Summary:   VFM Report 51: Development of Human Resource Management System for the Health Service (PPARS)

Summary of Findings

The origins of the Personnel, Payroll and Related Systems (PPARS) project date back to 1995. At that time, each of the former health boards was statutorily responsible for its own human resource management and most of the personnel and payroll processes were manual in nature and processed centrally. The PPARS vision established at the outset encapsulated the development of an integrated human resource management and payroll system which would be used to transform the manner in which health service personnel were managed. A move from centralised personnel administration type activity to a more strategic function was envisaged with elements of personnel administration decentralised and  devolved to line management. Hence, the PPARS project involved much more than the implementation of a computer system ? it was part of a change management drive.

A further significant feature of the project was that it represented the coming together of many health agencies in pursuit of a common goal.

Project Outcome

The project experienced considerable time slippage and cost escalation. On 6 October 2005, the Health Service Executive (HSE) decided to suspend the further rollout of the project pending a review. At the time the project was suspended, a combined personnel and payroll system had been implemented in three HSE areas and St. James?s Hospital. Configuration work and some elements of testing of the combined system had been completed in the remaining five HSE areas. In addition, personnel administration modules were functioning in three of those five areas. The planned extension of the system to the Dublin Academic Teaching Hospitals and voluntary agencies has also been deferred. A set of issues raised by users, including issues relating to the reporting element of the system have yet to be resolved.

Particular features of the project had a significant bearing on this outcome. These included

  • A failure to develop a clear vision of what strategic human resource management actually meant for the health service as a whole and for its individual operational units.
  • An urgent need in the Department of Health and Children (the Department) for accurate information on health service employee numbers and pay costings and a consequent desire to see the system implemented as speedily as possible.
  • A complex governance structure defined by a consensus style of decision-making.
  • Substantial variations in pay and conditions, organisation structures, cultures and processes which existed between and within agencies, the full extent of which was not known before the commencement of the project.
  • The lack of readiness in the health agencies to adopt the change management agenda.
  • An inability to definitively ?freeze? the business blueprint or business requirements at a particular point in time in accordance with best practice.
  • A failure to comprehensively follow through on its pilot site implementation strategy before advancing with the roll out to other HSE areas.

History of the Project

Procurement of the system commenced in January 1997 at which point six health agencies (five former health boards and St. James?s Hospital) became involved. The system was required to support Personnel Administration, Payroll, Attendance Monitoring/Control, Rostering, Recruitment and Superannuation functions in an integrated manner and was to be capable of interfacing and integrating with existing systems in health agencies, where appropriate. The system eventually chosen in 1998 was one based on SAP R/3 application software. SAP is considered to be a leader in enterprise resource planning systems. The project was approved by the Department.

A fixed price contract for implementation services in the initial six participating agencies was awarded to Bull Information Systems Ltd (BISL) in July 1998. The contract anticipated that implementation in those agencies would take approximately two years to complete and included all the required functionality, with the exception of Superannuation. The overall budgeted cost was ?9.14m, although this did not include a provision for the hosting of the system, network infrastructural improvements or post-implementation system support.

The project was led by the Chief Executive Officer (CEO) of the North Western Health Board on behalf of the CEOs of the participating agencies. He chaired a National Project Board established to oversee the project made up of representatives from all of the participating agencies. Day-to-day management was by a National Project Director assisted by a National Project Team based in Sligo. Local governance and management arrangements existed within the individual agencies.

Not long into the BISL contract it became obvious that it would not be possible to have the system implemented within the anticipated two-year timeframe. The work involved in configuring the system to cater for the significant variations in terms and conditions of employment and practices and procedures, between and within the health agencies, had been seriously underestimated.

Following a dispute about the basis of remuneration, the contract with BISL was brought to a conclusion.

In effect, by the end of 2001 and more than three years after the commencement of the BISL agreement, only the personnel administration elements of the SAP HR system had been implemented in the initial six agencies and the former Western Health Board, which had joined the project in 2000. This cost approximately ?17m. A separate version of the system, configured to meet each agency?s specific requirements was the method of implementation. This gave rise to a substantial re-design and re-build when a single system strategy was later adopted.

The project recommenced with an advertisement in the Official Journal of the European Communities for consultancy support in December 2000. A realisation that the cost of implementation would be far greater than envisaged caused a delay in the procurement process. In the meantime, personnel from a range of companies were procured to carry out the technical configuration of the system. The first of these was procured in November 2001.

In May 2002, the Department insisted that national coverage of the project was essential. Its scope was thus extended to include the former Southern and South Eastern Health Boards as well as the Dublin Academic Teaching Hospitals and voluntary agencies in the community care area. The estimated cost of the project in February 2002 had been put at ?109m with an expected completion date in 2005.

Eventually, following detailed negotiations, Deloitte Consulting Limited (Deloitte) was engaged in October 2002. Apart from an initial project ?scoping? exercise carried out for a fixed price of ?400,000, their engagement as project support adviser was ?time and materials? based.

Investment Appraisal and Business Case

Appraisals of the project were carried out at two stages. The first was in 1998, when the initial concept was being submitted for approval. The second was in 2002, following the failure of the project to deliver the original planned scope within the initial planned timeframe.

Both appraisals fell short of the requirements of a full business case for the project. The first did not adequately address the costs and benefits of the proposed approach while the second was seriously deficient with regard to its analysis of costs. For example, no detailed breakdown of costs was provided, estimates were not linked to the organisational or functional scope of the project and the extent of the necessary investment in process reform and change management were not quantified.

Project Budgeting and Outturn

While annual estimates were produced there was no definitive overall budget extending over the life of the project which linked money to deliverables.

In general, the examination found that estimates prepared in the course of the project were not supported by detailed cost analysis and were mostly framed in the context of funding requests. This led to the planned scope of the project being adjusted from time to time to take account of funding constraints.

The total cost incurred on the project at 31 August 2005 was approximately ?131m. This can be broken down as follows

  • Consultants and Contractors          ?57m
  • Project Infrastructure                     ?20m
  • National Administration                 ?17m
  • Local Agency Costs                      ?37m

The principal consulting and contract payments were in respect of advice and support from Deloitte - ?38.5m, project implementation assistance from BISL - ?3.3m and payments to contractors to configure the system and provide technical support - ?11.7m.

The latest estimates at October 2005 put the total cost to completion of the rollout in St James?s Hospital and the eight HSE Areas at ?195m in the period to 31 December 2006.

Governance of the Project

The examination found that, while nominally there was a single responsible owner for the project in the 'lead CEO', this person did not have the power to make and enforce decisions across the range of autonomous agencies. Likewise, neither the National Project Director nor the National Project Team had the authority to direct when or how the implementations would take place in the individual agencies. In fact, there was evidence of a lack of ?buy-in? to the project in some agencies.

Moreover, decision-making was cumbersome due to the size and composition of the National Project Board. Difficulty was experienced in getting agreement on binding decisions with members often unsure of their authorisation to make decisions. This was further exacerbated by the often patchy pattern of attendance and the frequent changes to personnel attending board meetings.

In addition, several factors, some of which relate to the fact that 2005 was a year of significant change in the health sector generally, were identified as having contributed to the less than satisfactory outcome on the project to date. These included a void in decision making caused by an uncertainty among senior management of their future roles and authority with the health service and, at agency level, a shift in project sponsorship and frequent changes in team leadership.

Management of Procurement

A number of issues associated with the management of the procurement came to light in the course of the examination.

A dispute with BISL as to whether the basis of remuneration was ?fixed price? or ?time and materials? caused the initial contract for implementation support to be re-negotiated and brought to a conclusion following completion of a reduced volume of work.

In the case of the subsequent contractual arrangements the health service was advised that an external party should quality assure the output from an initial project preparation review by Deloitte. This was designed to ensure that the scope of the work was properly defined and that the resulting revised price for work by Deloitte on the recommenced project represented value for money. The recommendation was not acted upon.

The arrangements with Deloitte did not incorporate an appropriate sharing of risk. In practice, the State carried all the risk.

There is evidence of a lack of clarity regarding the role of Deloitte. Whereas the PPARS National Project Team characterised Deloitte as a strategic implementation partner, Deloitte regarded itself as a project support adviser. This lack of clarity on the part of the health agencies militated against clear  direction and control.

Because of uncertainty around funding, agency participation and other factors, the PPARS National Project Team entered into a series of short-term engagements with Deloitte. This short-term procurement approach is unsuited to a multi-annual project on the scale of PPARS.

A competition for the procurement of technical configuration and support contractors was held in November 2002, one year after the PPARS National Project Team had begun to engage personnel on an ad-hoc basis through recruitment agencies. Notwithstanding the results of the competition, there does not appear to have been any change in the companies engaged in this work. Companies that had not been involved up to then, but ranked well on price, were not engaged. Even after this procurement round the actual rates paid to a number of the companies who submitted tenders were higher than their tendered rates. The HSE is currently reviewing the arrangements that were used to procure these services.

Variations between and within Agencies

Arising from the legally autonomous nature of the former health boards as well as their historical origin in the local government system, significant variations existed between the organisational structures, cultures and processes of the agencies participating in the project. Substantial variations existed also from agreed national rules in pay and conditions. While many of these can be attributed to the historical and autonomous nature of the former boards others appear to have arisen through the interpretation in different ways of Department circulars on terms and conditions of pay. Typically these variances related to working hours, leave entitlements, grades and premia. The need to accommodate or deal with these differences contributed substantially to the complexity of the project.

The project identified 2,590 variances in practice. Of this number, 23% were configured into the system.

The remaining 77% were not configured and while some of these have been eliminated, manual intervention is still necessary in other cases to ensure that individuals are paid correctly. The extent of manual workarounds still existing is not known but represents an inefficiency in the system which will have to be dealt with prior to any move to a shared services environment.

One benefit of this process is that a large number of anomalies in terms and conditions have been brought to the surface. This information will help inform human resource management decisions in the context of addressing issues of standardisation across the HSE.

Consequences of Project Approach

Documentation of the business process requirements of an organisation through a ?blueprint? is a key stage in any system development and forms the basis for the system design. Best practice suggests that ?freezing? the blueprint before commencing configuration, testing and rollout, is a pre-requisite in any large-scale programme in that it provides a stable definition of requirements and design. Otherwise, the implementation programme runs the risk of scope creep through gradually changing requirements and rework.

Since PPARS was being implemented as a single system in a non-standardised operating environment within legally autonomous agencies each with significantly different organisational structures, cultures and processes, the project was faced with changes to requirements as each new agency implementation progressed. This made the project particularly complex with the result that the technical configuration and subsequent testing required was greater than had been anticipated.

The Department and the CEOs urgently sought accurate information which could be used in the control of employment numbers and the costing of pay awards. Thus, the project was driven by a desire to implement in as quick a timeframe as possible ? with adverse consequences.

It overstretched resources and resulted in a failure to fully complete the two declared pilot sites before moving on to implement new sites. The failure to take the opportunity to learn from the experience of the pilot sites and adapt the implementation in subsequent agencies impacted negatively on the project.

Failure to pause after the pilot site implementations eliminated the opportunity to establish more fully the scope of the project which in turn would have allowed for the alteration of ?time and materials? based remuneration arrangements to more ?fixed price? arrangements.

A lesser amount of functionality has been delivered than what was initially envisaged. Rostering, Recruitment and Superannuation functions have not yet been delivered. Although this can be partly attributed to cost containment issues, the desire to get the key elements of the system ?live? in all agencies as early as possible also played a part.

Reviews of the Project

The project was reviewed by external consultants on five occasions. None of the reviews provided a meaningful challenge to the case for continuing with the project. In fact, the reviews tended to justify the continuation of the project although a wider review scope might have focused attention on the escalating cost, reduced scope and the risks to timeliness and coherence.

Implementation Issues

Not surprisingly given its scope and complexity, PPARS has experienced a number of problems since golive. Major matters requiring attention were still being highlighted by staff at June 2005 prompting the drawing up of a ?Top Ten Issues? List. While some of these related to bugs or system errors, others related to demands for additional functionality over and above that previously provided. This is indicative of a failure to properly define business requirements prior to configuration/go live.

A major frustration for staff is that work has not yet been carried out to enable the production of standard reports from the integrated system to assist in the management of HR. The view often expressed during the examination was that most benefits are still potential benefits at this stage.

It appears that where the payroll has gone live little or no redeployment has taken place and additional resources are required for the system, especially for the recording and entering of time. There is no evidence of staff savings having been achieved.

Although one of the main aims of PPARS was the devolvement of HR management to line managers, this has not been achieved to any appreciable degree.

Benefits

Apart from the not inconsiderable benefit deriving from the computerisation of personnel records there are a number of key achievements that can be built on, not least

  • a single system across a large section of the health sector
  • the isolation of variances from national rules which can potentially now be managed in a human resource management context
  • the creation of expertise within the system which may be available for other developments if it is not dissipated.

However, work to complete the payroll and personnel modules for all HSE areas would be required

  • to support regular comprehensive staff census reporting
  • to produce reports geared towards proactively managing recruitment, transfers and absenteeism
  • to enable devolution of HR management to line managers.

Good Practice

Chapter 8 outlines the main elements of good practice in relation to the management of major ICT projects which have been derived from this examination of the PPARS project.