Agenda item

To scrutinise the work to date of the Stabilisation Programme for the Unit4/MySurrey ERP system.

Witnesses:

Cllr David Lewis, Cabinet Member for Finance and Resources

Andy Brown, Executive Director of Resources

Karen Telfer, Portfolio Lead for Communities

Key points made during the discussion:

1. The Cabinet Member for Finance and Resources introduced the report.

2. In reference to paragraph two in the report, a member asked for more detail on the three tickets that had been open for over a year and the key findings of the audit reports that gave ‘Minimal’ or ‘Partial’ assurances. The Portfolio Lead for Communities explained that the three tickets were scheduled to be delivered for Quarter 1 (Q1) of 2025. March 2025 was the date for delivery in the test environment, and May 2025 for the ‘live’ environment. There were target completion dated for all action in the audit reports, she added, before noting that all actions with a target completion before the date of this meeting have been completed. It was also noted that the integrations audit had improved from a ‘Partial’ to a ‘Reasonable’ assurance rating, and accounts receivable improved from a ‘Reasonable’ to a ‘Substantial’ assurance rating. An accounts payable issue, purchase orders reflecting incorrect amounts, was one of the three tickets part of the Q1 release upgrade.

3. The member asked if there were any outstanding issues of concern or if everything was on track. The Portfolio Lead for Communities explained that the team meet with Unit4 twice a week, prioritised and categorised any new tickets and marked progress made. The Executive Director for Resources clarified that the changes would be added to the test environment in March 2025 and that the team had requested ‘hotfixes’ on some issues, i.e. resolutions to system problems that can be implemented quickly and upon request, before any planned upgrade. The planned upgrade in Q1, i.e. March 2025, would apply a lot of the fixes, but Unit4these had to work well in the test environment, and until the proposed fix was tested and in the live environment, they would still be considered as outstanding.

4. The Vice-Chairman asked what the three tickets the council wanted Unit4 to fix were. The Portfolio Lead for Communities explained that the three tickets were all in the finance area: incorrect values between different screens (with a manual workaround in place),a missing ‘Accept’ button in a goods receipt (with a manual workaround in place), and a ticket in the ‘Financial Planning and Analysis’ module.

5. In reply to a comment raised by the Vice-Chairman, the Portfolio Lead for Communities clarified that no additional money had been paid to secure resolution of the tickets.

6. The Vice-Chairman suggested that the committee might choose to meet with Unit4 directly, unless it would complicate any contractual discussions already underway. The Executive Director for Resources supported leveraging the committee’s support though currently, the council is working well in a collaborative relationship with Unit4, and he envisioned there may be a time when the committee should re-engage with the supplier.

7. A member asked about approaches to testing, such as testing extensively as opposed to the customer finding problems with products. The member asked if one of those approaches was used by Unit4 and asked if the Executive Director had any views on this and how the council should approach future projects.  The council has experienced frustration given that it I still learning despite the fact that we are at the upgrading stage, he said, noting that this did not provide much assurance for officers ahead of the next upgrade and that this has been expressed to Unit4. Regarding future procurement of systems, the upgrade process should be considered, he stated.

8. In reference to paragraph 25 in the report, a member asked if the council had to pay extra for staff redirected onto the programme from other activities, such as the two Unit4 specialist system architects that employed, if this was part of the initial contract or if these costs were being recovered. The Portfolio Lead for Communities clarified that the two Unit4 contractors were sourced from the external market and possessUnit4 expertise, they are not themselves from Unit4. System downtimes were monitored and any Service-Level Agreements (SLAs) within the contract were leveraged, she added, stating that some service credits (essentially refunds) have been conferred due to system downtime and unavailability.

9. The Executive Director for Resources explained that the council was rigorously holding Unit4 to account and that refunds and service credits are coming into force. Unit4 was working collaboratively with the council, but there are difficulties regarding upgrades, which would be dealt with through the contract. He explained that additional costs included £350,000 for the Stabilisation Programme and £1.2m set aside in reserves for the Optimisation Programme, clarifying that the stabilisation phase aimed to address vital fundamental controls, with good progress being made. There was more to be done on the optimisation and manual workarounds at that stage, he noted.

10. A member asked if the additional £350,000 and £1.2m had been anticipated. The Executive Director for Resources explained that the £350,000 was for the fundamental work required to stabilise the system, while the Optimisation phase was intended to extract maximum benefits from the product, and this process was naturally not planned from the outset. Further investment proposals were put forward to Cabinet to enable the council to get the most out of the system and deliver some benefits originally forecasted.

11. A member asked how much more, beyond the £1.2m, may be required. The Executive Director for Resources explained that some of the £1.2m was needed to address some backlog issues that have been present since the system went ‘live’, particularly concerning pensions and enrolments. He explained that he has asked the programme team and service leads about what was required to deliver the desired optimisation, and that was the figure provided. He has asked for clarification regarding whether this was absolutely required, as well as what the ongoing costs would be to maintain the optimised system. The manual workarounds in place would also be ceased after this work. While he stated that he could not predict whether further investment would be required, he is asking questions about this. The £1.2m remains a ‘one-off’, with the anticipation that any future works will be budgeted for within the base budget, he said.

12. Regarding paragraph 32.2 of the report, which refers to potential “technical alternatives to providing a solution in the absence of a solution from the supplier”, the Vice-Chairman asked if the Council was looking to dispose of manual workarounds, including these instead in the core functionality of Unit4, and whether this would be covered as part of the £350,000 stabilisation costs or the £1.2m. The Portfolio Lead for Communities explained that manual workarounds are not encouraged, that a tightly managed list of every manual workaround in the system is maintained, and that the elimination of these manual workarounds would be funded via the £1.2m.

13. The Vice-Chairman asked how the programme’s new governance arrangements ensure the best project outcomes and visibility to stakeholders. The Portfolio Lead for Communities explained that the Stabilisation Board was represented by Directors from HR, Procurement, and IT. There are also operational and technical boards that met fortnightly, represented by officers from the different directorates, with these boards producing progress reports, raising issues and concerns which were addressed to the Stabilisation Board. She noted that this process is working very well, with officers feeling comfortable raising concerns. This was expected to continue into the Optimisation phase, she added.

14. The Vice-Chairman asked how the new Procurement Act 2023 was likely to affect future procurement exercises and if it would have meant the original product specification would be different if written today. The Portfolio Lead of Communities outlined procurement’s response, which noted that, future procurements will benefit from some key advantageous changes, such as the transition from "Most Economically Advantageous Tender" to "Most Advantageous Tender", allowing procurement to place greater emphasis on non-financial factors. The introduction of competitive flexible procedures grants procurement the discretion to design procurement processes tailored to their specific needs, while enhanced transparency and feedback mechanisms are also provided, meaning that all contracts with a value of over £5m must publish performance against at least 3 key performance indicators (KPIs) annually, she stated. It was stated that, if written today, the specification itself would not have changed, as the functionality the council required was clear, though the council could have designed their own procurement process to enable different interaction and negotiations. It was clarified that the key difference would have been a requirement from both sides to manage the contract effectively through KPIs. The Vice-Chair requested that this response was sent to the committee for review.

15. The Cabinet Member for Finance and Resources stated that he did not think the Procurement Act 2023 would have affected the outcome of the decision. He acknowledged a valid question about whether Unit4 was the right solution for Surrey County Council, as well as questions regarding how the council procures.

16. The Vice-Chairman asked whether the Procurement Act 2023 would be included and updated withing Unit 4’s Procurement module, if this was part of the standard system upgrade path, if it was part of the £1.2m, or would be another funding request. The Portfolio Lead for Communities explained that it was part of the financial planning and analysis module and the normal upgrade cycle.

17. A member asked if the documentation submitted at the request stage for funding was incomplete. The Portfolio Lead for Communities did not believe the documentation was incomplete, though The Executive Director for Resources highlighted that the decision regarding the specification was made some years ago, so they could not answer whether the documentation was complete or not. He stated that he has asked Internal Audit to review the procurement specification and how it was assembled to gather any lessons that might be learned. He stated that he would like to say the documentation was completed given the rigorous process usually followed here, but the specification review is a worthwhile step.

18. A member wanted to clarify where the lessons learned were and referred to the difference between the initial projected and final costs of the system implementation. The member expressed his difficulty in understanding how the original specification could be adequate given the inflated costs. The Executive Director for Resources agreed with the member’s concerns.

19. A member asked whether the £350,000 and £1.2m figures had already been approved by Cabinet? The Cabinet Member for Finance and Resources explained that the £350,000 for Stabilisation phase came from the existing budget, while the £1.2m was included in the 2025/26 budget approved by Council.

20. A member requested more detail about the “technical issues linked to the stability of the main platform [which] proved problematic”, the subsequent review of data integrity and the lessons that were learned from this process. The Portfolio Lead for Communities explained that that some of the forms within the HR module are highly complex, with multiple employment types etc., and that this area has been the origin of many of the difficulties. The supplier’s solution was slow, so the council has considered alternatives, such as redesigning the forms, she added. Data integrity remained an issue, she stated, noting that data cleansing work would put the programme in good stead. These issues relate to people, processes and the technology and undergo constant refinement.

21. A member raised concern, especially in the context of the committee’s task and finish group on Unit4, around the “fundamental constraints for system functionality which is having an impact on ways of working” present from “the outset”, raised in paragraph 32.6 of the report. The member asked why the design limitations existed and what lessons could be learned. The Portfolio Lead for Communities explained that some processes were not fully or clearly mapped at the outset, which then impacted the design and implementation, and that the task and finish group recommendations informed better programme governance and were carried through to the Stabilisation Programme. All other transformation programmes were now adopting the recommendations, she added.

22. The Vice-Chairman referred to paragraph 32.2 in the report which states, “there are a number of technical system constraints”, and noted the difference between processes and technical constraints. Regarding the technical constraints, the Vice-Chairman asked if Unit4 was capable of delivering what the council requires. The Portfolio Lead for Communities explained that the performance of this work continued to be monitored and that continued learning is occurring.

23. The Vice-Chair asked if the system was fit for purpose to deliver what the council requires. The Executive Director for Resources stated that he feels the system is definitely fit for purpose as it is operating and delivering the council’s core finance function, and at the last programme board meeting, he asked Unit4 for assurance of the stability of the system. He would therefore not give the committee assurance that the product is 100% fit for purpose. He also referred to stability issues due to problems with capacity and manual workarounds, noting that the question of whether it was the right product for the council is a question being posed to Unit4. The Vice-Chairman stated that it would be helpful for the committee to receive the assurance sought from Unit4.

24. The Vice-Chairman asked if there was any thinking around how Unit4 might need to be adapted depending on the outcome of LGR. The Executive Director for Resources explained that lessons learned other areas that have undergone LGR showed that IT infrastructure is a key consideration and that the council would look to alter the Optimisation programme to also function as an extensive onboarding programme and consider how Unit4 could be structured across the future authority/authorities. He also noted that the council had to ensure that the IT infrastructure was legal and safe for whatever came forward and confirmed that it is being actively considered.

25. Regarding the £1.2m for optimisation, the Vice-chairman asked whether there are opportunities to re-consider – and potentially stop and refocus - items that may not align with the outcome of LGR. The Executive Director for Resources explained that this was one of the checks forming part of the Optimisation programme - part of the £1.2m was to cover dealing with backlog issues and part to optimise the system.

26. The Cabinet Member for Finance and Resources raised the example of the work required on pensions, which accounts for around half of the £1.2m. Whether LGR went ahead or not, his understanding was that this work will be required.

27. A member raised that there was still uncertainty regarding whether Unit4 could deliver the benefits the council is seeking and asked whether the council was ‘stuck’ with Unit4 or if an alternative could be sought. The Executive Director for Resources explained that the LGR business case would take account of the requirements of any ERP system, that the council had to ensure Unit4 was a fit-for-purpose product, and stated that he felt was that it was, but it may not necessarily be able to perform exactly as expected and there are stability concerns that need to be resolved. The council may have to accept that Unit4 would not do exactly what was desired, he noted, adding that the council may decide to continue with the system with its limitations until it needs upgrading or replacing. But, if it returned to being not fit for purpose, then a new ERP system could potentially be introduced for the future authorities established by LGR.

RESOLVED:

• The select committee welcomes the continued prioritisation of work underway to keep resolving issues with Unit4 through contract negotiations and changes to governance and acknowledges the lessons learned, but remains concerned about the number and nature of outstanding issues, the cost and impacts to the council and its staff, and the nature of the original specification used when procuring the system.

:

• The select committee RECOMMENDS that officers update the select committee approximately 3 months from now (or at the most appropriate time, such as at the end of the Stabilisation phase) on the progress in resolving the remaining issues with Unit4, the performance and capacity of the system, and the effectiveness of the new governance arrangements.

• The select committee RECOMMENDS that Cabinet consider undertaking a review to understand and evaluate the likely impacts of any Local Government Reform (LGR) on the use of the Unit4 systemto deliver the core financial functions of any future Authorities, as part of its planned wider work on how IT infrastructure would change due to LGR, and that the results of any review are shared with this select committee.

Actions/requests for further information:

• Portfolio Lead - Communities to provide Procurement’s response regarding the impact that the Procurement Act 2023 would have had on the Unit4 procurement process had they been in place at the time the system was procured.