James Riley
July 1, 2015

Tech procurement is a bit of a mess

Tech procurement is a bit of a mess

Procurement: A legitimate instrument of industry policy?

It is hard to find anyone selling into the Australian Government who has anything good to say about its procurement practices in relation to information technology. Even those on whom the Gods of the public service bestow a fat living will agree it’s a bit of a mess.

And it has been a mess for quite some time. For those that work in technology – both inside and outside of government – the apparent reluctance to come to grips with ICT procurement issues has been baffling.

In an era where dollars are tight and the political imperative of both sides is about balancing budgets, ICT presents some pretty low-hanging fruit. Smarter tech procurement delivers at both ends – enabling the public sector to deliver better services on the one hand, while reducing the cost of delivering those services on the other.

As things stand right now, government ICT procurement is failing to deliver at both ends: It is expensive to deliver and reliably underwhelming.

There is a third broken leg to this tech procurement stool. Procurement policy should also provide important leverage for Australian companies to innovate and build scale. It should also encourage smart people with great digital ideas to slip more easily between the government and private sectors.

This does not happen. The industry development component of federal tech procurement has been forgotten in the mists of time, to the great detriment of our local providers.

There is nothing wrong with using procurement power as an instrument of industry development policy. The notion that this somehow contravenes our trade treaty obligations is a nonsense.

The great shame of this missed opportunity is part cultural (aversion to risk and lapping acceptance of FUD drives buying decisions toward the largest and best marketed tech brands) and part institutional (for example a tax regime that offers competitive advantage to offshore-based multinationals.)

The current Commonwealth ICT strategy (2012 – 2015) is limping along, desperate not to draw attention to itself. The Secretaries ICT Governance Board (SIGB) – which had been the peak cross-agency technology oversight committee – has been quietly put down. Its replacement, if there is one, has been unheralded.

And the long-promised ICT Advisory Board, which was to have drawn expertise from the private sector to help steer tech procurement through this period of disruptive change, has simply not eventuated.

In fact, the last time the SIGB sat down in May 2014, it discussed the implementation plans for the ICT Advisory Board – along with other promised reforms to tech governance in the Commonwealth – only to never meet again.
It is fair to say that Australian Government ICT procurement is broken.

Our annual expenditure on ICT in the federal government runs at $6 billion. About two-thirds of this is spent keeping the lights on – that is, operational expenses just in keeping existing systems functioning (which, in the case of Centrelink, involves hiring a cleaner to remove the dead moths from its relays and vacuum tubes).

ICT procurement in government in recent times have generally rested on a competitive tension between the interests of centralised and decentralised bureaucratic power. Right now it’s a mish-mash that is delivering the opposite of the best of both worlds. This is well known: Easy to recognise, hard to fix.

What makes this interesting right now is that the newly created Digital Transformation Office formally comes into being this week as a statutory federal agency. There is yet little clarity about how this office will effect change.

The DTO has either grand ambitions or delusions of grandeur, depending on who you’re talking to. Certainly it has a big task in front of it. The agency has talked itself up as behaving a bit like a startup (albeit a startup that secured $95 million in first round funding from a sugar daddy named Joe Hockey in the May budget) but is constrained by process.

Transformational change in this space is immensely difficult. Without more of a say on how tech dollars get spent, the DTO aspirations seem hamstrung before even losing its interim status.

Whole-of-government ICT procurement decisions reside inside Finance, whereas large agencies like Centrelink and the Australian Taxation Office largely retain decentralised control of tech spending.

And now into this model is thrown the DTO, which has a kind of centralised ‘influencer’ role for cross-portfolio change. But without the purse-strings. And in the Communications portfolio, rather than Finance. That’s a very tough gig.

One of the prerequisites to success for the DTO will be the reform of tech procurement. At the very least, departments and agencies – including the DTO – must be given the flexibility to run short turn-around, smallish projects with private collaborators without having to jump through onerous procurement process hoops.

A big part of this challenge lays in the flexibility to fund projects. But tied to that is the ability of agencies – especially the DTO – to attract innovators. This is a monumental cultural challenge. How to attract the smartest digital problem-solvers into the service of government.

It won’t be the salary that makes the government role interesting for someone working on digital projects in the private sector. It will be the challenge itself.

There is a fascinating interview in Fast Company with Barack Obama about digital transformation in the US Government, and how much the administration relied on attracting top private sector talent. And allowing more free movement of talent between the public and private sectors.

This makes a lot of sense from an industry development point of view. Small Australian companies can use such projects to get a leg-up into larger government contracts, or as reference-able work for getting work elsewhere.

If tendering for modest, transformative digital projects is prohibitively expensive, the legions of well-connected, well-heeled and extremely well remunerated usual suspects will continue to dominate our government supplier lists. IBM, HP, Accenture, et cetera, et cetera.

It does not seem unreasonable to give departments and agencies – including the DTO – the flexibility to engage with Australian tech firms on small projects that do not carry the same tendering benchmarks as the large projects.

Of course our ICT procurement should be predicated on a value for money yardstick. But this should not be the only measure.

The creation of the Digital Transformation Office holds exciting prospects for local innovators. But the fact that it is landing in a confused ICT funding landscape makes its job more difficult.

This is perplexing because the Coalition had a well-received plan – its policy for eGovernment and the Digital Economy – that it took to the 2013 election. The policy was announced by the then shadow ministers for communications and for finance.

From an eGovernment perspective, work to date on this policy has been piecemeal. To an outsider at least, the problems arise directly from ICT procurement issues, that old nexus of policy and purse-strings.

It’s a bit of a mess.

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