Hot Water: PwC faces legal action after failed IT project

Sydney Water will take legal action against PricewaterhouseCoopers after the consulting firm's inability to deliver a major IT billing project on time. In the process, this cost the water provider twice as much as was originally projected.

The decision coincides with the delivery of a report this week by the NSW Auditor-General on the project called the Customer Information and Billing System (CIBS).

¡§Sydney Water relied upon the skill, judgement and expertise of its prime contractor for the CIBS project, PricewaterhouseCoopers. We feel we have been let down,¡¨ Sydney Water chairperson, Gabrielle Kibble, said in a statement.

As a result, the Board resolved that Sydney Water "commence litigation for the recovery of loss and damage arising out of the terminated project".

After a lengthy tender process Sydney Water contracted PricewaterhouseCoopers (PwC) to build and implement its customer information and billing system in June 2000. The scheduled completion date was February 2002. However, in October 2002, with CIBS incomplete and over budget, Sydney Water decided to terminate the project.

The then managing director, Alex Walker, said in a letter sent to the NSW Auditor Generals office in March that the Sydney Water board had "lost confidence in the ability of its contractor, PriceWaterhouseCoopers Consulting (PwC), to deliver a satisfactory system, at an acceptable cost and in a reasonable timeframe".

CIBS was originally projected to cost $38.2 million. However, the audit report detailed that when the project was stopped on October 18, 2002, Sydney Water had spent about $61 million on the core billing system and a further $18.6 million on related CIBS hardware and software.

Had the project continued, the Audit Office estimated that it would have cost Sydney Water $135.1 million in total. The Audit Office said that most of the $61 million - $29.4 million of which was payment to PwC - spent on the core billing system would be written off.

Following the failed project, the audit report listed a number of recommendations, some of which were:

- A current IT corporate strategy should be in place. Each IT project should be assessed prior to commencement for compatibility with the strategy,
- There needed to be a change in the culture of accepting that large and complex IT projects would be delivered late and at increased cost,
- A prototype of the IT solution should be developed and proven at an early stage.

Kibble said that the Board would action a plan and timetable for swift implementation of the recommendations.

Despite the termination of the project, PwC said it would have been successfully completed. A letter written by PwC's legal counsel, Ross Rydge, to the Audit Office said that it was "incorrect to describe the CIBS project as a ¡¥failed¡¦ project in circumstances where it was unilaterally brought to an end by Sydney Water. It would in our view more accurately be referred to as a ¡¥cancelled¡¦ project. It is PwC¡¦s firm belief that at the time the contract was cancelled by Sydney Water it was deliverable."

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