$35m vaccine software overspend? CEO says Ministry memo, released under OIA, helps prove his case

The Ministry of Health has finally confirmed that a $38m contract for a new vaccine management system was awarded without a competitive tender.

The revelation came in a December 18, 2020, Ministry memo released to the Herald under the Official Information Act.

But the development has further infuriated Ian McCrae, chief executive of Auckland-based software company Orion Health, who alleges $30m to $35m in overspending, with key features not delivered. McCray says the Ministry’s emergency exception request was based, in part, on what he says is “false information” about his company.

And McCrae is questioning why the Ministry sought a pass from the usual rules in December, when an October 9, 2020, Ministry of Health business case document, signed off by Covid Response Minister Chris Hipkins, approves funding for a solution to be created by Deloitte, using software and services from US giants Salesforce and Amazon Web Services.

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Even the business case document had an element of after-the-fact reasoning in the fast-paced pandemic environment. Deloitte had already signed a contract on October 2, 2020, with Salesforce pending.

“After sewing together this document [the December memo] and the communications we’ve had directly with the Ministry of Health, I’m concerned that the Ministry had a clear and predetermined desire to work with Salesforce and Deloitte. I believe a simple procurement process, lasting even just a few weeks, would have flushed out other options that would have been cheaper and delivered on time,” McCrae said.

In the December 18 memo, Ministry of Health group manager national digital services Michael Dreyer asks for an emergency exception to the government’s usual procurement rules for any contract worth more than $100,000. Exceptions can be granted in situations like natural disasters, major cybersecurity attacks or other national crisis – in this case, the Covid-19 outbreak and the need to develop a system to manage a complicated vaccine distribution and two-stage vaccination programme. The exemption was signed off by the two deputy directors-general of health, Shayne Hunter and Deborah Woodley, and MoH CFO Fergus Walsh.

“It’s deeply concerning that false information was used to engineer an emergency exemption to ignore procurement processes. The documents released show that the Ministry did not take time to understand the situation with Orion Health,” said McCrae, who has lodged a complaint with the Auditor-General over the tender, or lack of.

Orion was the incumbent, having created the National Immunisation Register (NIR) first deployed in 2005.

McCrae and the Ministry both agreed that system wasn’t fit to manage the Covid-19 vaccination rollout.

But they disagree sharply on whether Orion thought the system had a future.

The Ministry’s October business case document says “a compounding issue is that the Ministry has been advised by the current vendor, Orion, that it will not support the NIR from 31 March 2022 onwards” The issue is also raised in the exemption memo.

McCrae said that statement is flat-out wrong. His company never said it would end support. A spokesman for the Ministry said it stood by the statement. He said he did not have access to any correspondence from Orion to the Ministry that would verify it.

The Ministry claims Orion flagged its intention to stop supporting the NIR around the time of its 2019 restructure when, facing a cash crunch, the Auckland company delisted and sold part of its operations. It has since rebounded, recently returning to profit and landing a US$100m-plus contract to implement a new health information exchange for the US state of Alabama, among other new work that has helped it return to the black.

“Statements about our withdrawal of support are also false,” McCrae said. “The Ministry is aware of this and staff have confirmed this in recent conversations. Indeed we were asked by a staff member to confirm that we had issued an end-of-life notice, to which we stated we had not. The person then admitted they had incorrectly stated that the product was end-of-life in their business case.”

McCrae says Orion approached the Ministry in 2017, offering to upgrade the NIR, but was rebuffed.

Had Orion been approached to tender for the new system, it would have offered to add booking capability to the NIR for around $50,000, or the various features the Ministry wanted for a new cloud-based system – including managing vaccine distribution and a web portal for people to see their vaccine status and make their own bookings for an inoculation – for between $1m to $3m.

McCrae was backed up on May 7 by Navman founder (and former Orion Health minority investor) Sir Peter Maire, who told the Herald he had worked with Salesforce on complicated projects, including a current initiative to upgrade forecourt systems for thousands of service stations across the US, which he says will “cost significantly less than $1m”.

Today, after reviewing the emergency exemption memo, NZRise cofounder Don Christie said the government had to be more open to considering open-source software, which is free (if still often requiring consultation and IT service fees for its implementation).

The Ministry memo redacts dollar figures, but says the contract for a new national immunisation system includes provision for more than 4000 Salesforce licences.

“My view is that there needs to be an all-of-government review on its over-commitment to Salesforce,” Christie said (Christie is a director of Catalyst, an IT services firm with a focus on open-source solutions).

“It’s an overseas platform that has been shoehorned into situations that it is probably not fit for purpose for. We are committing critical data and systems to this platform without thinking strategically about where we want to go. The use of Salesforce was also at the core of Statistics NZ’s botched Census.” (A report into the 2018 Census – which was followed by the resignation of StatsNZ CEO Liz MacPherson – noted that Salesforce was one of the key platforms used for the Census, but blamed problems on multiple factors, including lack of testing, lack of leadership and under-funding).

“If the government is going to spend hundreds of millions on CRM [customer relations management] technologies, they should be looking elsewhere, such as espoCRM, which is open source and already has a health module, running this up on a shared government cloud platform and extending it from there,” Christie says.

“Not only would this be far more cost-effective it would future proof significant investments and provide clear jurisdictional control over our very personal data.”

The December memo reiterates the Ministry’s October business case document’s line that although there was not a request-for-proposals, various alternatives were considered against a number of criteria. Those included upgrading the current, Orion-built system.

Both documents recommended Deloitte and Salesforce (and Salesforce-owned Mulesoft) because the pair had proven their worth through their work on the successfully deployed National Screening Solution (NSS) solution, which underpinned a bowl-cancer screening drive, and the National Contact Tracing Solution (NCTS) deployed earlier in the pandemic. Elements of both existing solutions could be leveraged in a rapid development process for a new, Salesforce-based Covid Immunisation Register (CIR), which would act as a limited, stopgap solution to get the Pfizer jab programme underway while the overall new vaccine system, the National Immunisation Solution, was developed – a staged project that would take until March 2022, with features like online booking (to be added via a Salesforce plug-in created by Australian company Skedulo and due before the end of this month), to be added along the way.

The emergency exception applied to the initial CIR work. A more traditional tender process could be applied to later stages of the NIS project as additional partners were brought on board.

As ever in the technology industry, there are shifting alliances, depending on context. At the opening of Amazon Web Services’ new Auckland office last week, McCrae was a featured guest, with Orion Health and Deloitte both highlighted as Amazon partners.

Ministry offers more detail on costs

Although dollar figures were redacted from the December memo released under the Official Information Act to the Herald this week, Hunter included a big-picture breakdown, saying:

“A current breakdown of the costs is $15.1 to build and roll out the National Immunisation Solution – initially for Covid-19, then for all services in 2022; $8.98m to build the consumer information channel (allowing individuals to access their own immunisation data) and $2.8m operating costs for the first two years followed by a business-as-usual cost of $5.9m annually covering operating costs, maintenance and support, depreciation and capital charge.

McCrae countered, “The more I understand about what the money is being spent on, the more frustrated I am by these costs. We have built far more complex systems for health systems around the world for less money than what the Ministry of Health is being charged.” (Some of Orion Health has engaged larger budgets, too, however. Its patient record management system for Alabama – population 5m – is a US$100m-plus project.)

Hunter would not comment on allegations made around the December memo.

“We won’t be responding further to these comments by Mr McRae. Our focus is on supporting the efforts of the Office of the Auditor-General,” Hunter said.

Earlier, after McCrae laid his complaint with the Auditor-General on May 6, Hunter told the Herald:

“The business case of the future National Immunisation Solution forecast $38m over a four-year period to transform the way immunisation campaigns are delivered in New Zealand, and is a mix of business and technology costs.

“This includes software, project resources, operational support, change management and ongoing business improvement, integration to GP systems, and consumer access to view their immunisation status and other related data.

“The National Immunisation Solution itself will be significantly more complex and have greater functionality than the current national immunisation register, which was a register rather than a service that supports a full range of requirements including screening campaign management, multi-vaccine support, inventory distribution and tracking, safety monitoring, reporting, workforce, integration to GP systems, consumer access to their information. The new system will also be easily configurable which avoids significant cost and effort each time vaccination schedules change in future.”

A spokesman for Auditor-General John Ryan said this afternoon that the A-G had no comment, and would likely not until consideration of McCrae’s complaint is complete. (In a broader report on vaccine preparations and the rollout so far, released on May 18, Ryan said the government would need a “significant scale-up” in its efforts to hit its goals.)

A spokesperson for Salesforce declined to answer questions, saying, “We don’t provide running commentary on customer deployments.”

Deloitte declined direct comment, referring the Herald to the Ministry of Health.

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