Defence System Failures Highlight Project Management Weaknesses

The Defence Department paid more than twice what it expected for its new integrated personnel management system without gaining the promised benefits of a system which took years longer than planned and which was undertaken without proper Cabinet approval.

An ANAO report has shone the spotlight on major project and governance failings within the Defence Department's Personnel Management Key Solution (PMKeyS) Implementation Project. The report finds the system came in $38 million over budget without delivering promised outcomes and without the budget being approved in accordance with government requirements "including failure to obtain Cabinet approval." A major component of that blowout comprised project management costs, initially budgeted at $1.22 million and eventually rising to a staggering $15.76 million, with the project manager pocketing $14.58 million, or a cool 92 percent of the project management costs.

The Defence Department has acknowledged there were lessons to be learnt from the deeply troubled PMKeys Project.

One outcome of a 1997 efficiency review, PMKeyS was supposed to deliver a single integrated computer system consolidating all defence's separate personnel management functions by June 2000. The Department chose PeopleSoft as prime contractor and supplier of the system following an evaluation of commercial off-the-shelf products recommended by the then Office of Government Information Technology. The contract included personnel, leave and payroll administration for the entire Defence Department.

By June 2002, when the project had blown-out by an estimated $45 million and was two years overdue, Shadow IT minister Senator Kate Lundy was accusing the government of "gross mismanagement" of the Defence Department contract. The Department was already reportedly questioning the contract, saying only some of the elements of the original contract would ultimately be delivered. By then issues with customization had forced the department to renegotiate its contract a number of times, and use a number of different consultancies.

Lundy claimed at the time the Defence department had been "dragooned" by government policy into a "stupid" IT outsourcing contract, just one example of a department "stung" by a policy "destined to fail".

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."

The latest ANAO report found the first phase of the project had been delayed by 39 weeks and parts of phase two as much as 158 weeks late. It also found that by the time the project closed in December 2002, major outcomes under phases three and four had still not been delivered.

The total cost to defence to bring PMKeyS into service, including the production support costs during the rollout period, is estimated to be at least $131 million," ANAO said.

This cost exceeded defence's 1998 estimate of $103.5 million to maintain its legacy personnel systems for five years by more than $26 million.

ANAO said the project met defence criteria to be classed as a major capital equipment project but it was not approved in accordance with government requirements, including failure to achieve cabinet approval.

And it identified numbers of lessons Defence (and presumably other government departments) needed to learn from the Project, including:

- The need for project approval processes for IT systems to comply with government and departmental requirements. To ensure improved project governance, future management information system projects should be approved in accordance with applicable government and departmental procurement policies.

- The need for a structured process of periodic management review, following the awarding of contracts, to provide additional assurance on the robustness of schedule, cost and performance outcomes being achieved in material projects.

- Project management business processes should accord with sound management practice for contractual and financial management, and for the retention of appropriate records, to ensure legislative compliance and that project outcomes meet with end-user needs.

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