QLD Health ignored IBM contract breaches

IBM was in breach of its contract with Queensland Health very soon after it was signed, though little was done in response, the inquiry into the bungled project has heard.

After wrapping up questioning related to the procurement process that led to the appointment of IBM, the inquiry has begun investigating the adequacy and integrity of the contract management process.

Already, it has heard of scope blowouts, contract breaches and clashes between Queensland Health and the lawyers working for shared services agency CorpTech who were trying to ensure IBM met its contractual obligations.

Christopher Bird, whose role at CorpTech was to manage the IBM contract, took to the stand yesterday.

Bird testified that IBM was consistently submitting deliverables for acceptance too late, and was not adhering to the contract when it came to seeking time extensions.

“There was also a statement in there that no payment was to be made 
unless the delay process was followed and it never was 
followed as per the contract,” Bird told the inquiry.

“So my issue was when we did
 pay for all of these extensions of time there was never any 
due diligence involved,” he said.

The inquiry has heard an initial scoping study conducted by IBM blew out from a contract cost of $550,000 to $926,000. Ultimately IBM’s contract with the government grew from $6 million to $36 million during the life of the project.

The project eventually went live in March 2010, despite the original contract stating a go live date of July 31, 2008. It subsequently failed to perform as required, leading to 35,000 payroll anomalies.

Bird testified that in meetings, IBM’s forward planning team questioned why the project’s managers couldn’t just go back and ask for more money to continue.

“I think the expectation was that, yes, it cost more money, we've, you know, underestimated the complexity,” Bird testified.

When Bird told his superiors about the breaches and arranged for a breach notice to be drafted, Bird testified he was told there was “too much water under the bridge” to issue the notice to IBM, and that Queensland Health and CorpTech management had decided to pay IBM more money.

According to Bird’s witness statement, he was told Terry Burns, the CorpTech employee responsible for the procurement process, did not agree with the way CorpTech lawyers wanted to manage the IBM contract.

“Campbell (Bird’s superior) told me that he had heard Queensland Health was complaining that, “there’s some lawyer down at CorpTech killing our project. He’s refusing to sign change requests”.

“It was correct that I was not signing them. But that was because I was unsure whether they were project changes, defects or actual contract/scope changes.”

The inquiry continues.