Ongoing friction revealed in Novopay fiasco

Disgruntled and frustrated teachers can safely point the finger at both the Ministry of Education and Novopay provider Talent2 for the industry's pay crisis, according to briefing documents, emails and memos released on Friday under the Official Information Act.

They show two parties at loggerheads towards the end of last year as the Novopay debacle escalated.

The pay system has consistently under-performed since it went live last August, even though all parties involved knew it was defective. As a result thousands of teachers have been underpaid, overpaid or not paid at all, with consequences affecting tax returns, child support payments, ACC and superannuation.

In a letter sent by email to Talent2 chairman Andrew Banks on November 14, 2012, Education Secretary Lesley Longstone, who has since resigned, was scathing in her assessment of Talent2's performance.

"I must highlight my disappointment and concerns to you and the Talent2 board about your New Zealand organisation's ability to meet the commitments you made.

"My personal observations are the promises made are not kept and that the organisation seems to be operating in a completely reactive manner, that there is a lack of executive direction and engagement and that there is no customer service ethos. This is not satisfactory given the investment we have made in this platform and the service levels we contracted for."

The following day Banks responded with a salvo of his own, addressing an email to Longstone and Associate Education Minister Craig Foss. While saying Talent2 was "absolutely committed" to delivering a high quality service, he went on to blame the ministry for many of the problems.

"While I understand there is no merit in apportioning blame it is important to acknowledge this entire project was a collaborative effort between us, the Ministry, and the service and system we have built reflect a specification and model the Ministry participated in and approved [bold highlights are Banks']."

He went on to say the ministry had not been clear on the huge number of relief teachers who teach at multiple schools, and that the staff put in place by Talent2 reflected the ministry's assessment of work volumes. "As we have previously explained to the Ministry we had a baseline staffing level with contingency based on volumes provided by the Ministry but this is clearly not enough and over 30 FTE [fulltime equivalents] have been already added since go live."

Otago University professor Robin Gauld, an IT expert, says an upcoming ministerial inquiry will reveal what went wrong and where. "It's unclear what the politics in the ministry were - it's unclear the level of debt the advisers went into when they said they should go ahead with this system," he said.

"And the person in the ministry who put their hand up to say ‘we really shouldn't be doing this, we should pull the plug' may have been seen as some kind of pariah, which is a really unfortunate situation."

A memo to ministry deputy secretary Anne Jackson, included in documents, showed the ministry contracted Talent2 despite the company posing a "high risk" that "pay clerks may not be available to deliver payroll services".

A second memo to Jackson, sent in April 2012, revealed bad blood between Talent2 and the ministry after threats were made to hand out a contract breach after failure to perform. It showed Talent2 were "laying the foundations" for legal action against the ministry. In the memo Talent2 accused the ministry of "hindering" its performance. The ministry acknowledged it should inquire as to why Talent2 felt hindered but that should not "necessarily involve admitting [the ministry] is at fault".

The memo showed the ministry had previous provider Datacom lined up in case Novopay failed before launch and one month after receiving the memo, signed a conditional contract with Datacom. Last week Steven Joyce, the minister now in charge of Novopay, announced the Government will continue talks with Datacom. Joyce said he wasn't entirely confident there was sufficient goodwill and trust to continue working with Talent2.


In 2004 the ministry requested tenders for a new schools payroll provider after a 2003 review of operations found the current provider Datacom posed a high risk.

The contract was given to Talent2 in 2005. An independent review the same year found Datacom's payroll had been upgraded and was no longer "high risk", so plans were scrapped.

Tenders were requested again in 2007 when Datacom announced it would not be maintaining its payroll after 2011.

Eleven tenders were received for the $30 million contract including Datacom which proposed the Peoplesoft payroll, and Talent2, which proposed its own Novopay system and subsequently took the taxpayer-funded contract in 2008.

It was clear Talent2 had underestimated the contract by 2010 after it failed to meet numerous targets, delaying Novopay's go-live for two years.

Under pressure from the sector, the ministry launched the payroll in August 2012 despite knowing it was defective and would not pay teachers correctly.

As of January 6, 14,470 teachers were owed about $11.8 million in wages. Talent2 has been paid only $16.4 million from its blown-out $100m eight-year contract.

Sunday Star Times