Immigration New Zealand overestimated the benefits from its newest transformation project by $134 million because of "significantly flawed assumptions".
By Gill Bonnett of RNZ
The new head of INZ said it was virtually unheard of to get the productivity savings the project had forecast, and it had paused the programme.
The overestimate amounts to more than a quarter of the $453 million savings that Our Future Services (OFS) was forecast to save.
It means if the $336 million project goes ahead, it will now cost more than it saves — and its financial credentials had been a key drawcard when ministers chose it.
A report to Cabinet shows the project's productivity boosts and overhead savings from staffing cuts were both overstated.
New head of Immigration New Zealand Andy Milne was not pulling any punches when he spoke at the Association for Migration and Investment conference in Auckland.
"One of the questions I asked at our last OFS board was, how do we get those benefits so wrong? So even my new programme lead coming in has looked at it and said, look, if you were aiming for a 50% productivity uplift from a process improvement — that's pretty much unheard of.
"So there's some pretty hard questions that we have to answer around those benefits. And overhead benefits... I think it was $50,000 per FTE saving was the estimate.
"But you don't get those kind of overhead [cuts] as you reduce by fives and 10s. They're usually sort of big organisational costs that are shared across the whole of the organisation.
"So there's some lessons for us there in terms of how we've calculated those benefits."
The Cabinet paper shows moving visa types onto the new Adept system has taken longer than expected, meaning plans had to be rescheduled and old technology was still being used.
"The productivity gains that we expected and the overhead savings that we expected have not been realised or they've been smaller than we anticipated," Milne said.
"So now is a really good time to take stock of that programme. When I first read the business case, the thought that it was going to take us another seven or eight years to migrate all products onto Adept just seemed a staggeringly long time. And in the world of fast-moving technology, it's hard even for me to imagine where we'll be in eight years' time."
The demise of the Biometric Capability Update (BCU) also affected the OFS project, as it was due to deliver an identity capability that the newer project relied on.
At the time Cabinet first signed off OFS, it was told legacy platforms that were at the end-of-life stage carried significant risk and required high maintenance costs, estimated at $224m over the next 13 years.
The BCU rose in cost over time and took seven years before it was axed, with Parliament's privileges committee ruling MPs had been deliberately misled over its axing.
Immigration Minister Erica Stanford said she and other ministers were also kept in the dark about its progress but she did not believe the benefits of OFS were deliberately inflated.
"Of course it's disappointing that they haven't got some of their figures right. But as I say, the most important thing now is that we stop, pause and do what we have done and make sure we are getting that right and that we are getting more productivity and better efficiencies out of the visas that we have already moved on so we can see some of the benefits and take a breath and make sure we get the next part right.
"From what I understand, it's a genuine error. I'm not sure that it was done to look better, but look, these are questions that need to be put to MBIE and probably to the chief executive."
Officials had pointed to higher productivity seen when permanent resident (PR) visas were on the Adept system, automating some tasks and allowing each immigration officer to process 20 visas a day compared with five previously. But PR is simpler, has a lower decline rate, and is processed by a small team at one site, meaning its results should not have been extrapolated to future productivity gains.
The Cabinet paper shows Our Future Services went through an independent quality assurance review and a Treasury review in 2024 before it was given the go-ahead.
It said the $134 million in forecast benefits were now unlikely to happen "in the way, amount or timeframe assumed in the detailed business case".
Both OFS and BCU — which cost about $36 million — are now the subject of a Public Service Commission review.
MBIE has decided to pause the project and reconsider the strategic case for change - and key technology choices - before more expense is incurred.
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