A $150 million government IT project has gone so badly off track it has been called to a halt.

The Department of Internal Affairs yesterday admitted to RNZ it has called a stop to the huge project that had aimed to take all births, deaths and marriages data online in the cloud.

It has terminated contractors, and employees' jobs may be on the line, too.

Just nine months ago the department said it had got the project - the second phase of the $300m Te Ara Manaaki programme - back on track after difficulties.

Now it says it is in talks with the IT vendor, Australian company DWS Group, "about the progress of that work stream".

"While these discussions are ongoing, we have stopped work on Civil Registration system replacement" service delivery and operations deputy chief executive Maria Robertson said in a statement after RNZ inquired about the project's status.

"A number of hourly rate contractors have been working on this programme and we have decided to end these contracts while we agree a way forward.

"We also have a number of other people engaged in different ways to support this work. We are continuing to have conversations around what this means for them.

"Given we are in the process of consulting with potentially impacted staff, we cannot discuss the particulars of our discussions or the final numbers of staff impacted by this decision at this time."

Public agencies have a long history of poorly run IT projects costing taxpayers or users dearly, including INCIS at police in the 1990s, Novopay for teachers pay a decade ago and Archives NZ's current collections search tool overhaul.

RNZ has asked DIA how much if any taxpayer funds might be sunk and lost on Te Ara Manaaki, but it would not say, nor would it say if data security in the new system was a factor in calling a halt.

Its "commercial" discussions with the vendor were confidential and it could not discuss these "or other matters relating to this part of Te Ara Manaaki programme of work while those discussions are ongoing", it said.

Internal Affairs Minister Brooke van Velden said she had been briefed on the matter but could not comment further while talks with the vendor carried on.

The DIA systems deal with sensitive, personal information. Previously, passport and citizenship services were updated by US company DXC in a $95m first phase of Te Ara Manaaki.

The new IT platform in the project's second phase is aimed at making it easier for people to access and use their identity and "life event" - the 80 milllion births, deaths and marriages records - services online.

"The new system will be more efficient, secure, and reliable," the department pledged last year.

But RNZ understands its attempts to customise an off-the-shelf product encountered unanticipated complexities, and multiple deadlines have been missed.

The aim is to put the masses of sensitive data in a Microsoft 'cloud' data centre which is currently under construction in Auckland.

Microsoft said it was "still on track to launch the NZ datacenter region in 2024".

If it was held up, and the data had to be transferred to cloud services in Australia, that could pose a data sovereignty problem for Internal Affairs.

The project was already running over budget due to a backlog of applications for citizenship.

The existing births, deaths and marriages system is at the end of its life, and it is not clear if the department has a plan B.

A Treasury review in mid-2022 rated the $150m second phase project as 'amber' - at risk.

DIA told Reseller News nine months ago that it was setting it right, and delivery was forecast within the approved budget and timeframes. "Analysis, design, build and data migration is on track. Improved citizenship and passports functionality is on track."

The department told RNZ on Wednesday the passports phase of the whole programme had delivered "significant benefits and value to customers staff and our organisation over the past six years, with more on the horizon".

Catalyst.net managing director Don Christie said the government should look at the strategies on all its major IT projects.

It was possible to use an open-source platform for a lot less than what was being spent on making something "absolutely fit for purpose" for local context and aspirations, said Christie, whose company competes against US Big Tech to offer cloud services approved for government use.

"Instead, we just keep throwing massive amounts of dollars overseas and leaving no value here in NZ and undermining our own capabilities and skills," he said via email.

"I'm pretty sure that people like myself could run a rule over many [of] the government's overseas IT spend and create enough savings to finance the tax cuts committed to and the frontline delivery improvements promised."

DWS and the Public Service Association union have been approached for comment.