​Brisbane Lord Mayor blasts TechnologyOne for AU$60m contract blowout

The city's mayor has called for the renegotiation of council's contract with TechnologyOne after he learned the project was experiencing lengthy delays and a potential cost overrun of up to AU$60 million.
Written by Asha Barbaschow, Contributor

Brisbane Lord Mayor Graham Quirk has directed council officers to renegotiate a contract with enterprise software firm TechnologyOne after learning of an 18-month delay in deployment and a potential AU$60 million cost blowout.

Quirk said in a press conference on Wednesday that he was acting on information provided in a briefing on Monday about the AU$122 million, ten-year, IT systems replacement contract that was awarded to Australian Securities Exchange (ASX)-listed TechnologyOne back in June 2015.

"On Monday, Civic Cabinet received a briefing about progress of an independent review of the Local Government Systems Program that is being conducted prior to any further investment, to gain assurance that appropriate due diligence has been undertaken to ensure a successful outcome," Quirk said.

"When I was made aware in November last year that delivery of this contract was behind schedule I commissioned a review so we can get the project back on track."

The review is still ongoing, but the mayor said Monday's briefing identified "looming" problems that caused him to take decisive and immediate action.

The council had already stopped making payments to TechnologyOne back in October after it was decided the company needed to deliver "significant" milestones first.

"[The review] has recommended that council renegotiate the contract with a six-month deadline for TechnologyOne to provide an acceptable IT system to council, appoint a Systems Integrator to assist in the system's implementation into council's existing systems and plan a viable alternate option to ensure existing IT systems remain available where necessary," Quirk explained.

TechnologyOne issued a statement to shareholders on Wednesday afternoon that said the Brisbane-based company welcomed the independent review, but highlighted that there appeared to be "confusion and misunderstanding" within the council on the history and status of the project.

"It was agreed that Brisbane City Council (BCC) would be development partners of TechnologyOne with the award of the tender, but as the project progressed it became clear that BCC struggled with this strategy," the company said.

"At the request of BCC, the decision was made that TechnologyOne would complete the build of the new product before the project implementation proper continued. This change in strategy has introduced delays to the project."

TechnologyOne said that the council had requested "substantially more" functionality than was originally tendered for, which the company said was provided to the council at no additional cost.

"It is important to note that though there have been delays to the project, to date TechnologyOne has not charged any additional costs to BCC. TechnologyOne has remained within the contracted amount," the company explained.

"It is also important to note that the additional AU$60 million referred to in the press release [from Brisbane City Council] does not include any additional costs from TechnologyOne at this time."

TechnologyOne also said the software build has been completed, tested, demonstrated, and handed over to the council for the next stage of the project, which is to configure the software as required.

At the beginning of 2015, TechnologyOne was named as the preferred supplier for Wellington City Council's new core IT system, with the council originally seeking to cut through the complexity of more than 120 separate IT systems that supported its business by replacing them with an integrated package.

However, a little over a year later, the council re-evaluated its strategic asset management software options after TechnologyOne had parted ways with Melbourne supplier Assetic -- the company awarded the Wellington Council contract.

It was also revealed the budget rose from NZ$15.3 million to NZ$16.2 million.

At the time, TechnologyOne executive chairman Adrian Di Marco said the Assetic relationship ended after it was acquired by venture capitalists and TechnologyOne was unable to negotiate a new distribution agreement.

TechnologyOne recently signed up the federal Department of Treasury and the Australian Bureau of Statistics, with both departments implementing TechnologyOne's OneGovernment SaaS solution in a shared services arrangement that is expected to eventually include upwards of 25 government departments.

Under the AU$5.8 million deal with Treasury, TechnologyOne has taken responsibility for running the software, replacing the ageing SAP software the department previously had in place.

The company also inked a AU$6.2 million deal with the federal Department of Agriculture and Water Resources last year, and announced in August that it had signed a 10-year contract worth AU$40 million to supply TAFE Queensland with its student management solution.

For the 2016 financial year, TechnologyOne reported a 16 percent year-on-year increase in net profit after tax to AU$41.3 million, and experienced its seventeenth consecutive year or record revenues with FY16 revenue totalling AU$249 million.

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