Auditor-General raises questions over $88m health IT project

A new report from the Auditor General's office raises questions over apparent cost overruns and deadline blowouts with a major health IT upgrade, known as the National Oracle Project.

The project kicked off in 2015. The name “Oracle” is in the title because it’s based on software from the US multinational Oracle, headed by America’s Cup billionaire Larry Ellison.

The initiative is led by NZ Health Partnerships, a subsidiary owned by all 20 district health boards.

NOS is the system intended to replace the boards' finance and supply chain systems, many of which are ageing and unsupported, the Deputy Auditor-General writes. Its expected benefits include enabling smarter sector-wide procurement through better quality data and easier implementation of national contracts.

Deputy Auditor-General Greg Schollum says NOS’ benefits are still expected to outweigh its costs but notes that it appears to be over-budget.

“The original budget was $87.9 million, which we understand has been spent,” the deputy auditor-general writes (reports earlier in the project put the budget at $65m; the deputy auditor-general makes no mention of this figure).

The district health boards have gone to the cabinet seeking a top-up. At this stage, it’s not clear to the deputy auditor-general whether that will happen.

The cabinet’s decision will be informed, in part, on a review of NOS carried out by Deloitte.

The deputy auditor-general’s report does not touch on the review but National’s Shane Reti raised a flag in Parliament earlier. Dr Reti says there is a conflict of interest concern, given Deloitte owns one of the contractors involved in NOS, Asparona. (Although Dr Reti did not mine this territory, he could also have noted that Deloitte bought Asparona in 2013, at which time the software development outfit was laid low after its involvement in the Novopay debacle, as detailed in a technical review for the government carried out by Deloitte).

"I want the NOS to succeed as there will be real benefits if we can get it over the line," Dr Reti tells NBR.

"Fundamentally my concern is over poor decision making in appointing Deloitte as supposedly independent reviewers."

The Whangarei MP says the Deloitte report will cost taxpayers $150,000 but will not include a conclusion on whether the new system is fit for purpose.

Dr Reti says he is acting on concerns from people inside the process who were too scared to speak out publicly.

"People in the health IT sector came to me with their concerns many months ago and that started me on the journey of discovery and accountability," he says.

"They had concerns over self-review and validity of a final report but Deloitte is a big player and they didn’t feel they could advance this matter safely and so they brought it to me with my health IT background at Harvard and MP tools." (Dr Reti was on the Northland District Health Board before entering Parliament.)

Behind schedule
The project is also behind time. The first four district health boards were supposed to adopt NOS last year. The revised timeline is for the four to adopt it next month.

“In 2016/17, the National Oracle Solution did not achieve any of its performance measures, one of which was to have the first four district health boards begin using it in 2016/17.”

The deputy auditor-general says he will continue to monitor NOS.

In the meantime, he says all 20 district health boards need to consider whether there has been any impairment of their investment in the National Oracle Solution that should be provided for, "which means assessing whether the value of the investment has reduced because it will not be fully realised."

Deloitte declined the opportunity to comment.

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