Hard News by Russell Brown


The unstable Supercity

One week short of six years ago, Rob O'Neill published a story for Computerworld revealing the background to the Auckland Transition Agency's decision to apply a "veneer" to the integration of the IT systems the constituent councils of the imminent Auckland supercity.

O'Neill focused on responses to a memo from the government-appointed ATA's "stream leader of business processes and systems", Mike Foley, on the viability of commissioning the quick-fix without a conventional public tender process. As was the case in other areas, central government's unrealistic timeline for integration was having a impact on decision-making.

The response from Waitakere City’s group manager for information John Johnson warned Foley that the decision made on a fix would set the "platform and future IT direction for the new council over the next five to 15 years” and said having no public tender process was “not a defendable option”.

The ATA did not conduct a public tender. Instead, as acting local government minister John Carter confirmed later that year in response to a question from Labour's Phil Twyford, the contract was awarded to a group of four companies led by SAP after a "discussion". [NB: the original response in this discussion was led by Deloitte, not SAP.] The minister said he had "every faith that the Auckland Transition Agency, and particularly the new council, will deliver a grand service for the people of Auckland."

In a commentary accompanying his report, O'Neill noted the opacity of the ATA's way of working and the difficulty in getting officicial information. He wrote:

There are signs building of a serious backlash against the way the Auckland Supercity is being implemented. Whether it’s the way executives are being recruited or the way the Council-controlled organisations are being reorganised, it looks increasingly as if the entire effort is being driven out of Wellington — and that’s making Aucklanders uncomfortable.

Arguably, all of these new structures should be decided by the new elected council and not implemented before elections are even held. At the very least, the new Council should be able to undo some of the decisions made before they arrive if they feel that to be necessary and in the best interests of ratepayers and residents.

He concluded that hope that Aucklanders would have to hope their shiny new council "is not hamstrung by decisions now being made by unelected officials."

 I used somewhat stronger language in a follow-up blog post headed The Auckland Council as leaky building:

My understanding is that the quick-and-dirty approach will have another unpleasant effect, one reaching across much more than IT consolidation: it will delay the real spending until after the Auckland Council is formed.

This might suit the government, which can declare that the delayed spending – of the order of $200 to $300 million – is being done at the discretion of the newly-elected council. But it will leave us Auckland ratepayers with huge obligations from day one.

It’s been described to me as “the Auckland Council as a leaky building”: it looks fine on the outside, but is rotten underneath. The word “veneer” would seem to have been well chosen.

 A year on, the Herald was reporting that the council was faced with a $500 million bill over eight years to build new computer systems to conduct its business – a staggering $300 million of which had not been budgeted. And I was writing:

Even if we are charitable and assume that this is all simply the cost of equipping a robust unitary authority, it is not what we were told would happen. Local government minister Rodney Hide wrote in the Herald a year ago that projected $94 million establishment costs up until election of the first Auckland Council in November were “a drop in the bucket” compared to the $2 billion spent annually by Auckland’s councils. “Decisions now made,” he wrote in the passive tense, “also commit the new council to a further $66 million on IT to finish the job post November 1.”

Given that, as The Aucklander has discovered, the new council has been obliged to spend $2 million a month on private outsourcing of planning work it no longer has staff to cover, it is not unreasonable to conclude that Hide’s estimate of post-November establishment costs – to which the transition authority he personally appointed has committed Auckland ratepayers – will be out by a factor of 10.

Last week, the Herald reported that Auckland Council has spent $1.24 billion on IT since its formation in 2010. This figure very probably includes normal operational costs and thus is not all additional spending on development. But it does seem clear the council's IT integration has been a calamity.

Now, a guest post at The Standard lays out a firm, and damning, view on what got us to this point. The author says that ATA chief Ford:

... ignored modern business practices and ignored sensible advice by dividing transition planning into siloed ‘work streams’, and relegating IT to a minor role inside ‘infrastructure’.

Ford showed little understanding of, or care about, the critical, extensive and expensive role IT plays in modern businesses and not for profit entities. The result is a massive cost overrun.

It's even more damning on the role of Ford's hire Mike Foley, who became Council CIO and, according to the post, "proceeded to make every IT mistake in the book."

It identifies major problems with governance and scope that the new council inherited and failed to address. And describes how it got worse:

Incredibly, the poor programme governance, poor decision making, and lack of accountability identified in the reports were still occurring. For example, Foley decided to undertake a major re-design of NewCore, which blew time and a lot of money, and threw out the existing software used for property, consents and LIM’s (Pathway), in favour of heavily customising the expensive off the shelf SAP package. Maybe this was based on a 19 year old SAP project he once worked on in the UK. Who knows?

Customisations of massive monolithic software such as SAP hugely increase long term costs as every update to the product (e.g. new version, security update etc) has to be tested by Council against their customisations. Eventually the core product diverges significantly from the customised code and the entire IT system has to be re-written, again at massive cost.

This has also been the experience of a major NZ utility firm, who’s customised version of SAP has locked them into a lifetime of exceptionally costly testing, re-coding and upgrading as SAP changes. These problems are well known in the IT industry, but were ignored by the council’s IT leadership.

And concludes:

The Supercity was set up this way from the start. The elected council has no real oversight powers and as the potential IT spend was not costed correctly at the start, that’s been a costly NACT political decision for the rate payers of Auckland to cough up for.

The warning is very clear. The supercity structure is highly vulnerable to massive cost overruns.

Mayoral candidate Vic Crone may well be right when she slates the "lack of leadership, oversight, transparency, discipline and expertise" that got us here. But it seems clearer than ever that those problems were baked into the new city right from the start.

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