NZ Government sues IBM

Kieron Lawson (
Wed, 18 Aug 1999 13:06:44 +1200

[For FoRKers entertainment.
Background: The NZ Police in 1994 entered into a contract with IBM to
develop an Integrated National Computerised Information System
(INCIS), essentially an enormous database of information about every
New Zealander - linked to police, court and other legal records. Big
brother is watching you.

The project, already 3 years late and $30mil over budget, has been
problematic from the start. Variations on the original contract,
which was a 10000 page behemoth, are 900 at the latest count. IBM,
having reached the end of stage one, delivered the system last week,
and politely told the New Zealand Police where they could shove the
remaining stages.

Some pertinent facts:
1. Treasury originally envisaged saving $300million dollars through
reduction of frontline staff, and sales of the system to other
2. The INCIS project is currently one of IBM's top five 'problem
projects' internationally. (Makes me wonder what the other four
3. IBMs annual revenue of approx NZ$160billion is greater than New
Zealand's Gross Domestic Product of NZ$100billion
4. Recently IBM New Zealand has had two other 'failures' - the
canning of the voyager project, which was a $50million
'object-oriented' replacement to Telecom's ICMS system. Pretty soon
after that, Telecom also decided to can IBM's $110mil p/a services
contract, instead purchasing 10% of EDS New Zealand and appointing
them as services provider. The Telecom contract accounted for 1/3
of IBM NZ's revenue; last year IBM made a net profit of -$20mill
(apparently much of that was due to sunk costs on the INCIS project)
5. Prime Minister Jenny Shipley rang IBM CEO Lou Gerstner, who
politely told her to take a running jump. Shipley suffers from a
loose mouth and the inability to think on her feet.
6. The delivery of stage one of system means that the police now
have a system that provides the same level of functionality as the
old system, which was developed by a couple of programmers over a
two year period in the mid-seventies. Oh, they have email too.

The latest news is that the NZ Government plans to sue IBM NZ for
breach of contract. This is quite funny; how do you breach a contract
that has 900 variations. IBMs argument is that they're owed a large
chunk of money (they reckon about $40mil), and buggered if they're
going to sink any more into this disaster.

The lessons are the classic ones:
1. IBM still micromanages it's development projects. A friend who
was working on the voyager project told me they had approximately 120
people working on the project, including layers of managers,
architects, and programmers. Communication was non-existent, with
architects consistently making interface changes which would break
other teams' compiles. Frankly if I had to work in that sort of
environment I'd hang myself. Perhaps IBM likes to model itself after
2. The NZ Police have made over 900 change requests to an already
complex system. IBM, who had a profiteering glint in their eyes,
naively agreed to those changes. I thought there was a rule about
this sort of thing; Don't make changes until it's finished!
3. Given that projects of this size have a high probability of
failure, perhaps the advice of the police minister in 1991, when
originally approached by the police, was sage: (a) Surely there must
be a system somewhere that does this. (b) It would be better to do
this in small parts. Of course the idiot police minister in 1994
didn't think these were pertinent facts, particularly given the
proposed bottom line savings (which have never eventuated, and
probably never will)
4. New Zealand has a population of 3.5 million people, approximately
a medium sized US city. What justification is there in spending over
$100mil on a police computer system in the first place?

Oh, if anyone's looking for programmers, there's approximately 300
ex-IBM C++ guys looking for work over here. I'm sure they'd be happy
to get H1B sponsorship. Actually, the more I look at it, the more I
think this country is a great country to *holiday* in, and not much
more. It won't be long before we become New Zealand, State of
Australia. Anyone want to sponsor me for an H1B?


By Andrew Laxon
political reporter

Taxpayers could soon face legal bills of up to $24,000
a week after the Government's decision to sue IBM over
the failed Incis police computer

The Minister of Finance, Sir William Birch, said
yesterday that the Government had begun proceedings
against IBM for pulling out of the $130 million
contract last week.

The decision comes a day after Prime Minister Jenny
Shipley called for a wide-ranging inquiry, examining if
the Government or the police might also
be to blame.

Sir William said IBM had walked away from a binding
contract and the Government was entitled to substantial

"It's no different from any individual building a
house. You enter into a contract with the builder. At
the end of the day you expect the builder to

But IBM spokesman Jason Dykes said the Government had
refused to negotiate with the company and had rejected
its compromise proposals to
settle the dispute.

Labour's police spokesman, George Hawkins, said a long
and costly court battle could now be expected.

"The only winners in this whole sorry saga will be the

Legal action is expected to cost the Government about
$5000 a day in lawyers' fees.

The bill could quickly reach $100,000 after about a
month, although the Government might get its money back
in court costs if it won.

Professor Charles Rickett, of Auckland University, a
commercial law specialist who worked on the long
Equiticorp trial, said Queen's Counsel in that
case were paid $500 to $600 an hour.

The marathon Winebox case, still running in the High
Court, has so far cost taxpayers more than $17 million.

The Government's decision to sue makes any prospect of
a full-scale inquiry - suggested out of the blue by Mrs
Shipley on Monday - most unlikely.

Asked in a radio interview if she thought there should
be an inquiry, Mrs Shipley strongly agreed, saying: "I
personally want to know the role of IBM,
the role of the police, the role that we as Government
played in this."

Yesterday, Mrs Shipley refused to say whether she still
believed there would be an inquiry.

The Minister of Police, Clem Simich, said there would
be. However, he acknowledged that the legal action
would probably delay it until well after the

Sir William played down the Prime Minister's call for
an inquiry even as the Government was preparing to sue

"Mrs Shipley responded to a question and she was
absolutely honest."

Sir William said the Government owed IBM some money in
final payments but it was nothing like the $40 million
claimed in one newspaper report,
or even as much as $20 million.

Police Commissioner Peter Doone welcomed the decision
to sue, saying it cleared the way for police to look
for an alternative to Incis.