SAP awarded AU$3.4m to design next phase of new Centrelink payments system

The Department of Human Services has signed with the enterprise software vendor for the provision of preparatory planning and design work of Australia's new welfare payments system.

The Department of Human Services (DHS) has signed with SAP Australia to help it progress design work for the Welfare Payment Infrastructure Transformation (WPIT) Program that it is undertaking to transform Australia's 30-year-old payment system, currently responsible for processing over AU$100 billion in Centrelink payments annually.

According to DHS general manager Hank Jongen, the AU$3.4 million contract will see the software vendor work with DHS on the provision of preparatory planning and design work until May 19, 2017.

The second tranche of the WPIT project is slated to continue through to the end of June 2018, however DHS is yet to contract SAP or any over firm for the second tranche of the project.

SAP was announced as the department's software vendor of choice for overhauling the payments system when it went to tender in August.

At the time, DHS said it was yet to sign with SAP although contract negotiations were already underway; however, discussions with the software vendor actually began after the department published a Request for Expressions of Interest in September to gather suggestions from the IT industry on how to design and begin construction of the new welfare payment system.

Speaking at the GovInnovate summit in Canberra in November, John Murphy, deputy secretary for payments reform at DHS, said the department was already working very closely with SAP on what will be the co-design and building of a social protection suite.

"An industry-strength solution that we will look to implement here in this country and SAP certainly has an intention to build a social protection suite that they can then market to other governments around the world," Murphy explained. "We will look to co-design, co-develop the social protection suite with SAP, which will underpin what we do."

The WPIT program has been labelled the biggest digital transformation the government has embarked on to date by Minister for Human Services Alan Tudge, with the project estimated to take seven years in total to complete.

"Over the next five years, we're going to be progressively building a new system for each one of the major payments to make it simpler, faster, and cheaper to administer," Tudge said previously. "We're going from a world today where the system is stifled with unnecessary inefficiency and complexity to a world where there will be progressive transformational change."

DHS announced appointments to its system integrator panel in October, with the department signing Capgemini, Accenture, IBM, and HPE. At the time, it was revealed by DHS that either Capgemini or Accenture would be providing systems integration services for the WPIT overhaul, with the pair of consultancy firms to battle it out for the final rights to the contract.

It is not just the bigger tech players DHS is working with to fix the payments system, with Murphy "fully" expecting to engage with bespoke specialist change management firms as DHS moves into implementing major changes across its 35,000 departmental staff.

Centrelink has been in the spotlight recently, after it emerged over the holiday season that the agency's new automated debt recovery system had letters demanding money repayment sent in error to welfare recipients in Australia.

DHS announced in December it had implemented the online compliance system in July and said it was finding approximately AU$4.5 million that had gone awry each day. With this, the federal government hopes to improve the nation's Budget by AU$2.1 billion over the next four years.

The new system automatically compares the income people declare to the Australian Taxation Office against income declared to Centrelink. When it detects a disparity, Centrelink automatically issues a debt notice and that debt comes with a 10 percent recovery fee.

One large error in the Centrelink system is that it was incorrectly calculating a recipient's income, basing a recipient's fortnightly pay on their annual salary rather than taking a cumulative 26-week snapshot of what an individual was paid.

Prime Minister Malcolm Turnbull called the debt recovery system "quite appropriate" and said it boils down to the fact that the government has an obligation to ensure that Australia's "very extensive and generous" social welfare system is allocated correctly.

"Centrelink has a responsibility where it identifies a discrepancy between what the recipient has reported and what the employer has reported to seek an explanation and that is what is being done," he said.

"The letters that go out in the first instance are simply saying, there is a discrepancy: 'Your employer is saying you earned this, you say you earned that, can you explain what that discrepancy is' -- and that is entirely responsible and appropriate."

It was announced last week that Australian rail freight company Aurizon terminated its Freight Management Transformation project, contracted to SAP since 2014, resulting in an impairment charge of AU$64 million to the company.

The FMT project in 2014 attempted to bring 18 separate legacy systems used for logistics planning, scheduling, ordering, and billing onto a single platform. However, following a review of the project, Aurizon decided to pull out of the remainder of the contract, expecting it to provide little benefit by continuing.

Updated 2.05 pm AEDT 9 February 2017: Provided clarification that DHS is yet to sign with any vendors for the second tranche of the WPIT transformation and that SAP has been contracted to provide preparatory planning and design work to DHS only.