This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its April 2010 report, the Alberta Auditor General found that an information technology initiative launched by the Alberta Treasury Branch (ATB) to update its banking and financial systems was “significantly over budget and behind schedule.” The report identified deficiencies in project governance, particularly as they related to the proper planning of project requirements and timelines, as the key causes of the project problems. The Auditor General made a series of recommendations that serve as useful benchmarks for other institutions seeking to implement proper project planning.
The Auditor General found that ATB underestimated the risks and complexities of the major technology transformation initiative. It found that ATB failed to: (i) make key business decisions relating to project scope prior to launching the initiative; (ii) put a proper governance structure in place to manage the vendors retained to implement the project; and (iii) establish an adequate reporting structure up to its board of directors. As the report noted:
The Core project is significantly over budget and behind schedule. ATB’s Core project governance processes were inadequate; management did not identify or resolve the key issues that caused the significant delays and cost increases. A primary cause has been unsatisfactory project management.
We found that ATB management significantly misjudged the following:
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risks associated with being one of the first financial institutions in North America to implement the SAP solution
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the work required to customize the SAP solution for the North American banking market place complexities to successfully implement the Core project, and the skills and resources required to manage it.
As of December 2009, ATB had spent $145 million on the Core project. However, the project scope and significant business process decisions had not been finalized. Significant project change requests remained outstanding. The project design continues to evolve and ATB has not yet finished the design validation.
As part of the functional design phase (or blueprint phase), ATB identified 278 business processes that must be documented and validated by the line of business representatives on the project. As of December 2009, only 89 of the business processes had been completed and approved. There had also been 400 project change requests up to December 2009. As of January 2010, there were still 85 change requests that had not been resolved.
ATB hired two major vendors; SAP and Accenture, to assist ATB implement the Core project. ATB needed to carefully manage such a relationship between the three parties to ensure that there was no abdication of responsibility through the diffusion of responsibility.
ATB’s contractual arrangements with SAP and Accenture did not set fixed limits on time and materials to be invoiced. The contractual arrangements did not include incentives or penalties that would have shared the project’s risks amongst the three parties.
Management’s performance reports to ATB’s Board of Directors have not been sufficiently detailed to allow for meaningful comparisons of the actual project results to the original project plan. In particular, the matching of actual and budgeted project costs to predefined project outputs has not been clear.
The Auditor General made a series of recommendations aimed at addressing the project’s deficiencies and avoiding further delays and cost overruns, including the introduction of proper control measures and clear project requirements.
Moving forward, the Auditor General’s recommended that ATB “resolve pending business decisions,” “lock down the project’s scope”, and develop a new project plan with a “realistic schedule and budget to complete the project.” As this case study illustrates, the success of a project can be seriously undermined by the failure to set clear requirements and set down realistic timeframes during project planning. The fact that these remedial measures were recommended after the initial project expenditure of $145 million serves as a clear warning sign to all institutions of the importance of conducting proper project planning prior to initiating project implementation.
