Birmingham City Council, the largest such entity in Europe, has been declared effectively bankrupt. The city’s financial woes stem from a disastrous project to replace its income management system using Oracle. The cost of this initiative has skyrocketed to $230 million, surpassing the original estimate of $24 million. The project, initially scheduled to be completed within three years for a fraction of the current cost, has faced multiple delays and budget overruns, leading to significant financial strain on the council.
During the initial planning phase, the council allocated 19.965 million euros for the replacement of SAP with Oracle Fusion, initially set to conclude by the end of the 2021 financial year. However, the project’s timeline was extended, with the go-live date pushed back to April 2022. The budget was later increased to 40 million euros, and after the council realized the need to reimplement all of Oracle, the budget for running the old system and introducing the new one ballooned to 131 million euros. Despite these adjustments, the project has yet to be fully implemented, with the go-live date now pushed back to November.
Testing of the new system revealed severe shortcomings, with only a 73.3% pass rate and 10 severe deficits, far below the required 95% pass rate and zero severe deficits. This has raised questions about the oversight and management of the project, with councilors expressing frustration that the news of the project’s failure had reached the public before they were informed. The situation has sparked public outrage, with many criticizing the council for poor project management and inefficient use of public funds. As the financial crisis deepens, the council faces growing pressure to address its financial mismanagement and find solutions to recover from the mounting costs.