Novopay to cost taxpayers over $100m

Delays in the implementation of the troubled teacher's payroll system mean it will cost much more than previously indicated

The Ministry of Education will end up spending more than $100 million on the troubled Novopay pay system for teachers.

A ministry contract register shows that the contract with Talent 2 for Novopay extends to September 2015 and is worth $80 million.

But in response to questions from Computerworld, the ministry says that the contract register doesn’t take account of the delay to the implementation of Novopay and the resulting contract variations.

“The contract value of $80 million covers the Talent 2 implementation costs and six years of operation from go live,” the ministry says.

According to the ministry the total Novopay costs are:

  • Development and implementation - $29.4 million;

  • Long-run cost - $12.5 million a year until 2018.

Following a subsequent enquiry by Computerworld, the ministry now confirms the total cost will be $105 million over eight years.

The original contract was signed in September 2008, but the project was delayed for two years while additional testing was done.

Talent 2 has also earned around $500,000 by providing a programme manager, systems administrator, and business analyst, according to the contract register.

Computerworld asked if, given the on-going issues, there were penalty provisions that come into play.

The ministry responded briefly: “The . . . contract with Talent 2 does include penalty clauses.”

This week, the Prime Minister, John Key, said the company was likely to face a financial penalty if errors weren’t resolved.

“The government had paid them a lot of money and they should have got that all right.”

Ministry chief executive Lesley Longstone has since confirmed that the ministry will be seeking penalties from Talent 2.

Assurity Consulting is listed in the contract register as having a contract as test lead for Novopay, valued at $350,000.

The Ministry says Assurity was engaged to do both pre and post go-live testing. A $350,000 payment was made to the consulting company for the first contract. Subsequent contracts have since been signed, and the total invoiced now stands at $842,000.

“Assurity delivered the services required under its contract, and there is no reason for the ministry to enact any penalty provisions.”

Computerworld asked if the ministry had identified the base causes of the on-going pay issues. The ministry responded:

“Most of the issues fall into three broad categories: leave entitlements, staff who use timesheets (such as relief teachers, and staff who are leaving or joining the payroll.

“During the first two pay periods in particular, many schools – frustrated by the problems with Novopay – reverted to using forms instead. This created a backlog of clost to 8000 transactions. This has now been reduced to under 1000.

“The ministry’s focus so far has been on avoiding and resolving errors that impact people’s actual pay. This had reduced the number of underpayments or non-payments from 5600 in the first Novopay period, to 221 in the most recent period.

“Now, particularly through the road shows, schools are giving us feedback on the next layer of issues to address, like making sure entitlements show correctly. While these errors don’t impact pay, they are causing stress and frustration for schools and are our next priority to fix.

“We have releases scheduled each fortnight from now until the end of the year to address the technical problems.”

The ministry says that, as the contracted service provider, Talent 2 is responsible for fixing the errors and providing the payroll service that meets the needs of all schools and staff. It says that Talent 2 has hired additional staff to make sure system performance and service levels improve.

Computerworld asked how many individual teachers’ pay issues had been identified.

“The last pay cycle identified 221 non-payments or underpayments. These are being addressed with the staff and schools,” the ministry replied. It pointed out that a third of New Zealand’s education workforce are support staff, so the answers applied to support staff as well as teachers.

Rebecca Elvy, group manager and Novopay business owner for the ministry, says Talent 2 is being held to account for delivering the service levels and performance the ministry and schools require.

“We are making good progress on getting through the backlog and developing fixes to the technical issues. Our strong focus now is on supporting schools and continuing to make improvements to ensure a successful end-of-year process,” she says.


John Holley


Payroll migration of this size/scale should have included a period of parallel processing. Testing only runs through scenarios provided by the business. The real test is to run the system in parallel to the old system and compare results. If you are not getting close to 100% concurrence you need to check things or make sure you have bloody good mitigations in place e.g. out of cycle pay runs, not "we will sort this in the next pay run".

Quite frankly responsibility lies squarely with the project sponsor and steering committee. They are the ones who must have given the green light to "go live".

So responsibility/accountability must lie with some of the MoE's most senior managers - not a contracted testing organisation - that is just a PR101 diversion.



This is outrageous. $100m for a payroll system that is full of problems? Who the heck signed-off on this deal in September 2008?

What was wrong with an existing NZ-developed system? I have previously used iPayroll (I have NO affiliation with that company) and found it perfectly adequate, reliable and easy to use. And there are other ones just as good too, I'm sure.

Heads should role and penalties be imposed, instead of Minsitry officials racing to effectively give them more leeway.



Considering we are taking about less then $15 a teacher per month this is quite cost effective.
A distributed solution would cost considerably more than this..

All major project have hiccups, I am sure the issues will be resolved as part of normal project negotiations.

not full story


so us tax payers have also overpaid some teachers and now "we" pay to recover those funds... or do they "write it off"?



They are spending $400m over the next decade, thats only $40m a year... Just wondering what they are going to provide, could this money have gone into the pacific fibre cable as we are already using 1Tb of data a month and we are a medium sized school



As a seasoned solution architect based on the pattern emerging from the nature of issues that are surfacing there should be an independent audit to assess the state of the data. I suspect that data has ended up in a corrupt state due to the faulty logic and is soon going to end up in an irrevocable state.

Can Novopay provide an assurance that no one is cleaning up the data manually within the database directly?



Had a look at the Assurity Consulting web site .. and found this::
Test Consultant

XXX completed Assurity's Graduate Training Programme in January 2011 and entered the business as a Test Analyst. He quickly demonstrated his ability to understand complex business requirements, develop effective testing solutions and articulate these at all levels of the business.

His involvement in and contribution to the Talent2/ Ministry of Education payroll project resulted in a special commendation from the Ministry of Education CIO. XXX has also been recognised for his strong communication skills and leadership abilities, acting as Test Lead to provide direction, support and coaching to the team.

XXX has represented Assurity at careers events and has also presented to Victoria University students about how his Arts degree and the skills and experience gained at university translated into a successful career in software testing.



Why is Assurity being excluded from a list of parties responsible for this disaster? Have they:
- Done the testing and found all issues that the teachers are now facing in the live system, and those issues were then ignored by MoE; OR
- Done the testing and found everything is in order

Because if this is the latter they are as accountable as Talent 2.

Berend de Boer


Why are we doing this big bang projects anyway?

Just bulk fund schools, and let them select a payroll.

But that would be using a market mechanism, and that's anathema to the big government parties running this country.

And the taxpayers has unlimited funds to be tapped anyway. The less they have themselves, the better things are for big government.



If heads don't roll over this we should march on Wellington.

How many times have we seen Government IT projects end in disaster?

And now we're going to let MoE spend hundreds of millions of $$$$ trying to build a national education network? Really??



Seems to me that if every teacher in the country put $5 toward a good employment lawyer we might get a better result.



A basic question - why was a new pay system needed ? What was so wrong with the previous system that it had to be replaced by Novopay ?
I have noticed a trend in many big organisations - new "managers" come in, want to re-invent the wheel - so: out with the old, in with the latest. And, of course, the bigger the latest toy ( sorry, system) is the better - justifies having higher managerial salaries. Also, it looks good on their CVs - "successfully implemented a major system". Yeah right !



Here are some other questions:

- When the MoE CIO took over the programme, who was removed from the programme, and why?

- Is it true that user acceptance testing recommendations in terms of the number of FTE's required, was ignored by the programme board, who felt that a much smaller amount of resource was needed?

- Who is ultimately accountable for this?

- How can teachers trust the integrity of the data that Novopay holds?

- Is the Novopay data corrupt?



To me it looks like the usual formula. How much can we get away with NOT doing to reduce Cost. The government would have gone to market and picked up the companies that claimed they could get the job done at the cheapest price. I would have bet the word Quality would have only been whispered in the shadows.
The usual checks and balances along the way would have been side stepped to ensure timelines where meet and budgets adhered too. Quality would have only ever been assumed based on promises and the usual band-aid is cheaper than fixing it in the short term
The problem I have is that these companies that are signing up to deliver to this model are just proving to me they have little integrity in what they are doing and a solely profit focused.
I agree if defects where ignored shame of the Business Owners for launching it. If defects where not found shame on the testing for adding no value.



I find the comment in the article that the project was delayed for 2 years for additional testing interesting. 2 years!!?? that is a lot of testing for it to be delivered in such a spectacularly bad way. I would expect a journo to delve into that a bit more and not take it at face value as that implies something has gone wrong in the engagement process.
As for Assurity involvement, as a consulting company if you were going to take nearly 1mill from such a high profile project surely you would do your best to ensure it was successful? Admittedly it is the business decision to go live and the test representatives can only provide metrics and recommendations so either the issues were found and the decision to go live was taken regardless or the issues were not found and the go-live decision was based on poor testing results. In the former case I believe it is the test representative responsibility to scream to the rooftops and if all else fails walk away. For the latter well that can happen, either way I believe Assurity should be taking a long hard look at where they failed - because somewhere along the line they have.



Any decent employer (the school and its board of trustees) should simply pay anybody who has not been paid. Call up the bank if they have to (most won't they have enough in the current account)and say we are about to overdraw our account, the bank will not say no they are backed by the govt. after all.

The minister tried to point this out last night on Campbell Live -- but that's not a good story.

If I was a teacher the first thing I would do is tell my Union where to go. They have been absolutely and totally useless.



I thought the original contract was to talent2 and fronde .. mention of a small company, but what's fronde's billing ... my experience of them is that will not be doing this for free.



The will be smart and integris people working on the project which know what went on and what warning signs were overlooked by management. Please speak up. It's our tax dollars getting wasted yet again.



While we are bemoaning this carnage don't forget the other one that is still an utter failure.



Couldn't any competent analyst design this system in less than a month after talking with the key users? Basically all very standard stuff. It should boil down to one table for all the inputs (base salary, allowances) to a teachers pay amount and one table for all the different places for the outputs (payments for salary, wages, IRD, Kiwisaver, super, other deductions) to be paid out. Then run the design (ERD or UML) past some experts in the field to ensure all bases have been covered.

Then it is just a matter of designing the input screens and security of which users can do what, reporting/inquiry and reconciliations.

The system architecture and communications is pretty much straight forward these days with a lot of options available. The hardware with fail-safe backup should be easy to set up - hopefully not some over-specified monstrosity.

Then a well tested one step conversion process which can be re-run for testing and recociliation checking however many times is required.

So just how hard is this? I could write the whole damn lot in less than a year. Am I over-simplifying something here? What management often fail to get is that just because they are dealing with a system that pays out billions of dollars does not mean it needs cost millions. A payroll system is really straight-forward - where it gets complex is when you throw a lot of money and a therefore lot of people at the problem - they will trip over each other and really make it a mess.

I am not advocating just one person do this but a single designer with 1 or two understudies, a couple of front end screen developers and a few testers would have done it. I guess documentation is useful but any decent system should be intuitive. I wonder how useful any of the current Novopay documentation is of use anyway - as they were running out of time it is unlikely to reflect the final product - which appears to be still evolving anyway.

I do know payroll - I worked on a manual system for the Post Office back in the 70's - that had every permutation and twist and turn in payments and deductions that could be imagined - but basically it could be all simplified into a streamlined application - if the designer was good enough. Else I can imagine that it could be complicated to hell - especially if it could justify charging millions to develop it.

It is just plain stupidity that this system was not put into a cross-section of schools for testing prior to going live - whoever decided that has cost the tax payer a fortune and caused a lot of aggravation to already over-worked teaching staff.

The stupidity of those in IT decision making is unbelievable - it is my opinion it is dominated by people who got into IT for the money but actually hate the technicalities of it (which they never could really understand) so they rise through management to get away from the real work. They have picked up enough of the jargon though to get by and so continue to get IT management roles. The real techies are too busy with their heads down working to be bothered playing the political games required to rise to the top. And so we keep getting these bad decisions. I hope those who made the key decisions with Novopay never get to make dumb decisions again - but no doubt they all have their backsides covered with excuses on why it is not their fault.



There are NZ companies that have the skills to do this work .... and a lot of other work that is sent out the door and overseas!! I remember reading that it was Abraham Lincoln, when questioned as to where to buy cannon for the military (because British cannon was cheaper) said "If we buy theirs they get the money and we get the cannon, If we buy ours we get the money and we get the cannon". This country needs some basic common sense and there would be many jobs and a greater prosperity for our nation as a whole.

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