Are the estimated IT costs in the proposal credible?

Why this question is important:

The financial benefits of the proposed amalgamation are paper thin at $10m gain over ten years. Any significant change in transition costs nullifies an already very weak business case. 

What casts doubt on the credibility of the estimated IT costs?

1. The huge changes in estimates over three years - from $25.5m down to $2.3m.

  • In 2014 $25.5m, the estimate was published in the so-called Supercity Draft Proposal (p218-219 6.377 Draft Proposal for Reorganisation of Local Government in Wellington Table 38).
  • In 2016 $10m, the estimate was published in the report "Wairarapa Local Government Assessment of Options June 2016". On page 49, 4.5.5 Corporate Support it states, "Previously Deloitte had identified a cost of $21M for this; based on the fact that the councils have similar IT systems and on recent experience in identifying an enterprise reporting system we have assumed a cost of $10M." (emphasis added)
    Note that it states $21m not $25.5m.
    To be fair, the report later states (page 51, 4.9 Financial), "Transition to single IT systems ($10 million). In its 2014 report to the Local Government Commission, Deloitte estimated that the cost to transition the three Wairarapa Councils to a single IT system would be in the order of $21-30 million." 
  • In 2017 $2.3m, the estimate was published in "Update to combined Wairarapa District Council costs Local Government Commission February 2017".

2. The $2.3m estimate doesn't at all cover the range of areas required for an IT system integration.

IT consultant and ex CIO at Wellington City Council pointed out in his verbal submission to the LGC that there are eleven components to integration of IT systems and that the estimates published by the LGC didn't cover them at all.

You can watch David's verbal submission to the LGC:

3. The LGC hasn't followed the recommendation of its own consultants.

In the report, "Update to combined Wairarapa District Council costs Local Government Commission February 2017" the consultants completed their report with this sentence:

"Should a combined Wairarapa District Council be progressed, we recommend that a full IT transition scoping and costing exercise be commissioned to provide more accurate costs."

Why wasn't that completed before issuing the final proposal?

The shifting estimates, the narrow scope of the latest estimate, 
and the failure to follow their own consultants recommendations create doubt about the robustness of the IT Costs estimates.

Some links to associated material

Shonky cost assumptions - analysis of the weak job on IT Costs

From zero to 10 in 6 months - how did the LGC get an estimated $10m return from amalgamation after reporting zero return 6 months prior?

The variable estimates of the LGC - the estimates have changed significantly from 2014 to 2017

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