True cost of government IT outsourcing scrutinised

The Community and Public Sector Union and the government’s former digital chief have warned that aggressive ICT outsourcing has led to agencies being left at the mercy of external vendors.

Outsourcing has left the Australian Public Service (APS) “overly reliant on external vendors and contractors, which has created critical issues with capability and costs,” CPSU policy and research officer Osmond Chui today told a hearing of an inquiry into the digital delivery of government services.

Chui said that a second key problem facing the public sector is a historical focus on cost cutting rather than opportunities for strategic ICT reform.

“The APS itself is very reliant on external vendors and contractors,” he told the inquiry. As of 2017 the APS employed more than 14,000 ICT personnel, a third of which were contractors, the CPSU official said.

“Since 2011-12 there has been a significant shift away from permanent APS staff towards the use of contractors. The proportion of external full time equivalent ICT staff grew from 23 per cent to 30 per cent while the proportion of internal full time equivalents decreased from 77 per cent to 70 per cent.”

Agencies in some cases do not have the internal expertise to assess the quality and suitability of advice from external suppliers, he said.

Chui cited the report of the government’s ICT Procurement Taskforce, which argued that the Commonwealth’s “over-reliance on contractors is unsustainable going forward”.

“It is expensive (the average annual cost of an internal ICT employee is around $132,000 while the cost of a contractor is around $214,000 35), and causes ongoing erosion of ICT capability in agencies,” the report noted.

In its written submission to the inquiry the CPSU called for the government to set “an express and specific goal to reduce the reliance on contractors and external vendors.”

The government should cap agency expenditure on consultants and contractors, and reinvest the savings to build APS staff and internal capacity, the union argues.

Imposing a cap on contractors and consultants and allocating the savings to boosting the digital capability and capacity of the public service was supported by former Digital Transformation Office CEO Paul Shetler.

“Instead of providing digital training to public servants, too often we’ve outsourced IT to large international technology vendors and consultants,” the former DTO chief executive told the hearing.

“Outsourcing makes the government seem smaller but it is expensive and it contributes further to deskilling the public service.”

Shetler cited two other key “blockers” to digital transformation within government. One is the culture within government, he said: “Amazon, for instance, would never ask you to deal with their packing website and then to head over to their shipping site.

“But Australian entrepreneurs have to work through multiple different websites to get various licences, tax numbers and other things required to start a business rather than being led through a single process. We leave it for them to figure out how it all works and if they are in fact in compliance.

“To operate at ‘Internet-quality’, government agencies need to collaborate to build services that focus on what users are trying to get done, like starting a business, rather than their own structures.”

The other key challenge Shetler addressed was the government’s approach to building digital products, which he said was “outdated”.

“Government too often tries to build digital services the same way it builds bridges, with lengthy requirement documents of specifications decided at the onset of the project,” he told the inquiry.

“This makes it impossible to deliver a lean solution quickly, to test it with users and continuously improve it based on user insights.”

He said Centrelink’s ‘robodebt’ program was a great example.

“Government agencies should adopt the methods of Australian startups to deliver better user-facing services at lower cost,” Shetler said.

“Where contracting is appropriate, we should reduce the barriers to entry in government procurement that currently give international corporate giants an advantage over smaller, more agile Australian firms.”