is no longer such a big deal.

Let's see. $23M divided amongst 80k teachers is $287 each. That capital investment might fund a salary increase of approx $20 each per year. I'm sure the teacher unions would welcome and agree to that. Not.

However it might fund an online remedial maths and logic course.

Move along, nothing to see here just another example of departmental failure. Nobody at fault, of course.

National has been in power for many years, so the failure is one of National leadership. Surely, a government with such a cost-cutting emphasis should be ensuring large government contracts are run efficiently and that compliance mechanisms are being utilised as intended.

Yes but with IT projects the stuff up is always at the beginning - if the foundation for the project is not set at the beginning then it will become a series of unplanned add ons trying to shore up the foundation.

I am just working on one now - albeit much smaller and am basically redoing 12 months work - and no it wasn't a Government one - not even in NZ.

No surprise here. I said last year, the Ministry of Education will be full of airy fairy educational philosophy and political lobbyists. The complications of actually delivering and operating a practical payroll service would be entirely beyond them. Though I must say, actually delivering misrepresentations in their advice to ministers goes beyond their expected mere incompetence.

Having dealt with MoE staff 4-5 years ago on a smaller software project I can understand how this has gone terribly wrong. MoE staff are not competent to manage software projects of any size - their Ministry seems to be a place where people go when they can't hack it in the commercial world!

National signed this initiative off, even though red flags were raised.

Five other government department IT departments also reviewed this project before it was signed off.

This is incompetence at all levels of government.

From the INCIS debacle on there have been countless reviews, and time after time the SSC and Treasury have issued reports filled with recommendations, a methodology introduced from the UK, all of which were supposed to address the governance of large IT projects. All have failed. There are a number of reasons, not least is the fundamental lack of honesty that is found in the governance of these projects. Senior management simply will not admit they don't know enough about IT or specific projects.
The shinier the report the steering committee is presented with the better, and out comes the tick. Added to the failure of these projects has been the idiocy of continually appointing senior Treasury staff to be SSC commissioner, the competing viewpoints of control agencies has been lost. Added to that has been the withdrawal of the auditor-general as a significant player. IT governance has been the triumph of sizzle over substance for decades, but at the same time IT projects and architectures have got more complex.

Privatise the lot and the IT issue will go away

Talent2 isn't private? Blinkers anyone?

Everyone is glossing over the obvious question: will the two senior MoE management personnel be outed as incompetent bureaucrats or protected by their Wellington civil servant buddies and be moved on to the IRD IT upgrade?
It is high time accountability is taken at the management level, as well as the political level.

It is quite simple. The IT people didn't walk on the footpath but flew straight to the sky and built it downwards - ie, backwards. They forgot to identify the users at source and didn't design it to be used by a user. Remarkable or negligent, or maybe both. Presumably, the names of the designers will become known in their industry and never again get IT employment.

Sorry, but why is this still news? We all know when all is said and done there is little if any accountability within the ranks of civil servants, from top to bottom, irrespective of party. We all know governments and their respective departments (not to mention local government) all preside over wastage and inefficiency that is frankly verging on criminal at times.

If these things are not in themselves a sound argument for a drastic reduction in the size and scale of government in this country - and for selling, at least in part, some of the govt-owned assets - then I'm not sure what is.
But yet about half the country seems to want Shearer and Norman to be in charge. I've always said we get the politicians and govt that we deserve, but I'm not sure we deserve something as terrible as that?!

As above, it takes two to tango. Seems to have slipped your mind that Talent2 is a private company.
Or is it more that the govt (ie, taxpayers) get to both get the blame for the mess and pay while the marvellous private sector company that actually made the mess gets off?.
BTW, it would be really interesting to see how many of the nominally MoE staff involved were actually private sector contractors 'advising them' at huge cost.

Suggest that those in Government involved in IT projects are required to read "Waltzing With Bears: Managing Risk on Software Projects" by Tom DeMarco and Timothy Lister before they get anywhere near an IT project. Of course once they had read the book they would probably want to run away from any Govt IT project as fast as possible.

How can we possibly expect our civil servant infrastructure to be accountable, transparent and conduct themselves with integrity when their political bosses lie, obfuscate and conveniently forget what they have said or to whom they have spoken.