IBM Australia on the stand over $1bn blowout
Inquiry asks why ex-IBMer wanted Big Blue in the race for payroll system
In 2007 the Australian State of Queensland decided it needed shared services arrangements to streamline its affairs and reduce costs.
One shared service was a new payroll system that would be used, in part, by the State's health department. IBM won a deal to do the job for an initial payment of $AUD6.19m. But by the time the system went live, had received $37m and by 2012 a review by KPMG found the system's costs had reached at least $400m.
And still the system wasn't working. Staff were overpaid, underpaid and sometimes not paid at all. Queensland's State government even docked workers to recoup overpayments, which went down predictably well with unions.
All sorts of stakeholders are livid about the affair, more so when it was revealed another $836m is needed to get the SAP-based system working.
What's emerged is a situation in which two companies – Accenture and Logica – had deep engagements with the agency seeking the payroll system. Both were therefore natural bidders for the work.
This week's hearings explored whether a consultant on the procurement process before the project, Terence Burns, gave IBM the inside running for the gig by suggesting the company bid and later by arranging a “dry run” at which IBMers could test their pitch. Burns is said to have felt that more competition for the deal would be a good thing.
There's nothing wrong with that, but Burns is a former IBM employee, having headed its operations in a South African province. He has has also filled numerous consulting roles around the world, including a stint running his own project turnaround consultancy. He had also once hired IBM for work in New Zealand.
Burns has denied having any conflict of interest that would have made his decisions on the project contentious. His statement can be read here (PDF). He's also said, during hearings, that he doesn't recall if he offered dry runs to other bidders, or conducted such sessions.
Before Burns, current IBMer – indeed the commercial and public sector lead for IBM Global Services in Queensland – Lochlan James Bloomfield took the stand. His statement (PDF) revealed that some IBMers were working inside the parts of the Queensland government that assessed bids and that they passed information about the assessment process to him.
Some of that information included a strong suggestion that Accenture had been able to read IBM's bid. Bloomfield's statement also says that in his opinion Burns dealt ethically with IBM throughout.