Do you want to know how to set up a billion dollar Government contract without getting sued? I’m writing a book about it: you can read more about that here.
As I go, I’m producing a series of videos on particular problems you may encounter. Some are specific to the really big contracts, others may have application to small procurements too. I love getting feedback on the videos, and particularly any stories you can tell of similar situations you have been in or heard about.
Take a look around the website. If you have any questions, stories or things you would like to see in the book, please contact me at firstname.lastname@example.org
Planning for contract management
If you engage a contractor to deliver a project, good project management means good contract management. Here is a link to my recent article on the subject in PM World Journal.
Now that Procuring Successful Mega-Projects is in the hands of the publisher, I am starting to be more active in the real world again. Recently I gave a joint presentation with Owen Hayford of Clayton Utz at one of their training events. The subject was ‘Today’s solution to yesterday’s deal: managing difficult contracts’.
I presented on some of the things you can do at a management level to improve the workings of a difficult contract, then Owen took over and looked at some of the more drastic remedies you might call upon when the management-level stuff has failed,
We turned it into a two-part article: you can now read my part on the Clayton Utz website. Owen’s part will be published there in the next edition of Clayton Utz Insights.
The Elephant in the Room
If you ignore the elephant in the room, you can get into a lot of trouble.
In 2007 Queensland Health paid its 85,000 staff through an aging payroll processing system that could not be supported for much longer and needed replacing.
Payrolls were run centrally, but the processing of the payrolls was done locally in the various districts. The Queensland Government was then undertaking a Shared Services Initiative, centralising administrative functions to achieve cost savings, so it decided to replace the old Queensland Health payroll system with one that would do the processing centrally.
The concept was simple, but the implementation was a shocker. After ten aborted attempts the payroll system finally went live in March 2010. Thousands of staff received the wrong amount or were not paid at all, and errors continued for months, indeed years.
A ‘catastrophic failure’ was the verdict of the subsequent Commission of Inquiry. Other reports had been more temperate in language but equally damning in content. The cost of fixing the problems was estimated at hundreds of millions of dollars.
So what was the elephant in the room?
Queensland Health provides healthcare and services. At the time it had 85,000 employees across many locations throughout the state and across a range of professional occupations. This was not a standard Government department full of 9-to-5 office workers. Many of the staff worked 24-hour, 7 day a week rosters.
It is obviously more complicated for a payroll system to deal with shift work payments rather than salaries, but that’s okay, any of the big payroll system providers can tailor a system to a particular industrial award.
Enter the elephant.
Queensland Health employees were not covered by one industrial award, but by twelve, under two different pieces of legislation. The twelve awards were impacted by six different industrial agreements, and between them they provided for over 200 separate allowances. KPMG later estimated this resulted in more than 24,000 different pay combinations. It was literally the most complex awards structure of any organisation in Australia.
Several thousand employees had concurrent employment arrangements – they held more than one position, each with different terms and conditions.
The payroll date did not align with the rostering cycle, so pay was always based in part on estimated hours worked rather than actual hours worked, giving constant reconciliation issues
Employees were entitled to submit retrospective claims for work done up to six years previously, giving further reconciliation problems
It must have been obvious to everyone that it would be a great deal easier to introduce a new payroll system if the industrial awards and pay practices were simplified first. But that would have required renegotiating twelve industrial awards and six industrial agreements with 85,000 employees.
It is perfectly understandable that that particular elephant should have been consigned to the too-hard basket. But if you aren’t prepared to solve a problem, you have to be prepared to find a way round it. Pretending the elephant doesn’t exist is not a good idea.
The old system worked, because the payroll processing was done locally, by clerks who understood how all of these different things applied to the particular segment of the workforce they were responsible for.
If Queensland Health wasn’t prepared to rationalise its employment arrangements then it needed to re-think the advisability of procuring a system designed for a simple industrial environment and central processing.
But Queensland Health went ahead with the centralised model. The awards complexity required more than a thousand modifications to the standard software used for interpreting industrial awards. More than fifteen hundred modifications were made to the associated payroll delivery software package, an extraordinary degree of customisation.
Even so, two years after the go-live, implementing the payroll delivery still involved about 130 manual workarounds, plus double handling of pay forms, retrospective payments, ad hoc payments and who knows what else.
Queensland Health had to take on around 500 staff, additional to those required under the previous system, in order to deliver an estimated 200,000 manual processes to process an average of 92,000 forms every fortnight. This for a project that was supposed to result in staff cost savings.
There were problems with the way the implementation was done that contributed to the catastrophic nature of the failure. But the fundamental issue was they went ahead with the project as if the elephant didn’t exist.