Lessons in preparation: how Queensland’s digital transformation headaches caused $540 million in late payments

By Matthew Elmas

Thursday October 1, 2020


Queensland’s new IT platform quickly became a high-profile example of the pitfalls of implementing new systems, when, several weeks after going live, millions of dollars had flowed out of the department in errant invoice payments.

Last year, Queensland’s Department of Health went live with a replacement for its 22-year-old finance and materials management ICT platform.

The program, nearly four years in the making under a $105 million budget, was billed as an opportunity to modernise the business, finance and logistics systems for the state’s hospitals and health services under a new SAP product called S/4HANA.

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But the project quickly became a high-profile example of the pitfalls of implementing new ICT systems, when, several weeks after going live last August, it emerged millions of dollars had flowed out of the department in errant invoice payments.

By the time project managers had identified the issue, a range of human and technical errors caused by the implementation had seen more than 13,000 duplicate invoices filed and paid across the state, totalling $6.5 million in over payments.

A little over 12 months later, a report filed by Queensland’s Audit Office about the program has found the department has started to recover the duplicate payments, after the systems issues led to a sizeable backlog in vendor invoices, causing $540 million in supplier invoices to be paid late.

And while significant efforts were made to transition over to the new system since it went live, 14 of Queensland’s 16 hospital and health service units reported the platform did not change their workflow as anticipated in the months after its release — not exactly a stellar endorsement.

“Entities did not properly understand the new system processes, nor did they fully appreciate the need to re engineer their business processes to fit the system,” auditors said of the implementation period.

There are no shortage of lessons for the broader public sector in the S/4HANA transition, and they’re particularly timely; over the next three years, departments and agencies at the commonwealth and state levels will be under significant pressure to undertake their own digital transformation programs.

Prime Minister Scott Morrison confirmed as much last week when he pledged commonwealth entities would be required to move to e-invoicing by midway through 2022 at the latest, while the independent APS review handed down late last year found many systems across the APS are grossly outdated.

They estimated $400-$900 million a year in new investment will be required to match private sector benchmarks for digital transformation, which by any measure is a lot of new systems.

Digital transformation and you: how failures to prepare led Queensland astray

With this in mind, Queensland’s recent experience is pertinent, and it all starts with preparation.

Broadly, auditors identified a set of key problems in Queensland’s implementation of S/4HANA:

  • Before the system went live, entities reported they were ready when they really weren’t;
  • Outstanding deficiencies in the processes required to enable the new software were not rectified before launch; and
  • Technical problems once S/4HANA did go-live created significant performance issues, including outages, that eventually led to a re-platforming of the system.

The issues were so severe that, within three months of the new platform being implemented, Queensland health had racked up $3.1 million in un-budgeted costs related to hiring more staff, addressing training shortfalls, and implementing manual workarounds to inventory and accounts issues.

“The post go-live experience showed that Queensland Health underestimated the compounding delivery risks,” auditors found.

A hundred gloves turn into one: how human failures drove implementation headaches

While auditors identified technical issues that eventually forced the department to double the memory and processing capacity of the new platform, the majority of the problems identified with the implementation arose from lacklustre systems training and failures in the development of human processes.

In other words, as has been identified in prior ICT implementation failures, issues with the technology itself paled in comparison to a vast array of human errors.

Namely, it has become clear that despite having delayed the go-live date twice in the lead up to August 2019, Queensland Health was not ready to implement the new system when it did.

This was largely because stakeholders responsible for reporting to senior executives had broadly professed their readiness in the months leading up to the implementation date, when in fact these assurances were caveated a total of 128 times across 19 separate entities.

“Chief executives or senior responsible executives endorsed their entities’ readiness to go live, despite none of them being fully ready,” auditors found.

This would turn out to have adverse consequences, as significant shortcomings in user training about the new platform –remember Queensland Health had been using its last system for 22-years — created massive headaches when the program did go live.

For example, changes in the way S/4HANA recorded stock orders versus the old system led staff to make sizeable errors in orders for personal protective equipment, whereby staff thought they were ordering one box of 100 gloves, but the new platform tried to deliver a single glove.

“Change management did not adequately teach and inform staff how the system would operate,” auditors found.

Other issues with new warehouse scanners and additional controls around stock management that were present in the new system but not the old one forced 15 of Queensland’s 16 health service entities to develop manual workarounds in the months after the system went live, which is really the opposite of the desired outcome.

Audit: senior executives must be responsible for whole-of-system projects

In recommendations to the department, auditors pointed to project governance and accountability as the genesis of many of these issues, recognising that implementing ICT projects at scale requires ownership to be taken over readiness well ahead of time.

They said accountability frameworks must ensure shared responsibility for project delivery across:

  • Completing project readiness activities in a timely manner and to a specified quality;
  • Understanding change implications to their entities and updating local guidance; and
  • Correctly identifying user roles and ensuring the right staff are trained at the right time.

Learnings from training in complex systems at scale: it pays to be over-prepared

One of the more significant findings that auditors made was that training in the S/4HANA system was broadly inadequate across Queensland Health prior to go-live.

State-wide, S/4HANA’s training completion rate was just 39% in the weeks leading into system implementation, while only one-in-two staff was completing instructor-led learning programs.

Crucially, the majority of superusers who, in a matter of months, were supposed to be in positions of workplace authority about the new platform, did not attend any training sessions.

“The majority of users did not attend sufficient training prior to go-live; some found the training not as useful as it could be after reflecting on their post go-live experience,” auditors found.

Queensland’s experience highlights the difficulty in rolling out complex training programs at scale, with a total of 23,000 role-based training places offered across 30 different modules.

Staff reported training programs were often overly theoretical, and did not place enough emphasis on how S/4HANA would change work practices in their own teams; and while there were some good examples identified of more localised training, staff reported the information they were taught turned out to be less relevant to their eventual post implementation experience.

While this is undoubtedly a difficult dilemma, a chicken-and-egg sort of situation, auditors reported that entities felt as though the criteria for assessing whether staff had understood what they had been taught was lacking.

This led to over confidence among decision makers higher up the chain that was exposed when the system did finally go live.

“Most entities did not understand the system processes well enough to re-engineer critical local processes to fit the new system,” auditors found.

Queensland Health has been undertaking its own reviews to learn from the implementation, as Director-General John Wakefield explained in his response to the auditor’s report.

“I note that the report represents a point in time and that Queensland Health has made significant inroads in addressing its findings,” he said.

“I reaffirm that S/4HANA has provided Queensland Health with comprehensive procurement and supply chain data that has been instrumental to the COVID-19 response, and that during the implementation there was no impact on patient care.”

The full auditors report can be accessed here.

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Chris Johnson
Managing Editor

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