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Legislative Council - Fifty-Second Parliament, Second Session (52-2)
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HEALTH INFORMATION TECHNOLOGY PROJECTS

The Hon. R.I. LUCAS (17:11): I move:

That this council notes with concern the government's management of IT projects within Health.

As we near the end of this four-year Labor government term, the Jay Weatherill Labor government term—and one would hope the end of a 12-year term of Labor government, since 2002—I rise, sadly, to outline the very significant problems that either a re-elected government or a newly elected government will confront in terms of South Australian Health and its management of IT projects and processes.

What we see evolving within Health at the moment is a financial scandal of untold proportions. We are looking at a multimillion dollar disaster area, blowouts of tens of millions of dollars, and possibly hundreds of millions of dollars eventually. Key staff have already resigned or left the project and more are threatening to leave various IT management projects within Health.

Very significant probity issues have been raised by employees and tenderers in relation to the management of IT tendering processes and, sadly for South Australian taxpayers, minister Snelling literally has no idea what to do. He is desperate to keep a lid on the growing scandals within the IT function in Health or to try to keep them secret until after the March 2014 election. What decisions he is taking are geared towards keeping these issues secret or keeping a lid on them until after the March election and, as I will outline in my contribution, this is costing (and will cost) taxpayers many millions of dollars. Again, very sadly, it is typical of the financial mismanagement and incompetence of minister Snelling and the Jay Weatherill Labor government.

As we look at some of these projects, I will turn very quickly to the EPAS project, the Enterprise Patient Administration System project. In that particular project, and other IT projects, we are already seeing key personnel, such as change directors, operation directors and other senior executives within that particular project, as I said, either resigning or having left the project or threatening to leave the management of that particular project.

The management or mismanagement of IT within Health was so parlous that one of many consultancies, in this particular case Ernst & Young, was employed earlier this year and recommended the appointment of another senior person, a director of eHealth projects. A Mr Long from Canada was appointed in May of this year, but I am told that his contract was only to take him through until November of this year. He has been prevailed upon, I am told, to now extend his contract to February of next year, just prior to the state election, but the problems within IT in Health remain, remain significant and will remain long after Mr Long, who was evidently brought in to try to resolve some of these issues in a six or nine-month period.

If I turn quickly to the first project and the biggest project of the lot, which is EPAS. Questions have been asked in this place and in other places about this particular project. It was originally intended to cost $408 million. That has already blown out by $14 million to $422 million because the minister and the government forgot to put the normal CPI inflator into the project, given that it will take a number of years to roll out. Someone omitted to put a price inflator index into the costs for the project and that will cost taxpayers an estimated extra $14 million.

We have already seen very significant further blowouts in the cost of this particular project and significant delays in relation to the rollout of the project. A confidential minute that went to the EPAS project board in September of this year indicated that, if you looked at the blowout on an apples for apples comparison; that is, if one looks at the rollout of EPAS to the first site, which was the Noarlunga site—it went live in August, it was originally meant to go live early this year; the previous estimate had been March, but that was delayed until August of this year—and you look at how much of the budget was meant to have been expended by the time of arriving at the rollout of the first site, that apples and apples comparison, which was an analysis done by another consultant, indicated a blowout of $14.7 million in the EPAS cost to roll out to that particular first stage.

That confidential minute to the EPAS project board in September indicated that at that stage the estimated cost of the rollout to the next hospital, which was to be the Repatriation Hospital, the estimated blowout in cost by the time they got to that, which was going to be late this year, was a blowout of $24.7 million. So, this particular project was originally meant to be—as we speak, more information is being supplied from within the health department about this particular issue.

I have been momentarily diverted. I was referring to the leak documents provided to the September meeting of the EPAS project board and what that indicates, as I said, for Noarlunga. I think I had gotten to the stage of saying that the original scope of this EPAS project was originally to roll out to all hospitals, 72-odd hospitals, big and small, throughout South Australia. Because of the blowout in cost, that was reduced in scope to just 12 hospitals, most of those being in the metropolitan area and a small number in regional South Australia. The blowout, just to rollout the first of those hospitals, has been $14.7 million.

The estimate in September of the blowout to the second of the 12 hospitals is $24.7 million. Members should bear in mind that the first of these two hospitals in particular was selected because it was deemed to be the easiest and least expensive hospital to rollout EPAS to. For the more complicated hospitals, such as the Flinders Medical Centre, the Lyell McEwin, the Royal Adelaide, etc., one can only guess at the extent of the potential blowout later on in the rollout schedule.

We are already seeing very significant blowouts. There is an increase in the contingency budget of up to $49 million. Reports to the EPAS project board in September indicate that virtually all of the $49 million contingency budget had been allocated. That is, in the very first stages of the rollout, virtually all the contingency budget had been allocated, most of that being taken up by the very significant delays in the project.

What is referred to as the 'burn cost' for every month of delay is at least $3 million. So, for every month delay in the rollout of the EPAS project, it is costing taxpayers an extra $3 million. For every month delay $3 million is taken out of the contingency. Once that contingency is fully utilised, the taxpayers are going to have to dip into their pockets to further provide that burn cost of $3 million a month to keep this particular project going.

The original cabinet approvals, once the scope had been reduced to 12 hospitals, indicated that prior to the March election EPAS would be rolled out to a number of hospitals and hospital sites. It will be rolled out, at the very least, to the Noarlunga Hospital, the Repatriation General Hospital, the Lyell McEwin Hospital and the Port Augusta Hospital, together with some GP Plus sites as well. As I said, the first rollout site was Noarlunga, which was only achieved at the end of August.

As of last week, I have been advised, the most recent schedule—which the minister, I am advised, in question time today was not prepared to fess up to—that has been authorised is to wind that back completely so that it will only be rolled out before the March election into the Port Augusta Hospital (which is obviously a regional hospital, away from Adelaide), some GP Plus sites (which are very small and obviously less complicated than complex sites), and a 15-bed ward in the Repatriation General Hospital.

Only two or three weeks ago the minister told parliament the supposed rollout to the Repatriation General Hospital would happen before the end of the year. He is now being told that it is only going to rollout not to the whole of the Repat Hospital but just to a 15-bed ward, a palliative care ward, quite simple and specific, but one small component of the Repatriation Hospital, and it certainly will not be rolled out to the Lyell McEwin Hospital prior to March. I am told the next stage of the rollout schedule has now been put back to May 2014; that is, two months after the March election.

What we have seen with the EPAS, then, is a very significant reduction in scope from 72 down to 12 hospitals. Some community mental health facilities, which were in the original scope, have been removed as well. We have had very significant issues in relation to the security of the system, which we will be asking further questions about this week and in the remaining week of parliament. At this stage I will just summarise that the original scope which had been approved had a security of what was called 'twin factor authorisation'. Given the sensitive nature of the information—all the clinical information for patients would be included in the system—what would be required to access the system would be not only a swipe card but also a separate pin number.

That is twin factor authorisation, but the government and the ministers removed that twin factor authorisation to try to stem the haemorrhaging of the blowout in EPAS, and instead of having that twin factor authorisation security level they have now included just the use of a username and password. That is just a single factor, and the IT experts within the department are indicating and warning the minister and the government of very significant security issues in relation to the operation of EPAS.

This is clearly one of the reasons why minister Snelling is desperate to keep a lid on this particular issue until after the March election, and why he is desperate not to roll this out to all the hospitals he promised to do prior to March, because if he does and if the security breaches occur that he has been warned about, then clearly he will be embarrassed and the Jay Weatherill Labor government will be significantly embarrassed in the weeks leading up to the March election. Hang the cost, hang the expense of the project, the minister is desperate to ensure that that information does not get out and does not become public.

That is why I can indicate that, in terms of preparation of this particular contribution and questions we have been asking over the last couple of months, six separate persons with access to information from the IT function within SA Health have spoken to me about their concerns at the mismanagement within SA Health and the minister's mismanagement, not only of the department but also of the IT function within Health.

This is not just a single person; these are six separate people, and as I indicated earlier, just as I commenced my contribution today, a copy of further information from another complainant about the IT function within Health has been provided to me to have a look at.

The Hon. J.S.L. Dawkins: They are queueing up.

The Hon. R.I. LUCAS: As my colleague the Hon. Mr Dawkins says, they are queueing up at the moment to complain about the way this minister, this government and the department are mismanaging IT projects and processes within SA Health. They are looking for a voice in terms of expressing their concerns. They have raised the issues within SA Health, in some cases for nearly two years, only to run into a brick wall or no response from this minister and previous ministers and senior executives within SA Health. When all else is lost, some of these people have taken the brave step of raising the issues with members of parliament (in one case with the Auditor-General), to try to have their concerns listened to in terms of the minister's and the department's mismanagement.

I talked earlier about how decisions the minister has taken are geared towards trying to keep all of this secret until after the March election. As I said, the delay in the rollout to these hospital sites until after the election is costing taxpayers $3 million a month in terms of the burn cost of the project. These are all considerable; up to 200 employees are working on some of these projects within SA Health. We need to keep these particular employees, if we can, because some of the key people are now leaving or have resigned and do not want to continue to be associated with what they see as the mismanagement of the project.

I am told also, if I can give some examples, that one of the reasons for EPAS being introduced is to get rid of some of what are called legacy systems. There are many of those, but I will give two examples: HoMER and CHIRON—two legacy systems which were meant to be removed to allow EPAS to come in and supposedly provide a more efficient service. Because this project for EPAS was meant to have been concluded by 30 June 2014, what is happening is that the very earliest that even the minister is now conceding it will be rolled out will be late 2015, so a 12 to 18-month delay. I am told that that is the best possible case. The worse possible case is that this project might be delayed until late 2016 or early 2017, which would be a delay of some 2½, possibly three, years. That is the worst possible case. If it is somewhere in between the best and the worst, we are looking at a blowout in delay of around two to 2½ years or so. At $3 million a month in terms of burn costs, you can do the sums.

The vendors of these legacy systems know that they are being replaced and they now have SA Health over a barrel because they are saying, 'You're getting rid of us, and you said you'd get rid of us by June of next year—we're no longer going to service our particular legacy systems within SA Health.' They are saying, 'Well, now you're coming to us and saying that, because of your incompetence, you want us to continue to provide a service for another 12 or 18 months or two years,' and they then have the department, the government and the taxpayers over a barrel. They say, 'Look, we'll do it, but here's our price,' and they are now talking extraordinary increases in prices just to maintain the existing legacy systems which were meant to have been removed by June next year when EPAS would come in and replace them.

It is these sorts of extra costs (at this stage I do not have a number on those extra costs—it has not been provided to me and I am not sure whether it has been calculated yet) which minister Snelling is saying, in essence by his actions, that he could not give a continental about. He is seeking to delay the exposure of these problems until after the March election next year. He is delaying the roll-out, incurring the costs and, if he is not there in March 2014, it will not be his problem but the problem of a newly elected government and some new health minister who will have to manage the mess he will have left.

The other issue in terms of costs, I am told, is that the costs of EPAS are predicated on the local area health networks making significant savings in staffing, as well as removal of their legacy systems. Given the delays, I am told that some of the local area health networks are saying to the minister and the chief executive, 'With the savings that were in the original business case, all of them are no longer available because we have already made savings in some of those areas; that is, a particular person might have been working on an IT project, but that person was also working on something else and we have removed that person to achieve another saving that the government wanted us to achieve, and therefore that person is no longer available in terms of a business case offset for the costs of the EPAS project.'

There is an almighty stoush going on at the moment at the EPAS Project Board between the chief executive of SA Health and the managers of the area health networks in terms of trying to ensure the delivery of the assumed savings within the area health networks to offset the costs of EPAS. What we also have with EPAS at the moment is a massive legal dispute. We have lawyers at 40 paces between the government and SA Health and the vendor in relation to EPAS which is a company called Allscripts. The government has taken action saying, 'Okay, we're blaming you for the delay and we're therefore seeking millions of dollars from you towards the increased costs of the project.' I am advised that Allscripts has said, 'Well, hold on: we are blaming you for the delay and we don't accept responsibility,' and they are talking about a counterclaim of millions of dollars against SA Health—because it is blaming them.

For those members in this chamber who sit with me on the desalination select committee, I remind you that this sounds very similar to the lawyers at 40 paces between SA Water and the consortium who are building the contract. There was the government saying, 'There were delays and you owe us millions of dollars.' The consortium came back and said, 'Hold on, we are counterclaiming millions of dollars against you.' Of course, what happened there—and I guess we will discuss that at another committee—was that, in the end, the government did not get the money, as we all know. The government ended up paying tens of millions in incentive payments and did not impose any penalties at all.

The record of this government taking on big multinational corporations, companies or consortia in terms of legal disputes has not been an encouraging one. Again, whoever is elected after March 2014 I suspect is going to inherit this mess of lawyers at 40 paces with multimillion dollar claims against each other in relation to who is to blame for the delays in the rollout of EPAS.

Related to this issue—and the minister has had to concede this today; we had a question asked in the House of Assembly—is that some time ago now a senior executive of SA Health felt so strongly about this particular issue that that senior executive wrote a strongly-worded letter of concern and complaint to the state's Auditor-General about the way a $90 million federal grant to the state of South Australia had been handled, a grant which was intended for IT and EPAS.

Those sorts of decisions are not taken lightly by senior executives within government departments and agencies. You do not do those sorts of things if you are trying to win friends and influence people within government. Clearly, you only do those sorts of things, I would imagine, when you feel frustrated and angry at the way departments and ministers have been managing money on behalf of taxpayers, managing the processes and responding to concerns and complaints being raised, that any senior executive would take the decision to write separately to the Auditor-General to raise those concerns.

One of the many sources that has assisted me in putting this together today has information in relation to the audit function within the Auditor-General's office and certainly has confirmed, prior to us asking the question of the minister, that, indeed, a complaint had been lodged. Again, I am informed today that the minister has acknowledged that he is aware that a complaint had been lodged by a senior executive some time ago in his own department in relation to the government and the department's handling of this $90 million federal grant on these issues. That is the EPAS project.

The second project I want to talk about is the Oracle project. There has been a lot of debate about this, so I will not go into as much detail, but if I can just summarise the problems in relation to Oracle. Here is an IT project which was originally budgeted to cost just over $20 million which ended up costing the budget over $60 million—a $40 million blowout in the budget cost of the Oracle project. That was a combination of both a blowout in the cost and the nonachievement of savings that were meant to be achieved by the introduction of Oracle.

That is a very similar story to that which is unfolding in relation to EPAS—a blowout in the cost, but what looks like being a very significant nonachievement of the savings that were meant to be achieved by the introduction of EPAS. How can you have a $40 million blowout in budget costs on a $20 million project? Only ministers like minister Snelling and minister Hill and governments like the Jay Weatherill Labor government could manage to achieve that sort of a blowout on a $20 million budget cost.

It did not end there, of course. The government then had to spend almost $1.7 million to pay consultants PKF to help fix some of the problems. Remember the problems of unreconciled accounts a year or so ago. The taxpayers had to put their hand in their pocket to the tune of $1.7 million for the consultants to come in and help fix those particular problems.

Disturbingly, again from a separate leak from within SA Health which was the subject of a release a bit over a month ago, we highlighted what would be the reported accounts payable performance by SA Health compared to all other government departments and agencies. Even with this massive new IT system, SA Health's performance remained in 2012-13 appalling compared to most other government departments and agencies. Many of the other government departments and agencies were paying well over 90 per cent of their accounts on time. On recollection, I think the equivalent figure in SA Health was about 70 per cent were being paid on time, even with this very expensive new system which had been implemented. That is enough said on Oracle because that has been spoken about at length, and I just summarise that as a second example of the problems in health.

The third category of issues I want to raise this afternoon relate to significant probity issues. I am still receiving information on this, so I will seek leave to conclude my remarks in two weeks. Suffice to say that in three separate projects—one in relation to a tender process for desktop services, one in relation to the ESMI project (Enterprise System for Medical Imaging) and one in relation to the EPLIS project (Enterprise Pathology Laboratory Information System); they are not catchy titles but, nevertheless, they are the ones that SA Health uses—I have received significant complaints from persons associated with those particular projects about probity issues, and I want to briefly place on the record the complaints. I have significantly more detail which, if there is no progress from the minister in the next couple of weeks, I will place on the record at that particular time.

The first complaint about probity relates to a recent tender for desktop services. I am advised—and I must admit I was amazed that SA Health has 30,000 desktops or laptops—that about every nine months or so they go out to what they call an RFQ (request for quotation), so there is a constant process of going out to tender, or an RFQ, within SA Health. This is an ongoing issue in terms of managing the replacement of these 30,000 desktops, laptops and peripherals which are associated with these particular pieces of equipment. As recently as about August this year, I think, the latest one of those processes was concluded. At this stage I will not name the successful tenderer, but a tenderer was successful in relation to the procurement task for desktop services.

The specific probity or conflict of interest complaint that has been raised with me—and bear in mind, as I said, that this happens every nine months or so—is that because an employee in the position of manager of Desktop Refresh was going on maternity leave, for some reason SA Health just employed, on a short-term, six-month contract, an employee from one of the successful tendering companies to manage procuring tasks for desktop services within SA Health.

So here is one of the successful companies, which, on a nine-month basis has to tender against other companies for very significant contracts, and, when an SA Health employee goes on maternity leave, SA Health employs a consultant from that particular company on a six-month contract. I am told that SA Health is paying that company $90,000 every three months, or $360,000 a year, for the services of this particular person in their function of managing Desktop Refresh.

The concern that has been raised, not just with me but also with senior managers in SA Health, is that this particular person will have access to very sensitive competitor pricing information within SA Health as well as other commercially sensitive information about the structure and nature of the tenders from competitor companies. It is claimed to me that this person will have, for whatever period—three months or six months, or however long they are within SA Health—access to this very sensitive pricing information.

It is not just pricing but also other commercially sensitive information in relation to the management of the RFQ process, the tender process, and other processes and procedures within SA Health. When that person returns to their particular company, they will return armed with that information, which obviously places them in a very advantageous position.

Obviously there are significant concerns from other tenderers within the industry about this set of circumstances. There is also concern within SA Health about the way this has been handled, and about how the perceptions of conflict of interest and probity issues have been handled. Those issues have been raised, but at this stage it would appear that nothing has occurred as a result. That is the first of the probity concerns.

The second relates to the ESMI project, or the Enterprise System for Medical Imaging project. Again, I have much more information, but at this stage I will not mention companies or individuals. Clearly, the minister and the department would be well aware of the concerns because there has been a probity complaint raised with Ms Kate Phillips, who is the Probity Director of the ESMI project—and not just in relation to this issue. One of the specific concerns that has been raised is that a consultant or a contractor working for SA Health on that ESMI bid was a close personal friend of a senior executive in the company that was ultimately successful.

Secondly, the claim that has been made to me is that the closeness of that relationship between the consultant or contractor working for SA Health on that project and the senior executive of this particular company is evident in a series of text messages between not only those two people but at least three other people who were involved or associated with the tender process.

Concern is being raised in industry circles and elsewhere and also within SA Health in terms of probity issues that have been raised, I understand, not just in relation to that issue but also other probity issues that have been raised with the probity director, Ms Kate Phillips, in relation to that particular project. As I have said, I have significantly more information, including the names of the companies and individuals, but I am choosing not to put them on the public record at this stage.

Similarly, in relation to the EPAS project, I am told again that a probity complaint has been lodged with the probity director for this project, who is again Ms Kate Phillips, in relation to some significant probity concerns with the management of the EPAS project within Health. Again, I have significantly more details, including names of the companies and individuals concerned, but at this stage I will not put those on the record.

I raised both of those issues in a general nature with Mr David Swan and other senior executives in the Budget and Finance Committee some two or maybe three months ago, and there has been no response from those executives. We are in the last two weeks of parliament, and clearly a waiting game is being played by the minister and SA Health in relation to these issues.

I have had the questions asked now of the minister today, and he indicates the Sergeant Schultz defence: 'I know nothing.' That seems extraordinary because he has officers who attend the Budget and Finance Committee. I would not say that he has loyal members of the backbench on the committee, but he has a couple of members of the backbench on the committee, one from his faction and one not. You would think that the loyal one, the one from his faction, might tell him, 'Hey, you'd better have a look at this,' but I would not expect Mr Maher to do it.

These issues were raised in the Budget and Finance Committee, yet the minister, some two or three months later, in the house says that he knows nothing about it. Whether it is that he puts his hands over his ears and his eyes, and he does not want to see anything or hear anything until March 2014, but it seems extraordinary that he has his chief executive and his own backbench members, and government staff members sit in the audience of the Budget and Finance Committee, yet he stands up in the house and says that he knows nothing about these issues. I am hoping that, in the next two weeks, we might be able to flush out the minister or the chief executive to indicate what the government is doing about some of the probity complaints that have been raised about these issues.

In wrapping up the probity issues, let us bear in mind that Ms Kate Phillips, who is the probity director, already has access to lawyers, I am told, to provide advice to her on the probity issues. I am told that the chief executive, Mr David Swan, is so concerned about the probity issues in the department being raised in the Budget and Finance Committee and now obviously in the parliament that, in the last few weeks, he has appointed his own lawyer to act as his own adviser on probity issues within SA Health.

I am told that Mr Geoff Kendall has been appointed by the chief executive to that particular position. I am also told that the chief executive has, in the nicest possible way, I am told, tried to read the riot act to his officers within the department, indicating that if his butt is going to be on the line in Budget and Finance and other fora, he intends to take the particular officers who are managing these projects with him in the future so that they can answer some of the questions that are being put in relation to probity issues.

As I said, there is much more information in relation to this, because this is a multimillion dollar disaster area. As I said, we are looking at blowouts of tens of millions of dollars, and possibly hundreds of millions of dollars eventually, and there are very significant probity issues that we are confronting. I am hopeful, as I said, that in the next two weeks of parliament we can flush the minister out to answer some of these questions; if not, when I conclude my remarks, I will put on the record further detail in relation to some of these concerns. I seek leave to conclude my remarks.

Leave granted; debate adjourned.

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