US firm wins contract in $1b IRD project

IRD will own a perpetual licence for Fast's software, which is expected to deliver the bulk of the project. Photo / Janna Dixon

Fast Enterprises beats SAP and Oracle to be preferred software supplier as Inland Revenue replaces ageing system.

The Inland Revenue Department has selected Fast Enterprises as the preferred software supplier for its $1 billion-plus business transformation which will replace its ageing information technology system as part of an overhaul of the agency's operations.

Deputy commissioner of change Greg James said the tax department was negotiating the final terms of the contract after selecting Colorado-based Fast Enterprises over SAP and Oracle. The price was commercially sensitive.

Work is slated to begin in July, with an initial focus on PAYE and GST information collection.

IRD's business transformation project will replace its FIRST IT system, built in the early 1990s, and aims to protect its ability to collect Crown revenue while allowing it to deal with new responsibilities added over the past 15 years, such as overseeing KiwiSaver payments, student loans and welfare entitlements.

IRD will own a perpetual licence for Fast's software, which is expected to deliver the bulk of the project.

"Their expertise in delivering commercial off-the-shelf tax and social policy systems is what we evaluated them against," James said.

"Our target is to exceed the time that FIRST has given us and the underlying technology associated with this will allow us to do that," he said.

Initial scoping on the project estimates it will cost between $1.3 billion and $1.9 billion over eight to 10 years, a bill that's attracted criticism from IT specialists including Xero chief executive Rod Drury.

Three of the five partners who set up Fast were involved in the build of the tax department's FIRST system, though James said that wasn't one of IRD's evaluation criteria in selecting the software supplier.

The tax department's latest forecast is for the project cost to be at the low end of the range, and be delivered in eight years, he said. The design phase is expected to be $23.4 million below budget.

Fast will set up a locally-domiciled company to deliver the work and has indicated it will contact New Zealand universities to institute a graduate programme.

While no local firms participated in the tender to supply the software, James said several New Zealand companies were providing services in other aspects of the programme.

The tax department is working closely with accounting software developers Xero and MYOB, and James is confident IRD's partners can pick up some of the work it has traditionally undertaken.

"We see the ecosystem around tax broadening, so some of the activity that was previously undertaken by Inland Revenue could well be undertaken by other partners in that ecosystem," he said.

"The work that we're doing with Xero and MYOB is the start of that, so we see the services model here as particularly interesting."

IRD will need simpler policy around digital and information exchange, and has previously signalled planned reviews for business and provisional taxes.

Last week, the Office of the Auditor-General said the project was too important to fail, but it was too early in the design stage to assess whether it was delivering value for money.

New system
•Colorado-based Fast Enterprises selected as software supplier.
•Price of the software contract is commercially sensitive.
•Overall project will replace ageing information technology system.
•Cost estimated at $1.3 billion to $1.9 billion over eight to 10 years.