The NSW government-run workers’ compensation scheme awarded contracts for critical claims-management systems worth hundreds of millions of dollars in a tender process described as “rushed” and a “sham”.
The tender process to build a claims and billing platform for icare’s workers’ compensation scheme took less than three weeks, according to documents produced to the NSW upper house under a parliamentary order and obtained by the Herald.
The timeframe for the contract award was so quick that alternative credible vendors pulled out ahead of the deadline, leaving the Guidewire/Capgemini consortium the only valid candidate.
The target contract date was the end of September 2015, just ahead of the launch of icare as the new workers’ compensation scheme for NSW. The entire project was set to go live by July 2017.
The claims model is at the centre of the scandal that has engulfed icare in recent months. A joint investigation by the Herald and ABC TV’s Four Corners revealed icare had underpaid thousands of injured workers by up to $80 million, and that regulators had “grave concerns” about its deteriorating financial position.
The investigation also revealed that, in late 2019, the workers’ compensation insurance regulator identified major problems at icare, including a massive blowout in costs relating to its claims model, and delays and inaccuracies which affected return-to-work rates. Costs are estimated to have blown out to $360 million.
“Implementation of the [platform] has cost considerably more than originally estimated,” the regulator said in a report.
Greens politician David Shoebridge recently grilled the government in Parliament about an association between a former icare executive and Capgemini “at the time that icare entered into a contract with Capgemini and Guidewire for a $360 million IT project”.
Capgemini has been contacted for comment.
Over the course of its contracts, Guidewire paid for at least two senior icare executives to attend its annual conferences in America.
Icare is overseen by NSW Treasurer Dominic Perrottet to provide workers’ compensation insurance to more than 326,000 businesses and insures 3.6 million employees.
Documents obtained by the Herald show one of the alternative bidders for the lucrative contract, FINEOS, wrote to icare’s current acting CEO Don Ferguson in August 2015, just before the deadline, to warn him it was pulling out because the timeline was “extremely aggressive” and “unrealistic” for such a complex, high-value project.
It said continuing to participate and meet the deadlines posed a reputation risk and “put in jeopardy the high quality to which FINEOS aspires” not just for the project but its existing clients, which include Victoria’s WorkSafe and TAC, four of the country’s five largest life insurers and Accident Compensation Corporation (ACC) in New Zealand.
It said the ACC had completed a similar procurement process for a system with similar billing, claims and policy requirements but the procurement and evaluation process had taken almost two years to complete.
The letter made it clear that if the timetable changed, or a more “realistic” scope was adopted, it would be keen to re-engage with the process.
Days later a second vendor, SBC IT, pulled out after conducting a risk assessment of the request for tender.
Other documents show that Capgemini/Guidewire’s proposal attracted a series of savage ratings from consultancy giant PwC in a vendor evaluation study.
PwC gave the consortium proposal an overall score of 61 out of 100 with non-compliance in three essential areas.
Of particular concern was that it was unclear what the support model was; it was unable to perform medium or large changes in a reasonable timeframe; its onshore support team consisted of only three people who largely triaged problems to offshore resources and it required 32 full-time staff to be employed by icare to manage the system.
Another document, a Health Check of the Procurement Process, undertaken by Procure Group in September 2015, noted that “the period is very short (two weeks) when compared to other procurements of complex systems of high value”.
It also noted the role of the CEO outside the steering committee and evaluation committee “requires careful governance of the evaluation process to ensure evaluation integrity.”
Icare refused to respond to a series of questions but in a statement it said the new claims management and billing platform had given the workers’ compensation scheme control of the policy and claims systems for the first time, allowing 24/7 real-time information.
Mr Shoebridge told the Herald the tender process was so rushed that the end result was a hugely expensive and much-delayed project that harmed injured workers.
“This ended up being a $360 million IT project and that’s a staggering amount of money and shows why more rigorous tender controls are needed,” he said.
“Every dollar that icare spends on these tenders comes from the pockets of injured workers, this is why we cannot understand why the Treasurer will not force icare to have transparent tender rules.”
NSW shadow minister for finance Daniel Mookhey described the tender process as a “sham”.
“Icare turned a deaf ear to so many warnings about how risky this tender was,” he said.
“Icare chose the wrong company through a sham tender. Employers and sick and injured workers have paid the price for icare’s awful mistakes.”
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Source: Thanks smh.com