MBIE CEO defends keeping his job as failed project's costs rise above $50m

Ministry of Business, Innovation and Employment chief executive insists he can rebuild trust in him and his ministry amid revelations the costs of a botched IT project have surpassed $50 million.

Chief executive Nic Blakeley today fronted Parliament’s education and workforce select committee and revealed extra spending had been discovered related to the Biometric Capability Upgrade (BCU) project, which was scrapped late last year after years of delays amid persistent bugs.

Blakeley admitted the project had been “incorrectly capitalised” in June last year and the Ministry of Business, Innovation and Employment (MBIE) had also recommended to ministers to write off the cost of the associated In Person Enrolment (IPE) project, which was split from the BCU project, because it was “now considered unusable”, he said.

Blakeley then revealed how the latest assessment of the cost was $42m for the BCU project and $8.7m for the IPE project, totalling $50.7m.

However, he admitted he was still not confident that was the final total cost, raising concerns about the ministry’s financial controls, which were currently undergoing an independent audit.

Under questioning, MBIE chief financial officer Sharyn Mitchell acknowledged the incorrect capitalisation occurred as a result of officials not fielding enough external advice and relying on internal sources, noting the project was live and capitalising projects typically took place when they went live.

MBIE chief executive Nic Blakeley (centre) with officials Paul Stocks (left) and Andrew Milne (right) at a select committee. Photo / Mark Mitchell

Officials couldn’t provide a cost estimate to replace the failed BCU project. Immigration Deputy Secretary Andrew Milne expected it would reach the threshold at which it would need Cabinet approval, which had been a point of controversy in the project’s history in light of claims officials used “creative accounting” to keep the project under the $35m threshold.

Blakeley told MPs that MBIE had increased visibility of its integrity reporting channels since the project’s failure had been made public, acknowledging it had increased the number of investigations into reports to about 20-25 per month from 10-15 per month.

Blakeley had come under intense pressure in recent months with Labour calling for his resignation after it was found he deliberately misled a Parliament select committee in March. Polling obtained by the Herald found two-thirds of Kiwis thought Blakeley should have been sacked.

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Immigration Minister Erica Stanford has previously revealed cost blowouts from the failed project. Photo / Mark Mitchell

Speaking to reporters after the hearing, Blakeley was repeatedly pressed on whether he could remain in the job.

He said $50m “on these two biometric projects is unacceptable, that’s not what New Zealanders should expect and that’s why we’re putting in place a number of changes”.

“We’ve got a mountain to climb to rebuild trust, that’s my accountability now is to show that we can do that.”

He refused to answer several questions related to the project’s failings and claims officials acted to avoid scrutiny, referring to the Public Service Commission’s current inquiry into the matter.

Asked about who had been held accountable, Blakeley noted many of the senior officials who had been involved in the project no longer worked at the ministry.

This is the latest in a series of updates showing more money than was known had been wasted on the project, which was designed to upgrade New Zealand’s biometric identity management system.

In June, Immigration Minister Erica Stanford was first to reveal about $33m had been wasted on the defunct project, while also accusing ministry officials of misleading successive ministers and using “creative accounting”.

That cost estimate was revised in July when Stanford again revealed a further $6m had been discovered as being spent on the project.

In the week before that revelation, MBIE told Stanford that staffing costs for that year were zero and just $236 had been spent on contractors. After being challenged by Stanford’s office, the ministry later informed Stanford it had discovered the extra $6m.

At that point, Blakeley couldn’t guarantee about $40m was the final sunk cost and announced the financial audit.

However, today’s admission was yet another revision, taking the known cost to $50.7m.

The saga includes Blakeley offering his resignation, which was declined, after Parliament’s privileges committee found he had deliberately misled a select committee over the project. In March, Blakeley and former Immigration New Zealand head Alison McDonald did not reveal the project had been canned months earlier when asked about its progress.

Public Service Commissioner Sir Brian Roche refused to accept the resignation offer. Photo / Mark Mitchell

The pair apologised to the privileges committee at their hearing, arguing they hadn’t deliberately misled MPs, but the committee made up of cross-party MPs decided otherwise, while not calling for any further sanction.

Blakeley said he had offered his resignation to Public Service Commissioner Sir Brian Roche following the committee’s findings but Roche hadn’t accepted it, saying it wouldn’t be fair or proportionate.

“Mr Blakeley was only six weeks into the chief executive role when this occurred. That does not excuse what happened, but they are factors I considered in reaching my decision about his position,” Roche said.

In June, Roche said the commission’s review would take about three or four months, telling the Herald he expected it to conclude ahead of the November 7 election.

However, the Herald understands from those with knowledge of the review that it could continue after the election, given the extent to which new information is coming to light.

The Herald has approached the Public Service Commission for comment.

The review is separate to the review into the MBIE-run, $336m Our Future Services programme; a seven-year visa processing rebuild that began last year, had failed to meet its targets and had been due for completion between June and December last year.

Adam Pearse is the Deputy Political Editor and part of the NZ Herald’s Press Gallery team based at Parliament in Wellington. He has worked for NZME since 2018, reporting for the Northern Advocate in Whangārei and the Herald in Auckland.