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Outsourcing is costing a fortune for poor results

In the lead-up to the last election, Malcolm Turnbull spoke loftily about his government’s preparedness to forge ahead in this brave new world of digital transformation.

“We have established a Digital Transformation Office and made innovation in government services an important focus of our National Innovation and Science agenda. We have delivered a public data policy and released more than 8000 datasets in anonymised and machine readable form. In addition, we will use public dashboards to measure our performance, which will be benchmarked against best practice in the private sector.

“The coalition will accelerate the digitisation of government services and drive innovation in government by investing $50 million to modernise myGov and streamline myGov login process; delivering a digital transformation roadmap for government by November 2016; [and] establishing a taskforce in the Prime Minister’s Department to reform government ICT procurement policies.”

Unfortunately, as is so often the case with Turnbull, the words do not match the deeds. In fact, his Digital Transformation Office chief Paul Shetler just quit, delivering what turned out to be a prescient spray on his way out.

“When it comes to service delivery, the transaction volumes of government services are small compared to the wider world. Government might think it’s huge, but its daily transaction volume is equivalent to just a few minutes of Twitter – or even less on the NASDAQ.

And still, government spends more than $16 billion a year on IT.

Our procurement and funding processes encourage big IT programmes, with bigger contracts. They drive a culture of blame aversion which create the perverse outcomes and actually increase risk. The history of the past several years of government IT failure is testimony to that.

This is further complicated and exacerbated by the lack of technical and contract management expertise in government. Too frequently, we actually ask vendors to tell us what they think we should buy.

There’s also a fear of digital. Over the last 40 years, as we’ve outsourced technology, there’s been a progressive de-skilling of the public service. The reliance on consultants is remarkable and the amount spent on them is eye-watering. That’s just not necessary if we re-skill the public service, which was one of the Prime Minister’s goals on establishing the DTO.

Government’s biggest challenge in the digital age is to completely upskill the public service so that it is well equipped to deliver the change that’s needed.”

Mr Shetler wrote of the many public servants who were working hard to improve the services they provided but “institutional inertia” and resistance to change remained serious problems.

“All of their work is made more difficult by the astonishing complexity across government,” Mr Shetler wrote.

“I’ve sat in meetings where senior public servants search out the exceptions and the edge cases – at the expense of simplifying the common case, because they’re focused on the process rather than a better outcome.

“It’s naive to expect an organisation that is very comfortable with its way of working to decide to spontaneously transform itself.”

The ATO has spent AU$700 million on computer software and hardware since 2011/12, according to its annual report. Most of the AU$34 million in consultancies spent over the past financial year also related to IT.

But that didn’t stop their “upgraded” services from crashing for several days this week. As tax agents tore their hair out, the ATO assured us that they are “working with our partners at Hewlett Packard Enterprise to determine the underlying cause.”

In September 2014, the Canberra Times reported that the Australian Taxation Office was considering an offer from computing behemoth Accenture to move outsourced IT work to the Philippines.

Apparently, Accenture has been quietly using IT workers in India for several years to work on Australia’s National eHealth Initiative, not that they are privatising Medicare or anything.

Speaking of which, Austender shows that today is the last day for tenders to the Department of Health for “Commercial advisory and procurement support services relating to health services and aged care digital payment services.” When I went to read the full details, as you can on all the other tenders, I was denied access – it is apparently restricted information. Hmmmmm.

Getting back to the ATO – in January this year, CT reported again on Accenture offshoring government contracts.

“Earlier this financial year the ATO commenced a short-term arrangement with Accenture to use their Philippines Delivery Centre to increase our IT capability in application development for new policy implementation,” she said.

“This additional capability is being used at peak times to temporarily support the ATO’s workforce and existing onshore arrangement with Accenture. The arrangement is expected to continue to December 2016.”

Accenture and the ATO have history, with the company reaping fees of $677 million for its work on the office’s trouble-plagued “change program”, which blew out in cost from an initial “fixed price” of $230 million in 2004 to $756 million when it concluded in 2010.

As it turns out, Accenture and HPE have an “outsourcing alliance.”

Community and Public Sector Union national president Alistair Waters said “Offshoring ATO IT development appears completely at odds with what the Prime Minister has said about supporting and developing Australian innovation. If this government had not cut the jobs of around one in five tax workers, this so called ‘support’ in the form of sending tax work overseas may well not be necessary,”

The examples of IT failures in government departments and agencies are endless and paying billions to external partners like IBM and HPE does not seem to be helping. The lack of IT expertise in the public service has allowed consultants and service providers to hold us to ransom, charging huge fees, still running over budget, and no penalty when their systems crash.

The Newman government launched legal action against IBM in 2013, arguing the company had misrepresented its capability to deliver a $6 million contract for a new payroll system on time and on budget. The rollout was plagued by delays and budget blowouts. When it did go live, the system failed spectacularly, resulting in thousands of health workers being underpaid, overpaid, or not paid at all.

But IBM challenged the lawsuit and pointed to a 2010 agreement that the company said released it from the damages claim.

A trial was held in the Brisbane Supreme Court last year with Justice Glenn Martin ruling in favour of IBM. The cost to taxpayers has been estimated at $1.2 billion and the debacle has been described as possibly the worst public administration failure in Australia.

So when Scott Morrison and Christian Porter bemoan the money wasted on “welfare cheats”, understand that they oversee a department whose computing system has not been upgraded since 1983 and which takes three months and costs $20,000 just to change the header on a letter.

They also pay billions in government contracts to companies who pay little to no tax in Australia like IBM who paid $5.8 million tax on earnings of $4 billion, and HP who paid no tax, and Accenture who are domiciled in Ireland.

It seems the government is more than content to shell out a fortune to their private enterprise buddies when what they should be doing is offering cadetships to talented IT students and rebuilding the public service expertise they have so wantonly discarded.

35 comments

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  1. Jaquix

    Great probe Kaye Lee of a subject that’s mostly kept under the carpet. Of course what is needed cannot possibly be delivered (to use one of MT’s favourite words) by this government, because their ideological mindset prohibits investing in government (ie people-owned or invested in) services. Your research, and the quotation from Paul Shetler, point to the abject failure of the Coalition to keep pace with the rest of the world. They cant accept climate science, to start with. Keep at them Kaye, and I hope this reaches the Other Side so they can be working up some solutions before they get back into office.

  2. Kaye Lee

    Australian federal government departments are paying Microsoft $14.4 million to continue to support their use of outdated Windows operating systems for another year because the software giant no longer officially provides security updates or support for them.

    The Department of Finance recently signed off on two one-year contracts for ongoing “custom support” for Windows XP and Windows Server 2003 to service the departments of Defence, Human Services, Immigration and Border Protection, and the Australian Taxation Office.

    Microsoft discontinued support for Windows XP in April last year, and for Windows Server 2003 last month, meaning it will no longer provide users with security updates or support.

    Organisations can buy continued support although it comes at a cost – Microsoft is reportedly doubling the annual fee for Windows Server 2003 support each year.

    While staying in operating system limbo might have been cost-effective for the departments in the current financial year, ultimately it was not sustainable as support costs ballooned, Mr Sweeney said.

    “Upgrades cost millions – they don’t cost $14 million or $28 million,” he said.

    http://www.smh.com.au/it-pro/government-it/revealed-australian-government-pays-hefty-price-to-keep-outdated-windows-operating-systems-secure-20150804-girdcd.html

  3. Miriam English

    Many countries around the world are moving to Linux for their secure systems. Microsoft Windows has spyware built into it. There are 3 documented NSA backdoors into Microsoft Windows. Goodness knows how many others there are. And if ordinary people can find them then organised crime certainly can. Microsoft’s secretive, insecure systems should never be used for anything important. The government is building an enormous, broken honeypot which will be irrestistible to criminals… and that’s not even considering the crooked people who work for ASIO and CIA, and NSA, and the rest of the insane aphabet soup of spook agencies.

    Thanks for shedding more light on this government’s incompetence, Kaye.

  4. Kaye Lee

    I just love the government’s idea of achievement. Look at Malcolm’s election pitch. In two paragraphs…

    They have an office and a focus and an agenda, a policy and a dashboard, a transformation roadmap and a taskforce, and three innovations thrown in for good measure.

    I would suggest all they have achieved to date is a hell of a printing bill.

    (Don’t mention the census or the ATO crash or the ridiculous length of time to count Senate ballot papers)

  5. jim

    About 40 naval engineers, architects and other technicians are taking a stand against the degradation of technical capacity in the Defense Department, by refusing to work on the new $50 billion fleet of submarines for a week from midnight on Tuesday. They will also target the future frigate program, the offshore patrol boat program and the replacement of a vital naval refueling vessel. .“If the Prime Minister says innovation and national science and engineering capability are at the top of his priority list, he should properly recognise the engineering, science and technical expertise thats already present across Australian Government.”…..link….http://www.professionalsaustralia.org.au/australian-government/
    But Mals “tech savvy” because he can take a selfie no doubt. and more so that he ordered 1,400 km of corrosive copper wire instead of fiber for our “world famous”? NBN.

  6. townsvilleblog

    All talk no action this could be said of the Abbott/Turnbull govt, but those of that opinion would be ignoring the financial rape of ordinary Australian people we have lost family tax ‘B’ school kids bonus, and many more, working people on the most common wage of $43,000 p.a. have lost a great deal of support, now they are tackling the poorest of the poor, the pensioners from 1st of January, which is unAustralian and moves public money from the “people” to the untaxed foreign multinational multibillion dollar corporations. “People lose, the untaxed foreign corporations win. We must remove this terrible government they are driving this country into a recession.

  7. Klaus

    Yes Kaye,

    Add to that Telstra outsourcing to the Philippines, India (my son travels for Telstra to these destinations to teach the appropriate skills), and many Government departments with their utter/blind believe in American institutions. I have seen the blind naivety when making a sales pitch to prim and proper public service decision makers in all aspects of buying IT hardware, software or services. Put an American, depending on the audience preferably an American woman (sorry for the sexist remark, but it works), in front of these decision makers and the job is half won.

    How many CEOs are no longer Australians. Start believing in yourselves Australia.

    There is no trust among Australians in the skills of other Australians. It is a serious problem in Australia. I don’t know what kind of complex it is but buying overseas, preferable in the US, even when ultimately outsourced to India or the Philippines, is seen as a proper decision.

    The country is in a sad and vulnerable, collective state of distrusting its own capabilities. And the LNP is using this as a weapon against Australia.

  8. billshaw2013

    Have to agree with you Kaye and all of the above. Turnbull thinks he is tech savvy to the detriment of us all. He’s just a merchant banker who has picked up key tech words with no real meaning. Just have to look at the mess of the NBN. While I’m on my horse I’m waiting for some class actions against NBN for the MTM used as it has created unfair property values.

  9. Kaye Lee

    In December last year, Austender advertised an industry information session.

    “The Discussion Paper seeks the views of interested parties on the most effective and efficient way to consolidate shared and common service delivery in a manner that represents value for money to Government. Finance is seeking market intelligence, in particular, to understand whether opportunities may exist for partnering with the private sector to deliver shared services and the risks or issues associated with this.”

    https://www.tenders.gov.au/?event=public.atm.showClosed&ATMUUID=96ABD66A-D900-82B9-2193FAFC17DC179B

    It isn’t coal that will lift millions of Indians out of poverty – it’s call centres and offshoring.

    We are losing our scientists and IT experts as well.

    This is poor public policy and woefully short-sighted.

    Conservatives know the cost of everything and the value of nothing.

  10. Matters Not

    focused on the process rather than a better outcome.

    True enough. But maybe Mr Shetler didn’t appreciate that in the public service, ‘accountability’ requires a transparent, documented ‘audit trail’. While it’s very annoying and time consuming, it’s also necessary. Government decisions are subject to all types of legal avenues that are simply not applicable to the private sector. FOI is but one example. The Administrative Appeals Tribunal (AAT) is another.

    The Administrative Appeals Tribunal (AAT

  11. helvityni

    townsvilleblog, yes, we have to get rid of them. I despair when I see people writing about that maybe Ms Julie would make a good PM, no,no, nor would Morrison or Dutton. We already know that about Abbott and Turnbull.

    Bloody Baird now wants to sell some NSW Public Hospitals, mine included. We already have one Private Hospital here, cutting pensions and selling our much loved hospitals; who do Baird and Turnbull think they are, only willing to care about the wellbeing of the already rich…

  12. Matters Not

    Governments are also keen to ‘outsource’ because ‘responsibility’ is outsourced along with the decision making power. Take Education Departments and the current push to devolve decision making. Let each school become ‘autonomous’, give them a ‘one line Budget’ and more that half the Minister’s day to day responsibilities simply disappear.

    Parents who complain about the number of children in a class can be quickly referred back to the school Principal who made that decision. Who prioritised X over Y. Who decided that computers were more important than teacher-aides. Or vice versa. The list of ‘contentious’ decisions is almost endless, particularly in an environmental where budgetary constraints are the order of the day.

    Now, not the Government nor the Minister’s decision but through the principle of subsidiarity it’s the lower levels that must wear the opprobrium. QED.

    Now if we could break the unions, that would be so much better.

  13. Matters Not

    One of the emerging scandals is the proposed sale of the extremely profitable ASIC data base.

    ASIC bosses were up before the committee on Wednesday. They said their usurious charges for corporate data, $876 million last year, was not their fault. The government, parliament, sets the prices.

    How much does it cost to operate this database?

    “Our registry direct costs are in the order of about $20 million. On a fully loaded basis—which includes IT, property and other back office services provided by ASIC – we think it is in the order of about $60 million.”

    Fully-loaded indeed. Buried in the notes to ASIC’s own financial statements is the line “information costs”, which was $6.047 million last year. In stock market parlance that’s a “ten-banger”.

    Anybody care to own a business which makes $876 million on a cost base of $6 million? Thought so. So if it is due to rake in $900 million this year and only costs $6 million to operate, why is the government selling it?

    Both ASIC and Department of Finance chiefs, who were up before the committee the day before, trotted out the sly line that the database was old and in dire need of an upgrade.

    That upgrade would cost $100 million. Think about that, $100 million equates to just one-ninth of the income the thing will rip out of taxpayers this year alone. Yet, hand on heart, they claim they are selling it because they can’t afford the computer upgrade.

    Sheepish stewards of ASIC sale face a sceptical Senate

    I’ve been following this scandalous sale for some time and communicating with my local ALP member who’s ducking for cover. As are the ALP in general.

    This is the same government which is plotting to privatise the corporate database – sell it to a monopoly private operator – the very same database which already boasts the world’s most expensive and inaccessible “public” information.

    This is the same government, whose Department of Finance spurns Freedom of Information (FOI) requests; the latest being for a scoping study into the sale of this Australian Securities & Investments Commission (ASIC) database.

    One concerned citizen, James Horton, had sought more open and accessible information from government and submitted an FOI request two months ago. The Department of Finance soon informed him that the cost of “search & retrieval” of this scoping study would be $15.30. The document would take just over one hour to retrieve.

    The cost however of “decision-making” for this process – redolent perhaps of the efficiency of the old Soviet Five Year Plans – would amount to $2,561.00, which entailed 128 hours of decision-making by the department’s comrades at $20 per hour.

    It gets better. James Horton informed us this morning that – after his volley of correspondence with the Department – he had been informed by the department’s comrades that he could not have access to the “public” information he was seeking anyway.

    Oh and the ALP.

    Just out of interest it is worth detailing the Opposition’s policy on the sale of the ASIC database. What was Labor’s position on the sale? “Consulting and going through our internal processes”.

    Shakes head.

  14. John Lord

    Your last sentence says it all.

  15. wam

    It can all be traced back to the death of evaluation under the blanket of review.
    When, before fraser/howard. projects were evaluated there was accountability then the realisation that reviews were malleable and QED.
    I would even vote for the loonies if they would promise an evaluation of the basics card and consultancies in the public service.

  16. Jennifer Meyer-Smith

    The only way ordinary people like us can make these wankers in the LNP stop selling our Aussie assets off or the dickheads in Labor so-called Opposition letting them do it, is to take legal action in Misfeasance (and arguably Malfeasance too).

    It will take a communal, classy Class Action.

    Our Standing is that we are part of the Australian People whose assets are being sold off without our best interests being taken into proper account.

    I’m willing to be involved in such an action. Who else wants to?

  17. paulwalter

    The fanaticism that goes with ideological neo liberalism in play again. Rupert will be most pleased.

  18. Miriam English

    Jennifer, I’d be in. Anybody know lawyers who’d be willing to do it?

    I’d have thought they were derelict in their duty of care. They have a responsibility to care for Australian property. In selling it off at bargain basement prices and obstructing us in our attempts to protect Australian interests they are running dangerously close to treason.

    This extends to many things, including the irrational funding of the Adani mine and protection of fossil fuel interests at all costs. The outsourcing mentioned above by Kaye is another. Firing of Australian scientists is another. Sneaky attempts to so hobble Medicare that they can pretend that it’s reasonable to sell it off. The list goes on and on.

  19. paulwalter

    That’s a gem of a comment, Miriam English.

  20. Ian Parfrey

    I am very much in favour of a Class Action, but I would be aiming at the climate denialists such as our good, albeit weasel-looking friend Malcolm Roberts. Does anyone really believe that that goose could produce HIS ’empirical evidence’ in a court of learned folk and be judged factual, reasoned and true? From there is is but a small step to necking the likes of Truffles, Erica Betz, Corgi Barnyardi and the rest of the RWNJ’s that fester inside the LNP’s wizened,cadaverous form who blather on without any need for scientific fact-based research as proof of their concept.
    When faced with the possibility of losing their beloved coin, tories will say and do anything to keep their stash safe. Even admit that climate change IS real.

  21. Kaye Lee

    MN,

    Speaking of the Administrative Appeals Tribunal, George Brandis just appointed Andrew Nikolic for a 7 year term.

    The AAT reviews government decisions in a bunch of areas including taxation, migration, freedom of information and welfare payments.

    Nikolic has no legal experience. He was in the army and then in politics for a few years before his constituents threw him out. No matter…he now gets paid even more than when he was as a backbencher – seven years, no elections to bother with.

    George Brandis Just Appointed A Bunch Of Ex-Politicians To Cushy Government Roles

  22. Matters Not

    KL, the appointment of Andrew Nikolic for a 7 year term is a scandal of the highest order. At $230 000.00 a year for 7 years to undertake a task(s) for which he has no qualifications is beyond the obscene. BTW, I could link to a large number of other appointments by Brandis which are in similar vein. Political hacks, hangers on, factional allies and the like. The ‘political’ problem is that this obscenity is not confined to one side of politics.

    Thus in the morrow, the deserved, and perhaps, expected outrage will be somewhat muted.

    We deserve all we get – because we cop it. And most don’t understand the rort.

  23. Kaye Lee

    We really need an independent panel to make senior public service appointments. It is truly beyond obscene. Is this George’s last hurrah before he heads off to London?

  24. Matters Not

    KL, he is going somewhere, but I don’t think it will be London. Downer knows where all the skeletons are buried and I don’t think he wants to depart just yet.

    As for this ‘independent panel’. While I agrre with the sentiment(s), ‘independent panels’ have to be appointed by some ‘authority’. You can’t just pick them off the shelf. Thus almost by definition, ‘independent’ panels are a type of contradiction in terms. Not possible in any absolute sense.

    Ben through ‘merit selection’ on any number of occasions and made ‘merit selections’ as well. Great in ‘theory’ but they are a ‘mask’ and perhaps always will be. Politics are a part of life – but we could improve things if we kept politicians out

  25. Matters Not

    Re Merit Selection and Andrew Nikolic. Can’t imagine any self respecting panel ever making that recommendation. Perhaps Pauline to be the new Human Rights Commissioner? What’s wrong with replacing one female with another, after all?

    About as sensible. Not that I want to give them ideas.

  26. Michael Taylor

    In my years in social security legislation, social security litigation, and AAT/SSAT reviews and appeals, I was always impressed by how well the AAT and the SSAT panels were versed in the various legislations. Gosh, they even knew more than me, and I used to draft the bloody stuff! Nobody can convince me that Nikolic has the experience or credentials for the role.

  27. Miriam English

    Couldn’t members of an independent panel be appointed by judges? They are (in theory) somewhat insulated from government.

  28. Michael Taylor

    Whoever makes the appointments, Miriam, there needs to be a transparent selection process. This was ckearly ignored by Brandis.

  29. Matters Not

    Miriam English, one of the big ‘prizes’ in becoming the US President, is the power to nominate members of the Supreme Court. These days no one pretends that such nominations are apolitical. Roe versus Wade, for example, is up for grabs with the election of Trump and who he appoints to fill a current (and future) vacancy.

    The highest court in the US is essentially political. As elsewhere.

    Certainly after appointment, they can behave as they want. But probably don’t. If history is any guide,

  30. Kaye Lee

    Tim Wilson anyone?

  31. nurses1968

    Miriam English

    December 15, 2016 at 8:35 pm

    Jennifer, I’d be in. Anybody know lawyers who’d be willing to do it?

    Why not get Jennifer Meyer-Smith on the case?

    Jennifer Meyer-Smith Independent Australia profile

    “Qualified lawyer with a Master of Laws from Monash University with special interests in human rights, civil rights and law reform;”

  32. Jennifer Meyer-Smith

    Anybody interested in the class action can ask Michael for my email contact details. I trust Michael will vet their contact details to determine their bona fides.

    Yes nurses1968, I am a qualified lawyer. I want to work with practising and non-practising lawyers, as well as other interested and dedicated people who are sick of being taken for mugs by this arrogant, obscene LNP Government.

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