Why IT Outsourcing Sucks for Australia’s Government.

Back in 1996 one of the incoming Howard government’s core promises was to reduce their expenditure dramatically, specifically with regards to their IT. The resulting policy was dubbed the IT Initiative and promised to find some $1 billion dollars in savings in the following years primarily through outsourcing many functions to the private sector. It was thought that the private sector, which was well versed in projects of the government’s scale and beyond, would be able to perform the same function at a far reduced cost to that of permanent public servants. The next decade saw many companies rush in to acquire these lucrative IT outsourcing arrangements but the results, both in terms of services delivered and apparent savings, never matched that which was promised.

Contract Law Word CloudFor many the reasons behind the apparent failure were a mystery. Many of the organisations involved in providing IT services to the government weren’t fly by night operations, indeed many of them were large multi-national companies with proven track records, but they just didn’t achieve the same outcomes when it came to the government contracts. After nearly a decade of attempting to make outsourcing work many departments began insourcing their IT departments again and relied on a large contractor workforce to bring in the skills required to keep their projects functioning. Of course costs were still above what many had expected them to be, result in the Gershon Report that recommended heavy cuts to said contractor workforce.

This all stems from the one glaring failure that the government has still yet to realise: it can’t negotiate contracts.

I used to work for a large outsourcer in the Canberra region, swept up while I was still fresh out of university into a job that paid me a salary many took years to attain. The outsourcer had won this contract away from the incumbent to provide desktop and infrastructure services whilst the numerous other outsourcers involved in the contract retained ownership of their respective systems. After spending about 6 months as a system admin my boss approached me about moving into the project management space, something I had mentioned that I was keen on pursuing. It was in this position that I found out just how horrible the Australian government was at contract negotiation and how these service providers were the only winners in their arrangements.

My section was dedicated to “new business”, essentially work that we’d be responsible for implementing that wasn’t in scope as part of the broader outsourcing contract. Typically these would be small engagements, most not requiring tender level documentation, and in all honesty would have been considered by any reasonable individual to fall under the original contract.  Of course many of the users who I came back to with a bill detailing how much it would cost to do the work they needed often responded with much surprise and often would simply drop the request than try to seek approval for the cost.

The issue still exists today primarily because many of the positions that handle contract negotiations don’t require specific skills or training. This means whilst the regulations in place stop most government agencies from entering into catastrophically bad arrangements the more subtle ones often slip through the cracks and it’s only after everything is said and done that oversights are found. All of the large outsourcers in Canberra know this and it’s why there’s been no force working to correct the problem for the better part of 2 decades. It’s why Canberra exists as a strange microcosm of IT expertise, with salaries that you won’t see anywhere else in Australia.

The solution is to simply start hiring contract negotiators away from the private sector and get them working for the Australian government. Get contract law experts to review large IT outsourcing arrangements and start putting the screws to those outsourcers to deliver more for the same amount of money. It’s not an easy road to tread and it won’t likely win the government any friends but unless they start doing something outsourcing is always going to be seen as a boondoggle, only for those with too much cash and not enough sense.

 

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