Report on Public Sector Agencies, June 2002

• Victorian Forest Industry Structural Adjustment Package
• Survey information at Land Victoria
• Land titles automation project

LAND TITLES AUTOMATION PROJECT

7.282 The State’s Land Titles Register comprises in excess of 3.9 million land titles. Around 800 000 updates of details registered on these titles and 1.1 million title searches occur annually. Management of the Register is under the responsibility of Land Registry, a division of Land Victoria within the Department of Natural Resources and Environment.

7.283 A project to automate the Land Titles Register (the project) was commenced in 1997 following consideration of the need for greater automation dating back as far as 1989. This current automation project encompasses the conversion of former paper-based land titles and associated documents to electronic format and the implementation of a new electronic system, the Victorian On-Line Titles System (VOTS).

7.284 The project is aimed at transforming the way in which land titles information is recorded, accessed and transacted and at delivering significant benefits to users, including the property industry, banks, solicitors and individuals. Specific benefits should include:

• remote and immediate access to land titles and associated documents;
• quicker and easier registration of land dealings;
• improved customer service;
• improved security over the Register; and
• ongoing enhancements in the processing of land transactions by providing the framework for the development of a State-wide property transaction and information network.

7.285 My Report on Ministerial Portfolios, June 2001 set out findings of our interim review of the project viz:

• significant delays in automating the land register over the last decade with limited progress made between suspension of an initial automation project in 1993 and the commencement of the current automation project in 1997;
• delays in completion of the current automation project compared to original timeframes;
• an increase of $29.4 million from the original cost estimate for the project of $62.2 million with potential for further escalation of costs; and
• actions taken by Land Registry to address deficiencies identified in project management arrangements.

7.286 Given the size and importance of the automation project and the findings of the previous review, a further audit assessment of the status of the project was undertaken.

Current status of the project

7.287 Since the previous audit review, significant progress has been made on the project with VOTS becoming operational on 27 December 2001, approximately 2 months after the project’s revised commencement target of 7 November 2001. Delays in the commencement of VOTS operations have been attributed to industry-wide action of public sector employees from August to October 2001 that adversely affected the timing of certain project activities including training of staff in using the new system.

7.288 The decision to commence operation of VOTS in December 2001 was based on the achievement of critical project milestones by external contractors and the completion of data migration, integrity and quality assurance checks by Land Registry and external consultants. Some of the key activities in the lead up to the commencement of VOTS included:

• relocation of Land Registry operations to new premises at Bourke Street;
• installation of IT infrastructure and systems to enable VOTS functionality at the new premises;
• finalisation of information download from the previous system;
• completion of data migration and data conversion reconciliation processes;
• confirmation and acceptance of VOTS by Land Registry, following business quality assurance processes;
• completion of VOTS training for Land Registry staff; and
• official handover of VOTS to Land Registry.

7.289 Some initial problems were encountered in the period following the commencement of VOTS. These problems, which since have been largely rectified, included an increased number of system errors, slow system response times, malfunctioning of computer screens in customer areas and data issues that affected a small number of titles.

Key post-implementation activities

7.290 A number of post-implementation activities were completed in the three months following the commencement of VOTS operations including:

• the systems that were previously used for recording land information (Unregistered Dealings System and the Automated Land Titles System) were decommissioned in March 2002;
• a final report on the data conversion reconciliation process was issued, highlighting minor discrepancies in the numbers of records that had been converted in comparison with the estimated Land Registry numbers;
• contracted project management arrangements were handed over to Land Registry on expiration of the project management contract at the end of March 2002; and
• the project risk management committee was disbanded with responsibility for project risks being allocated to nominated Land Registry staff.

7.291 In addition, Land Registry has developed a framework for two post implementation reviews to be undertaken with the aim of evaluating project management and project delivery outcomes. These reviews, to be conducted by independent consultants, are expected to be finalised by July 2002. As the project has now been operational for 4 months, it is critical that post implementation reviews are conducted as soon as possible to ensure the early identification and resolution of any shortcomings in project expectations and deliverables.

Status of key services provided under the data conversion and VOTS development contracts

7.292 Longer term contractual arrangements are in place for the provision of facilities management and support services by the data conversion and VOTS development contractors until the expiration of their contracts in March 2004. Other outstanding contractual obligations are connected with further upgrades of VOTS software (due for completion by July 2002 for release 2 and yet to be determined for release 3 and 4), and the conclusion of data conversion and imaging services for the remaining plans and diagrams as detailed in Table 7J.

TABLE 7J
STATUS OF DATA CONVERSION AND VOTS DEVELOPMENT SERVICES,
AS AT 30 APRIL 2002

Project Management Arrangements

7.293 A project control group was established in 1997 to oversee the development of the project and has continued to play a key role in this area, directly reporting to the executive management team of the Department of Natural Resources and Environment on all aspects of the project.

7.294 Additional measures were also introduced to enhance project management arrangements as the project progressed through the implementation and deployment phase. An independent IT expert was appointed to the project control group in May 2001. An IT risk manager was also engaged in June 2001 with responsibility for reviewing the implementation plan for the commencement of VOTS, developing contingency plans and monitoring and reporting on the status of project risks. Approval procedures for project variations and payments were also strengthened.

7.295 As indicated previously in this Report, contracted project management services were handed over to Land Registry at the end of March 2002. In preparing for this transition, the external project managers were required to:

• finalise procedures for managing production system issues, including change requests and faults;
• undertake a post implementation review of project management outcomes;
• address all issues in the project risk register to achieve closure;
• all outstanding issues in the “Issues Log” and allocate ownership to Land Registry staff for those remaining incomplete; and
• consolidate and deliver project documentation.

7.296 With the exception of the post implementation review of the project, Land Registry have advised that all other responsibilities were satisfactorily discharged by the contractor by March 2002. It is intended that formal acknowledgement of the satisfactory completion of external contractor responsibilities will be undertaken on completion of the post implementation review.

7.297 While project management enhancements have been introduced to ensure the efficient administration and timely completion of the project within budget, project management could be further strengthened by the:

• continual review of the project management processes to ensure that they continue to be appropriate as the project progresses through the operational, software enhancement and facilities management stages;
• enhancement to project management reports produced from the system including development of exception reports to enable the effective monitoring of project performance and deliverables; and
• formal assignment to the internal project management team of activities previously performed by external contractors.

Project funding

7.298 Initial funding for the project was established at $62 million and approved by the Department of Treasury and Finance in August 1997. Further funding requirements were to be finalised on the completion of detailed project specifications that were unavailable at the time of the initial funding request.

7.299 Additional funding requirements were subsequently established within the context of detailed project specifications. A comprehensive review of project costs to completion was also undertaken by external consultants in October 2000 to ensure that total funding requirements had been adequately determined. The review undertaken by consultants established a total cost to completion for the project of $91.7 million, including a contingency provision of $3 million.

7.300 In January 2001, a submission for additional funding of $29.7 million was made to the Department of Treasury and Finance to cover the estimated costs to completion of the project of $91.7 million. Funding approval for $22.2 million was received from the Department of Treasury and Finance with the balance of funding to be sourced from the Department of Natural Resources and Environment ($3 million) and facilities management cost savings ($4.5 million) that would emanate from the closure of the previous systems that were used to record land transactions.

Project costs

7.301 Since our previous review, the estimated total cost to complete the VOTS project has remained at $91.7 million. As outlined in Table 7K, while additional costs of $1.5 million are forecast relating to the data conversion and the project management components of the project, these additional costs will be met from the allocation of $1.15 million from the contingency provision established for the project and a reduction of $355 000 in the estimated costs to complete system development.

TABLE 7K
ESTIMATED COSTS TO COMPLETION OF THE PROJECT,
AS AT MARCH 2002
($’000)

7.302 The decrease in the estimated costs to complete system development has resulted from a reduction in the scope of the project following a decision by the Department of Natural Resources and Environment to integrate the new VOTS system within its information technology architecture. It was previously intended that Land Victoria, the group responsible for Land Registry, would operate within an autonomous IT environment. The Department of Natural Resources and Environment has agreed to compensate the VOTS contractor to the value of the reduced project works by their engagement in the provision of alternative IT services before March 2004.

7.303 The key reasons for the increases in the estimated costs to completion for data conversion and project management include:

• delays in VOTS training programs due to industry-wide bans that were in force from August 2001 to October 2001;
• rectification of errors that were identified in the diagram conversion process, following a quality assurance process by Land Registry (some of these costs are expected to be recouped from the contractor);
• difficulties encountered in downloading title information from the previous system to VOTS;
• additional staff appointments including a risk manager and an independent member of the project control group to enhance internal project management arrangements; and
• extension of staff employment arrangements as a consequence of the industry-wide bans.

7.304 While Land Registry does not anticipate further cost overruns, any variations in the estimated costs for outstanding project activities, including certain data conversion services and VOTS system upgrades, will erode the contingency provision of $1.85 million that remains unallocated and may lead to an increase in final project costs.

7.305 While the Department has estimated the cost of the project to be $91.7 million, this estimate excludes certain substantial costs that should be accounted for as part of the overall cost of the project. These costs include:

• salary costs of in-house staff involved in the project, as only the overtime component of the cost of these employees has been assigned to the project;
• redundancy payouts made to staff in the Land Registry section as a consequence of the changes in business processes arising from the project;
• post implementation review costs;
• the conversion of an additional 240 000 complex titles to the new system with conversion costs to be met by Land Registry from its operating budget; and
• costs associated with the relocation of Land Registry operations to new premises, costs to store paper titles and associated land documents within new storage facilities and project clean up costs.

7.306 Land Registry should continue to closely monitor project costs to ensure the completion of the project within budget and on time. The impact of system change requests on the timing and cost to completion of the project should also be continually assessed.

7.307 Direct costs incurred on the project to 31 March 2002 amounted to $71 million, leaving an unexpended amount of $20.7 million. A significant portion ($13.6 million) of the unexpended amount will be applied towards contracted facilities management services that extend to March 2004 with the remaining amount to be applied to the completion of the data conversion and system development components of the project.

RESPONSE provided by Secretary, Department of Natural Resources and Environment

Overall comment

As audit’s Report acknowledges, the Titles Automation project was successfully deployed over the Christmas New Year period 2001 with first registrations on the new system on 27 December. The project is also within budget.

The project was initially scheduled for deployment over the Melbourne Cup Week 2001. Industrial action in support of the public sector wide Enterprise Bargaining negotiations delayed completion of the intensive staff training program and the deployment date was postponed. All other aspects of the project in particular key data migration activities and final software testing and acceptance were completed by 29 October 2001 to the original schedule.

Once the industrial action bans were lifted a new deployment date (Christmas 2001, a date suitable to Land Registry customers) was selected.

Since deployment the new Victorian Online Titles System (VOTS) has performed above contract requirements which specify 99.5% system availability during business hours (7.00 am to 8.00 pm). Any problems experienced in the immediate post deployment period were consistent with installation of a new IT system and were rectified.

Post Implementation Review

The Department agrees with the need to complete a post implementation review of the project. A Request for Tender (RFT) to conduct an independent evaluation of project outcomes and deliverables has been advertised and will be completed by July 2002.

Project Management

Deployment of the new Victorian On Line Titles System was undertaken simultaneously with relocation of services to a new building and the introduction of a new organisational structure. In the immediate days and weeks after deployment project governance and project management reports reflected Land Registry’s intention to maintain intensive monitoring of all aspects of business operations including IT systems, staff training, office fit out, new business processes and customer satisfaction.

Project governance and project management reports have since been reviewed to reflect transition to a stable production environment. In February 2002 the TAP Project Control Group approved establishment and terms of reference for a VOTS Operational Steering Committee and operational reports on system performance are provided to that committee.

Most external project contractors left during January 2002 when their respective activities were completed. Two project management contractors remained to March to assist with the transition from a project to an operational system and any ongoing activities were formally handed over before their departure.

Estimated Costs to Completion

Difficulties in downloading information from legacy systems and costs associated with appointments to enhance internal project management were funded from savings in other areas of project expenditure.

Utilisation of project contingency has only been required to date to fund costs associated with the postponement of the ‘go-live’ date as a result of sector wide industrial action and may be required to meet some additional data conversion costs.

As mentioned in the audit report, at 31 March 2002 the unexpended amount of amount of project funding is $20.6 million of which $13.6 million will be applied to contracted facilities management services. These are fixed price contracts with no risk of cost escalation. The balance of unexpended project funding of $7 million (to be spent on software enhancements and plans of subdivision rectification) includes $1.85 million contingency. Land Registry will manage the remainder of the project within available funding.

Excluded Costs

All appropriate TAP relates costs including project clean up and post implementation review costs, are included in the $91.7 million TAP capital funding. This also includes $3.988 million of Land Registry’s costs for staff overtime and employment of fixed term staff to replace permanent staff assigned to project related activities.

Salary cost for staff with ongoing positions in Land Registry beyond the completion of the Titles Automation project continue to be funded from the recurrent budget.

Land Registry will monitor project costs to completion to ensure that the balance of the project is completed on schedule and budget. A constant monitoring regime is included in the responsibilities of the Project Control Group, the Operational Steering Committee and in the work program of senior officers accountable for the project.

Part 7 - Natural Resources and Environment, continued:

• (i)    Victorian Forest Industry Structural Adjustment Package
• (ii)   Survey information at Land Victoria
• (iii)  Land titles automation project