Novopay costs blew out as Talent2 and 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, chairman of Deloitte New Zealand, and Maarten Wevers a former chief executive of the Department of the Prime Minister and Cabinet assessed a project which had its genesis in 1999 and earlier 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 didn't 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 over-runs.

Steven Joyce, minister responsible for Novopay, said 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 over-hauled to increase scrutiny and improve project management.

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

Last month, 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.

By Jonathan Underhill - BusinessDesk