A monumental and catastrophic failure in IT corporate governance.
On October 12th 2005 after more than three years of development, the Australian Customs Service (“Customs”) Cargo Management Re-engineering Project entered a critical phase – commissioning of the new Integrated Cargo System Imports Module (“ICS”).
Over the subsequent fortnight, Australia’s cargo ports ground to a halt.
By October 21st, crisis talks were being conducted at Federal Ministerial level.
On October 24th, despite continuing protests, announcements were made that the system was here to stay.
On October 26th – fourteen days after it went live – Customs notified industry that the prior system would continue to operate “indefinitely”.
Freight and transport companies say the clearance delays resulted in millions of dollars in extra storage costs and penalties for broken delivery contracts.
The industry is examining the possibility of filing a class-action suit for damages and the industry peak body has called for a moratorium on customs compliance offences caused by the chaos. (Customs have promised to compensate importers on a “case-by-case basis” for storage costs incurred while containers were stranded).
Customs put in place “transitional arrangements” to address the concerns including 200 additional call centre staff and clearance teams at the ports.
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ICS was the final and largest component of Custom’s decade-long, $200 million overhaul of its cargo processing systems.
A web based transactional portal running into IBM mainframes, the ICS processes Customs clearances for cargo entering and leaving Australia, with customers required by law to use the system.
ICS was intended to revolutionise the customs processes in Australia.
In additional to greatly improving controls and tracking, ICS was to break an effective monopoly on customs processes that had been held by Customs Brokers and Freight Forwarders. By using web based technology, and B2B type interfaces between corporate systems and the new Customs systems, importers and exporters were to have their first opportunity to deal direct and cut intermediaries out of the picture.
The Australian called the project “the most complex IT based undertaking ever undertaken in Australia”.
In November 2003 it was noted that the project was $100m over the initial budget of $28m and more than a year late. Of concern was a newspaper report at the time that quoted a software developer involved in the development of systems that would interface to ICS: “nobody expects software projects to be delivered on time.”
At this stage, there were already warning signs:
· Bugs in early releases of the software were not being fixed in a timely manner
· Some business transactions were taking much longer to complete than with the prior system.
By February 2005, The Australian reported a further cost extension to $184m.
A subsequently leaked report showed that Customs was aware in August 2005 of serious problems before it switched in the system:
"The projected capacity requirements to September / October 2006 suggest that there is a major capacity problem imminent … further mainframe performance savings must be found and implemented ASAP.” (Source: Customs August Mainframe Capacity Review report)
Despite the report warning Customs it needed to upgrade its hardware and double its processing capacity to the run the ICS, the Agency did not upgrade the mainframe before its launch.
In October, Customs admitted some users had been able to access and view each other’s import documentation. This was despite the system being assessed for security by the Defence Signals Directorate.
The impact of Customs’ strict new data hygiene requirements was also becoming apparent.
Customs had spent the last two years warning industry that ICS would reject any numerical variation in electronic clearance documentation – it appears that both Customs and industry grossly under estimated how strict new data hygiene requirements would be. Under the previous system a degree of fuzzy matching and fault tolerance was accepted to compensate for inconsistencies in data provided by suppliers.
On the day before the scheduled cutover, The Australian reported that Customs had been “forced into another embarrassing backdown” by issuing a last minute exemption for end users that were not ready for the new system.
Many users complained that they had not been given sufficient time to fully test the system and that there had been “virtually no end-to-end testing and no training”.
Customs has been forced to delay several large technology projects as it worked to contain the fallout from ICS – a human resources and rostering package, an electronic data management system and a server and network storage project have been delayed as the Customs IT section works to fix the ICS.
There was strong criticism as to the timing of implementation – during the Christmas build up period.
As an aside – there is famous precedent for poor system implementation timing.
The August bank holiday weekend is the busiest period of the year at London’s Heathrow Airport.
In 1997, British Airways chose this weekend to implement a new system for baggage handling. Of course, something went wrong and, inevitably, luggage went astray.
The cost of compensation to passengers left without clothing is believed to have exceeded the initial cost of the system.
Lessons to be Learnt
The ICS implementation demonstrated most – if not all – of the main reasons / internal control weaknesses which cause information system implementations to fail or to fail to reach their potential:
- Lack of proper senior management sponsorship
- Complexity of stakeholder relationships
- Poor management of expectations
- Poor corporate governance
- Mistaking the non-project effort required
- Scope creep
- Culture of denial
- Poor resourcing
- Underestimating the importance of project management
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Since the troubled implementation, the Customs Chief Information Officer – Murray Harrison – has not spoken publicly other than to the Senate Estimates Committee.
Customs NSW regional director David Collins was the person that fronted daily press conferences to explain the flawed implementation.
“Things we tested, which worked well, in reality didn’t work well,” Mr Collins said.
“We are well aware that this is causing a lot of pain and heartache”.
