Feds IT project sees $45m cost overrun

Feds IT project sees $45m cost overrun

After an estimated $45 million cost overrun and the lateness of an overdue human resources IT project, shadow IT minister Senator Kate Lundy accused the Australian government of "gross mismanagement" of the Defence Department contract.

Following an efficiency review in 1997, the Australian Defence Department was given a mandate to replace some 20 separate legacy systems with a single personnel management system to be rolled out through the entire Defence organisation. Defence Department spokespeople were unavailable for comment at time of print; however, earlier reports on its Web site indicate that PeopleSoft was chosen as the prime contractor and supplier of the system, following a rigorous evaluation of commercial off-the-shelf products recommended by the Office of Government Information Technology.

Defence's head of personnel, Rear Admiral Russ Shalders, said the organisation signed a $25 million contract for the personnel management system from PeopleSoft, known as PMKeyS (Personnel Management Key Solution), with a delivery date of 2000. The contract included personnel, leave and payroll administration for the entire Defence Department.

In a question to Senator Robert Hill, Minister for Defence, at a Senate hearing last week, Hansard reports that Senator Lundy asked: "Has any action been taken by the government to penalise the company responsible for PMKeyS? Did the contract have penalty clauses for any failure to deliver on time? Why did alarm bells not ring three or four years ago when the project was failing to meet deadlines and why did the government not act then to protect taxpayers' dollars?"

Hill, who provided no details about the contract or cost overrun in his answer to Lundy's queries, said only that he would "take some advice and get a well-informed response".

Lundy expressed surprise that Hill could not answer the question, as he was present at an estimates hearing in early June, where the issue was canvassed in some detail by Shalders.

Six years and an estimated $70 million on, the department is questioning the contract, saying only some of the elements of the original contract will be delivered more than three years late.

Issues with customisation forced the department to renegotiate its contract a number of times, and used a number of consultancies, at the benefit of the consultancies, Shalders said at the estimates hearing for the Foreign Affairs, Defence and Trade Senate.

"Up to this point, most of the expenditure has been related to consultancy, contracts, employees and administrative expenses. At this stage, there has been no direct infrastructure cost associated with this project, because we are using existing Defence infrastructure," he said.

"There is obviously a considerable degree of training associated with implementing a system like this across the Defence Force, and a large part of the consultancy fees that we have had to pay out have been related to training," he said, adding the extent of customisation required for the military payroll was underestimated.

Last week, Lundy said the Defence Department was "dragooned" by government policy into a "stupid" IT outsourcing contract, adding it is only one example of a department "stung" by a policy "destined to fail".

"Is this a licence to print money by this contractor? Or is it, as I suspect, another case of gross mismanagement by the coalition government in the implementation of IT outsourcing contracts?"

Lundy slammed Hill for his inaction saying, "to come to this chamber and respond to a question by saying 'I don't know' is just not good enough. It forces me to speculate as to whether or not this government cares enough to concern itself with, effectively, the mismanagement of some $70 million worth of taxpayers' money."

Lundy went on to blast the coalition's outsourcing policy, saying it was so bad, "this government actually had to create (its) own independent review just so that (it) could dump (its) own policy on IT outsourcing."

"This government must be accountable. (It has) some pretty bad form when it comes to IT outsourcing. This is just another example," Lundy said.

Senator Hill was unavailable for comment at time of print and PeopleSoft had not responded to a request for comment.

In late 1998, PeopleSoft announced the formation of a User Group for the Office of Government Information Technology (OGIT). The group represents five Commonwealth customers of PeopleSoft under the OGIT whole-of-government contract for Human Resource Management Systems. In the group are Australian Customs Service, Australian National Audit Office, Civil Aviation Safety Authority, Defence Department and the Department of Veterans' Affairs.

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