State allowed itself to be taken for a ride

Photo: Sander Ilvest

The years in the making SKAIS2 information system of the Estonian Social Insurance Board has become a shameful example of foolishness and inept supervision on the highest national level made especially appalling by the post-factum sabre-rattling of ministers, deputy chancellors, and other officials.

“I have never seen a project fail so completely from day one. The procurement itself was absurd, promising the reward to whoever can complete an utterly unfathomable thing in the shortest time. Damn the idiocy! Everything so a young politician could blitz through his first reform. And now those responsible are digging up their old letters to b... the public,” a former high-level participant said.

Let us take the story to pieces once more with the help of the facts and comments from those involved. Firstly, the timeline.

To leave aside all manner of tedious development plans no one except their authors ever reads, the SKAIS2 project began in October of 2013 that marked the completion of business rules and the social system’s IT strategy analyses ordered by the social ministry and carried out by PricewaterhouseCoopers and Ernst & Young.

It is possible problems started already with these overly optimistic analyses. Whatever the case, social minister at the time Taavi Rõivas (Reform Party), itching to get his social reform underway, gave notice of the SKAIS2 procurement before the analyses were even completed.

The date was October 2, 2013. We can hope people at the ministry had at least had enough time to leaf through the analyses. The tender was prepared by the state’s best and brightest IT experts from the State Information System’s Board and the Ministry of Economic Affairs and Communications (MKM). It had become clear that the old SKAIS system could not service the reform, and that something else had to be done.

The tax board turned down

The pivotal procurement was titled “Information system development based on the framework contract (SKAIS2)” while bids were expected only a little more than a month later, by November 11. Four years of substantial work to be mapped in a matter of weeks? The condition according to which success would be determined not only based on price but also date of completion was another oddity. Participants included several major players, from Helmes to Tieto and Finestmedia.

It is important to note that the question, today making its way back onto the agenda, of why develop huge information systems where everyone works on their own very different levels in a tiny country like Estonia in the first place was being asked.

There was talk of merging the social payments system with the e-tax board that was an exemplary and highly functional system which move would have left e-state revenue and expenditure in the same system.

“The reason we made that proposal was rational: the state does not have many people who could grasp the complexity of such processes and IT systems as the client’s representatives,” former head of the tax board Marek Helm recalls in social media.

Unfortunately the mentality in the field of state information systems was the same it is today: everyone wants to do their own thing, to hell with rationality and skills.

“The idea was not met with enthusiasm. The desire was to handle the development independently, while they failed to realize that lack of experience meant lack of capacity on the client’s part,” Helm writes.

The fact that the “do it yourself” mentality endures is reflected again in former high-ranking state official Taavi Kotka’s recent social media utterances. “Work processes, their functionality and necessary software is procured separately in every ministry and agency,” he described the e-state mantra. However, the procurement went ahead and preferred the joint bid by Tieto and Icefire. The four-year framework contract was signed by chancellor Marika Priske, who had just moved from the economy ministry to the social ministry (read: from allocating to receiving), on July 31, 2014.

Work started and continued without much ado for about a year. The ball had been sent rolling and, as we now know, was headed south.

The political and financial architects of the procurement, then social minister Taavi Rõivas and the state’s IT chief Taavi Kotka, are the ones who are most critical of the process and the participants within today. Kotka claims he realized only a few months in that the project would not produce results.

Looking at correspondence from the period, it quickly becomes clear that the economy ministry (minister Kristen Michal, deputy chancellor in charge of IT Kotka) decided to give the project another €3.5 million and approve its future activity plan in 2015. Risks in terms of whether the project could be completed in time were acknowledged.

Postimees also has at its disposal minutes of a meeting of the SKAIS2 supervisory council from six months later on January 7, 2016 by which time the situation had become very sour. Participants included Taavi Kotka, Marika Priske, and the social ministry’s IT deputy chancellor Ain Aaviksoo. The decision: to move on with the project despite little existing code and considerable backwardness, sign new contracts with Tieto for the use of European structure funds, and apply for more financing.

“Myself and Rannar Vassiljev boarded that train when it had not only left the station but was supposed to be nearing its destination,” Margus Tsahkna (IRL), who became social minister in April of 2015, told Postimees at the time.

“I suppose the Reform Party is worried the scandal over the IT solutions of the SKAIS2 system could negatively impact its reputation as Taavi Rõivas was social minister (from December 2012 to March 2014 - ed.) at the time the procurement was prepared, the winner’s bid approved, the roadmap and development process laid down, and all relevant contracts signed,” Tsahkna said.

Coming back to the fate of the project, things really took a turn for the disastrous in December of 2015. So disastrous in fact that one of the developers - Icefire - decided to wash its hands of the whole thing.

Tieto found itself on its own. Work slowed even more. The ministry and the developer agreed on a new timeframe in July of last year that postponed some plans until 2018. A new timetable was agreed six months later and this time included a €180,000 claim against Tieto.

All of it happened despite the fact changes to how the process was managed were made following recommendations by the MKM that prescribed a switch from integral solutions to iterative development. Last summer the head of the social insurance board was replaced with Egon Veermäe who had managed the creation of the e-tax board. Tieto’s parent company in Finland was contacted. The social ministry launched its health care and welfare information system’s center (TEHIK) this January.

All of it was for nothing. Six months later, still with little to show, the ministry realized it was time to pull the plug.

“Because Tieto has failed to deliver work agreed on in the compromise contract by the prescribed term, we will be implementing a contractual penalty of €936,212.94,” the ministry announced when progress had ground to a halt. The sum was reduced by some outstanding invoices, with €855,452.94 remaining as the final penalty.

Toward spending another €10 million

That’s it. All that is left is a dispute over the penalty sum and the conditions of the contract’s termination.

Of the 42 contracts signed, only ten have been executed. A colossal €4.88 million has been spent. We can add to that €1.2 million paid to other developers for work on the existing SKAIS1 system to make sure slow progress would not affect payment of social benefits. The entire process has been managed by the social ministry’s deputy chancellor for innovation Ain Aaviksoo.

The main question, however, is what has the state taken away from four years of incompetence. Will tenders become more precise, project management come to sport higher quality, supervision tighter, procurements smaller, and perhaps e-services will finally be merged for the purpose of optimization?

The answer to these questions was provided during a social ministry press conference last week. At first things hardly seemed promising and suggested the same rake would be stepped on with even more enthusiasm: the plan is to once again sign a framework contract for the final development of SKAIS2 over four years for not 4-5 but no fewer than €10 million - to finish a project that was supposed to cost €5 million in the first place. Now it would be €15 million from the same client, and why not to the same developer should it emerge victorious from the tender process.

However, head of the TEHIK center Katrin Reinhold also listed some innovations. Firstly, the new procurement would be divided into sections, with every stage of development working on a single service - almost what has been attempted in cooperation with Tieto for the past year, which is to say hardly a radically new approach. For this purpose, the architecture of the IT system will be split up into pieces: there will be general components, an integration layer, business functionality, accounting module, and user interfaces - this constitutes a more thorough change.

TEHIK hopes to have at least two developers working on every element, while bidders have to submit a test assignment to prove their expertise.