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ICT Winners and Losers Inevitable in New Super Department

by Staff Writers •
Free resource

Established in October 2004, the Department of Human Services (DHS), brings together six social and health services agencies which collectively deliver payments and services worth more than $80 billion a year. These agencies are: Centrelink, Health Insurance Commission (including Medicare), the Child Support Agency, CRS Australia (Commonwealth Rehabilitation Service), Australian Hearing and Health Services Australia.

Supervised by Minister Joe Hockey, DHS is considered 'small and strategic', in that it employs just 60 people and works to an annual budget of some $12m. In comparison, the agencies under its control have a combined budget in the order of $600m per annum.

The role of DHS is to direct, co-ordinate and broker improvements to its six agencies. Given that information technology is a vital tool needed for improvements to services, how will the new 'super department' be managing its ICT infrastructure and business applications? And what likely ICT opportunities will emerge for vendors?

Autonomy with Central Control

Each of DHS' agencies has its own IT strategy and budget, and is expected to retain a degree of autonomy, including its name. Yet this comes at a price.

"With this concession will come a firm requirement to harvest the government's desired efficiencies," says Judy Hurditch, Executive Director of Intermedium, a research and consultancy firm providing services to companies selling to government.

"An obvious first step is to centralise those functions that can be performed efficiently in one business unit rather than allow all six agencies to continue to perform the functions individually."

Centrelink almost immediately pulled its IT and general procurement functions into the one unit to ensure that all current and planned procurement activity can be coordinated across all DHS agencies. "Minister Hockey is understood to have been personally scrutinising and approving each ICT contract, at least in the formative early months of DHS" Hurditch states.

However, this will by no means be enough of an efficiency. Patricia Scott, the inaugural DHS head, must find other ways of eliminating duplication of effort across the agencies. It is understood that she has drawn ICT executives from each of the agencies into a DHS nucleus to conduct ongoing planning.

While the Department asserts that it is not combining or consolidating the ICT services of its six agencies, three IT-related working groups have already been established to identify opportunities for service delivery improvements.

Already, Centrelink has been engaged by CRS to provide IT management services from early 2006, lowering the cost to government by some $3.9m over 5 years.

Similarly, Australian Hearing has just refreshed its supply of laptops that are used to conduct hearing screening tests. By using an existing CRS Australia contract savings were achieved in the order of $280,000. But, as these amounts will barely register in the vast Centrelink ICT budget, so much more will need to be forthcoming.

Advisers Everywhere

Acumen Alliance has been contracted to produce a baseline map of every program in each agency and how they are delivered. PricewaterhouseCoopers has been awarded a consultancy for development of a cross-agency service delivery strategy and associated principles. Both projects are expected to be completed in August 2005 as a building block for future tasks.

A panel of consultants has been appointed to provide expertise for short term IT projects worth approximately $1.5m. Contracts will be awarded off the panel for the next three years, with eleven panellists selected from a field of 60 tenders (the tender was released on 31 March and closed on 26 April).

Projects are expected to be of short duration, ranging from two to 10 weeks. The panellists are: Accenture, Booz Allen Hamilton, CSC Australia, Deloitte, Fujitsu Australia, Gartner Australia, Hewlett Packard Australia, IBM Australia, The IISM Group, PricewaterhouseCoopers and SMS Management & Technology.

Interesting Times Ahead for All

DHS' agencies have ICT requirements and solutions as divergent as their business functions. The DHS portfolio is lucrative for ICT companies: According to Intermedium's research of federal government contracts data. Centrelink alone will award computer contracts worth more than $200million during the next 12 months.

When DHS was created late last year, it was stated that the agencies were brought together because of their shared customer base and the government's desire to provide more effective and co-ordinated service delivery. But it may be difficult to bring some of the business applications together quickly, and in some cases impossible, because legislation will not allow it.

With the government eager for some quick wins, the logical place to look for efficiencies and savings in the short term will be the duplications that exist in the areas of IT management - infrastructure, networks, communications, database, storage and security.

This is expected to happen in the next 6 to 12 months. Once it does, there will be major winners and major losers, both within the DHS agencies and within the ICT vendor community.

In April, Joe Hockey told an audience at the National Press Club that the existing boards of the Health Insurance Commission and Centrelink would be dissolved, indicating that Australia's two biggest IT bureaucracies would be 'recreated' as statutory agencies reporting directly to him.

Hockey also explicitly warned government CIOs and IT managers that budget blowouts and blunders embarrassing his ministry would be ruthlessly punished.

Citing the recent Australian National Audit Office report into a combined Centrelink and Department of Family and Community Services' $64 million transactional software development write-off called "Edge", Hockey said "we will be focusing intently on how well each of the six agencies is managing their major IT projects. The Auditor General's report [into the failed Edge project] indicates an urgent need for increased and more careful management attention to major projects."

According to Judy Hurditch, further changes are certainly in the pipeline. "Given the size of the two lead agencies, it is inevitable that they will have the greatest say in future directions, but that won't stop the smaller agencies from lobbying hard to protect their interests," she says.

With selective sourcing a topical issue, the exploration of open source a strategic direction, Centrelink's commitment to the Model 204database the incumbency of many of the large players in the six agencies, and significant change at the top of the Centrelink ICT management structure, vendors will have many issues to contemplate as they seek to position themselves in this new world, Hurditch concludes.

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  • DHS
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  • Super Departments