On Tuesday, 5th September 2023, Birmingham City Council (the largest local authority in Europe) effectively declared bankruptcy after being hit with a £760m bill to settle claims in a more than decade long equal pay dispute.
The council had issued a section 114 notice, which confirms that all new spending, with the exception of protecting vulnerable people and statutory services, must stop immediately. This announcement is the culmination of numerous financial difficulties which have plagued the council since 2010, when a group of 5,000 mainly female Council staff won their case for equal pay at an employment tribunal.
The council has already paid £1.1bn to settle these equal pay claims between the years of 2012-2023. In today’s announcement it was stated that the outstanding bill for these claims “is now increasing by about £14m a month and currently stands at £760m – and is just not money the council can afford to spend.”
Combined with the £1.1bn already paid out, this would make the total liability for the equal pay claims to be in the region of £1.9bn. And more claims are coming in all the time.
Unfortunately the equal pay dispute is not the only issue which has landed the Council in hot water in recent times. In May this year the Council was found blaming Oracle for its “disastrous” new ERP system, which had left taxpayers with an estimated £100m bill.
In June, £46.53m had been awarded to fix the problems with the Oracle system which were affecting payments, data management and background checks.
Birmingham City Council intended to replace SAP with Oracle’s Fusion Cloud ERP system, but it has ended up running both systems in parallel to ensure its reporting is up to date. A report published by the council in June acknowledged that the £46.53m costs awarded may not even account for half of the total spend required to fully integrate Oracle:
“Significant resources will be required to arrive at a position where the system can be fully implemented, and we estimate that the final costs of this will be in the region of £100m ($129 million).” Source: Computer Weekly
The original budget for the Oracle system was £19m…
Despite earlier blaming Oracle for the problems, the same report indicated the project’s failings were largely due to the council’s requests to make significant changes to the Oracle system which went beyond the original spec. According to the report, the authority was meant to change its processes to fit Oracle’s requirements; not the other way around. Such a change in approach was in contrary to the plan approved in 2021, and had “severely impacted upon the council’s ability to properly implement Oracle,” the council said.
At face value, the £100m cost of the Oracle system is pocket change when compared with the £1.9bn liability for the council’s equal pay claims, so a poorly-delivered IT project can’t be blamed for the council’s financial woes. It contributed to it, but its overall impact is minimal when dealing with such eye-watering numbers.
It does however highlight an issue which is all-too-common in both the public and private sectors when it comes to large-scale IT migrations. The complexity of change management cannot be underestimated, yet in most cases it is. The SAP system that Oracle was replacing was lauded at the time as the largest local government IT transformation project in Europe, so it would be reasonable to expect its Oracle replacement was of a similar size. For such a project to land in at over 5x the original budget there must have been significant failings in project management, and it is difficult to imagine that such a failure was a one-off or confined to the Council’s IT department. It looks like a clear red flag to me.