Qld lifts 12-year ban on IBM after $1.25bn payroll failure

The Queensland government has lifted its ban on contracting with IBM, more than a decade after it was imposed following the disastrous rollout of a whole-of-government payroll system.

Parliament House in Brisbane
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Under a new arrangement, the state’s Liberal National Party has agreed to allow IBM to re-bid for government contracts through a tiered engagement program, although it will remain barred from participating in any payroll-related projects for an additional three years.

If IBM is selected as the prime contractor for any major government initiative, it will also be required to fund independent program assurance for the next two years.

According to the government’s announcement, the decision aims to restore “competitive tension” in procurement processes and bring Queensland’s contracting policies in line with other Australian states and territories, none of which currently place a similar ban on IBM.

“We’ve taken a sensible approach and ensured the right settings are in place for this amendment to take place," Queensland Minister for Customer Services and Open Data Steve Minnikin said in a statement.

The announcement follows news that Queensland will invest $1 billion in a digital transformation program, aiming to unify IT investments and systems across 19 departments.

Minnikin said allowing IBM to re-enter the market would “provide greater choice for government agencies sourcing technology solutions.”

IBM’s troubled history with the Queensland government goes back to 2007, when the company won a contract to deliver an interim payroll system for Queensland Health – a project that soon became one of the most high-profile IT failures in Australian public sector history.

Originally budgeted at around $6.2 million [pdf], the project spiralled out of control, with a final estimated total cost of $1.25 billion to complete and stabilise the system.

A 2013 Commission of Inquiry [pdf] found serious shortcomings in project governance, oversight, and contract management, and labelled the entire project as “catastrophic”.

Following the inquiry, the then-Liberal National government under Campbell Newman imposed an indefinite ban on IBM, preventing state agencies from entering into new contracts with the company.

The Queensland Government later launched legal action against IBM, alleging the company had misrepresented its capabilities and oversold its expertise when pitching an SAP/Workbrain-based replacement for the health department’s ageing LATTICE payroll software.

However, in 2013, the Queensland Supreme Court dismissed the state’s case, ruling that a 2010 settlement agreement between IBM and the government released the company from further liability.

As a result, Queensland was unable to recover damages from IBM despite the project’s massive cost overruns.

At the time, however, IBM repeatedly accused Queensland Health of trying to “rewrite history” and “shift blame for its own failings” in terms of the failed payroll project.