Department of Defence's Troubled Human Resource System

The Department of Defence did not seek, nor obtain approvals from Cabinet or the Minister of Defence as should have been the case

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The Personnel Management Key Solution (PMKeyS) Project (“the Project”) was a significant and complex human resource business process change in the Department of Defence (“Defence”) and involved moving military and civilian staff off purpose-built long running human resource legacy systems to a common platform.

The Project, when completed, was to deliver a single integrated system that would consolidate both the delivery of personnel management functions and the number and disparate nature of the systems that performed those functions.

The Project was to deliver these outcomes by June 2000.

The Project suffered extensive schedule slippage, with Phase 1 delayed by 39 weeks and Phase 2 components rolled out between 75 and 158 weeks late.

When the Project closed in December 2002, major outcomes under Phases 3 and 4 had not been delivered.

The Project was also to facilitate significant savings of $100 million per annum. Nearly six months after Project closure the PMKeyS system was yet to demonstrate a return on investment and that although savings had been achieved through decommissioning the legacy systems, those savings fell well short of the costs for far expended.

The total cost to Defence to bring PMKeyS into service is estimated to be at least $131 million.

This cost exceeded Defence’s estimate of $103.5 million to maintain its legacy personnel systems for five years by more than $26 million.

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The Australian National Audit Office – in an August 2005 report – noted many significant governance and control weaknesses in relation to the Project:

Project Planning and Approval

• The Project Office, as part of its planning processes, did not develop, complete and update a number of the key project planning and management documents, as mandated by Defence procurement policy.
  
• Defence did not seek, nor obtain approvals from Cabinet, or the Minister for Defence and Minister for Finance and Administration for any cost increases in accordance with Defence procurement policy.

Contractual Arrangements

• The Software Vendor and Training Contractor were operating for an extended period without contractual coverage for the work that they were undertaking.
  
• For the period between 1999 and 2001, the Project did not have a Defence Project Director and employees of the contracted Project Manager fulfilled the Project Director’s role – thereby reducing governance over the Project Manager.
  
• The (then) Office of Government Information Technology contract with the Software Vendor required that services provided under the Official Order had to be formally accepted by Defence by way of a Certificate of Acceptance. Limited evidence was found of the Certificates of Acceptance and Defence advised that they adopted less specific acceptance criteria. In the absence of Certificates of Acceptance, most of the payments made to the Software Vendor under the Official Order were not made in accordance with the contract terms.
  
• The Official Order was not compliant with Defence procurement guidance in that it did not include specific provisions for liquidated damages and performance incentives.
  
• Rebates were to become payable under the Official Order in the event of missed contract milestone dates. Notwithstanding that the Project missed all milestone dates, no rebates were paid to Defence.

Cost Performance

• Defence was found to have spent $15.76 million on contracted project management services, which was a thirteen fold increase over the initial budget.
  
• The Project Office underestimated the cost of providing training to PMKeyS end-users, which increased nearly fourteen fold.

Training

• Following Project rollout, responsibility for training was devolved across Defence, producing a disparate ongoing training environment that was reported to adversely effect personnel data quality. This was situation was addressed through the establishment of a central training authority in December 2004 – more than four years after the first stage of PMKeyS rollout.
  
• When rolled out, the Project training was inadequate in that it often did not reflect the delivered functionality. Initial Phase 2 training, which was delivered 14 months prior to the sytem’s rollout to Army, was inappropriately timed.

Lessons Learnt

Defence agreed with the Australian National Audit Office on the lessons that could be learnt from the Project. They included:

• The need for project approval processes for IT systems to comply with Government and departmental requirements.
  
• Future management information system projects should be based on realistic estimates of project costs and system infrastructure requirements that have been subject to close analysis and review, prior to project approval.
  
• The need for a structured process of periodic management review, following the awarding of contracts, to provide additional assurance on the robustness of schedule, cost and performance outcomes being achieved in material projects.
  
• Training delivered to end-users as part of new management information system implementations should be appropriately timed and reflect the functionality of the delivered system. Where this does not occur, follow-up or revised training programs need to be implemented.
  
• Meaningful and measurable key performance indicators should be implemented to assist Defence in the monitoring of the effectiveness of management information system remediation initiatives.