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QAO Report on the Effectiveness of the SPER ICT Reform – Key lessons for agencies

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Earlier this year, the Queensland Audit Office released its report on the Effectiveness of the State Penalties Enforcement Registry (SPER) ICT Reform project.

The report identifies a number of key lessons for agencies procuring ICT products and services.  These are summarised in the QAO better practice guide: Learnings for ICT projects.

Defining the customer’s requirements and contract deliverables and milestones

It is critically important for agencies to specify detailed requirements.  Ideally, agencies would do this when they first go to market.

However, an agency might prefer an outcomes-based approach where they go to market with high-level objectives only and let the suppliers offer solutions to meet those objectives. In that situation, the first stage of the contract should be dedicated to scoping, planning and design and the deliverable for that stage should be a detailed requirements document.

The requirements document should clearly detail the technical, functional, operational, business, performance, interoperability and quality requirements together with the applicable standards and other requirements, including legislative requirements, for both the deliverables and the performance of the supplier’s obligations under the contract.

It is critically important for the requirements to be identified and for the contract to specify detailed deliverables and milestones.  If this is not done, the agency’s and the supplier’s expectations about requirements and deliverables may not be aligned, which can result in multiple time-consuming and costly change requests, contract variations and disputes.

For example, an agency could enter into a contract expecting to be provided with a complete, easily configurable off-the-shelf solution.  However, it could later be discovered that the supplier’s solution does not meet the customer’s requirements and requires considerable customisation and that the agency is required to procure third party components and to perform systems integration services for those components.

Failing to specify detailed requirements, deliverables and milestones can also make it difficult for an agency to terminate the contract for breach by the supplier where the agency cannot provide clear evidence of the supplier’s failure to meet its obligations under the contract.  If the agency cannot terminate for breach, then in order to avoid being locked into procuring deliverables which do not meet its requirements, the agency may need to terminate for convenience which can be unpalatable because it is potentially costly.

Defining the roles and responsibilities of the customer and the supplier

Appropriately defining the roles and responsibilities of the agency and the supplier is particularly critical where the parties agree to use agile methodology to perform the contract.

If the agency is required to ensure that staff with a detailed knowledge of the agency’s operations are available to assist the supplier, then the commitment level and availability of those staff members should be negotiated and agreed up-front. The agency will also need to work with those staff to determine whether they have the capacity to continue performing their usual duties while also assisting the supplier.  An agency’s staff may be required to perform project management duties, for example, the role of the ‘product owner’, or to provide technical expertise.

Utilising staged implementation where appropriate

Staged implementation is a default option available under the Queensland Information Technology Contracting (QITC) Comprehensive Contract Conditions and could potentially be included as an additional provision in other ICT contracts.

Agencies should be careful about committing to long-term contracts that make it hard for them to terminate if things go wrong.  It is also important for agencies to have the opportunity to pause, assess risks and fully consider their options before proceeding to the next stage under a contract.

Implementing a project in stages allows an agency to be confident in the deliverables already provided before committing to procure further deliverables under subsequent stages. It also provides the agency with the opportunity to conduct assurance reviews and assess the risk involved in continuing.

Managing the supplier’s performance

An ICT contract should include terms governing contract management, including reviews of the supplier’s performance, for all stages of the project.

There are several options available to agencies in managing a supplier’s performance under an ICT contract, including:

  • identifying and adopting a preferred project methodology and addressing any risks associated with the chosen methodology;
  • drafting detailed requirements, deliverables and milestones against which to measure and assess the supplier’s performance;
  • drafting clear terms governing the required outcomes following the conduct of performance reviews, for example, the preparation and implementation of corrective action plans to remediate identified performance issues;
  • drafting clear and objectively measurable service levels to determine the supplier’s compliance with its contractual obligations for all stages of contract deliverable, including planning and design, build, integration, testing and pre and post go-live implementation, as appropriate;
  • drafting clearly defined consequences for service level failure, for example, the payment of service credits;
  • utilising template terms under the QITC Framework for staged implementation, liquidated damages, retention of monies and performance reviews, as appropriate; and
  • incorporating detailed dispute escalation and resolution procedures.

Agencies which conduct detailed risk assessments prior to entering into a contract will be better placed to take action to mitigate the identified risks when drafting the contract. It’s important that agencies don’t downplay the identified risks and consequential avoid taking any steps to effectively manage those risks.

Although both parties to an ICT contract may have the best intentions of establishing a collaborative and cooperative working relationship, it is critical to have a clear process and procedure in place to proactively manage the supplier’s performance and to promptly identify, escalate and resolve any performance issues if and when they arise.

Auditor-General’s recommendations

The Auditor-General made several recommendations in the report.  These included a recommendation made to the Department of Housing and Public Works to develop and implement a guideline to assist agencies in establishing ICT contracts, including software-as-a-service (SaaS) contracts, including guidance on:

  • minimum supplier and supplier’s products and services due diligence;
  • incorporating clear contract milestones, break points and options for the customer to ‘stop and think’; and
  • minimum contract management requirements.

The Department has agreed to review its existing guidance tools for the QITC Framework and make improvements where necessary.  Agencies should look out for any new or amended guidance material released by the Department.

If you have any questions about procuring ICT products and services, or require assistance in drafting and negotiating ICT contracts, whether under the QITC Framework or otherwise, Crown Law can help.