QLD Govt feared IBM counterclaim in payroll dispute

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QLD Govt feared IBM counterclaim in payroll dispute

Legal advice given to previous government revealed.

Queensland Health's botched payroll upgrade left the previous state Labor Government paralysed with fear over getting sued by IBM for breach of contract, according to documents tabled in state parliament.

The previously-secret documents contain legal advice from law firm Mallesons Stephen Jaques and the state attorney-general’s department. (pdf)

The current state Government had been pressing for the release of the documents to determine whether they should initiate fresh cost recovery action against IBM.

Legal advice handed to the then-Government in 2010 ultimately proposed a supplementary contract be entered into with IBM to rectify issues with the payroll system.

The documents also recommended the public be left in the dark about the fiasco.

IBM originally won the payroll system project in 2007. System acceptance was slated for April 30, 2011.

By August 13 2010, 11 pay runs had been completed. However, significant defects remained in the system, and the pay runs were only possible through the close attention of IBM and its subcontractors, and state shared services provider CorpTech.

The state considered terminating the contract with IBM and dealing directly with the sub-contractors.

Negotiations to work directly with sub-contractors were shot down by IBM, which warned the talks could undermine the existing contract.

The legal advice also suggested any move to terminate the contract with IBM would leave the payroll system, which was still barely functioning, in an even more precarious position.

The advice given to the government was divided into two options. The first was to continue the contract under supplementary terms; the second was to terminate the contract and then either do nothing, negotiate or litigate.

The legal advice provided to the state suggested a contract termination could lead to IBM walking off the job, and pressuring its subcontractors to not deal with the state.

There was also the danger IBM would sue for wrongful termination.

The State Government ultimately entered into a supplemental contract with IBM.

Defects in the system were rectified, said the documents, and IBM was permitted to invoice for its work. No additional payments were made for supplemental work. 

Though most focus was on the prior legal advice, it was but one of a swathe of documents tabled in parliament and made public.

A number of other documents that were released focused on the fiscal ramifications of the botched payroll system — specifically overpayments made to Health workers, and to what extent repayment would be sought.

One document noted that each pay run produced 2880 overpaymenys of less than $100, at a total cost to the department of close to $100,000 per run, and in excess of $69 million overall.

Overpayments of up to $200 were written off due to the cost of attempting to recover the money, the documents state.

A "small number" of employees were also able to defraud the department by taking advantage of an Emergency Payments system put in place to assist people left out of pocket because of payroll malfunctions. 

The document (pdf) noted that 23 such matters were referred to Queensland Police, two people were charged, and a further staff member was convicted of "misappropriating more than $20,000".

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