Sunwater’s $38m budget blowout to new IT system servicing 5000 people

Queensland's state-owned bulk water provider Sunwater has been slammed by farmers after the costs for its new billing structure ballooned to $38m, with a completion date nowhere in sight.

Burdekin River cane grower and chair of the Burdekin River Irrigation Area Mario Barbagallo said he feared Sunwater would recoup its costs by increase water charges to farmers. Picture: Contributed

Sunwater, one of Queensland’s state-owned bulk water providers, is facing backlash over a $38 million cost blowout on an IT billing system designed to service a mere 5000 customers.

Originally projected to cost between $500,000 and $1m, the costs for the new billing structure ballooned to $38m, with a completion date nowhere in sight.

The shocking findings were outlined in a damning Queensland Competition Authority draft report, which is expected to be finalised and tabled in January, when it sets the bulk water price for the next five years.

If implemented, the costly IT system, known as CASPr, would translate to more than $7000 per customer, sparking significant backlash from stakeholders, including farmers and industry groups, over the anticipated impact on water prices.

Burdekin River cane grower and chair of the Burdekin River Irrigation Area Mario Barbagallo said the proposal to spend more than $38m for a billing system was outrageous.

“It is financially impractical and ultimately burdensome for farmers and irrigators, who fear the high costs associated with the new billing infrastructure will be passed on through increased water charges,” he said.

“Sunwater said it can’t install the system for $18.5m as suggested by the QCA – but that’s ridiculous and would never happen in the real world.

“This government body is building a Rolls Royce system when all we need is a Commodore.”

Cotton Australia general manager Michael Murray said cotton growers were also concerned they would be left to pick up the tab of the budget blowout.

Cotton Australia general manager Michael Murray said cotton growers were concerned about ‘inefficient’ use of resources. Picture: Contributed

He said in comparison, four bulk water schemes operated by local farmers and independent directors had not increased their water price over the past five years.

“Cotton Australia finds it outrageous that a $38m budget is even being proposed for a billing system with such a narrow customer base of 5196,” he said.

“At over $7000 per customer, this cost is staggering for a billing system that would only generate around 20,000 invoices per year, or about four invoices per customer a quarter.

“The total annualised cost of what is being proposed would be enough to employ an additional 20 staff, who would only have to write out five invoices a day – it’s ludicrous.”

The QCA report said the project, which has been put on indefinite hold, has not yet delivered on any of its goals and cast serious doubt on management practices and expenditure oversights.

Called “Rural irrigation price review 2025 - 2029: Sunwater”, the report highlighted the troubling trajectory of the projected expenses which it estimated to cost $18.5 million, which is $20.1 million less than the Sunwater prediction.

The significant cost increases, according to the QCA, were partially due to “a lack of relevant expertise” within Sunwater’s management, which caused underestimated initial projections.

Sunwater Chief Information Officer Steve Somerville. Picture: LinkedIn

The QCA also noted a lack of accountability mechanisms, making it unclear if the predicted blowout resulted from factors such as poor planning, excessive contractor costs, or other management inefficiencies.

“We do not consider that the cost of the project is efficient,” the QCA report said.

“Specifically, we note project management consultancy AtkinsRéalis’s assessment that there were significant weaknesses in how this project was managed from an options assessment, budgetary, procurement and governance perspective.

“We also note that the build cost for the project has changed significantly since the need was first identified, from an initial forecast of between $0.5 million and $1 million, to the present estimate of $38.6 million, with little indication of a budget limit or value for money assessment informing the evaluation process during this time.”

The multimillion-dollar costs will be one of many “surprises” the new state government will be forced to include in its first budget due in May.

A spokesman for Premier David Crisafulli said an incoming LNP Minister would seek assurances from Sunwater that taxpayers would receive the best value for money, now and in the long-term.

“The LNP government is concerned about how costs, including water, skyrocketed under the former Labor government, leaving many Queensland families, farmers and businesses unable to make ends meet,” the spokesman said.

“To drive down costs for Queenslanders and lock-in water security, the LNP Government will deliver three new weirs and review existing water plans across the state.”

Sources within the organisation said the project’s indefinite pause may be an attempt to sidestep mandatory reporting to the Senate, which requires transparency on government-funded projects exceeding $40 million.

Sunwater’s senior management team is headed by Chief Information Officer Steve Somerville.

In a statement, Sunwater said calling the CASPr as a “billing system” significantly understated its use, function and vital nature of the system to operations as a modern water organisation.

“The systems Sunwater has in place are at the end of life, and must be replaced,” Sunwater said.

“This was recognised by the QCA, who stated that CASPr is a necessary and prudent investment.

“Sunwater’s detailed business case, that justifies the full-cost of the project ($38.6 million), was acknowledged by the QCA’s consultant, AtkinsRéalis as being valid.

“In fact, they said the detailed business case was ‘a reasonable document in terms of setting out future activities, risks and the breakdown of costs’.

“Our customers expect that we have robust ICT systems in place that ensure their bills are correct, their personal information is protected from cyber risks and that we can meet our compliance obligations.

“The Queensland Audit Office has also supported and endorsed the project.”

Sunwater’s Paradise Dam. Picture: Sunwater

Sources inside the organisation described the company’s management and IT department as “extremely incompetent and inefficient”, with claims that the project was mismanaged for more than two years.

Sunwater released a 101-page statement addressing the QCA findings acknowledging that some works and costs between 2020 and 2022 were not “demonstrably good practice” and amounted to $3.6 million, costs which the company would bear.

However, the water distributor said the QCA had incorrectly accepted an out-of-date review of the project’s costs at $18.5 million.

“This capital cost (of $18.5 million) represents a scope of work that will not deliver the necessary, tangible benefits to Sunwater’s customers,” the report said.

“Sunwater cannot support this decision and it seeks a QCA final position that is aligned with the value contained in the detailed business case.

“Sunwater aims to be constructive by proposing a reasonable and justifiable solution and not seeking to recover costs incurred until the middle of 2022, covering the period when its management of the project is alleged to have been inefficient.

“This results in Sunwater bearing $3,621,668 of costs. Sunwater therefore seeks to recover $34,878,332 from customers, ensuring they receive the necessary and prudent billing solution.”

Originally published as Sunwater’s $38m budget blowout to new IT system servicing 5000 people