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Schott Report is a game changer for NSW Government ICT

by Paris Cowan •
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Releasing the final report of the NSW Commission of Audit in Sydney yesterday, Premier Barry O’Farrell joked that while it was important, the 425 page document was unlikely to push Olympic triumphs off the front pages of the major newspapers.

But for the ICT industry the reverberations of the report are set to transform the way that they sell to the State’s public sector.

The Commission of Audit, known within Government circles as Schott 2 following an interim release earlier this year, has let the cat out of the bag when it comes to the NSW Government’s plans for shared services reform and has given its new  shared services roadmap a tentative price tag of $850 million.

It has also put forward a new model for the consolidated procurement of ICT which would see existing State Contracts rolled into centralised panels for IT managed services and the number of State Contracts which are mandatory for agencies to use reduced dramatically.

The Government has given its support to nearly all of the ICT-related recommendations. Intermedium has the details below:

Goodbye Businesslink & ServiceFirst, hello NewCo:

The Schott Report has revealed that a proposal is under development which would see the Government’s two shared services entities, Businesslink and ServiceFirst, replaced by a new body called NewCo.

Initially Businesslink and ServiceFirst’s existing clients will be transitioned to the new provider, including Families and Community Services (FACS), the Department of Finance and Services (DFS), the Department of Premier and Cabinet (DPC) and Treasury. By 2015, it is proposed that the Trade Investment Regional Infrastructure Services cluster and the Office of Environment and Heritage will join them.

Crucially, NewCo’s remit will also be extended to place an emphasis on its role in procuring and managing outsourced corporate services for agencies, in keeping with a consistent endorsement of outsourcing across report.

Minister for Finance and Services Greg Pearce has been hinting for some time that significant changes to the shape of the Corporate and Shared Services Reform Program were on the cards, confirming to Intermedium earlier this year that the Government was still committed to the rationalisation but with some amendments to the plan.

The NewCo plan retains the policy of maintaining single in-house shared services units for each of the largest clusters: Health, Education and Communities, Attorney-General and Justice and Transport. One of the crucial lessons of the shared services failures in Queensland and Western Australia, it said, is that one-size-fits-all approaches are destined for failure.

The Commission of Audit has suggested that the implementation take place within the next 12 to 24 months, after criticising the “glacial rate” at which shared services reform has been rolled-out thus far.

It has also warned that the new model cannot be built on a shoestring budget.

“Significant expenditure is required in the short and medium terms with significant benefits in the longer term.

“The level of investment required needs to be determined but could be in the order of $850 million over the forward estimates,” it says.

However, the recommendation that the DFS come up with a cost estimate for the program, and that Treasury allow agencies to dip into a $110 million reinvestment pool to cover their up-front costs was one of the few not fully supported in the Government’s response.

Goodbye mandatory State Contracts, hello managed services panel:

The Commission of Audit has heralded a shift towards outsourcing and pay-as-you-go procurement when it comes to the public sector’s ICT needs, particularly hardware and software.

It has suggested that the NSW Government establish a whole-of-government managed service provider panel that would take the place of State Contract 2007 for desktop hardware and associated services. If the suggestion (which did not result in a formal recommendation) is adopted by the Government it would result in a centralised vehicle for the outsourcing of end-user infrastructure.

The panel would be based on leasing or a pay-as-you-go structure rather than the in-house buy and own ethos that is predominant at present.

“This is now a very dated approach to ICT procurement and one that is not efficient with the changes in technology and service availability that have occurred,” said the report.

It would bundle together all non-agency specific software and associated support services alongside any desktop purchases and would include only 3-5 vendors, as opposed to the 47 currently providing end-user infrastructure to the State Government. The report anticipates that it would net savings of up to $196 million per annum.

Agencies are also facing more freedom of choice when it comes to the use of whole-of-government contracts and panels.

The Commission of Audit says that the rate of procurement leakage from mandatory State Contracts is a poor reflection on their capacity to produce value for money.

“Leakage from whole-of-government contracts suggests that agencies consider they do better elsewhere.

“It is now recognised that whole-of-government contracts may be best value for homogenous commodity purchases. For other goods and services, value for money is often more effectively achieved through more localised agency and intra-agency based contracts,” it advised.

The Government has supported the recommendation that as State Contracts expire, only those where volume purchasing is proven to drive down prices should retain the mandatory requirement.

The Commission of Audit has also advised that mobile data carriage should become subject to aggregated purchasing across government, while mobile and fixed line voice rates attracted praise.

Related Articles:

Schott Report: NSW needs a new Budget Management System

New Transport CIO to drive major systems consolidation

Revised procurement model to replace NSW 2020 panel for IT Services

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