Novapay contract costs Talent2 $20m
The Australian company that built the troubled Novopay payroll system says it will have to swallow a $20 million loss over the life of its contract with the Ministry of Education.
Talent2 New Zealand booked the entire hit in its accounts for the year to the end of June 2011, which have just been filed with the Companies Office.
The provision for the "onerous contract" saw it record a $15.9m loss on revenues of $32.2m for the year.
As well as building and running payroll systems, Talent2 runs a recruitment business, providing information technology workers for private and public sector organisations.
It was one of 43 recruiters that last year won an "all-of-government" contract let by the Ministry of Business, Innovation and Employment to supply external recruitment services to government agencies through to 2015.
The Ministry of Education said last year that it had agreed to pay Talent2 $100.5m over eight years to build and run Novopay. Sources said the direct penalties that could be imposed on the privately owned Australian firm for missing performance targets amounted to only $50,000 per fortnightly payroll cycle.
Talent2 said the $20m loss comprised "costs associated with going live and the reassessment of forecasted costs for the term of the contract".