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23.5% in 2010-11: Federal agencies fight an uphill battle against Gershon’s contractor reduction targets

by Paris Cowan •
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Staffing numbers published in the recently released State of the Service Report into the Australian Public Service (APS) suggest that Federal Government agencies are falling behind when it comes to the ICT contractor cuts recommended by the 2008 Gershon Review.

One of the key recommendations of Sir Peter Gershon’s Review of the Australian Government’s use of ICT (Gershon Review) is that the Government reduce the number of ICT contractors within the APS by 50 percent over two years (to June 2010), and to correspondingly increase its numbers of internal ICT staff over the same period. 

The Review stated that 3,135 ICT contractors were working across Federal Government and estimated that the transfer of positions from contractor to staff roles would deliver the government a savings dividend of $100 million.

In November 2008, the Government accepted all of the Review’s recommendations, but extended the timeframe for the reduction of ICT contractors within the APS from two financial years to three calendar years commencing from 1 January 2009.

A phased approach was adopted comprising:

  • 10% reduction in calendar year 2009;
  • 15% reduction in calendar 2010; and
  • 25% reduction in calendar 2011.   

This phased approach was to allow for the development of a strategic workforce plan and a whole-of-government ICT career pathway.

The tracking of progress against these targets is by no means a simple process.  The revised targets are measured in calendar years, while commentary against these targets from the State of the Service Report as well as Dr Ian Rienecke’s Review into the Gershon implementation are reported in financial years.

To counter this confusion, Intermedium has reapportioned these targets according to their financial year:

  • 5% in 2008-09;
  • 12.5% in 2009-10;
  • 20% in 2010-11; and
  • 12% in 2011-12.

According to the 2009-10 Report, at 30 June 2010, the number of ICT contractors working across the Financial Management and Accountability Act 1997 (FMA Act) agencies was 2,706.  This represents a reduction of 429 contractor positions, or 14% percent, against the Gershon Review figure of 3,135.

This is a shortfall of 3.5% against the total 17.5% that should have been achieved cumulatively to 30 June 2010.  This shortfall will have to be made up in 2010-11, in a year when further 20% is set to be achieved, resulting in a target 23.5% to be achieved.  

However, the number of ICT contracts posted in Austender in the 2010-11 year to date, indicates that reductions of this scale are not taking place. Overall, Intermedium’sanalysis suggests that the Labour Hire market is experiencing an increase in business.

And to make matters more difficult for agencies struggling with contractor numbers, all current trends indicate that the transfer of positions to APS staff roles is going to get progressively harder at the same time as the targets increase.

The Labour Hire industry maintains the view that contractors who accepted positions as permanent employees as a defensive mechanism to the Global Financial Crisis and concerns about the impacts of the Gershon Review, will choose to exit APS employment as they see the market improve.

The recently released Reinecke Review echoes this view by forecasting that the momentum behind the transfer of contractors to staff positions was likely to stall as a result of improved economic conditions.

Reinecke also attributes the insecure employment market of 2008 to the preparedness of contractors to transfer to more permanent staff positions, despite the economic disincentive to do so.

“Contractors facing an uncertain future in the context of Government responses to the crisis were clearly more receptive to the certainties of going on to the public sector payroll, albeit at a lower level of remuneration,” he writes in the Report.

At 30 June 2010, ‘Solutions Development and Programming’, a description which broadly aligns with Intermedium’s ‘System Integration Services’ category, employed the greatest number of ICT contractors, according to the State of the Service report.

The Report also estimates that Federal agencies will require another 3,168 ICT personnel by 2013 in order to maintain capability, according to numbers generated through agency forecasting.

These needs will be felt most acutely in the areas of:

  • Development and programming
  • Program project management
  • Testing
  • Business process analysis and design
  • Systems analysis and design

Finance has told Intermedium that it is currently analysing the ICT benchmarking information from agencies for the financial year ended 30 June 2010.   They state that their preliminary results, “show that most agencies are on track to achieve the contractor reduction targets for 2010”. 

Finance also explains any discrepancies between the contractor reduction numbers being suggested by the Report and its own benchmarking results as due to differences in methodology, with Finance utilising Full Time Equivalent (FTE) numbers and the Report utilising an agency survey that captures ICT contractor numbers as headcount at 30 June 2010.

Finance state that for their purposes, the FTE approach is “a more accurate reflection of the amount of work being undertaken by ICT contractors over the course of the year”.  They also see it as better aligning to the approach used in the analysis of ICT investment decisions.

However Finance have also stated that “notwithstanding the differing approaches, our expectation is that there will not be a significant difference between the final ICT contractor numbers from the ICT Benchmarking survey compared to the APSC State of the Service Report”.

Finance intends to release more detailed information once analysis of the 2010 ICT benchmarking information is complete.

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