£100m Oracle bill contributed to Birmingham City Council bankruptcy

BCC is in 'financial chaos,' says councillor

An Oracle IT project originally set to cost £20 million played a part in Birmingham City Council's bankruptcy, announced last week.

Birmingham City Council (BCC), the largest local authority in Europe, declared a Section 114 Notice last week after the cost of an Oracle IT project ballooned from a planned £20 million to £100 million.

A Section 114 Notice means the Labour-run Council's expenditure is higher than its revenue, including borrowing. As soon as the CFO declares one a local authority is banned from any new spending, except funding statutory services.

The Council's biggest bill is the settlement of equal pay claims, which could cost up to £760 million - following £1.1 billion already paid after a Supreme Court ruling over pay in 2012.

However, in a statement council leader John Cotton and deputy leader Sharon Thompson said the implementation of an Oracle IT system was also a factor.

'Not suitable for local authorities'

BCC began its Oracle migration for core HR and finance functions in 2018, moving away from a heavily customised version of SAP.

The Council reviewed the project in 2019, 2020 and 2021, by which time the total cost for implementation had nearly doubled to £38.7 million.

At the time, a spokesperson said the project was "crucial to an organisation of Birmingham City Council's size."

In May this year, Cotton told the Birmingham Mail that the way the system had been implemented, rather than the system itself, was to blame for the rising costs.

He said: "The problems have not had a direct effect on frontline services or on whether the council pays its bills and pays its way.

"But we do know that there is an issue with how the system is then tracking our financial transactions and HR transactions issues as well. That's got to be fixed."

Rather than involving an IT specialist, former deputy leader (and now cabinet member for finance) Brigid Jones led the business case and implementation for the Oracle system.

Earlier this year a source told The Register that Oracle Fusion, the cloud-based ERP system the council is moving to, "is not a product that is suitable for local authorities, because it's very much geared towards a manufacturing/trading organisation."

Conservative councillor Alex Yip described the situation as "financial chaos," and said BCC was "unable to be trusted with the city's finances."

Oracle refused to comment on the story.

Computing is running the IT Heroes Roadshow at The Belfry, near Birmingham, tomorrow morning. It's a must-attend event for local IT leaders - and, perhaps, some local councillors.

Computing says:

The choice of Oracle Fusion does, as the source implies, appear to have been driven by someone who didn't understand what they were choosing - which is not necessarily to criticise Oracle, but its sales partners pushing something wrong for that particular use case.

On the other hand, it could also have been a tender issue. Local authorities have to follow strict procurement rules. Considering the cost of an IT system for an authority the size of BCC, it's reasonable to assume that only the large suppliers would have been able to bid.