DHBs wear a further $33M systems write-down but back government project 'reset'

DHBs wear a further $33M systems write-down but back government project 'reset'

All ten DHBs targeted to use Oracle system under a project "reset" are on board

David Clark (Minister of Health)

David Clark (Minister of Health)

Credit: Supplied

New Zealand's stressed district health boards have made further write-downs totaling $32.9 million on the failed National Oracle System (NOS) project in the year to the end of June.

The system is now live in just four DHBs after six years of effort.

The DHBs are, however, backing the government's project "reset" to scale back the roll-out of the shared system to just ten DHBs. 

Indeed, it is possible one more DHB may decide to join the other ten in backing the renamed Health Finance, Procurement and Information Management System (FPIM), announced by health minister David Clark in August.

Under the project plan, the remaining DHBs can select their own software but must use shared charts of accounts and products catalogue to enable the procurement savings identified in the business case.

The failed NOS system, which cost more than $100 million, had a carrying value at 30 June after depreciation and impairments of $27.9 million, Jakkie van Wyk, FPIM programme director, told Reseller News 

"Of the $32.9 million impairment this year, $27.8 million (84 per cent) relates to historic expenditure incurred under Health Benefits Ltd," van Wyk said.   

"While NZ Health Partnerships provides guidance, DHBs make their own decisions on impairments to their books. 

"We understand that $22 million of the impairment was spread across those DHBs that are not migrating to the FPIM system, with the balance spread across the 10 that will migrate."

The good news is that the reset project is receiving the support it needs from the DHBs, some of whom have to shift off old and unsupported versions of their existing financial management systems.

"All 20 DHBs are participating in the FPIM programme," van Wyk said. "Ten DHBs will move to a single Oracle instance on common infrastructure as modelled in the business case. It is likely that one additional DHB will also join this FPIM cluster."

The remaining DHBs will use the National Catalogue, a common chart and accounts and central data repository modelled in the business case, which was released with redactions to Reseller News under the Official Information Act last month.

"All DHBs are actively participating in the planning of FPIM, along with other stakeholders such as the Ministry of Health, Pharmac and Treasury," van Wyk said.

However, the National Technology Solution (NTS) -- the hardware platform on which the FPIM will run -- has slipped behind its business case schedule.

"Following endorsement by all 20 DHBs, Cabinet approved the business case in June 2019 and the FPIM programme formally commenced in July," van Wyk explained.

"As a result of a longer than expected approval process and detailed planning with delivery partner, Oracle, the National Technology Solution is now scheduled to be completed in October 2020.

"While this is later than anticipated in the business case, it is a timeline that the sector supports and one in which programme governance has a high degree of confidence."

The NTS build was currently tracking "green" – on time, on cost and on scope. 

"The development environment, the first of seven environments that collectively constitute the National Technology Solution, was formally handed over and accepted on Thursday 7 November, as scheduled."

One of the options outlined in the project procurement plan was to build an in-sourced (health sector) programme team. 

This option has been selected in the interim, with the long-term operating model (delivery vehicle/s) to be determined next year, van Wyk said.

Under Ministry of Health-led governance, NZ Health Partnerships is delivering both the FPIM Programme and the live service to the four "Wave 1" DHBs already using the new system.

"Across both the FPIM Programme and Service, NZ Health Partnerships has recruited close to 40 subject matter experts in recent months to lead delivery," van Wyk said. 

The team was well supported by DHBs, Pharmac and other key stakeholders, she said.

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