Outsourcing failures can involve more than a supplier missing a deadline: weak requirements, poor client oversight, inadequate testing and unclear accountability can all contribute. The cases below illustrate those risks in public-sector IT. The available evidence supports four examples—not a definitive ranking of six—and one, Queensland Health’s S/4HANA rollout, is best described as troubled rather than a proven outsourcing-contract failure.
1. Queensland Health payroll system: IBM and a disastrous go-live
Queensland contracted IBM as prime contractor for a shared-services initiative that was later narrowed to a payroll system for Queensland Health. The Queensland Health Payroll System Commission of Inquiry reported that by October 2008 IBM had met none of the contracted performance criteria. The State had paid about $32 million of the $98 million contract price, while the forecast cost to complete had risen to $181 million. These are historical figures reported by the inquiry, not current costs or independently recalculated totals. Queensland Health Payroll System Commission of Inquiry (2013)
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The payroll system went live on 14 March 2010 after ten aborted delivery attempts. The inquiry described the result as catastrophic: employees experienced hardship and uncertainty, and the State faced serious financial consequences. About 1,000 employees were needed to process data for fortnightly pay, and the inquiry estimated the system would cost about $1.2 billion over the following eight years. Queensland Health Payroll System Commission of Inquiry (2013)
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The inquiry did not treat outsourcing as a transfer of all responsibility. It identified unwarranted urgency and lack of diligence by State officials among the principal causes of cost increases and shortcomings. Commissioner Richard Chesterman wrote that appointing a prime contractor did not absolve the State of responsibility for requiring delivery against the contract and ensuring effective implementation. Queensland Health Payroll System Commission of Inquiry (2013)
2. Queensland SPER reform: weak governance of outsourced ICT
The Queensland State Penalties Enforcement Registry (SPER) Reform Program shows how an outsourced model can fail when governance and client capability do not keep pace with changing needs. The Queensland Audit Office concluded that governance was ineffective from the program’s inception. Its origins in an outsourced model shaped project-management and governance approaches that were not suitable after the policy setting changed. Queensland Audit Office, SPER Reform Program
What the audit identified
- Requirements guidance was insufficient, and vendor due diligence was inadequate.
- Risk documentation was incomplete, while internal ICT skills were insufficient and the program relied too heavily on external experts.
- Assurance findings were not acted on promptly, and contractor performance management was ineffective.
The audit’s broader lesson is that a long-term software-as-a-service contract still requires thorough assessment of the vendor and product. An outcomes-based contract does not remove the need to specify detailed requirements when the product must be tailored. Queensland Audit Office, SPER Reform Program
3. NHS General Practice Extraction Service: accepted despite design flaws
The UK’s General Practice Extraction Service (GPES) was intended to extract data from GP systems for NHS planning, payment, quality monitoring and research. The NHS Information Centre contracted major clinical-system suppliers to create extraction software and awarded Atos a contract in December 2011 for the central software. In March 2013, the Information Centre accepted the system from Atos; its successor organization later found fundamental design flaws and that the system did not work. UK Parliament, Committee of Public Accounts
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The project began about five years later than planned, ran over budget and still did not provide the full required service. The Committee of Public Accounts cited failures in Department of Health governance, the wrong contracting approach, loss of continuity among key staff and insufficient testing before acceptance. The committee summary also notes that Atos may have met the letter of its contractual obligations even though the overall system was inadequately tested. That distinction matters: a contract can be met narrowly while the public service it was meant to deliver remains deficient. UK Parliament, Committee of Public Accounts
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4. Queensland Health SAP S/4HANA: a troubled rollout, not a proven outsourcing failure
Queensland Health launched SAP S/4HANA on 1 August 2019 after delays. The Queensland Audit Office documented low training completion, unfinished readiness work, configuration errors, hospital supply-ordering problems, productivity impacts and extensive workarounds. Vendors were not always paid on time. Go-live and four months of heightened support during hypercare and transition cost an additional $33.5 million, according to the audit. Queensland Audit Office (2020)
This is a useful example of implementation risk, but the audit does not establish that an outsourcing contract failed. It also reported progress addressing problems and improved supply-chain management capability; Queensland Health indicated little to no adverse impact on patient care. The case therefore illustrates the cost of readiness, training and configuration problems without supporting a claim of total or solely vendor-caused failure. Queensland Audit Office (2020)
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What these examples show about outsourcing risk
Across these cases, recurring weaknesses include unclear or inadequate requirements, ineffective governance, limited internal technical expertise, poor due diligence, insufficient testing or readiness, and weak contract management. That is a synthesis of these particular public-sector records, not a universal finding that every outsourced project fails for the same reasons. Queensland Health Payroll System Commission of Inquiry; Queensland Audit Office, SPER Reform Program; UK Parliament, Committee of Public Accounts; Queensland Audit Office (2020)
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For organizations considering external delivery, the practical checks are to:
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- book
- A Guide to the Project Management Body of Knowledge (PMBOK Guide) – Seventh Edition and The Standard for Project Management (ENGLISH)
- Define the business outcome and detailed requirements before selecting a contract model.
- Retain enough in-house expertise to challenge supplier plans, assess risks and make informed decisions.
- Check the vendor’s capability and product fit, particularly for long-term or heavily tailored services.
- Set measurable acceptance criteria, test the complete service and resolve significant readiness issues before go-live.
- Monitor performance and assurance findings throughout delivery, with clear ownership for corrective action.
- Plan for service continuity and remediation if a rollout is delayed or does not work as intended.
Why the six-case promise needs qualification
The four documented cases vary in severity and in what they establish. Queensland Health payroll and GPES involved major service failures; the SPER audit exposed serious governance and management weaknesses; S/4HANA is a qualified troubled rollout with reported progress. The available records do not establish a canonical set of six cases or a comparable ranking, so presenting these as the “worst six” would overstate the evidence.
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