Papers reveal Novopay nearly axed

16:00, Feb 01 2013

The testing and roll-out of the defective Novopay payroll system was so beset with problems it was delayed three times - and almost scrapped.

A chain of correspondence between supplier Talent2 and the Ministry of Education was released yesterday, as the Government attempts to get a handle on the politically damaging debacle.

The documents reveal three Cabinet ministers signed off on the project, knowing there were 147 defects. But it is unclear if officials revealed the true scale of problems to ministers. A ministerial inquiry will begin next week to determine who is to blame.

Novopay minister Steven Joyce yesterday conceded he did not have a "high level of confidence" that the system could be fixed. His admission came just a day after he said dumping Novopay was not the "simple solution".

Next week's pay round is expected to be chaotic, with a new secondary school teachers' collective agreement coming into play.

"I think it would be unfair to say I'm massively confident, but I've certainly got to make the best of the situation we are in," Mr Joyce said.


The documents released yesterday outline a series of delays and problems with Melbourne-based Talent2's complex system.

As early as 2009, officials began winding back the "go-live" date. In 2011, Melbourne-based Talent2 even asked for extra money, threatening to downsize the project. By the end of the year, the ministry put the company on notice.

As the 2012 deadline approached, relations between the ministry and Talent2 became ever more strained, as the firm failed to fulfil promises.

By April last year, officials were investigating pulling the plug altogether. But Talent2 threatened legal action, and advisers said ditching the contract was "unpalatable" to both parties.

Two months later experts from three government agencies and PricewaterhouseCoopers gave the project the green light. A report to ministers advised of 147 bugs in the system - but said they were not show-stoppers.

The report to Finance Minister Bill English, Education Minister Hekia Parata and then associate minister Craig Foss does not mention the Ministry of Education considered jettisoning the system.

It is not yet known if the ministers were told - but Mr Foss was receiving regular verbal briefings.

As problems with Novopay became apparent in September, relations between Talent2 - which stood to earn $100 million over eight years from the deal - and the ministry continued to deteriorate.

In the run-up to Christmas, Talent2 was "unwilling" to staff a call centre for teachers, even though it meant a "large number" would not get their holiday pay.

By January, ministry acting chief executive Rowena Phair concluded: "I have no confidence that preventable service problems will not continue in 2013."

Canterbury's Southbridge School principal Peter Verstappen says problems with next week's pay round were already apparent.

He has spotted five errors and says his school's operation grant is $8000 in the red. "The Novopay system, we were told, would be as easy as online banking."

Labour MP Chris Hipkins said it "beggars belief" Novopay was signed off by ministers.

"They didn't ask the right questions, they didn't ensure that adequate contingencies were in place."


The Novopay contract is signed in 2005, but twice renegotiated by National. It is meant to "go live" in May 2010 but delayed three times.

By April 2010, it becomes clear Talent2 is experiencing difficulties and correspondence makes reference to a series of missed deadlines.

In May 2011, Talent2 asks for more money, threatening to "descope" the project. Ministry of Education deputy secretary Anne Jackson balks, but does put up a small "goodwill gesture".

Nothing has improved by December 2011 and the ministry puts the company on notice. Its "performance requires improvement", Ms Jackson writes.

An April 2012 memo shows four important deadlines were not met by Talent2. The ministry formally warns the firm it is in breach of its contract.

With the go-live date fast approaching, the ministry considers other options, including scrapping Novopay. Talent2 had threatened legal action and pulling out is eventually deemed "unpalatable".

Talent2 accuses the ministry of "hindering" its performance.

In June, a final report to ministers outlines 147 software defects in the system and 5913 payslip errors are made during testing. As none of the problems are "show-stoppers", Novopay is set be activated as planned in August.

Four independent advisers - from PricewaterhouseCoopers, the Social Development and Primary Industries ministries and the Transport Agency - give the system the green light.

Talent2 is "unwilling" to staff a call centre for stricken teachers in the week before Christmas. Then associate education minister Craig Foss has to call chief executive John Rawlinson to intervene.

The contract is worth $100 million to Talent2 over eight years.

The Dominion Post