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Invest to save, or save to invest?

by Staff Writers •
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This week, the QLD Government became the latest to announce a new state ICT strategic plan, Toward Q2 through ICT. The plan is comprehensive, well-structured and has a range of prioritised actions together with timetables and responsibilities to communicate what will be happening when, how and by whom to QLD stakeholders and other interested readers. It has three Ministerial sponsors, including Premier Anna Bligh, and is focused towards a ‘one government’ approach to service delivery. Some investment will be required to support this more integrated service delivery model.

A review process will be developed and implemented with QLD Government agencies to deliver a 15% reduction in “the per unit cost of BAU expenditure”, to be achieved by 2013. Meanwhile, NSW announced a Treasury Taskforce to undertake a forensic examination of NSW government agency spending, to identify savings and improve service delivery. The Government aims to deliver efficiency dividends of 1% over the next two years and 1.5% thereafter.

These follow Sir Peter Gershon’s Report on the Australian Government’s Use of ICT, which was handed to the Government just over a year ago. The Gershon Report, as it is known, has already resulted in savings of $569 million over the next four years, on its way to the Government’s target of more than $1 billion.

In contrast to these, the Department of Defence has been funded by the Federal Government to invest over $700 million in ICT over the next 10 years, with the aim to yield almost $2 billion in ICT savings under the Strategic Reform Program.

In addition, many of the ICT investments made under this program are expected to contribute significantly towards savings of more than the $20 billion Defence needs to make over the period to fund capability projects set out in the Defence White Paper and Defence Capability Plan.

Two contrasting strategies are at play:

  • The first, initiated by the Gershon Review and followed by at least two states so far, is based on a “save to invest” model, whereby savings achieved in ‘business-as-usual” expenditure will be partly reinvested;
  • The second, illustrated by Defence, is an “invest to save” model – funds are provided up-front for “efficiency projects” to generate larger, more significant savings downstream.

The jury is still out as to which is the right approach. But underlying both is the dilemma faced by the public sector when trying to deal with its investment requirements. The absence of commercial pressures means that traditional investment models based on ROI, payback – even productivity and efficiency gains – are difficult to apply. Moreover, even when these “returns” can be identified, the public sector tends to be slower in reaping them, especially where they may involve redundancies.

Sir Peter Gershon expressed serious concern about the lack of focus in the public sector on 'the business case', having found that of 193 completed ICT projects he reviewed, only 10 (or 5%) “reported actual measurement of benefits and compared anticipated benefits with the actual benefits realised” (Gershon Report, p18). He recommended much stronger program and project governance including planning for benefits realisation.

One year on, it would be interesting to hear a progress report on this recommendation. The silence in respect of this aspect, from QLD with its new strategy, in NSW, where the focus seems to be on costs and Defence as it invests to save, is a serious concern.

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  • QLD
  • Policy
  • Defence
  • Gershon
  • ICT Strategic Plan
  • Queensland Governmnt
  • Toward Q2 Through ICT