Ministry of Defence’s ERP headache is Deloitte’s uncontested millions

The UK’s Ministry of Defence has handed Deloitte £5.9 million in contracts in just six months as it scrambles to get a legacy ERP system migrated onto Oracle Cloud before the data centre hosting it is mothballed.

A £2 million, five month contract extension with Deloitte on April 6 also belatedly changed the design requirement. Like a similar £3.9 million November 24, 2022 contract extension, it was awarded without competitive tender. MOD blamed “unforeseen” challenges including “complex underlying design issues.”

Although neither contract extension specifies this, both are understood to relate to long-running efforts to get MOD's payroll and HR software for civilian staff off a decades-old, unsupported and heavily customised version of PeopleSoft (8.8) onto a software-as-a-service (SaaS) alternative that will work out-of-the-box.

Deloitte won £6,488,900 contract to act as a systems integrator on the project starting in August 2021, with the aim of swapping existing legacy systems to "Oracle Human Capital Management (OHCM) Global Payroll (GP), Oracle Expenses and Workforce Compensation as an option" as that contract notice put it.

That process, suggested one Deloitte Partner, has been painful. Speaking in 2021, Deloitte’s Simon Lowe said: “[One response was] “This isn’t going to work here because it isn’t the way we do things… some things were deemed sacrosanct like the policies which weren’t really policies, they were procedures that had been in place for a long, long time. [Tackling this] was a mighty, mighty challenge across lots of parts of the MOD.

“We’ve got a lot of scars from going through that stakeholder management and decision making process.

The new design and scope changes come despite Deloitte having been involved in the discovery phase of the programme as early as 2017. Competition was unnecessary under regulation 32(b)(ii) of the 2015 Public Contract Regulations because competition is “absent for technical reasons” a MOD transparency notice said.

The Ministry of Defence said in this April’s contract notice that “only Deloitte's [sic] have the current specific functional and technical know-how of the Authority's Payroll, as well as use tools available to support data migration and Payroll Comparison Testing, used to date, to verify and validate and assure the current build and provide further assurance once the mandated changes are made within the necessary timeframe…”

MOD ERP modernisation: What now?

In a transparency notice on the £2 million extension on April 6, 2023, MOD blamed “changes to the design and scope of the services to be provided which have been necessitated by the unforeseen amount of data discrepancies identified (during testing) between the Authorities [sic] HR and legacy Payroll system.”

These, it added, were “exacerbated by complex underlying design issues identified in the legacy Payroll system, requiring the Authority needing time to carry out extensive data reconciliation” before assurance for go-live.

The Ministry of Defence ERP migration delays mean that there is also now an “ unforeseen need immediately post Go Live, to implement mandated, statutory, legislative changes, the majority of which were not expected as they have been delayed exceptionally beyond what could be reasonably anticipated” MOD said, opaquely.

“As a result of the additional time required to implement these changes in design and scope and to… de-risk delivery due to known events which impact delivery (such as known MOD pay awards and dependant Oracle system upgrades), the additional service of migrating legacy data onto the new system has had to be amended and implementation delayed until the earliest time by which the Authority reasonably considers it safe to do so as to minimise the impact to the Authority's continuing Payroll and Expenses obligations” it added this month.

See also: US Army CIO applauds cloud migration of “3 most complex ERPs”

With plans to mothball the data centre hosting this heavily customised legacy HR and payroll software within months, pressure is mounting. Defence officials spelled it out in the contract notice: “[MOD] as part of it its estates strategy, [is] closing down the site that hosts the on premise data centre which provides the existing Payroll services in quarter three of 2023 and as such decommissioning the legacy Payroll system, so it is imperative that the Payroll service is transitioned to Oracle Cloud well in advance of this date to de-risk both projects by continuing to provide a Payroll service and vacate the site as per the lease agreement.”

Neither the April nor November contract extension refers back to the original contract. The Stack could not immediately confirm as we published which it was, but it appears to be an extension of a long-running (conversations starting in 2017 if not earlier) programme focussed primarily on HR and payroll for MOD’s 40,000+ civilian staff, which have been running on a two-decade-old version (8.8) of PeopleSoft software. Design and iterative prototyping for the replacement software started back in 2019 and a replacement build was largely in place in 2020; business change planning for users at every level has been among the challenges.

Contract notices show that Deloitte inked a £5.9 million contract for the MOD ERP modernisation work in 2019, beating 10 other applicants for what was then billed as a 21 month deal. Initial work (“scope/priorities, engagement with users/business/government, capture of user needs, down-selection to SaaS option, procurement strategy, cost/benefit modelling, assessment of business change impact, establishment of governance forums and approval/funding to proceed”) had been done by a 20-strong joint “Defence Business Services” and “Defence People” team of 20. (A breakdown of that team in an early contract notice shows that despite the technical complexity of the project just six were on the technical team. About 60% of the roles for the programme were still being recruited for at the time of the initial contract notice in November 2018.)

Whether Deloitte and friends at MOD can get the migration done before someone starts ripping servers out of the data centre is an open question but it is certainly securing fresh funds in the meantime.

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