1.45pm: THE State Government appears to have been too frightened of global tech giant IBM's legal firepower power to call in the lawyers as the health payroll contract began to implode in 2008. In an explosive statement tendered to the inquiry, it's been revealed senior public servants may have had an opportunity to head off the financial disaster in Christmas of 2008. Head of Vendor Management Malcolm Campbell said despite legal advice to issue a breach of contract notice on IBM, which was failing to meet deadlines, it was decided to hold fire. Program Delivery Director, James Brown, is alleged to have described the move to issue a breach on IBM as "volcanic." "I recall Mr Brown saying that the (breach of contract document) was volcanic and that his view was that the government did not wish to be engaged in a long legal battle with IBM," Mr Campbell said in a statement. The Queensland Health Payroll Inquiry has heard former Premier Ann Bligh will appear on the witness stand in the weeks ahead to be cross examined on one of the most financially disastrous private sector contracts in the state's history. The payroll system started life as the $6 million component of a large outsourcing contract won by IBM in 2007. After under paying and over paying thousands of Queensland Health employees the system imploded in 2010 and is now estimated to cost tax payer around $1.2 billion. Mr Campbell, who has spent the morning on the stand in the inquiry, was tasked with helping to bed down the new system after IBM won the contract, but has been openly critical of the government's approach. He said even as he watched IBM fail to meet agreed "Statement of Work" benchmarks, the government was still paying IBM. My view was this action from senior management of CorpTech (the government-run IT outfit) was weakening my ability to enforce the terms and conditions of the contract,' he wrote in a statement. Mr Campbell said he and other colleagues grew concerned IBM would not keep its end of the deal and urged for a contract breach notice to be drafted in late 2008. The move was designed to clearly state where IBM had breached its obligations, and shore up the state's legal position if the matter did end up in court. On Christmas Eve of 2008 the draft was presented to Mr Brown who described it as "volcanic." "I recall Mr Brown saying that the letter would not be issued to IBM," Mr Campbell wrote. Mr Campbell said he and a colleague suggested to Mr Brown the breach notice was a "normal and powerful contract management tool." Under the rules, it would force IBM to notify anyone else it was involved in contract negotiations with that a breach notice had been served. In January 2009 another briefing note was prepared with the intention of advising the Department of Public Works director general Mal Grierson that IBM should be issued with a breach notice. If the breach was not issued, it was argued, IBM could argue the delay in bedding down the payroll contract was acceptable to the customer. No breach was issued and by March 2009 Mr Brown was saying "too much water has gone under the bridge," and legal action should not go ahead. 10.50am: FORMER Premier Anna Bligh will be called to give evidence at the Queensland Health Payroll inquiry, which has been told of the "death spiral" of one of the state's biggest financial disasters.