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Finance flexible on shared services reform

by Chris Huckstepp •
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Over 200 industry representatives attended the Department of Finance’s briefing on the Commonwealth’s Shared and Common Services Programme – possibly the most substantial overhaul to government ICT services since the 1997-98 Budget’s whole-of-government outsourcing initiative.

Despite already conducting some initial work on the programme – including consultation with other jurisdictions – Finance was clear that nothing has been finalised as of yet, including the required number, size, and coverage of service providers.

Taking place on 17 December 2015, the briefing’s purpose was to assist industry to compose responses to the Shared and Common Services Discussion Paper, and to provide industry attendees with the information that they need to convince their boards or senior planners within their organisations to take advantage of the forthcoming contracting opportunities. It is expected that any procurement from the programme will be carried out through an open tender.

The questions asked by Finance in the Discussion Paper are intended to help it develop the details of the programme, including determining the optimal number and coverage of back office providers.

Stein Helgeby, Deputy Secretary, Governance and APS Transformation, told the briefing that Finance will collaborate with both the private and public sectors to avoid the mistakes made by other jurisdictions in the services reform process. It has also investigated cases of failure as well as success around Australia and the globe.

So far, lessons identified by Finance include:

  • Work collaboratively with agencies – act as a collective rather than dictate to agencies from the centre;
  • be reasonable with the expectation of savings, particularly in the short-term; and
  • when collaborating with the private sector, focus on the outcome (the ‘what’) rather than the input (the ‘how’) – i.e. do not be too descriptive in the requirements.  

Following a November 2014 Secretaries Board agreement, 96 non-financial government agencies were asked whether they would rather be providers of back office services or consumers. All but eight agencies expressed their preference to be consumers of services, suggesting that many back office procedures did not align with core agency business. The eight agencies who were interested in providing services are: The Australian Taxation Office; the Treasury; the Shared Services Centre; the Department of Industry, Science and Innovation; the Department of Human Services; the Department of Immigration and Border Protection (DIBP); and the Department of Defence.

Finance told attendees of the briefing that Defence and DIBP were ‘deferred’ from the programme, as both are already undertaking projects to derive efficiencies from back office consolidation which align with programme goals. Defence will soon be seeking First Pass Approval for Defence INSIGHT, a program to consolidate and integrate processes through an enhanced ERP offering. DIBP, which recently merged with the Australian Customs and Border Protection Service, is in the process of integrating the business and renegotiating ICT services contracts

Finance made it clear that the programme’s timeline and order of implementation are not set in stone, but MYEFO suggests that savings will be realised from 2016-17. The Discussion Paper suggests that tranche one of the programme will focus on “core transactional services” that are low risk, low to moderate in complexity, and high volume. This would include accounts payable/receivable, credit card management, ledger management, pay and conditions, and payroll administration. ICT services are likely to be in tranche two, along with other value-adding transactional services such as asset management, learning and development, and recruitment.

Finance is also interested in how it could adjust the eventual contracting terms to make the programme more attractive to industry without a loss of value to the taxpayer. This includes measures to drive down bidding costs and changes to the tenure of contracts to bring greater return on investment. 

The practice of offshoring is also open for discussion, with the department asking respondents to outline both the benefits of offshoring and how risks would be mitigated. Representatives acknowledged the NSW model whereby Service First’s ICT service provision responsibilities were outsourced to Unisys and business processes, like HR functions, contracted to Infosys – similarly, suppliers to the programme might conduct their operations from both on-shore and off-shore sites.

The Shared and Common Services Programme is part of the Government’s Smaller Government Reform agenda, which begun in 2013 and includes a mandate to reduce the size of government through the abolition or merger of government bodies and functions. It also dovetails with the Government’s pre-election Policy for e-Government and the Digital Economy, which included a concept of ‘light user’ agencies, which would either have services provided by the 12 “large-scale and/or very intense users of ICT” or through individually outsourced cloud solutions. 

$3.5 to $4 billion is currently spent by ninety-six agencies on enterprise resource planning (excluding the ICT costs), and roughly 85 agencies out of 96 surveyed provide services to themselves or others, according to Finance representatives at the briefing.

While the savings expected from consolidation are important – MYEFO estimates that the programme will save government $40.9 million over three years from 2016-17 – project consultant Steve Beet suggested that its greatest value will be in helping improve service delivery through faster aggregation of whole-of-government information. Other benefits include improved decision-making and ability to cope with machinery-of-government changes, better use of APS purchasing power, the smoother movement of personnel between agencies and business units due to standardisation, and improvements to benchmarking processes.

A 2006 report by the Economist Intelligence Unit found that more than 66 per cent of government agencies across major western countries either used shared service models or were in the process of implementing one.

Responses to the Discussion Paper are due to be submitted by 10 February 2016. The implementation of the programme will commence on 1 July 2016.

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