Why are the cost assumptions shonky?

The cost assumptions made by the Local Government Commission appear to have been manufactured to support the proposal and are deficient and unreliable.

The benefits from amalgamation claimed by the Local Government Commission are not based on sound financial planning and budgeting.

The cost benefits are inaccurate and unreliable.

IT Costs

Taking the LGC position on IT costs:

  • There has been no requirements based cost analysis used to support the estimates used by the LGC.
  • The assessment of IT costs first provided by one lot of consultants ranged around $21m.
  • The draft LGC proposal said the costs would be $10m.
  • When asked by LGC to revisit the costs the consultants rang some IT service providers and obtained verbal estimates which have little more credibility or reliability than a “wet finger in the air" and which have been conveniently (for the LGC) translated into the final proposal as just $2.3m (PDF 750kB).
  • The updated IT costs along with others have been remanufactured by the LGC to provide a final cost estimate that is most likely significantly understated at $2.3m.
  • Costs for the IT element of the Auckland Super City formation were initially estimated by the LGC to be $71m and these have now blown out to $151m and potentially significantly more.
  • Locally, the best IT cost estimate arrived at by IT professionals with relevant knowledge and experience but without a full understanding of the detailed requirements ranges around $10m.

Further specific issues with the IT transition costs provided by the LGC show, in an 8-page assessment, apparently performed by the consultants engaged by the LGC, that the cost assessments exclude consideration of the following:

  • Current state of the Applications (versions, modules used etc).
  • How the applications are used in each council including alignment with council services and processes?
  • Council processes that are not in systems (spreadsheets, desktop databases, or are manual.
  • Differences between the Council’s in the functional scope and configuration of the applications and services. (software customisations).
  • Functional gaps in the applications (what don’t they do that they need to).
  • Information/Data use of each council including gaps and inconsistencies such as online services?
  • The basis on which it was assumed that the current applications are the best fit for a new single District Council?
  • Opportunities to implement better systems and technologies?

Items missing from the IT costs estimate

There are significant items missing from the IT cost assessment and these are items that most often result in budget blow outs:

  1. Transition and programme planning including alignment of business processes and systems
  2. Solution Architecture, Solution options and Design (the technical and business blueprint)
  3. Information and Data Migration (including applications, email, databases etc.)
  4. Infrastructure (sizing of hardware, storage, backups, security, etc.)
  5. Integration of software (how software talks to each other and shares data)
  6. Reporting
  7. Testing
  8. Business Continuity and Disaster Recovery
  9. Telecommunications (including any call centre requirements)
  10. Implementation costs (including technical, staff training, documentation)
  11. Systems decommissioning (including archiving and access to information)

Finally, on IT matters there is no provision made by the LGC to put together an experienced professional ICT transition team with a “knowledgeable” and capable governance team with a realistic budget.

There is no reason to believe that any of the cost estimates provided by the LGC are soundly based or free of “adjustment” to suit the case for restructuring.

No reasonably well informed individual would make an investment in structural change based on a case that lacks reliable fact based costs and benefits and people who will be accountable for them. There is no reason why ratepayers should be expected to sign up to costs and benefits based on a lesser standard, especially when there is no obligation on the proposed new District Council to realise the benefits at the levels of cost concocted by the LGC.

The claim that increased scale will reduce the need for consultants is not true by reference to the scale of GWRC and the amount it still spends on consultants.

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