This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its November 2011 report, the Alberta Auditor General found that the project launched by Alberta Innovates – Technology Futures, to address internal business inefficiencies, lacked a proper project governance structure. While the provincial body was established to facilitate the commercial use of technology and encourage an entrepreneurial culture in Alberta, the Auditor General’s report found it wanting with respect to its own project governance. The report made a series of useful recommendations to help address those problems.
The Auditor General noted that a prior attempt to implement an information management system by Technology Future’s predecessor, Alberta Research Council (ARC), had resulted in a significant project failure. As the Auditor General stated, “In 2004, the former Alberta Research Council began building a new information management system. The project was not completed and ARC wrote-off $2.2 million in project costs consisting of $1.4 million in consulting fees and $800,000 in licensing costs.”
To address its “significant business inefficiencies,” Technology Futures launched a new corporation information systems (CIS) initiative. While it decided to contract out the implementation of the project, the Auditor General noted that this did not remove the ultimate accountability of Technology Futures for ensuring the successful completion of the project. As the Auditor General stated, “Although functions were outsourced to third parties, the Corporation remains accountable for successful completion of the project. In our June 5, 2009 management letter to ARC, we pointed out that the lack of systems development processes could and did contribute to the previous project’s failure.”
The Auditor General noted that Technology Futures had failed to implement the project governance policies and processes established by its predecessor in the wake of the prior project failure. Instead, Technology Futures had retained an external project manager. However, the Auditor General noted that external consultants are no substitute for ensuring proper internal project governance:
In response to our June 5, 2009 management letter, the former ARC had developed policies and processes following termination of the previous Management Information Systems project. When we assessed the current project, those policies and processes were not available; rather, the Corporation relied on the skills of the Project Manager. Management advised us that they would rely on an implementation partner to provide a structured project management process. However, the Corporation still needs to implement project management policies, processes and standards to supplement the implementation partner’s controls. Part of the reason for the failure of the previous management information system project in the former ARC, was due to not having the proper internal resources to support and monitor the contracted resource.
The Auditor General found that the dependency on external advisors to run mission-critical projects places an organization at significant risk and that this risk should be managed thorough the implementation of proper project governance structures. As the Auditor General stated, the “role of project governance is to provide a decision-making framework that is logical, robust and repeatable to govern an organization’s capital investment. A lack of project governance could result in the Corporation implementing an inadequate corporate information system or incurring significant financial losses.”
To help reduce the risk of another project failure, the Auditor General called for clear project management policies and procedures, an oversight structure, defined roles and responsibilities, clearly defined objectives, and clear performance measures:
We recommend that Alberta Innovates — Technology Futures improve its governance practices for the Corporate Information Systems project, by:
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establishing formal project management policies, processes, standards and controls for the Corporate Information System project
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establishing a project steering committee comprised of key stakeholders
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documenting and communicating the roles and responsibilities for all stakeholders, including the steering committee, board sub-committee and project sponsors
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updating the business case to set out the project’s objectives that enables the steering committee to monitor and measure the project’s progress
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formally assessing the impact of the project on other strategic business initiatives and periodically updating the assessment.
The Auditor General also warned that the failure to adhere to these recommendations could place the institution at significant risk.
While the Alberta Auditor General’s recommendations were aimed at a specific institution and specific project, other institutions would be wise to take those guidelines into account and establish proper project governance frameworks before embarking on their own major projects.
