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Ongoing challenge to AGIMO to find all Gershon’s estimated savings

by Staff Writers •
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AGIMO has an ongoing challenge in dealing with the Gershon Report recommendations in that while the estimated savings have been announced, they have not yet all been identified.  The inability to identify all estimated savings also explains why there has been some debate as to whether or not there are to be more cuts to business-as-usual (BAU) budgets this year.

The Gershon Report recommendations, accepted in full by the Government, apply BAU savings of 15% to large agencies (those spending more than $20m annually on ICT), and 7.5% to smaller agencies. 

These savings are baselined on their 2007-08 actual expenditure and are to be phased in over two years.  The expectation was that this would save the Government around $140m in the first year (2009-10) and $400m annually thereafter. 

Sir Peter Gershon further recommended that “50% of the savings generated… be transferred to a central fund for reinvestment in projects to improve efficiency and effectiveness of ICT BAU activities…”

The 2009-10 Budget Papers, together with an AGIMO presentation to the CeBIT Conference in May, reveals that the targeted BAU savings for 2009-10 of $140m were not achieved by the ICT Review teams.  Instead, $109.2m in savings from BAU reductions were identified this financial year.

The key word here is “identified”, which means actual programs of activities affected or cut to achieve the savings.

So far, the identified BAU savings are as follows:

 Table 1

2009-10

2010-11

2011-12

2012-13

Total

Identified Savings

as at Budget 2009-10

$109.2m

$139.2m

$152.5m

$168.5m

$569.3m

ICT activities and technologies affected include:

•          Renegotiation of contracts;

•          Rationalisation of applications maintenance expenditure;

•          Overall reduction in contractor numbers;

•          Consolidation of servers and server virtualisation;

•          Better ICT management;

•          Rationalisation of Desktops and Laptops;

•          Mainframe capacity review and tuning; and

•          Conversion of contractors to APS staff.

Together, AGIMO estimates these account for 75% of the reductions achieved thus far.  However, this falls somewhat short of the estimated total savings, flowing from the Gershon Report:

 Table 2

2009-10

2010-11

2011-12

2012-13

Total

Estimated Savings

pre Budget 2009-10

$140m#

$298.2m

$303.1m

$306.1m

$1,016.5m

# original estimate from Gershon Report This leaves quite a gap -- $447m over the next three years— in savings still to be identified.  This is described as “Phase 2” for the ICT Review Teams, to be completed late in 2009, which is no doubt challenging Government agencies:

 Table 3

2009-10

2010-11

2011-12

2012-13

Total

Savings to be Identified post Budget 2009-10

$-m*

$159.0m

$150.6m

$137.6m

$447.2m

 

 

 *2009-10 Budget is “locked in”

Put simply, the question is what are the other areas, after the eight above, are available to yield the additional savings?

CLARIFICATION:

The following table setting out the results of the ICT Reform Program BAU reduction as at 1 July 2009 was presented by AGIMO to the CeBIT Conference on 13 May:

$ million

2009-10

2010-11

2011-12

2012-13

Total

(1) Estimated total savings as at Budget 2009-10

109.2

298.2

303.1

306.1

1,016.5

(2) Estimated total Reinvestment Pool as at Budget 2009-10

-54.6

-149.1

-151.5

-153.1

-508.3

 

(3) Identified Savings as at Budget 2009-10

109.2

139.2

152.5

168.5

569.3

(4) Identified Reinvestment Pool as at Budget 2009-10

-54.6

-69.6

-76.2

-84.2

-284.6

 Intermedium acknowledges that while the BAU savings figure of $140m for 2009-10 was never mentioned in the Budget Papers, it was the first year BAU savings estimate clearly identified in the Gershon Report. Intermedium included this figure in Table 2 of the article.

In the AGIMO presentation to CeBIT, it was noted that:

“…As a consequence of work done by agencies and the ICT Review Team in Phase One, Finance was able to establish a better understanding of agencies’ ICT expenditure.  The amount of savings realised in Phase One for 2009-10 is $109.2 million…”; and

“The lesser savings amount is primarily a result of data quality issues and issues associated with the delineation between BAU and non-BAU expenditure as reported by agencies during Sir Peter Gershon’s Review.”

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