NSW Audit Office - Financial Reports – 2003 - Volume 1 – Review of Sydney Water's Customer Information

Shaen - The Audit Office Of New South Wales

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Publié par	Shaen
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Review of Sydney Water’s Customer Information and Billing System INTRODUCTIO N Sydney Water is the largest water services provider in Australia with annual total revenue of $1.4 billion and assets in excess of $13 billion. It manages- slcaarlgee programsf ocapital works and maintenance. In recent years it has completed a number of projects including the $90 million upgrade of the Cronulla sewage treatment plant and the $460 million Alliance for the Northside Storage Tunnel. The CIBS project with a finadl gbeut of $6 0million was Sydney Water’s largest IT project. In October 2002 the Treasurer requested the Au-Gdietnoreral to audit CIBS and report to Parliament. The review covers Sydney Water’s performance in relation to: §project governance § tpsjocecitacefiprct management htiresup ,sejorn,iont ifaer wce §selection of suitable contractor §cost estimation §risk management. Our work has primarily focused on relevant Sydney Water documentation and interviews with individuals mainly within Sydney Water. It has boeneen h thwitdh ni tfoenif eeb meSo. htigds individuals and parties external to Sydney Water, including PricewaterhouseCoopers (PwC) and the previous Managing Director of Sydney Water, Mr Alex Walker, were also interviewed. The focus on Sydney Water should ncoatrry any adverse inference about Sydney Water’s legal relationship with PwC. At the time of the request for the review, Sydney Water was seeking legal advice on the project’s contractual arrangements and was considering its legal options in relathieo nc oton ttract. Sydney Water is considering litigation at the time of tabling this report. Usually when the Audi-toGreneral is aware that an agency may be involved with litigation, we would not report in such detail that it could unduly influence the outcoof mthee litigation. Detailed reporting may occur once the litigation has been settled. However, the- GAeundeitroarl has reviewed and reported before any possible litigation. Potential litigation features strongly in the responses to our report. Due teon stihteiv isties of the timing and nature of our work, we have included responses from Sydney Water, PwC and Mr Walker. These responses generally sought only to clarify factual matters identified in our draft report and were not a general reply to all matrtaeirsse d. The only deletions that we have made to the responses are where we have corrected factual errors in our draft report or wording has been clarified. Some of Sydney Water’s responses warrant further comment. Sydney Water has a concern that issues inthis report had not been raised by our officers with its Audit Committee during the implementation of CIBS. Also that the Audit Office had not included a qualification in the 2002 audit opinion on this matter. The Audit Office did not, nor is it requoi ruend dtertake an extensive review of each major project of an agency in order to issue an audit opinion on its financial statements. The matters raised in this report come from our recent detailed work. The Audit Office did highlight the delays in the CIBroSj epct and the increase in costs in its 2001 and 2002 Auditor-General’s Report to Parliament and 2002 Statutory Audit Report. The Audit Office also raised matters on CIBS at the September 2002 Audit Committee. Auditor-General’s Report to Parliament 2003 Volume One11

Review of Sydney Water’s Customer Information and Billing S ystem

KEY BACKGROUND INFORMATION Sydney Water’s ctuosmer information and billing system (CIBS) project was intended to improve service to customers, to fill gaps in existing information systems and to provide business efficiencies. The project required the solution to be integrated with 12 existing ntmearjnora l i business systems and over 60 external party interfaces. Sydney Water issued a Request for Tender to six potential suppliers in March 1999. It evaluated PricewaterhouseCooper’s (PwC’s) tender as providing the highest complying solution toi eitds specif requirements, with the lowest risk and the lowest price. Sydney Water contracted PwC in June 2000 to buil adindlempntmeC BI.S The core package came from the- bUaKsed vendor, Severn Trent Systems (STS) which was part of the successful consortium. Folwliong four months of analysis, CIBS then moved into the design and construct phase asnd was separated into discrete proje cts: §release 1 (R1) a tool to service major customers release 2 (R2-) electronic interaction with commercial land developers § § the substantial phase of the project, being the core customer informationrelease3 (R3) -and billing engine. The R1 and R2 components were implemented, although R2 did not achieve its full functionality. Sydney Water terminated the CIBS project on 30 Octobe2r. d iathat dhtatetdrs B aoThe002 become concerned that the project was not reaching acceptable standards and that there were excessive costs and delays. The Board resolved to explore options to recover any loss or damage Sydney Water sustained. Sydney Waterhad originally expected CIBS to be operational by February 2002, at a cost of $38.2million. Before the project was stopped, the budget had increased to $60 million, with a further revision pending and the ‘Go Live’ date had moved to March 2003. Litigation arising from the project is currently being considered by Sydney Water and PwC. In October 2002, the NSW Treasurer asked us to undertake a comprehensive review of CIBS.

KEY FINDINGS Project Governance § project neydWay Shad ter t apspenmitarpxo6$.1le yiollmi0 1, Ronn dna 2R ot pu 3R termination and another $18.6 million on related CIBS hardware and software. We believe most of the $61.0 million will be written off. §important issues to Sydney Water’s Board of Directors in aManagement did not always report clear, complete and timely manner. §The Board did not oversee the project as effectively as it might have. Its understanding of the project, in light of its complexity, was limited. §eht isylfo slymena ae ontia tih dad ICSBi fed with proceedy mar tevehat noSaW yendy Technical Proof of Concept. §Sydney Water did not effectively follow up and address recommendations from a ‘Health Check’ review. §Water did not adequately disclose the status of CIBS in its 2002 Annual Report.Sydney

Auditor-General’s Report to Parliament 2003 Volume One

Review of Sydney Water’s Coumster Information and Billing Syst em Project Specification, Intefrace with Users, Project Manageme nt §Project planning and specifications were inadequate, contributing to many change requests and significant additional costs and delays. §The business costscase supporting CIBS was not updated for substantial changes ind an benefits. §The project team lacked certain skills to do the job. §that it needed a business improvement process, but during theSydney Water recognised project it reverted to only implementing a computer system. §ciseeSvrem rsuot cejorp eht neewt Che tnd aamtet sap oo rTeherw ation becommunic Division. This greatly weakened the project. §a corporate information technology strategy. Once SydneyThe project was approved without Water developed this strategy, it was found that the CIBS computer architecturoet was n compatible. §An integrated project plan was not maintained during the project. §Testing was neither timely nor comprehensive. §IT projects of this nature and complexity wouldThere was a belief in Sydney Water that inevitably go over budget and be delayed. §The involvement and accountability of some internal service providers was lacking. Selection of Suitable Contractor and Contractual Arrangements §assess the selection of the contractor because Sydney Water couldWe were unable to fully not provide all relveant documentation. However, it appears that Sydney Water performed an extensive evaluation and selection process. §was deficient. One variation to the contract transferred significantContract administration responsibilities and risks from PwC back to eSy r.te aWdn §The contract with PwC was weaker than the request for tender in some important areas. Cost Estimation §ject proinalhe fTmi1 5.13 $as wBSIC rof etamitse et obudgf cn,iolld repaomo eht ot lanigir $38.2 million. §Significant contingencies, as well shardware and smo eostfawerc soat ni ton erew st he original budget. Risk Management §was not effective at the corporate and projectRisk management levels. §belief that the outsourcing of major projects willThe culture of Sydney Water suggests a effectivelytransfer all risks to the contractor. Other §functionality, is a positive outcome from theThe introduction of CIBS R2, albeit with less project. Auditor-General’s Report to Parliament 2003 Volume One13

Review of Sydney Water’s Customer Information and Billing S ystem

§areas because Sydney Water was unable to provideOur review of CIBS was restricted in some us with relevant dcoumentation. A poor records management system exists in relation to CIBS.

RECOMMENDATION S The Government should consider amending the Annual Reporting legislation to require agencies to expand their reporting on large projects, explaining significants edlayand whether sefit benject pro will be achieved. The following recommendations are specific to Sydney Water, but are applicable to the public sector as a whole: §should be in place. Each IT project should be assessed prior toa current IT corporate strategy commencement for compatibility with the strategy §be complete and timely, all the way to Board levelcommunication in an organisation should §there needs to be a change in the culture of accepting that large and complex IT projects will be delivered late adnat increased cost §the business case to support a project must be updated for significant changes as they occur §major projects should have the best people involved from the outset §lotuTIs ht eo fe deld bshouion vorp dna depolev slyar eant aento rogpeettay pa §should be performed during major high risk projects.at least one ‘Health Check’ Recommendations should be addressed on a timely basis §internal service providers with specialist skills should be used from the start of a project and should be made caocuntable. They should decide if any external skills are required to support them §Sydney Water needs to substantially improve its management of records.

PROJECT GOVERNANCE

Sydney Water had spent approximately $61.0 million on R1, R2 and R3 up to project termination and another $18.6 million on related CIBS hardware and software. We believe most of the $61.0 million will be written off

Sydney Water advised us that: §value for R1 and R2. We believe the majority of theit had not determined an asset $61.0million will be written off §all CIBS hardware and software will be allocated to other applications at no further cost Of the $61.0 million, $23.0 million was internal Sydney Water costs and $38.0 million was paid to external parties. The largest external panyt mweas $29.4 million to Pw C.

Auditor-General’s Report to Parliament 2003 Volume One