Address by The Hon Lindsay Tanner MP
Minister for Finance and Deregulation
Address to Australian Information Industry Association
Melbourne
Thursday 30 October 2008
Thank you Russell. I’m delighted to be here to address the Australian Information Industry Association.
The AIIA plays an important role representing the interest of the Australian Information and Communication Technology sector and has been among the key private sector contributors to Sir Peter Gershon’s Review of the Australian Government’s use of ICT.
Today I would like to discuss the key findings of the Gershon Review, which the Government released two weeks ago, and explore what these findings might mean for AIIA members and the ICT industry at large.
When Sir Peter undertook to conduct the review in April I knew it would be in good hands.
With over 30 years experience as a leader within the UK ICT industry, and coupled with his role as a former Chief Executive of the UK Treasury’s Office of Government Commerce, Sir Peter provided the Australian Government with a unique perspective on avenues to maximise efficiency and effectiveness in government ICT.
The Gershon Review is arguably the most comprehensive assessment of Commonwealth ICT capability undertaken to date.
Sir Peter’s findings are based on the input received from across industry and the Australian Public Sector.
During the course of the review, he considered evidence from 112 submissions, and from the 63 meetings he held with heads of departments and agencies, senior ministers, and industry leaders.
As a peak organisation in the Australian ICT landscape Sir Peter received a submission from the AIIA and met with many AIIA members both individually and as a group as part of his bilateral consultations.
I would like to thank the AIIA for its input in to the review, particularly the assistance received in surveying small and medium enterprise on their experiences on procurement practices with government agencies.
As Sir Peter’s report and its recommendations are currently under consideration by Cabinet, today I will limit my remarks to discussing Sir Peter’s key findings, the reforms he proposes, and what these reforms may entail for ICT professionals in both the public and private sectors.
The Gershon Review should be understood as an important component of a much bigger reform agenda being pursued by the Rudd Government to improve service delivery.
I have a genuine desire to improve the efficiency, transparency and performance of government. Indeed, by bringing together deregulation, oversight of government ICT policy and the administrative and spending review functions of Finance into one portfolio, and giving responsibility for these areas to a cabinet level Minister, the Rudd Government has signalled a new emphasis on the importance of getting the business of government right.
In discharging these roles I am effectively acting as the Government’s version of a private sector Chief Financial Officer and Chief Operating Officer – within government, between governments and between the citizen and government.
Other reform processes in train include an overhaul of how government manages advertising, property and discretionary grants. However it is in ICT where there is arguably the most work to be done.
Sir Peter’s report paints a sober picture of the Commonwealth’s ICT capability.
There are serious deficiencies in the way government manages across the life-cycle of ICT projects.
Agencies do not subject their on going ‘business as usual’ spend to sufficient challenge and scrutiny.
Collectively, industry identified and proffered solutions to a range of issues. On many issues there was a high degree of consensus.
Sir Peter got the message loud and clear from business that inconsistent ICT policies, strategy and practice among agencies not only creates inefficiencies within government, but drives up tendering costs for business.
Excessive decentralisation of ICT systems, applications and infrastructure is inhibiting structural reforms such as coordinated procurement, utilisation of commercial off-the-shelf solutions and the roll out of shared services across agencies.
Government has not given issues like sustainability, data centre use, ICT skill shortages and management of the ICT market the attention they deserve.
I want now to touch briefly on those recommendations which will be of most interest to business. These include improving agency governance, driving down business as usual ICT costs, and improving management of ICT skills and engagement with the ICT industry.
Much of Sir Peter’s attention is focussed on the poor governance of ICT by agencies, both internally and at a pan-government level.
Sir Peter found that agencies had weak governance mechanisms in respect of their focus on ICT efficiency and an understanding of organisational capacity to commission, manage and realise benefits from ICT-enabled projects.
Opportunities to transform service delivery through ICT are being missed. More alarmingly, it appears that some parts of government simply do not have the capability to manage ICT projects critical to delivering core functions.
Sir Peter found that the current level of agency autonomy is counter productive and inefficient. This finding confirms my long held view that the previous government’s ideological fixation with totally decentralising the public service was bad policy that has served the Commonwealth poorly.
While no one is advocating a return to full centralisation in areas such as procurement, it is clear the current lack of coordination is wasteful.
Sir Peter’s recommendations seek to correct the imbalance between agency autonomy and adherence to whole-of-government practices.
Sir Peter calls for a rethink of ICT governance and for new, more effective governing bodies. This includes establishing a Ministerial Committee on ICT and replacing the Secretaries’ Committee on ICT with a Secretaries’ ICT Governance Board with a strong mandate from government.
The Board would focus on strategic business issues, not technology issues, to meet the Government’s strategic vision. It would set whole-of-government strategies to support the ICT policies determined by government.
Under the Review’s recommendations the Australian Government Information Management Office (AGIMO) would identify the need for common approaches in areas such as standards, platforms, applications infrastructure, business processes and aggregated ICT procurement, and would prepare relevant business cases for the Secretaries’ Board.
Sir Peter has rightly not used his report to promote the use of any one particular technology or platform for service delivery or public administration. These are questions for the Secretaries’ Board and Ministerial Committee to consider on advice from AGIMO.
Sir Peter also calls for improved agency organisational capability and ability to manage ICT-enabled projects. This includes strengthening the governance overseeing whole-of-government adoption or modification of commercial off the shelf software, allowing the government to make better informed decisions about custom applications development.
Under this model, opt-out of whole of government arrangements by agencies would need approval by the Ministerial Committee.
It’s clear we need to embrace areas of good practice and better coordinate their application across government.
Although focussed on use and management of ICT, another crucial objective of the Review was to recommend ways to drive down the cost of the Commonwealth’s multi billion annual ICT budget.
Sir Peter found that agencies currently do not subject their business as usual spend to sufficient challenge and scrutiny.
Sir Peter recommends greater scrutiny and more efficient and effective management of business-as-usual ICT costs by reducing the ICT business as usual budgets of agencies by an average of 15% or 7.5%, depending on their current ICT spend.
It is estimated that this refocussing of business as usual activities will save the government $140 million in the first year and around $400 million in the second and subsequent years.
It must be emphasised that the recommended reductions in business as usual expenditure are not blanket, arbitrary cuts.
The proposed 15% cut is an on-average target across the larger ICT-spending agencies.
The precise cut for each of these agencies will be determined after each agency has been reviewed by an expert ICT Review Team. The Teams will examine each of these 28 agencies situation and circumstances taking each agency’s specific circumstances into account.
Given the lack of scrutiny of ICT business as usual expenditure to date, and that each larger agency will have a cut based on its particular circumstances, Sir Peter emphasised that the savings should be possible without any impact on the delivery of services to the agency’s clients.
The proposed cuts must also be considered in light of Sir Peter’s recommendation to invest half of annual savings taken into a central fund to improve the efficiency of ICT business as usual activities.
Sir Peter has made a number of recommendations for more effective interaction with industry.
His recommendation for an increase in agencies’ use of selective sourcing, rather than using a single large integrator or supplier, will create more opportunities for SMEs.
SMEs will have access to more agencies rather than having to apply multiple times for similar agency panels.
It is important to note that this is not a recommendation for a single government panel for each product or service. It is a recommendation about reducing the proliferation of panels to a more manageable number for both agencies and industry.
The Review has also made recommendations aimed at creating a more level playing field for SMEs.
For example, the recommended client code of conduct should include adherence to government policies on intellectual property and liability. Sir Peter found that practices within agencies in regard to IP were a deterrent to ICT suppliers, and that government liability policy was not consistently implemented, resulting in unlimited liability, or caps on liability, that are set at impractical levels, particularly for SMEs.
The client code of conduct, as recommended, would also encourage consideration of selective sourcing options for the contracting of several smaller work packages instead of a single, large work package.
This would increase the range of potential suppliers and reduce dependence on very large prime suppliers and, in turn, increase the likelihood of obtaining best in class offerings.
It was also recognised that agencies have, in the main, not been engaging as well as they could with industry prior to the commencement of formal procurement processes.
Sir Peter has recommended that the code include better quality engagement, such as industry forums on forward intentions.
I encourage you to give serious consideration to Sir Peter’s recommendation regarding an industry code of conduct, and to work with government to develop the code.
The final set of recommendations I will touch on relate to ICT skills development and management.
Sir Peter found a disconnect between the stated importance of ICT and actions in relation to ICT skills. He found that while agencies claim ICT is extremely important to their business, they on the whole do not have effective strategies actions for recruiting and retaining ICT staff.
Sir Peter identified that an over-reliance on contractors that has led to increased costs for agencies, and is symptomatic of a lack of scrutiny of agency ICT budgets.
There is evidence that agencies are using contractors as quasi-permanent staff, rather than to fill short-term gaps or source skills in short supply.
Sir Peter has recommended that an ICT career structure be developed to make the APS a more attractive employer, and also that an APS ICT workforce plan be developed to better manage skills shortages.
Through managing whole of government ICT career paths, the intention is to give APS staff a greater diversity of career options, along with the job security the APS provides.
We appreciate that a career in the public service will not appeal to all those engaged in contract work. And the government will continue to rely on contractors to support some of its business activities.
I am aware that some companies in the ICT contracting industry may be alarmed at the prospect of a 50% reduction in government ICT contractor engagement.
And the reality is that if the Government adopts this recommendation this section of the industry may have to amend its business model to compete in a more competitive market place.
But the Government’s focus is on maximising efficiency and effectiveness of the application of ICT.
And with this objective in mind, we will not institute changes that diminish our ability to deliver services to citizens and effective public administration.
What is proposed is a greater emphasis on developing and maintaining valuable ICT professional expertise within the APS, and relying less on external expertise, obtained at a premium.
There are many other areas of Sir Peter’s report that I do not have time to touch on today, including his recommendations in relation to government data centres and ICT sustainability.
Taken together, the Review recommends, in Sir Peter’s words, a major program of both administrative reform and cultural change.
Indeed, Sir Peter is proposing the most significant change in the use and management of ICT in the Commonwealth Government that we have seen.
Without pre-empting Cabinet’s consideration, the report forms an excellent basis for implementing a series of changes for improving the effectiveness and efficiency of government ICT.
Finally, I want to say how encouraged I am to learn that, in response to the Review, the AIIA’s is establishing a Gershon Leadership Team, comprising members of the AIIA’s Board and senior member representatives.
I understand the Team will lead the AIIA’s engagement with the Government on matters related to the Gershon Review.
This response illustrates the importance and relevance which your association places on the Government’s ICT agenda, and bodes well for continuing the mature and productive relationship that exists between the AIIA and the Government.
Thank you.
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