Thomas Neitzert: Labtests swap a classic case of project mismanagement

Labtests did not seem to have contingency plans in place. Photo / Dean Purcell

There is now enough blood on the floor, and not only spilled by lab staff in training, for us to take stock and ask for decisive action.

Aucklanders have, in the past, enjoyed a truly world-class lab service - contrary to our public transport, broadband, and waste recycling - but we are about to slip to mediocrity. The change-over from one monopolistic provider (Diagnostic Medlabs, DML) to the next (Labtests) is becoming a classic case study in failed project management, where practitioners have to compromise between delivery, cost, and quality of service.

After a few weeks of providing lab services to Auckland, it seems Labtests is trading quality and speed of service for reduced costs. The chosen business model is nevertheless questionable in a number of ways.

Cost savings are being sought by passing on expenses to the customers. Taking a narrow view of efficiency, a 10-minute wait time for a lab nurse is rated more highly than 50-minute waits by 10 patients in a waiting room.

The added risk of catching another infection while sitting in a confined space with others and the effect on public health is not even considered.

The minimisation of collection-points transfers the cost and time of travel from one sample-collecting station wagon to the travel of many sick, anxious and often medicated customers.

The time doctors are spending on the phone to receive additional information is another issue along those lines.

These are certainly moves in the wrong direction, as we are trying to increase our efficiency as a nation and to reduce our carbon footprint as a city.

It is also a sign of our senior public servants, who awarded the contract, drawing the "system boundaries" too narrowly during their decision-making process and neglecting the well-being of the community as a whole.

In terms of project management, the change-over process faced the added challenge of running an operation seamlessly and at full capacity from the word go.

An existing, highly tuned and extremely well-functioning system had to be replaced.

Such a high standard operation is necessary in a healthcare environment, where the safety of customers is paramount. Considering the size and complexity of this operation in the mega-city of Auckland, it is fair to say that this has not been done before and should not be attempted, as current experience shows.

The disastrous introduction of a new luggage system at terminal 5, Heathrow Airport, London is a similar case, but that only involved hundreds of thousands of pieces of luggage being separated from their owners and not vital analysis data of patients.

Commercial entities do start up all the time and new products and services are provided to customers, but there are ramp-up programmes and contingency plans in place. Where quality and delivery problems are encountered, the introduction schedule is delayed, a current example being the Boeing 787 Dreamliner aircraft.

These strategies were not or only partially employed in the lab changeover, which is basically an instant swap of providers. With such an immediate transfer of services, extra staff should have been employed to compensate for learning curves of inexperienced staff and teething problems with new equipment and software.

On the other hand, this would have jeopardised the promised cost savings for at least year one and there are physical limits to how many people can be around one patient or one computer. The approach chosen by Labtests and the District Health Boards is therefore not recommended.

The responsibility for the current situation lies equally with the service provider Labtests and the senior public servants in the DHBs who agreed to this world first exercise in project management in public healthcare.

Our public servants were not able to negotiate efficiency gains and cost improvements with the old, monopolistic provider using an open book policy and referring to industry best practices.

They chose instead to award the business to the next monopolistic provider, putting the public at risk during a massive handover process. People have been hurt and medical emergency situations have arisen because of this, but we should not wait for fatalities before action is taken.

Auckland should take advantage of the situation of two established providers and immediately run two test labs in parallel, competing as a duopoly on service and price for an initial 12 months, while DML is still offering to step in and assist.

And provide the opportunity to senior public servants in the DHBs to do the honourable thing and take responsibility for their past decisions and actions, and incorporate lessons from the current case study in training manuals for DHB officials to avoid a recurrence of the situation.

* Professor Thomas Neitzert is head of the School of Engineering, AUT and a researcher and practitioner of project and manufacturing management.