The Coalition Government’s five-month Commission of Audit will have widespread impacts on the Federal Government ICT market in both the short and long term.
Treasurer Joe Hockey and Finance Minister Mathias Cormann announced yesterday that the President of the Business Council of Australia Tony Shepherd will head the Commission of Audit (the Commission), which will also include Amanda Vanstone, Peter Boxall, Tony Cole and Robert Fisher.
The Commission is due to release an interim report in January 2014, with the final report to be delivered by March 2014.
“It’s going to be very thorough and very comprehensive,” said Hockey. “Every area of government is going to be examined, there are no restrictions.
“[The Commission of Audit] involves a relationship between the Commonwealth and the States, and it has very broad terms of reference.”
Terms of Reference
The Terms of Reference (TORs) that centre on the efficiency and effectiveness of government expenditure indicate that literally nothing is off the table, with the Audit expected to assess everything from the privatisation of government assets to the consolidation of agencies and functions.
The Commission is specifically asked to report on options for greater efficiencies in the Australian Government, such as:
- Increasing contestability of services;
- Adoption of new technologies in service delivery and within government;
- Consolidating government support functions into a single agency;
- Consolidation of agencies and boards;
- Privatisation of Commonwealth assets;
- Rationalising the service delivery footprint to ensure better, more productive and efficient services for stakeholders; and
- Flattening organisational structures and streamlining lines of responsibility and accountability.
It is also asked to look for potential improvements in productivity, service quality, and value for money across the public sector, including better delivery of services to the regions, plus “anything that is reasonably necessary or desirable to improve the efficiency and effectiveness of government generally”.
Each one of the above TORs has potential ICT impacts. They could manifest themselves in recommendations around greater use and faster achievement of online channels for service delivery, increased use of teleconferencing, further Machinery of Government changes, greater co-operation with state administrations in service delivery and the possible expansion of the administrative functions of the Department of Finance.
Areas of ICT impact
The Coalition’s ICT Policy, released in September 2013 provides some of the strongest indicators as to what might emerge as recommendations from the Commission. The ICT related recommendations of the Commissions of Audit undertaken by incoming State Coalition governments in Victoria, NSW and Queensland also provide strong pointers as to what is likely to come out of this Commission.
The preference towards ICT infrastructure outsourcing that has emerged in both Queensland’s and NSW’s Commissions of Audit is implicit in the Federal Commission’s TORS.
“Coalition governments tend to favour outsourcing because of their fundamental politics and beliefs about private sector efficiency,” said Intermedium’s Managing Director Judy Hurditch.
The 2013 Queensland Commission of Audit recommended that the Government “source ICT services, especially commoditised services, from private providers in a contestable market”. The major push for ICT outsourcing included the privatisation or dissolution of the Queensland Government’s central infrastructure provider CITEC.
Although the NSW Commission of Audit supported the ongoing role of a central shared services provider, it also recommended the greater outsourcing of ICT needs by government agencies. However, some recommendations of the May 2012 Commission of Audit report may not be implemented, including the suggested replacement of current shared services providers BusinessLink and ServiceFirst with a new body NewCo, which was to have a “wider role in procuring and managing outsourced services for clusters”. The future direction for both Businesslink and ServiceFirst remains uncertain more than a year after the release of the Final Commission of Audit Report.
Similarly, the decommissioning of CITEC in Queensland is also progressing slowly, indicating that any major outsourcing reforms recommended by the Federal Commission of Audit are likely to take some time to implement.
It is highly likely that the Commission will make recommendations to rationalise the number of business systems or platforms that sit within individual agency silos but essentially perform the same function. This will occur under the current round of machinery of government changes, but the Commission may well recommend more extensive changes.
The Coalition’s ICT Policy indicates it will address the “continued duplication and fragmentation of vendors, strategies and priorities” in order to reduce ICT costs. The adoption of shared and cloud-based services is outlined as a key strategy.
This push for a managed services approach to ICT has emerged in both the Queensland and NSW Government’s Commissions of Audit.
The Queensland Commission made strong recommendations for the adoption of “an ‘ICT as a service’ strategy”, which was quickly accepted and implemented in the State Government’s recent cloud-first ICT Strategy.
The NSW Commission of Audit recommended the establishment of a new whole-of-government panel for managed services providers to facilitate “a shift away from the buy/own model to a lease, pay-as-you-go model”.
Previous ICT reforms
The Federal Commission of Audit’s recommendations will be released against a backdrop of significant previous Labor Government efforts to find ICT efficiencies and reduce the rate of growth in ICT spending.
The 2008 Gershon Review into the Australian Government’s Use of ICT led to the implementation of a number of measures to improve the efficiency and effectiveness of the Government’s use of ICT. Measures implemented included:
- Establishment of stronger ICT governance arrangements;
- Reduction of ICT business as usual (BAU) expenditure by agencies (with targets of 15% for agencies spending over $20 million per annum and by 7.5% for lower spending agencies);
- Reduction of ICT contractor numbers and increase in number of APS ICT staff (target 50% reduction in contractors) ; and
- Implementation of a whole-of-government data centre strategy.
The Gershon Review also led to the implementation of a number of centralised procurement measures, including the establishment of extensive whole-of-government contracts, panels and multi-use lists.
Other elements of the current ICT landscape stem from earlier reform efforts. The Howard Government’s 1996 National Commission of Audit was responsible for the establishment of major infrastructure outsourcing arrangements. In the years since the 1996 Commission, a number of changes and rationalisations have occurred to the nature of those original outsourcing arrangements, most generally to break out of the original cluster arrangements, or to reduce the scope of the outsourcing arrangement. However the original arrangements remain visible in current structures.
The Federal Government’s Internet Gateway Reduction Program which established seven clusters under lead agencies for the procurement of gateway services across agencies is a more recent example of outsourcing reform that aligns with the Commission’s TORS.
While the Federal Government has not pursued a strong centralised shared services agenda as has been seen in the States, some elements of shared services provision are apparent in the market. The largest manifestations of this include the consolidation of ICT services at the Department of Human Services’, which now encompasses the provision of ICT services to Medicare, Centrelink and the Department of Veterans’ Affairs. The previous Department of Education, Employment and Workplace Relations’ (now split into the Department of Education and the Department of Employment) provides ICT Services to the Australian Public Service Commission, the Australian Building and Construction Commission and the Fair Work Ombudsman.
ICT Market Impacts
Federal agencies have been operating in a straightened budget environment for some time now, with an efficiency dividend of 4 per cent in 2012-13, which has since fallen to 1.25 per cent for 2013-14. The rate of the efficiency dividend for 2014-15 will no doubt be set by the recommendations of the Commission, and given the Commission’s TORS, could well return to 4 per cent.
ICT, particularly ICT contractors, can be a prime target for agencies looking to quickly cut spending to meet efficiency targets. However ICT can also act an as enabler for more efficient government administration and service delivery.
“Ultimately there’s only so much that can be squeezed from a sponge, and the ICT sponge has been squeezed pretty hard since Gershon, as Intermedium’s analysis shows, so a blunt instrument approach to finding additional savings as a result of the Commission will cause further pain in a market that has pretty much been flatlining since January 2013,” said Hurditch.
“On the other hand, the TORS will definitely yield a range of new opportunities for innovative ICT suppliers,” she added.
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