Govt outsourcing slammed

The Federal Government's outsourcing scheme has been condemned after facing the scrutiny of the Australian National Audit Office (ANAO).

According to ANAO reports, the implementation of the Whole-Of-Government Information Technology Infrastructure Consolidation and Outsourcing Initiative (IT initiative) has suffered from poor planning and higher-than-expected costs, presenting a myriad of resource and budgetary problems.

The outsourcing initiative was announced in the 1997/98 budget and was designed to improve the structuring and sourcing of IT services across Government agencies, supposedly saving the Government significant IT costs. It aimed to streamline all IT services through a common procurement system, where an external service provider (ESP) would have an end-to-end responsibility over the servicing and maintenance of Government IT systems.

As of June this year, only six of the proposed 12 major tenders for groups of Government agencies had been completed. Eleven of these were expected to be complete. With the audit study commencing even earlier than June, the ANAO was only able to study the results of three groups: Cluster Three (which includes the Dept of Immigration and Multicultural Affairs and the Australian Electoral Commission), Group Five (which includes the departments of Industry Science and Resources, Communications, Transport and Regional Services, Prime Minister and Cabinet and the ACCC) and the Australian Taxation Office.

The slow implementation time has caused serious difficulties for the IT capabilities of Government agencies. In anticipation of the savings, the agencies would realise under the outsourcing initiative, the last three Federal budgets have included cuts in IT spending. Government agencies are receiving lower IT budgets but are not saving on costs as anticipated.

"The extended timeframe has resulted in a mismatch between the timing of competitive tendering processes under the IT initiative and the reduction of agency budgets in anticipation of savings being generated through outsourcing," the report stated.

Even for those who have begun to see the cost-savings, the report indicates that "the savings realisable by agencies for outsourcing as quantified in each tender evaluation were overstated".

Originally, the expected cost of implementing the initiatives was $13 million. Implementation costs until May of this year, when under half of the tenders had been satisfied, has blown out to at least $40.38 million, nearly three times the original estimated cost.

The audit was particularly harsh on Advantra, a wholly owned Telstra subsidiary which the report claims offered "no savings" to the agencies it services in Group 5. Advantra released a statement suggesting that it was not in a position to comment on an independent Government report, but would abide by any actions the Government takes as a result.

"IT outsourcing contracts of this size require a very rigorous and complex negotiation period," the statement said. "Advantra has been happy with the process put in place by the Government during the tender evaluation period and also during the delivery phase of this contract."

As a result of these difficulties, EDS has accrued financial penalties totalling $1.1 million for its handling of the ATO implementation, Advantra has been penalised $960,000 over its handling of the Group 5 contract, and the total financial penalties applied to the Cluster 3 implementation total $2.4 million.