National Oracle System Programme Review Ministry of Health · 5/31/2018 · The Ministry requested...

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National Oracle System Programme Review Ministry of Health 31 May 2018 FINAL

National Oracle System Programme Review | Contents

Contents

Executive Summary 1

1. Introduction 3

2. Programme Context 6

3. Conclusions 8

4. Findings 10

5. Recommendations 26

Appendix 1: Interviewees 29

Appendix 2: List of abbreviations 30

01 FINAL - Commercial in confidence © Deloitte 2018

Executive Summary Introduction

New Zealand Health Partnerships (NZHP) is leading the design and build of the National Oracle Solution (NOS). NOS is a national financial management and procurement system based on Oracle business applications that is intended to replace all DHBs’ current finance and procurement systems.

In August 2017, NZHP sought approval from the DHBs for the revised timeline and an additional $22.84 million (including contingency) to complete the programme. All DHBs have approved the revised timeline and their portion of the additional funding. The Ministry requested this review to help the Ministry, Treasury and Department of Internal Affairs (DIA) make a more informed assessment of the proposed funding increase.

The Terms of Reference state that the purpose of the review was ‘to provide the Ministry, as well as Treasury and the GCDO as supporting agencies, with an objective assessment of the programme’s current situation and the robustness of the rationale for the proposed funding increase.’

The Terms of Reference state that the scope of the review was ‘to consider whether the programme is currently set up to deliver successfully, and, if not, what actions should be considered to increase the likelihood of a successful implementation.’

Conclusions

There are two different perspectives regarding this programme’s objectives. The first perspective judges the programme’s success in terms of delivering a working system, while the second expects the programme to deliver the sector outcomes and benefits described in the business case.

1. The core programme needs to strengthen its approach in order to successfully deliver its current system delivery scope. Key areas that will require attention include the reliance on DHBs to manage and execute significant business change activity, the absence of independent quality assurance of the solution design, the complexity of the ongoing support function and engagement with Pharmac.

2. The programme is not well set up to successfully deliver the sector outcomes and benefits. Stakeholders consistently support the concept of a shared system and believe intuitively that significant financial and non-financial benefits could be realised however this belief has not been substantiated by current analysis of the benefits and what is required to achieve them. We cannot be confident which benefits might be enabled and to what extent.

The current scope of the programme does not include activities across the sector necessary to support the broader business case vision, outcomes or benefits. Achieving these would require a more comprehensive set of actions, stronger governance and better coordination across the sector.

The $22.84 million funding request covers the core programme’s capital expenditure for the current system delivery scope only. Approximately $5.45 million of this amount has already been advanced by DHBs and NZHP. The $22.84 million does not cover DHB implementation and change management costs, Pharmac change costs, ongoing support and maintenance or future roll-out waves. The funding request therefore presents only a partial picture of the total funding commitment required.

The programme has developed updated estimates of the operating costs associated with the solution ($50.29 million to FY 21/22) but is using estimates from the original business case for DHB implementation costs ($27.85 million to FY 21/22). These estimates do not include capital replacement costs, any associated DHB


investments, activity to actually realise benefits or implementing any recommendations from this review. Based on the experiences of other healthcare jurisdictions substantial additional investment would be required.

Recommendations

Our recommendations reflect our view on how to increase the likelihood for a successful implementation, as asked for in the Terms of Reference. Our recommendations do not pre-suppose the future direction of the programme or reflect any assessment of alternative options. The programme may require further funding in order to implement any of these recommendations.

1. Based on the progress made to date and the programme’s current status, we recommend that the wave 1 go-live proceeds, but with increased support and oversight. By ‘wave 1 go-live’ we mean the implementation of the Oracle applications on HealthBIS infrastructure for use by the four wave 1 DHBs.

This carries risk of business disruption however it will help stabilise the existing system landscape for wave 1 DHBs and may realise some broader value through standardised financial and procurement information. It would also demonstrate that the programme can deliver, and provide a significant learning opportunity regarding the solution design and the deployment process. Even if the system were not to become a national solution as intended, we believe that proceeding with wave 1 go-live provides a pragmatic way to realise value from the investment to date.

Stopping the programme without the planned wave 1 go-live would forgo any opportunity to realise benefits and perpetuate operational risks inside the four DHBs due to ongoing reliance on current systems. If there were lengthy delays, then several other DHBs would also need to urgently plan for ‘Plan B’ replacements of their current systems. Stopping the programme could result in a number of the wave 1 DHBs re-using the NOS work done to date and implementing it anyway. For a number of DHBs, proceeding with NOS is likely to be less costly or risky than developing an alternative. Therefore strengthening the current programme is the most pragmatic way forward.

2. We recommend that the remainder of the currently proposed scope proceeds, but only on the basis that it does not put the wave 1 go-live at risk and that the programme does not over-commit to significant initial and ongoing expense. This work can proceed in parallel with wave 1 go-live where these conditions are met.

3. To work effectively towards the envisaged benefits, the programme should change focus, structure and approach. At a governance level this means a stronger ‘owner and investor’ mind-set. The programme should shift from a core system implementation to the coordination of sector-wide activity to maximise benefits.

We recommend that the programme is reoriented after the wave 1 go-live, so as not to interfere with that activity.

We recognise that achieving the intended outcomes and benefits – even partially – will require substantial business change across the sector. The detailed recommendations describe a series of key decisions on how to continue the broader NOS journey.


1. Introduction Background

New Zealand Health Partnerships (NZHP) is leading the design and build of the National Oracle Solution (NOS). NOS is a national financial management and procurement system based on Oracle business applications that is intended to replace all DHBs’ current finance and procurement systems.

The original business case, approved in 2012, envisaged significant savings from the centralisation of financial management, procurement and supply chain operations. In 2015 the programme was reset and the scope reduced to a common system for finance, procurement and less extensive supply chain functions, with benefits reduced accordingly.

The programme has experienced a number of challenges since its inception that have resulted in several and significant delays from the original 2014 deployment. As a result of these challenges, the programme was reset in 2015 and again in mid-2017. Costs have significantly increased, timelines have been delayed, scope has reduced and the delivery approach has changed. These challenges have eroded confidence and trust amongst stakeholders over the ability to successfully implement NOS.

In August 2017, NZHP sought approval from the DHBs for the revised timeline and an additional $22.84 million (including contingency) to complete the programme. All DHBs have approved the revised timeline and their portion of the additional funding. This was documented in a Change Control Report (CCR), dated 21 August 2017, which sets out the changes since the 2015 business change case and funding requirements.

The Ministry currently have insufficient information available to confidently inform the Minister of Health, Cabinet and Treasury that the additional funding being sought is sufficient and that NOS will be successfully delivered on its current course. The Ministry requested this review to help the Ministry, Treasury and Department of Internal Affairs (DIA) make a more informed assessment of the proposed funding increase.

Purpose of the review

The Terms of Reference state that the purpose of the review was ‘to provide the Ministry, as well as Treasury and the GCDO as supporting agencies, with an objective assessment of the programme’s current situation and the robustness of the rationale for the proposed funding increase.’

Scope of the review

The Terms of Reference state that the scope of the review was ‘to consider whether the programme is currently set up to deliver successfully, and, if not, what actions should be considered to increase the likelihood of a successful implementation.’

The review was to assess whether the programme has:

a) Current, clearly defined objectives and scope boundaries;

b) Clear traceability of the requirements to be delivered by NOS and linkage to the expected benefits, to ensure they can be covered;

c) Clear traceability of the solution, as designed and built, to the agreed functional and non-functional requirements, including the rationale not to pursue a cloud based solution;


d) An effective integrated schedule (including identified tasks, milestones, decision points, the critical path, named resources, effort and dependencies) that is linked to a realistic detailed bottom-up cost estimate;

e) A benefits realisation plan setting out an approach to realising the circa $520 million financial and non-financial benefits. This should also include clear ownership, reporting and governance for the benefits realisation plan;

f) Repeatable programme management processes, with particular focus on risk and issue management processes that identify, analyse, treat and close risks and issues in an efficient and effective manner;

g) A clear understanding of the implementation costs and impacts from a DHB perspective, including their readiness for the proposed operating model change as well as potential additional costs they will be facing; and

h) A suitable programme team structure with appropriate resourcing.

The following matters were excluded from the scope of the review:

• Detailed review of and testing of programme artefacts, such as budgets, financial models, Oracle system designs or business process designs, although examples were looked at to gain an appreciation for how the NOS programme is working

• Review of the Oracle solution beyond understanding its alignment to agreed scope and traceability. PWC has conducted a technical review of the underlying infrastructure

• Detailed review of programme governance structures, as we assume that these have been adequately covered in the previous IQANZ reviews

• Review of any commercial arrangements including sub-contracts and software licencing • Detailed reviews of prior business cases or programme reset points, other than to understand the current

state • Development of options for continuing the programme • Development of advice to the Minister • Estimation of programme costs or benefits • Review of associated DHB business cases, projects or funding relating to NOS • Detailed review of deployment readiness or the deployment approach

Limitations This report is based on the specific facts and circumstances relevant to the Ministry and included within the scope of the review as defined in the terms of reference. In the context of that scope, this report offers recommendations for improvements and has taken into account the views of key stakeholders, with whom these matters have been discussed.

For the purposes of preparing this report, reliance has been placed upon the desk review of documentation obtained from the Ministry and the programme team and the material, representations, information and instructions provided to us during interviews with key people. No audit or examination of the validity of the documentation, representations, information and instructions provided has been undertaken, except where it is expressly stated to have been. As a result of the scope of our work, we may not have identified all facts or information that you may regard as relevant. Accordingly, we accept no responsibility for the reliability of the information to the extent it is inaccurate, incomplete or misleading, or for matters not covered by our report or omitted due to the scope of the review.

Assessments made by our team during the review were matched against our experience and good practice guidelines for similar implementations.

The content of this report is based on the review carried out in the time allocated by the Ministry.


This review was substantively completed as at 6 April 2018. Deloitte assumes no responsibility for updating this report for events and circumstances occurring after the date of this report, unless agreed separately in writing with the Ministry.

Our report is addressed commercially in confidence to the Ministry, although we acknowledge that the Ministry intends to share the report with central government Crown agencies. Other than the Ministry, any person who obtains access to and reads this report, accepts and agrees, by reading this report, the following terms:

a) The review was performed by Deloitte in accordance with the instructions provided by the Ministry of Health and was performed for the Ministry’s sole benefit and use. The report should not be used for any other purpose without our prior written consent.

b) This report was prepared at the direction of the Ministry of Health for the purpose of the review noted above and may not include all procedures and information deemed necessary for the purposes of the reader. The report is based on specific facts and circumstances relevant to the Ministry, and has been prepared solely in the context of the scope of the review.

c) Deloitte, its partners, principals, employees and agents make no statements or representations whatsoever concerning the report, and the reader acknowledges that it may not rely on any such statements or representations made or information contained in the report.

d) To the maximum extent permitted by law, Deloitte, its partners, principals, employees and agents exclude and disclaim all liability (including without limitation, in contract, in tort including in negligence, or under any enactment), and shall not be liable in respect of any loss, damage or expense of any kind (including indirect or consequential loss) which are incurred as a result of the reader’s use of this report, or caused by this report in any way, or which are otherwise consequent upon the gaining of access to or reading of this report by the reader. Further, the reader agrees that this report is not be referred to or quoted in any agreement or document, and the reader must not distribute all or part of the report without Deloitte’s prior written consent.

Acknowledgements We wish to place on record our appreciation of the assistance received from the programme team, the Ministry of Health, NZHP, programme governance groups, DHBs, Pharmac, Oracle, Revera and all interviewees during the review.


2. Programme Context The following points regarding the programme’s context may help readers to understand our conclusions, findings and recommendations.

Vision

The vision of the NOS programme, as described in the CCR, is to ‘build and implement a sector-designed, standardised and consistent national Oracle platform for all DHBs to consume. This consolidated national platform is expected to replace the DHBs’ existing finance and supply chain systems and provide the data, processes and controls to support procurement activities by presenting better opportunities to reduce non-labour costs.’

The CCR states that ‘NOS is expected to reduce administration effort across the sector, assist with policy and regulatory compliance, and minimise errors through improved control and management features. It is also expected to provide a single point for electronic communication with suppliers that will help drive down cost-to-serve and improve the effectiveness of suppliers and efficiency of DHB Supply Chains. It is also expected to be more secure, more reliable and mitigate the refresh risks associated with DHBs aging current financial systems. As a whole, NOS is expected to enable standardisation across DHBs which is a key factor in improving clinical outcomes.’

Solution

The solution is based primarily on ‘off-the-shelf’ Oracle business applications designed to support finance and procurement functions. These applications are being configured to support the desired business processes and standardised national master data (such as the general ledger structure for financial transactions).

Deployment

The system will be deployed to DHBs progressively over time. Deployment of wave 1, consisting of Waikato, Canterbury, Bay of Plenty and West Coast DHBs, is currently planned for 1 July 2018. This deployment will use existing IT infrastructure already supporting these DHBs.

In parallel the programme will be building dedicated infrastructure to support the system at national scale, known as the National Technical Solution (NTS). The programme plans to migrate the applications being used by wave 1 DHBs to the NTS in early 2019 and then use the NTS for all subsequent deployments. Wave 2 deployment is currently planned for 1 July 2019. Further deployment dates will depend on DHB needs and readiness.

Programme structure

The NOS programme in its current form is run by NZHP on behalf of the DHBs (who jointly own NZHP).

The programme is made up of 11 projects, some of which are already completed. At 1 March 2018 the projects were:

• Project 1: Wave 1 Technology Deployment – preparing HealthBIS infrastructure for the wave 1 deployment (complete)

• Project 2: Business Solutions - Build and Execute SAT 2 – solution acceptance testing of the system with DHBs


• Project 3: Business Solutions - Business Intelligence Report Development – developing system reports to support DHBs

• Project 4: Business Solutions - Wave 1 Go-live – deployment of the applications to wave 1 DHBs • Project 5: Business Solutions - Build and Execute SAT 3 – solution acceptance testing of the national

integration, national reporting and migration to the NTS • Project 6: Business Solutions - Supplier EDI On-boarding – deployment of a national integration solution

for priority suppliers to interact directly with the NOS applications • Project 7: Business Solutions - Wave 2 Go-live – deployment of the solution to the first DHB in wave 2 • Project 8: National Technology Detailed Design – detailed design of the NTS infrastructure (complete) • Project 9: National Technology – Build, Test & Commission – build and deployment of the NTS

infrastructure • Project 10: National Technology – Wave 1 Migration – migration of the NOS applications to the NTS • Project 11: NOS Support Model – design and establishment of the ongoing NOS support function

The project managers responsible for delivering these projects report to a single programme director, who reports to the programme’s Senior Responsible Officer (SRO).

The SRO is the NZHP Chief Executive who is supported by several groups providing design and delivery governance at multiple levels to allow structured delegation.


3. Conclusions Overall conclusion

There are two different perspectives regarding this programme’s objectives. The first perspective judges the programme’s success in terms of delivering a working system, while the second expects the programme to deliver the sector outcomes and benefits described in the business case. Programme management and governance representatives we interviewed consistently gave the first perspective as the main driver of the programme, while acknowledging that the system also needs to enable the originally envisaged business case outcomes and benefits.

We have reviewed the programme’s current situation from both of these perspectives: the current scope of system delivery and the overall outcomes and benefits. The results of the review are substantially different for each of these two perspectives.

System delivery

The core programme needs to strengthen its approach in order to successfully deliver its current system delivery scope. Key areas that will require attention include the reliance on DHBs to manage and execute significant business change activity, the absence of independent quality assurance of the solution design, the complexity of the ongoing support function and engagement with Pharmac.

The programme is close to completing the work required for the deployment to wave 1 DHBs on existing infrastructure. The risk profile for this work is relatively low as:

• wave 1 DHBs are closely involved in the programme; • wave 1 DHBs already share a current system footprint well aligned with the NOS solution; and • existing infrastructure will be used.

A key benefit of this initial deployment would be the stabilisation of the core financial and procurement systems at four DHBs that have become difficult to support and are approaching obsolescence.

The remainder of the current scope included in the funding request primarily aims to build and deploy the National Technology Solution (mostly by expert vendors), provide support for the first DHB implementation in wave 2 and establish the ongoing support function. This work would be required for any significant further deployment of the NOS solution beyond the four initial DHBs, but is not essential for wave 1 deployment.

The $22.84 million funding request covers the core programme’s capital expenditure for the current system delivery scope only. Approximately $4.25 million of this amount has already been advanced by DHBs and NZHP has contributed $1.20 million from its own resources on the understanding that these amounts will be refunded on approval of the funding request. This means that $5.45 million (~24% of the requested funding) has already been expended.

The $22.84 million does not cover DHB implementation and change management costs, Pharmac change costs, ongoing support and maintenance or future roll-out waves. Some of the investments made to date (such as the NTS infrastructure) will require ongoing expense to maintain. The funding request therefore presents only a partial picture of the total funding commitment required.

The programme has developed updated estimates of the operating costs associated with the solution ($50.29 million to FY 21/22) but is using estimates from the original business case for DHB implementation costs


($27.85 million to FY 21/22). These estimates do not include capital replacement costs (e.g. via depreciation), any associated DHB investments or activity to actually realise benefits (as discussed in the next section).

The current estimates do not include the costs of implementing any recommendations from this review.

Outcomes and benefits

The programme is not well set up to deliver successfully at this higher level of ambition. Stakeholders consistently support the concept of a shared system and believe intuitively that significant financial and non-financial benefits could be realised in several areas including:

• reduced technical risk through replacing aging DHB systems; • improved DHB operations through more robust finance and procurement processes and data; • avoided costs of supporting, maintaining and replacing current DHB systems; • better value for money through national contract negotiation (e.g. for medical devices); and • avoided costs through better procurement control (e.g. reduced off-catalogue purchasing).

However this belief has not been substantiated by current analysis of the benefits and what is required to achieve them. We cannot be confident which benefits might be enabled and to what extent.

The current scope of the programme (as described in the section above) does not include activities across the sector necessary to support the broader business case vision, outcomes or benefits. Achieving these would require a more comprehensive set of actions, stronger governance and better coordination across the sector.

By way of example there is no current benefit model, tracking or realisation planning, nor is there a suitably empowered governance structure for benefit management. We would expect a programme with benefits of the magnitude described in the business case to actively track benefits and link them explicitly to solution features. We would also expect it to hold stakeholders accountable for realising them, through an appropriate governance forum. This would require governance with an ‘owner and investor’ mind-set, and recognition of the multiple ledgers accounting for spend across the sector.

There does not seem to be an agreed target operating model for the sector that defines the roles of DHBs, Pharmac, the National Procurement Function and the Ministry of Health. A target operating model is typically a key design artefact in a business transformation programme, defining how processes and information flow across the sector (e.g. DHB procurement via national contracts). Without such a model, it is difficult to understand how benefits will be achieved and what changes are necessary in affected organisations.

The programme management team and SRO have no dedicated support for stakeholder engagement and communications. The programme is complex and has been a long-running affair with many stakeholders. Multiple parties have commented that relationships have not always been open, transparent and trusting. Benefits are unlikely to be realised without a much more robust approach to governance, change management and stakeholder engagement, and much greater transparency of costs, benefits, risks and commitments.

In addition to the missing activity, the solution design is not explicitly linked to outcomes or benefits. This raises the risk that the system delivered by the current scope may not actually enable them. Based on our experience with other jurisdictions, we are concerned about the lack of a detailed cost controlling design that reflects the complexity of modern medical devices, the lack of agreement around the role of Pharmac as budget holder, and concerns raised by DHBs about potential poor alignment of procurement with existing supply chain solutions and standards such as GS1.

The funding request is not intended to cover the programme and stakeholder activities that we believe would be necessary to achieve the envisaged outcomes and benefits. These items have not been fully identified or explicitly costed. Based on the experiences of other healthcare jurisdictions substantial additional investment would be required.


4. Findings We have made the following findings in the specific scope areas identified in the terms of reference.

a. Does the programme have current, clearly defined objectives and scope?

Key findings: The original programme’s overall vision, outcomes and scope were defined in the business case in 2012. The programme’s delivery scope was reduced in the business change case in 2015 and while the benefits were accordingly revised downwards the vision and outcomes were not. As a result there is no current, consistent definition of outcomes.

Working to the 2015 scope, the core programme and governance groups have deliberately focussed only on delivery of the enabling system. As outlined in the CCR, NZHP and the programme team have defined their role as providing the enabling solution and supporting DHBs, while DHBs and Pharmac are responsible for the operational implementation and all benefit realisation.

While a tight focus on solution delivery is helpful for the programme team, the low level of central ownership of the overall objectives, outcomes and benefits gives us less confidence that they will be fully achieved.

Due to its narrow focus, the programme does not have the structure, information, plans, budget, capability or relationships in place to deliver the broader business outcomes or the projected cost savings. Supporting commentary: The overall investment objectives, outcomes and scope boundaries were set in the original business case in 2012. Since then the objectives and outcomes have not been changed, though scope was adjusted in 2015 as part of a programme reset (primarily the removal of national distribution centres to support supply chain activities and the centralisation of financial processing). The core programme’s remaining scope can be summarised as follows:

• Delivering tested NOS applications on infrastructure owned by the HealthBIS DHBs which make up wave 1 • Supporting the implementation of these applications at wave 1 DHBs and the first wave 2 DHB • Delivering a new national infrastructure platform (the NTS), based in a Revera data centre, capable of

supporting implementation and use of the applications across all DHBs • Migration of the wave 1 implementation to the NTS • Establishment of an ongoing national support team (Oracle Administration Team, OAT) managed by NZHP

that will provide ongoing technical support, governance, maintenance and development for the NOS system. The OAT will also support DHB implementations after wave 1.

Members of the programme management team and governance groups are consistent and clear in the view that the core programme should focus on delivering the system only (including the activities above). This is consistently reflected in the programme structure, information, plans, budget, capability and relationships.

However the broader outcomes and benefits can only be achieved by coordinated activity across many sector organisations over several years. This requires stronger common understanding of the benefit profile, the


operating model changes required and the accountability for delivering benefits. These are common elements of good practice for technology-enabled business change programmes.

Other health systems that have embarked on similar programmes have typically relied on strong centralised tracking, a senior CFO being accountable for a defined set of savings and a governance structure that has sufficient mandate to ensure that savings materialise. Without a strong mandate that includes harmonised cost accounting and financial controlling structures, benefits become very difficult to track and realise.


b. Is there clear traceability of the requirements to be delivered by NOS and linkage to the expected benefits?

Key findings: There is clear traceability of the NOS functional and non-functional requirements through design, build and test activities and artefacts back to what was agreed in a series of workshops with DHBs some years ago. Non-functional requirements have been further developed over recent months through the technical design process.

Some stakeholders have expressed doubts about how current these requirements still are, now that considerable time has passed. Some stakeholders have also expressed concern that they were not sufficiently involved in the requirements definition or design activities, even if they were represented (for example by someone from a nearby DHB).

By and large, the programme can show how the system addresses the requirements. The requirements appear sufficient for the first waves of implementation to effectively replace DHBs’ current systems, which would at least provide these DHBs with a stable financial system. The solution also establishes a common financial information structure and a ‘national catalogue’ that is one of the critical enablers for subsequent procurement benefits. However, there are risks that the requirements:

• are insufficiently analysed to cater for the needs of all DHBs nationally; • are not broad enough to allow DHBs with legacy systems to turn these off completely, when their current

systems are ready for replacement; and • do not include functionality that may be important for delivering the envisaged benefits.

There is no explicit linkage between requirements and the overall outcomes or benefits. For example we have not seen any detailed assessment of the functional footprint of current DHB systems and how they align with NOS requirements. This means that the NOS design may not allow such systems to be fully replaced or stabilised. Supporting commentary:

Traceability for functional requirements

As part of the reset in 2015 the solution design was validated through workshops, with representation from some DHBs, and approved by the Design Authority (DA) and Business Owners Forum (BOF). Independent quality assurance of the design was limited to a review by a single experienced individual.

The functional solution design, based on a structured set of process maps, was originally defined early in the programme. The process maps were the primary definition of the functional requirements for the system. At no point were they validated against established good practice frameworks. Since those requirements were set, new ‘best practice’ templates such as the AoG Finance and Back-office Target Operating Model have become available, providing an opportunity to get functional assurance on the solution design. There are also recognised healthcare industry standards and performance frameworks against which the solution could be validated. Oracle did not provide any vendor assurance or assessment of the process flow and functional design against their own view of good practice, which we would expect for a programme based on their products.

This raises the risk that the design has missed opportunities to improve DHB operations and access benefits. Finance functions have seen considerable change over recent years with the advent of new capabilities, the changing role of Chief Financial Officers and the different expectations placed on them. This is particularly


relevant given the complexities of DHB processes. For example, medical devices such as implants, come with complex capital equipment and tools as well as services such as specific training, certification of practitioners and even assistants from the device company during surgery. Many other supplies come with ‘free’ restocking services, safety stock on or off-site, imprest cupboards and supplier owned inventory. Taking opportunities to support sophisticated management processes in financial controlling, disciplined purchasing and value-based supplier management requires considerable design experience and an openness to external input.

If the cost accounting through primary and secondary cost centres, relevant profit centres (for inter-district flows) and work breakdown structure elements are not explicitly defined and standardised, then a procurement team cannot accurately assess the true lifecycle costs, compare providers and rationalise spend. The functional design for a finance solution therefore always requires a corresponding controlling design to support procurement cost reduction and vendor rationalisation.

Traceability for non-functional requirements

In addition to the functional requirements from the DHB workshops, non-functional requirements were defined by the programme in the Datacom High Level Design for the NTS (based on earlier work). Following the appointment of Revera and Oracle to deliver the NTS (instead of Datacom) these requirements were revalidated in workshops with representation from some DHBs. The requirements were incorporated in the detailed design documents and a requirements traceability matrix is in place.

PWC provided independent quality assurance that the solution design process was robust with regard to delivering high availability, but did not reference the requirements in assessing the design itself.

Some stakeholders have expressed concerns that the non-functional requirements (e.g. system availability) have been set too high, leading to unnecessarily high costs both initially and for ongoing maintenance and support. In addition the programme has elected to design and build infrastructure sized to support the entire country, rather than scale up over time as DHBs take up the solution. This does remove some complexity from the future deployment process but locks in a greater initial investment in specialised infrastructure.

Traceability for benefits

The benefits analysis has not been revisited in full since the 2012 business case. In 2015 the business change case amended the 2012 benefits to reflect the impact of reduced scope. Other than a 5% reduction in expected 10 year benefits in the 2017 CCR arising from delays in DHB implementation dates, there have been no other formal changes to the original benefit analysis.

The CCR shows a benefit figure of $524m. This benefits figure is overstated because it includes historical benefits from 14/15 to 17/18 that have not yet been realised. NZHP has not provided any further updated benefits analysis.

There is no programme-level benefits realisation plan or reporting. As a result, there is no current model showing how the benefits are enabled by solution features.


c. Is there clear traceability of the solution, as designed and built, to the agreed functional and non-functional requirements, including the rationale not to pursue a cloud based solution?

Key findings: Traceability of the solution is covered under b) above.

The rationale not to pursue a cloud-based solution in 2017 was focussed on whether to switch the full application suite to cloud components before wave 1 deployment. The CCR acknowledges that this option (and other options) was not investigated in great detail due to the urgency.

We note that the rationale provided references AoG and DIA guidelines on cloud systems that do not reflect current AoG or DIA thinking.

Having rejected the full cloud option as infeasible for the wave 1 DHBs and initial roll-out, the programme intends to re-evaluate the cloud strategy in 3-5 years.

This ‘all or nothing’ approach does not adequately consider a hybrid environment (adopting only the more mature cloud products) or a progression to cloud over the course of the DHB rollout. Some DHBs are already actively considering cloud solutions as an interim step or even as a ‘break-away’ strategy from NOS, and the Ministry of Health has already moved to a partly cloud-based Oracle system. We would expect a programme with a technology commitment of this scale and duration to already have a more robust cloud strategy aligned with sector technology standards and strategy. Supporting commentary:

The rationale not to pursue a cloud-based solution was formalised in the CCR. The following reasons were provided for rejecting a cloud-based solution:

• Additional time and cost required to change approach (including exit costs and rework) • Limited ability to customise the solution to meet sector needs • Immaturity of the Oracle cloud solution for the health supply chain

All of Government (AoG) cloud guidelines were also cited as a limitation on adopting cloud functionality, but these citations do not match current directives or intentions. We do not believe that the quoted material was a genuine barrier. Other government agencies including the Ministry of Health and Ministry of Education have already selected or implemented cloud-based Oracle financial management systems with support from an AoG perspective. The programme consulted with Oracle representatives to understand the maturity of the relevant cloud modules but a detailed fit-gap analysis between the NOS requirements and Oracle’s cloud applications was not performed. The functional design and requirements have been subject to very little external quality assurance. Therefore there is a risk that the underlying premise for rejecting a cloud solution was based on limited analysis. In fact the CCR acknowledges that some stakeholders would have preferred a more thorough option analysis, but in the interest of time this was not carried out. The programme does not plan to implement any cloud-based components as part of its current scope. The programme and NZHP have signalled that this will be reviewed in the lead up to the next technology refresh (likely to be in 3-5 years, driven primarily by the infrastructure replacement cycle).


The CCR acknowledges that a future shift to cloud is likely however there is currently no forward plan for upgrading the solution including the potential adoption of Oracle cloud components. There are no plans for either a parallel path that allows DHBs to adopt cloud components more quickly, nor for a hybrid or merger strategy over an extended period of time. The current ‘all or nothing’ analysis does not explore more nuanced options. Oracle have indicated that a full cloud solution is not currently feasible but that hybrid options should be considered in a full assessment. The high-grade NOS infrastructure design carries a high capital cost (with associated depreciation) and on-going operating expense burden. Because the hardware has already been purchased, the DHBs have effectively committed to a significant spend on Oracle technical resources to build and support the environment.

The full whole-of-life costs do not seem to have been included in the analysis of cloud options presented in the CCR. These would be an important factor for a NOS cloud strategy to consider. A comprehensive assessment would require recognition of the full costs to all parties including infrastructure, connectivity, support, maintenance and future upgrades.


d. Is there an effective integrated schedule (including identified tasks, milestones, decision points, the critical path, named resources, effort and dependencies) that is linked to a realistic detailed bottom-up cost estimate?

Key findings:

Schedule

The integrated schedule and supporting project plans provide an appropriate level of visibility and control over programme activity.

Projects yet to start are currently planned only at a high level which may affect the accuracy of cost and timeframe estimates, and make staffing difficult. The most complex project to be delivered is the deployment of the solution for wave 1 DHBs. Planning for this project is not as advanced as we would expect given the 1 July deployment date.

Oracle and Revera are well-placed to execute the NTS build activity, which is a significant portion of the remaining work.

Cost estimate

The capital costs in the funding request come from structured analysis of each of the 11 projects. This included project resources by role (based on days of effort and daily rates), Oracle costs, expenses (e.g. travel) and contingency (at a project level, based on the risks assessed for each project). Contingency aligns with the risk profile of the projects and reflects typical levels for this sort of programme.

The cost estimate appears realistic for the defined scope, though we would expect more robust analysis including an integrated resource plan and more explicit links to the planned activities. There is a risk that greater effort is required, particularly for the deployment of wave 1. We would also expect the cost estimates to have been refined over the months since the CCR was approved.

The programme has not finalised commercial agreements with vendors for technical work but the work required is reasonably well understood.

As noted previously the defined scope excludes significant activity across multiple organisations and is therefore not a full picture of the full costs. Supporting commentary:

Schedule

The programme has a high-level integrated schedule supported by detailed project plans. The integrated schedule shows then key inter-project dependencies and therefore allows the overall critical path to be determined. External dependencies and lower level dependencies (e.g. co-dependency on shared resources) are managed through detailed plans for each project. These project plans also contain named resources and track progress for input into status reports.


Budgeted capital costs As part of re-planning the programme, between July and August 2017, the capital costs were estimated for each of the 11 projects. This included project resources by role (based on days effort and daily rates), Oracle costs, expenses (e.g. travel) and contingency (at a project level, based on the risks assessed for each project). As part of developing these cost estimates, the days allocated to project roles for each project were reconciled with the time span for each project. The following table provides the capital cost estimates from 1 July 2017 to complete the 11 projects – this is the most recent cost estimate.

Capital Costs ($ millions)

Resource costs 10.28

Oracle costs 5.81

Other third parties 1.42

Cashflow funded costs to 30 June 2017 1.85

Contingency 3.48

Total Capital Costs 22.84

Since these estimates were developed, the project has had to delay some activities due to uncertainty about funding approval. The working assumption is that projects which have not commenced should continue to have a similar cost profile to the CCR estimate on the understanding that the assumptions in the CCR remain valid. We would expect ongoing updates to the plans and cost estimates as work has progressed and circumstances become clearer. Contingency is assessed at a project level (between 10% and 35%) based on risks relating to each project. The aggregate contingency is 18% of total pre-contingency capital costs, which is within the typical range for a programme of this nature.

The estimates do not include any on-charges such as project team accommodation, equipment and office expenses, nor is there any allowance for capital refresh or depreciation recovery.

Costs incurred to December 2017 NZHP uses the term ‘Cashflow funding’ to refer to costs paid for by Wave 1 DHBs or advanced by NZHP on behalf of the NOS programme, to fund activity while the CCR approval process was underway. These cashflow funded costs are expected to be reimbursed to Wave 1 DHBs and NZHP from the funding request.

While activity and expenditure on the NOS programme has slowed while the funding request is being considered, NZHP has continued to progress the programme. As at 31 December 2017, the programme has already expended approximately $5.45 million or ~24% of the proposed $22.84 million funding request on NOS activity that would be valuable to some DHBs independent of the NOS programme. Approximately $4.25 million has been advanced by DHBs and NZHP has contributed $1.20 million from its own resources, as shown in the table below.

Capital Costs to December 2017 ($ millions)

DHB cashflow funding 4.25

NZHP cashflow funding 1.20

Total Capital Costs 5.45


We note that:

• The February Board report did not include ‘estimate to complete’ for each project due to the uncertainty around timing of the Cabinet approval and the impact on the programme. However NZHP intends to include this, with assessment of the certainty around the forecast, for future Board reports.

• NZHP has advised us that, as at the end of December 2017, Projects 1 and 8 have been delivered to budget, and Project 2 is 98% complete and tracking to budget.

Other costs There are significant costs involved in NOS outside the scope of the capital funding request – notably DHB implementation costs and ongoing support of the system. Combining the capital, operating and implementation costs that NZHP expects to recover from DHBs over five years yields a total of $101 million, as shown in the table below.

Total Programme Costs ($ millions)

FY 17/18

FY 18/19

FY 19/20

FY 20/21

FY 21/22 Total

NZHP Capital Costs 18.54 4.30 22.84

NZHP Operating Costs 7.46 9.04 11.77 11.51 10.51 50.29

DHB Implementation Costs 6.89 5.48 10.36 2.45 2.67 27.85

Total Programme Costs 32.89 18.82 22.12 13.96 13.18 100.98

There are financial benefits which are likely to offset some of these costs such as current DHB expenditures on licenses and support, as well as avoided costs of DHBs individually replacing their systems. However, this cost avoidance can only be realised if the NOS functionality is sufficiently broad to allow recipient DHBs to actually turn off their current systems. As historical transaction data is not being migrated, DHBs will need to maintain access to legacy systems or extract data to another system such as a data warehouse – either of which will incur other costs.

As noted previously there are additional costs across multiple organisations associated with capturing benefits, upgrading the system and replacing infrastructure assets, which would be beyond the $101 million figure.

Even though any one programme may stand on its own merits, DHBs have been asked to make significant investments in response to national and local initiatives. Therefore the full financial analysis for this programme should be viewed in the context of the total investment that DHBs and the Crown in general are expecting to make.


e. Is there a benefits realisation plan setting out an approach to realising the circa $520 million financial and non-financial benefits? This should include clear ownership, reporting and governance for the benefits realisation plan.

Key findings:

The scope of the NOS programme does not include a benefits realisation plan and none has been developed. This reflects that the current governance structure does not provide a strong ‘owner and investor’ perspective to guide the programme.

We would expect a programme of this scale and complexity to actively track the expected (and actual) benefit profile including the impact of solution design changes and changing stakeholder circumstances. We would also expect a governance structure with explicit responsibility for benefit tracking (even if accountability for actual benefit realisation ultimately lies within different organisations).

Even if the scope of the programme is restricted to delivery of the enabling system, benefit tracking and realisation planning is good practice. For example, one stated benefit associated with the wave 1 deployment is the de-risking of the existing DHB system landscape. This should be quantified and tracked for each DHB.

Similarly, Pharmac has signalled that the full implementation of a NOS programme should allow them to bend the future cost curve for pharmaceutical expenditure and medical devices. This is not a cash saving but a reduction in the expected medical cost inflation.

The commonly quoted figure of a $520 million benefit of cost reduction and procurement savings does not seem to have any current supporting metrics, though an interim reporting process has been established to collect baseline data until NOS is fully deployed.

We note that NZHP has updated the NPV analysis for the programme for some known changes. However, because the cost and benefit assumptions have only been partially updated and the benefit estimates incorrectly includes benefits that have not yet been realised, the NPV and IRR analysis in the CCR cannot be relied upon.

Through our interviews, most stakeholders stated they remain confident that the procurement benefits are genuine and potentially conservative. Without benefit tracking or a benefit realisation plan it is difficult to substantiate this. Supporting commentary:

The scope of the NOS programme does not include the activities that will be required after system implementation and adoption to drive the benefits envisaged in the 2012 business case.

Benefit ownership is unclear. Multiple parties are expecting benefits (e.g. DHBs, Pharmac, the Ministry) yet no party has formal responsibility for realising them. Stakeholders we interviewed expressed a range of views about how procurement benefits would be realised – for example whether DHBs would keep money saved through better procurement. Stakeholders identified that:

• NZHP will have an important role to play post-implementation to help the sector derive procurement benefits;

• Pharmac will have a critical role in relation to medical devices and pharmaceutical expenditures, even though Pharmac’s desire to also be the budget holder has not been reflected in the system design; and


• DHBs will have an important role managing adoption of new procurement disciplines and behaviour change (e.g. to minimise off-catalogue spend).

There is a risk that the sector is relying on significant ‘cash benefits’ and in particular that DHBs hope to free up funding in order to redeploy that funding into other areas. However it may be that a large portion of the benefits can only be realised as cost avoidance. For example the financial benefits relating to procurement of medical devices and pharmaceutical expenditure are largely viewed as a reduction in forecast future cost increases rather than a reduction in current baseline expenses that could be redeployed elsewhere.

Pharmac has emphasised the importance of NOS to achieve its targets, as well as the importance of applying the ‘Pharmac approach’ to medical devices. In our view this would mean Pharmac owning the procurement budgets for the sector for medical devices, which is not reflected in the current solution design. It would also require a harmonised cost accounting model and financial controlling structure to support the proper full-life-cycle analysis of competing options amongst different medical technology suppliers and devices.

We believe that NPV analysis in the CCR cannot be relied upon at this stage because:

• The benefits are overstated since they have not been rephased properly for the delay in NOS programme implementation;

• Benefits analysis has not been reviewed and revised since the original business case; • Only a subset of the costs have been updated; and • Costs do not include the full Crown investment required, including the additional (non-programme scope)

work that will need to be carried out, post-implementation, to deliver benefits.


f. Are there repeatable programme management processes and governance arrangements to manage scope, objectives, schedule, budget, benefits, risks, issues and quality?

Key findings:

Programme management processes and governance arrangements are in general well-structured, consistently applied and appropriate for the defined scope of the programme. They were strengthened in mid-2017 following an independent quality assurance review and have been tested in operation over recent months (albeit at relatively low intensity given the funding request process).

The upcoming wave 1 go-live will place greater pressure on the programme at all levels requiring rapid, well-informed and clearly communicated decisions.

The programme has applied PRINCE2 principles to strengthen management processes. However we have seen no evidence of proven methods or frameworks to guide the activities of the programme (such as which artefacts to produce when, and what they should contain).

We would expect a programme of this scale and complexity to use established methods and frameworks at least as reference points. The sample artefacts we have seen are of good quality but there is a risk that the wave 1 deployment exposes gaps in the solution or approach.

Some stakeholders have commented that the programme seems resistant to scrutiny and defensive when challenged, as well as overly reliant on old or incomplete information. Some feel that for expediency key decisions have not always involved sufficiently robust analysis or scrutiny.

There has been minimal external review of the functional solution or technical delivery method and some concerns raised by DHBs have not been satisfactorily resolved. This can create a risk that governance is unable to adequately test management or becomes overly reliant on one perspective.

The lack of a proven delivery method and external perspectives also raises the risk of gaps in the current solution design or approach that may not be discovered until go-live or later. In addition, the programme scope boundaries make it difficult to assemble a full picture (for example of total costs or project team staffing).

Under industry standard approaches (such as MSP or P3M3) a programme is tasked with delivering the envisaged benefits and is expected to control scope, quality and time to achieve those benefits. The various NOS governance groups have not sufficiently maintained an overall owner or investor perspective as a check on programme management. This has allowed short-term project delivery thinking to dominate. For example the analysis of cloud-based options was limited due to time pressure associated with the CCR – and the topic is yet to be addressed properly.

Consistent with our findings in other areas, the programme management processes are not sufficient to manage the achievement of the overall programme benefits beyond the currently defined scope. For example:

• Benefit tracking and realisation planning is missing, as discussed under e) above. • Stakeholders beyond the wave 1 DHBs are not consistently well-informed or involved in planning and

decision-making – particularly with regard to the full cost and benefit implications across multiple organisations

• Current quality assurance arrangements do not consider the programme outcomes or benefits, and little focus on the actual solution.

• The governance groups do not have the mandate or information to oversee outcomes or benefits across the sector.


• The level of involvement by the Ministry of Health (and other central government agencies) do not reflect the strategic nature of the programme.

Supporting commentary:

The NOS programme has been broken down into 11 projects. These would better be described as workstreams within a project, but the division of scope is logical. The Project Initiation Documents provide clear information on scope, budget, staffing and other matters for each of these projects.

Each project is managed by a Project Manager who reports directly to the Programme Director.

The programme is supported by the NZHP Programme Management Office (‘PMO’) which manages the key management processes including status reporting, risk and issue escalation and the integrated schedule. This improves the consistency and rigour of the processes.

Relevant tools are used to support the programme including Daptiv and ATools, though there is no integrated project management tool in use.

Reporting lines and escalation processes are clearly defined and appropriate, including defined delegated authority for approvals. The delegations do not consider approval of changes to the benefit profile.

Risks are identified at the individual project level by the Project Manager. They are summarised in the weekly Project Highlights reports which are sent to the PMO.

Spend against budget is tracked at project and programme level which is appropriate.

The NOS programme status report, prepared by the PMO, has space for risk and budget reporting but these were not consistently populated in the most recent examples sent to us.

The layered approach of Programme Board and Executive Steering Committee is well defined and appropriate for the current scope, as is the inclusion of the NZHP Board and stakeholders in the escalation process. The use of a design governance forum, separate from but linked to delivery governance is good practice. Advisory groups are in place to provide specialist advice in key domains.

There are external committee members (i.e. not employed by NZHP or the DHBs) on the NESC, NPB and JDC. This provides an outside perspective and a degree of independence. Additionally, there are 4 DHB Chief Executives on the NOS Steering Committee which ensures there is strong sector representation and business owner commitment to the programme from the wave 1 DHB participants. However Pharmac has only recently been added to the design governance forum as an attendee which reflects the programme’s low level of focus on the strategic procurement benefits. Governance forum members we spoke to were in general informed and aligned in relation to the current programme scope.

Some DHB representatives have expressed concern that the governance processes have required significant decisions from DHBs with limited time to conduct the appropriate level of analysis and scrutiny.

Overall, the programme is placing a heavy reliance on Revera and Oracle to deliver the technical design and build of the national technology and the HealthBIS technology. Relationships with the vendors appear constructive but not as strategic as they could be. For example Oracle has not been engaged in any role regarding the use Oracle applications (other than licence sales and standard product support).


g. Is there a clear understanding of the implementation costs and impacts from a DHB perspective, including their readiness for the proposed operating model change as well as potential additional costs they will be facing?

Key findings:

The most recent overall estimate of DHB implementation costs ($27.85 million) is based on information from several years ago and is unlikely to be accurate. Some DHBs now expect higher costs than reflected in the original estimate.

The programme uses a readiness framework to help DHBs prepare for deployment. This provides good structure for preparation activities. However, this framework is not intended to be a full implementation guide and cannot substitute for a proven implementation method, effective resourcing and strong project management on the DHB’s side of a given implementation. The change management impact on DHBs is likely to be significant and will create a high level of business disruption for some time in each of those DHBs.

DHBs have varying experience with core system replacements and are likely to require more guidance and assistance than currently planned for, particularly after wave 2. Wave 1 DHBs are significantly closer to the programme and so face a reduced risk.

NZHP on-going operating costs have been estimated for the current year and the next three years, with the expectation they will be $1 million lower in FY 21/22 (i.e. total of $50.29 million). These include the Oracle Administration Team (OAT), licensing, infrastructure and support cost.

The OAT will need significant vendor support due to the nature of the technology and these costs will not be known until the procurement process planned for later this year. There is a presumption that the planned for OAT capacity is sufficient to meet the on-going roll-out demands and that DHBs can otherwise support their own implementations. The OAT operating model is yet to be determined, but will require strong central control and robust IT service management capability (including for example a service management system).

NZHP does not currently have this capability in place - and building it will require significant investment. Vendors and existing IT support entities in the sector do have relevant capability. The future operating model will impact DHBs as existing system support contracts and personnel may no longer be required – this is likely to be an important part of DHB cost reduction benefits. Supporting commentary:

DHB implementation costs The original and revised business cases assume DHBs fund their implementations. As part of developing the 2012 estimates, indicative implementation budgets were determined for each DHB.

• Forecast implementation costs were prepared by the following DHBs and healthAlliance as shared service provider for the Northern Region:

o Wairarapa o Hutt Valley o Auckland o Waitemata o Counties Manukau o Northland o Taranaki


o Waikato o Bay of Plenty o Canterbury o West Coast

• Indicative implementation costs for other DHBs were determined with the DHBs based on relative size.

The current estimate being used as part of the CCR process is based on these original estimates, updated for the impact of timeframe changes only.

We understand that NZHP plans to offer additional support to DHBs through its operational function at a cost. This is likely to create complexities such as how to define the trigger point for a given DHB to pay for further support. If a lot of additional support was required, NZHP may have greater responsibility than envisaged. NZHP would also need to maintain adequate staffing for peak periods and sporadic demand.

Ongoing operating costs The following table provide the operating cost estimates to FY 20/21.

Operating Costs ($ millions) FY 17/18 FY 18/19 FY 19/20 FY 20/21

IaaS costs as per business case 3.00 3.00 3.00 3.00

IaaS costs over business case 0.78 1.32 1.86 1.61

Oracle existing application licenses 1.53 1.53 1.53 1.53

Oracle gap application licenses 1.30 1.30 1.30 1.30

Oracle infrastructure licenses 0.78 0.78 0.78 0.78

Other Licenses 0.07 0.12 0.24 0.24

OAT 0.00 0.33 2.40 2.40

Additional support costs 0.00 0.65 0.65 0.65

Total Operating Costs 7.46 9.04 11.77 11.51

Note that for this review, we have assumed FY 21/22 costs will be $10.50 million and totalled these costs over five years. However, we do not have the breakdown of estimates for FY 21/22 and hence that has not been included in the table.

The Oracle Administration Team (OAT) is intended to be fully established next financial year (FY 18/19). Infrastructure as a Service (IaaS) costs at $4.61 million and licensing costs at $3.85 million are the largest ongoing operating costs. Operating costs are expected to continue for the life of the asset, with out-year annual costs expected to be around $10.5 million per year (i.e. circa $1 million lower than FY 20/21). Operating costs do not include depreciation of the IT infrastructure asset.

There will be some offsets against costs currently incurred by DHBs for licensing, infrastructure and support. This has not been quantified, and the level of offset is dependent on DHB decisions regarding current systems.

Stop costs At the time of the CCR it was estimated that cash costs of $12.5 million would be incurred if the NOS programme were to cease. Furthermore, an impairment charge of up to $68.3 million would most likely have to be incurred. The degree of any such impairment would depend on the future of the programme as well as each DHB’s level of participation.

In April 2015, NZHP estimated indicative DHB upgrade costs if the programme were to cease are a minimum of $16.1 million over three years. It is unclear how much of this upgrade cost has or will be incurred anyway.


h. Is there a fit for purpose programme team structure with appropriate resourcing and access to expertise?

Key findings:

The current programme team structure, resourcing and access to expertise is adequate for the delivery of the current scope (based on the level of planning completed to date, and excluding any additional work associated with implementing the recommendations from this review).

The NOS programme management roles and responsibilities are well defined and understood.

The deployment to wave 1 DHBs will require coordination across a large number of people in the programme team and associated DHB implementation teams. The deployment project is currently only planned at a high level, which raises the risk that the team will need to be expanded and/or access further expertise (potentially at short notice).

The programme team structure, resourcing and access to expertise is not fit for purpose to achieve the wider programme business outcomes and benefits for the health sector. This would require a different mix of skills and team structure including much greater involvement of stakeholder organisations across the sector. Supporting commentary:

The appointment of the Programme Director appears to have improved accountability and provided a single point of decision making for the delivery of the solution. The Programme Director is from Waikato DHB and brings experience from their previous role as NOS Joint Business Solution Lead.

The bulk of the core programme staff are individual contractors to NZHP supplemented by permanent NZHP staff and DHB secondees.

The programme leadership and management team have expressed a high level of confidence that they have the right capacity and capability to deliver the defined NOS programme scope for wave 1. Wave 1 DHB representatives have also expressed confidence that they have the appropriate resources in place – especially given that key members of the team come from their DHBs.

The programme has engaged Oracle and Revera to deliver the technical design and build of the national technology and HealthBIS technology. Both vendors are confident they can deliver the remaining build activity, noting that further delay will likely disrupt current staffing plans. Oracle’s New Zealand and global organisations have expressed their commitment to the programme and willingness to provide the support required.

Nonetheless the current team and resourcing structure is not geared up to achieve the broader outcomes and benefits for the health sector, although we note that NZHP is starting to hire procurement specialists to form a national procurement team.


5. Recommendations The recommendations in this section reflect our view on how to increase the likelihood for a successful implementation, as asked for in the Terms of Reference. Our recommendations do not pre-suppose the future direction of the programme or reflect any assessment of alternative options. The programme may require further funding in order to implement any of these recommendations.

We have grouped the recommendations into three areas.

1. Recommendations for wave 1 go-live

Based on the progress made to date and the programme’s current status, we recommend that the wave 1 go-live proceeds, but with increased support and oversight. By ‘wave 1 go-live’ we mean the implementation of the Oracle applications on HealthBIS infrastructure for use by the four wave 1 DHBs.

This activity carries the most risk of business disruption, especially as it is the first go-live for this particular solution. However it will help stabilise the existing system landscape for wave 1 DHBs and may realise some broader value through standardised financial and procurement information. It would also demonstrate that the programme can deliver, and provide a significant learning opportunity regarding the solution design and the deployment process. Even if the system were not to become a national solution as intended, we believe that proceeding with wave 1 go-live (including the strengthening recommended below) provides a pragmatic way to realise value from the investment to date.

Stopping the programme without the planned wave 1 go-live would forgo any opportunity to realise benefits and perpetuate operational risks inside the four DHBs due to ongoing reliance on current systems. If there were lengthy delays, then several other DHBs would also need to urgently plan for ‘Plan B’ replacements of their current systems. Stopping the programme could result in a number of the wave 1 DHBs re-using the NOS work done to date and implementing it anyway. For a number of DHBs, proceeding with NOS is likely to be less costly or risky than developing an alternative. Therefore strengthening the current programme is the most pragmatic way forward.

Completion of the wave 1 go-live should be used as a milestone from which to establish the ‘owner and investor’ perspective in the governance structure. This will allow the programme’s focus to be reset on the overall outcomes and benefits in the business case, as described in the third group of recommendations.

1.1 The Ministry should proceed with the approval process for the current funding request. This should include defining a clear sequence of briefings and decisions based on actual programme progress and the results of analysis as recommended below.

1.2 The Ministry should work with NZHP to strengthen the role the Ministry will have regarding governance, monitoring, funding, and sector-wide standards and policies. This should include making the sector investment perspective more prominent in decision-making, improving transparency and increasing the level of scrutiny of programme management. As steward of the sector, the Ministry has a key role to play with regard to strengthening the collective ‘owner and investor’ mind-set.

1.3 Once roles are agreed, the Ministry of Health should work with NZHP to fully support the wave 1 go-live – for example re-prioritising other initiatives and helping the impacted DHBs handle business disruption.

1.4 The programme and DHBs should accelerate the detailed planning and preparation for the go-live. This includes assessing the feasibility of the planned dates in light of the current delay and any capacity and capability constraints across all parties. Particular attention should be paid to change management and post-go-live support for the affected DHBs. This may reveal that more time and/or funding is required for a successful go-live.


1.5 The programme and wave 1 DHBs should ensure their project teams and governance forums are fully integrated into a single work programme so that risks, issues and activities are coordinated as a coherent whole.

1.6 The programme should increase the frequency and depth of reporting to governance groups, including any relevant DHB governance groups. NZHP should share wave 1 go-live reporting openly with the Ministry of Health, DHBs and Pharmac, as well as seeking their input on any key decisions that impact the sector. This may include the Ministry of Health in a governance or facilitation role, subject to the outcome reached out of recommendation 1.2 above.

1.7 The programme should arrange for independent quality assurance of the functional design. This should include comparison to the AoG ‘best practices’ for public sector in NZ, but it would also be helpful to assess areas of concern such as Pharmac control of procurement budgets and alignment with GS1.

1.8 The programme should arrange independent quality assurance of the go-live preparations in the core programme and DHBs. This should be specific technical quality assurance provided by a suitably experienced expert in complex system implementation using a proven system delivery method as a reference point. It should not be generic programme management quality assurance. This may reveal that more time and/or funding is required for a successful go-live.

2. Recommendations on remainder of Change Control Report scope We recommend that the remainder of the currently proposed scope proceeds, but only on the basis that it does not put the wave 1 go-live at risk and that the programme does not commit to significant initial and ongoing expense without fuller consideration. Our recommendations are intended to help the programme build stakeholder confidence through transparent and objective analysis with independent validation where appropriate. This activity is primarily designed to prepare the solution for a full national rollout. If the system were not to become a national solution as intended then some of the work may not be required, rendering some of the recommendations unnecessary.

2.1 The programme should review planned staffing, funding and timeframes for this activity to ensure it does

not put the wave 1 go-live or post-deployment support at risk (for example by distracting programme management or governance attention or by competing for key resources).

2.2 The programme should assess, with vendor input, whether the lifetime cost of the NTS can be significantly reduced or deferred given the likely time before the full specification is needed. This should include an explicit value-for-money assessment of the required resilience levels.

2.3 The programme should develop a comprehensive application roadmap before committing to potentially avoidable infrastructure costs (initial and ongoing). This should include full consideration of when cloud-based components could logically be adopted and whether hybrid cloud solutions or alternative migration paths add value. The roadmap should be developed collaboratively with the Ministry of Health, DHBs, Pharmac and vendors. The roadmap should consider whole-of-life costs and risks and should be aligned with sector strategies and standards.

2.4 The programme should thoroughly assess the various options for the operating model of the ongoing support function. We would expect such options to include a fully outsourced model, as well as delivery by an existing DHB technology support provider or an existing shared service entity. The programme should avoid making any significant commitments in this area until key decisions described in recommendation 3.1 confirm the NOS mandate and vision.

2.5 The programme should review, with all DHBs and Pharmac, the deployment process used in wave 1 and identify any lessons learnt, that can be fed by way of improvements into future deployments.


3. Recommendations for achieving the envisaged sector benefits

To work effectively towards the envisaged benefits, the programme should change focus, structure and approach. At a governance level this means a stronger ‘owner and investor’ mind-set. The programme should shift from a core system implementation to the coordination of sector-wide activity to maximise benefits.

We recommend that the programme is reoriented after the wave 1 go-live, so as not to interfere with that activity.

We recognise that achieving the intended outcomes and benefits – even partially – will require substantial business change across the sector. The recommended actions below would inform a series of key decisions on how to continue the broader NOS journey:

3.1 NZHP should, with DHBs, Pharmac and the Ministry, revisit and confirm the vision for the NOS system, its mandate from the sector and the outcomes sought. This will require agreement on current circumstances and ambitions.

3.2 In support of recommendation 3.1, NZHP should develop a robust cost and benefit model agreed by all stakeholders. Benefit realisation and management plans should then be developed with clear accountability across all the impacted stakeholders.

3.3 NZHP should, in consultation with DHBs, Pharmac and the Ministry, develop a target operating model that supports the benefits. This will require agreement on roles and responsibilities across all parties. Known issues such as Pharmac budget holding and alignment with GS1 supply chain initiatives would need to be resolved – as would any issues identified from the wave 1 deployment and the functional design review described in recommendation 1.7.

3.4 NZHP should work with DHBs and the Ministry to ensure that DHB business cases for NOS deployment beyond wave 1 consider all relevant options to maximise the outcomes and benefits to the sector. For example, some DHBs may be able to contribute standardised procurement information from their current systems until a logical system replacement point is reached. This is aligned with recommendation 2.3 regarding a more robust application roadmap.

3.5 NZHP should work with DHBs and the Ministry to review the programme team and governance structures necessary to deliver a more coordinated, flexible, benefit-driven programme. This would likely include changes to personnel, skills and structure, and firm commitments from all parties.

3.6 NZHP should develop a prioritisation framework to transparently manage the sequence of DHB deployments in a flexible way that accounts for changing DHB circumstances, sector readiness for change and opportunities to increase overall benefits.


Appendix 1: Interviewees During the review we interviewed individuals from the following groups:

• Ministry of Health senior management and NOS monitoring team • NZHP senior management and board members • Independent advisors and governance forum members • Governance forum members from DHBs • Senior management from several DHBs • Programme management • Pharmac senior management • Oracle and Revera


Appendix 2: List of abbreviations List of abbreviations:

NZHP New Zealand Health Partnerships

NOS National Oracle System

DHB District Health Board

DIA Department of Internal Affairs

NESC NOS Executive Steering Committee

NPB NOS Programme Board

PMO Project Management Office

JDC Joint Design Council

DA Design Authority

FOAG Financial Operations Advisory Group

SCOAG Supply Chain Operations Advisory Group

TOAG Technical Operations Advisory Group

POAG Procurement Operations Advisory Group

SRO Senior Responsible Officer

CFO Chief Financial Officer

OAT Oracle Administration Team

NPV Net Present Value

GCDO Government Chief Digital Officer

NTS National Technology Solution

BOF Business Owners Forum

AoG All of Government

WBS Work Breakdown Structure

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National Oracle System Programme Review Ministry of Health · 5/31/2018 · The Ministry requested...

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Transcript of National Oracle System Programme Review Ministry of Health · 5/31/2018 · The Ministry requested...