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Australian payroll provider Talent2 will keep its $105 million 10-year contract to to provide New Zealand's public education payroll service after the government decided switching to the old provider, Datacom, simply exchanged one set of risks for another.
Minister Responsible for Novopay Steven Joyce announced the Talent2 contract will "remain under review", but the decision effectively leaves the company in place as New Zealand-owned Datacom loses an identified time to implement an alternative between June and September this year.
Datacom's plan, also released, signalled strong school support for a return to the "old system" and that pricing would have remained the same as when Datacom bid for and lost the contract to Talent2 in 2008.
But Mr Joyce says Cabinet concluded Talent2 was starting to get on top of the Novopay bugs and "it wouldn't be sensible to make a change at this point", with error rates running at less than 0.5 percent in the three of the last four pay periods.
The government's independent technical reviewers regarded that as "a reasonable error rate for a stable system".
"Making a change now would increase the work for payroll administrators in the short-term during the cut-over from where we stand today, not decrease it."
Datacom is understood always to have experienced a small number of errors in each pay run, in part because the pay schedules for school staff are unusually complex and individualised.
Its proposal for replacing Novopay would have involved a short-term return to a version of its old system, with a new system to be implemented in 2016.
While parts of Datacom's plan are blacked out, the company apparently had little faith that it would easily reconcile Novopay data for use in its own systems. While it quoted firmly for the implementation job, it said from the limited information seen, reconciliation would take "a very long time" and would not give even a "guesstimate" at the cost.
Documentation referred to how Datacom's "reputational risks" would be managed if it took over the botched project from Talent2, which implemented Novopay late in the middle of last year despite evidence it was not working well.
A slower than targeted clearance rate remains one of the areas of "frustration" with Novopay, Mr Joyce says.
The next key milestones are the Novopay Ministerial Inquiry, which is due to be presented at the end of this month, and the review of progress in the remediation plan at the end of June.
The minister says education payroll simplification was a medium-term issue to be addressed.
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 has already committed significant unplanned resource to try and placate angry educational workers.