On 11 April 2008, Minister for Finance and Deregulation, Lindsay Tanner announced that former chief executive of the UK’s Treasury of Government Commerce, Sir Peter Gershon has accepted an invitation from the federal government to lead an independent review of the Australian government's management of information and communication technology (ICT).
According to the federal government, the aim of the review is to identify ways in which the whole-of-government management of ICT can be strengthened with the view of maximising the benefits from ICT to drive greater efficiency and better services. The review will also examine the way in which agencies manage ICT investments including maintenance, intra-agency links, development and staffing.
But what will the review of the federal ICT market by Sir Peter Gershon mean and what impact will it have for future ICT contracts?
Kevin Noonan, head of consulting at Intermedium, a government market analysis firm that specialises in supplying market information, strategic and tactical advice to companies dealing with the public sector, believes the appointment of Sir Peter Gershon means there will be changes to the federal ICT market.
“While it would be inappropriate to anticipate specific recommendations, it is likely he will cover:
- the future roles of the Australian Government Information Management Office (AGIMO) and the Department of Finance and Deregulation in relation to the whole-of-government coordination, strategy, planning and performance review
- scope for development of shared services for back-office applications among agencies (as implemented in the states)
- whole-of-government procurement opportunities (mainly in the ‘commodity’ ICT products)
“Sir Peter Gershon has extensive experience in leading high-profile independent reviews,” he says. “He has been involved with three major reviews in the UK covering major IT project failures, government procurement and public sector efficiency. In each case, from his reports there have been significant changes in government bureaucracy affecting its organisation, structure and processes.”
Lindsay Tanner has been quick to point the finger at the previous (Howard) government’s uncoordinated spending which he says led to cost blowouts.
‘”The government has approximately $10 billion in ICT assets and spends around $6 billion per annum on ICT, which encompasses procurement, maintenance, development and staff costs,” he says.
But Noonan says while Tanner is critical of the inefficiencies arising under the former government’s highly decentralised model, he is apprehensive that Tanner may go for a conservative centralised approach that does nothing to lessen the inefficiencies.
“He [Tanner] will be aiming to strike a balance, which will be a key challenge for the review. Gershon has some experience in this, and we can expect he will explore options for the future role of AGIMO as the organisation at the heart of a ‘centre-led’ approach to ICT project governance and coordination, as well as a greater shift towards more whole-of-government procurement,” he says.
In 2003, the UK government invited Gershon to lead a major review of efficiency across the UK public sector, the results of which lead to a savings of 20 billion pounds and also to a major restructure of ICT management and procurement.
Tanner says that Gershon’s expertise as an industry leader, strategist and highly effective reviewer of public administration makes him a compelling candidate to review the way in which the Australian government manages its use of ICT, which is all well and good but what will the review and subsequent savings mean for current ICT contracts?
Kevin Noonan believes that a lot of government purchasing has already been hit hard by the government’s Stage 1 Razor Gang cuts.
“We can expect some further Stage 1 cuts to be announced in the budget. The Gershon Review fits squarely in the Stage 2 category, where overall efficiency and effectiveness are being looked at.
"Current contracts are safe for the moment. Gershon will be focusing on structural efficiencies (better ways of doing business) rather than simple cuts off the bottom line,” he says.
“Most current, major ICT projects will continue, although the government’s earlier announcement imposing an additional 2% efficiency dividend on running costs expenditure in agencies will obviously affect any discretionary expenditure on these projects. It is likely large projects may come under a greater degree of governance and scrutiny through, for example, more rigorous application of the ‘Gateway Review’ process.”
While there has been no mention of contracts being outsourced, Noonan suggests that already contracts are on a transitional path away from the large-scale, clustered outsourcing contracts that were reminiscent of the late 90s.
“The shift is towards more ‘selectively sourcing’ models as is currently underway by the Australian Taxation Office, where different parts of the agencies' ICT environment are put to the market under different contracts, ie, network, desktop, mainframe. There may also be ‘shared sourcing’ models, where large or specialist agencies take on back-office processing for smaller agencies.
“Outsourcing contracts are continuing and at this stage it looks like the review may not have an immediate impact on the big ICT outsourcing tenders,” he says.
“A key feature of the reviews undertaken by Gershon, in the UK, is the comprehensive nature of the reports he presents to government. He is a mathematician by background and brings this rigour to his reviews. In the past, his reports didn’t just cover high level recommendations, instead he addressed implementation issues, roles and responsibilities and firm agreements for action in affected agencies,” he says.
Gershon’s review for the federal government is due for completion in September 2008.