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Outsourcing unlikely to be implemented in NSW this year

by Paris Cowan •
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With the salary costs of its public servants the single biggest cost to any government and with new Treasurer Mike Baird out to find $4 billion in savings to fund Liberal election promises, NSW public servants are waiting with baited breath to see whether the Coalition victory will result in the drastic staff cuts forecast by the outgoing Labor Party.

‘Frontline’ staff such as nurses, police and teachers are traditionally not as hard hit by cuts as are the ‘back office’ staff in corporate services positions (including ICT). 

So it will be a tense period until intended directions are known, which may not be until Baird’s September budget.

NSW Labor seized upon the issue of staff cuts under a Coalition Government in a last-ditch effort to convince the State’s voters to reconsider leaving the former government, with Kristina Keneally claiming that up to 5,730 IT jobs were likely to get the axe, according to The Australian.

They also released numbers claiming that 50,000 positions disappeared under the last Liberal Government in NSW.

In contrast to job cuts, NSW Labor sought to find savings throughout its 16 years in government through staff freezes and corporate service consolidations.

In June 2009, then Premier Nathan Rees declared a staffing freeze was applicable to all public sector agencies, halting the recruitment of all non-frontline staff, contractors, temporary labour hire and recruitment managers.

While jobs associated with capital works projects were excluded from the freeze, those associated with capital funded ICT projects were not.

The freeze remains in place for the present, with any applications for exemption being subject to the approval of the Directors-General of the 12 NSW super departments and Police and Emergency Services.

The former Labor Government also looked towards the corporate shared services model as a solution to their budgetary squeeze.  The release of the Blueprint for Corporate and Shared Services in July 2010, began the consolidation of these services into six service clusters.  The six clusters include one in-house provider for each of the five super departments with more than 20,000 full time employees, and one provider for the remainder.  

The pace at which these clusters, particularly the one servicing the new Transport NSW, began to establish themselves (with no forced redundancies) was unprecedented in NSW and was a clear indicator of how much the Labor Government needed savings to be delivered. 

While a dollar figure has never been attached to the Blueprint, it was projected that it could achieve savings of up to 20 percent on the functions within its scope.

While this type of ‘insourcing’ for ICT and other corporate services is one way to achieve crucial budget savings, it has been widely acknowledged that the ideological paradigm of the Liberal Party would tend the new NSW administration toward outsourcing options which extend a greater role to the private sector. Then Shadow Finance Minister Greg Pearce told The Australian that, “on a general plane, clearly we have got to do more outsourcing”.

However, full blown ‘approaches to the market’ for outsourcing services will require extensive procurement processes. In the case of the Federal Government, where outsourcing is a matured procurement model, this can take anything up to two years.

In addition, NSW has very little experience of major ICT outsourcing.  If the new administration needs quick savings, it may find it more expedient to pursue these inside the current shared services arrangements.  To do so, it will need to apply more pressure for these clusters to do ‘more with less’.

Hybrid models, where shared services units selectively outsource functions to the private sector, could also be within scope, and potentially not be as hard or high risk to deliver.


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  • NSW
  • IT Services
  • Policy
  • Barry O'Farrell
  • Election 2011
  • Greg Pearce
  • ICT Outsourcing
  • Mike Baird
  • Shared Services