Public sector ICT is raining money

James Riley
Editorial Director

It’s Christmas come early if you are a technology supplier to the Australian Government, with spending on ICT increasing by 50 per cent to $9 billion in the last financial year.

This is an extraordinary number, and is worth pondering for a short moment. That’s an additional $3 billion in ICT spending.

Just to be clear for the hard of hearing: On top of the approximately $6 billion spending on ICT that the Commonwealth has averaged in recent years, it has opened the public purse to a further $3 billion.

To my untrained and naive eye, this seems like an awful lot of money.

Speaking at the Tech Leaders forum in the Blue Mountains last weekend, the Assistant Minister for Cities and Digital Transformation Angus Taylor said the new investment in technology was necessary to fix ageing and run-down ICT infrastructure.

It’s hard to argue with this last point. The series of embarrassingly high-profile ICT failures in government stand as monuments to Commonwealth’s reduced tech capability. CensusFail, ATO, Centrelink and the rest.

The fact that these failures have coincided with the early work of the Digital Transformation Office and then it’s restructuring into the Digital Transformation Agency is testament to just how run-down the capability has become.

And we now learn that the failures also coincided with an additional $3 billion being spent on government ICT. We will have to wait until budget night to get a better idea of how much of this very large number is investment and how much is cost over-runs.

Things were always going to get worse in government ICT before they got better, I suppose. So I guess that’s the bad news out of the way.

Angus Taylor has said repeatedly that ICT problems in large organisations are a fact of life. The real test is how you respond to it. The restructuring work at the DTA in the past six months has been about this response.

“What we are positioning the Government to do is i) manage risk better than any government in the past ii) deal with the questions expeditiously iii) increase the likelihood of success for projects, I’ll come back to that one in a moment and iv) learn from our mistakes,” he said.

The creation within the DTA of a Digital Investment Management Office to oversee whole-of-government spending on ICT is a significant milestone.

It gives the DTA unprecedented power to review projects across government, and to pull the plug on projects deemed terminal.

“The DTA (Digital Transformation Agency) now has the power to review and oversee projects in a way that has never been done before. This is a critical point,” Mr Taylor said.

“No government of either stripe has had the strategic overview that this Government is now conducting into the Australian people’s multi-billion dollar investment in IT and we are investing,” he said.

“After years of stagnation in the ICT spend across Government, allowing systems to become badly rundown, we’re investing in the last 12 months $3 billion more per annum in ICT than the previous year.

“That’s a total investment of over $9 billion a year, $9 billion a year, that’s 50 per cent more than ever before.

“So this is a massive upgrade of the Government’s IT infrastructure and IT services.”

It is understood the jump to $9 billion in spending occurred in the 2015/16 financial year, and that the run-rate for this financial year is about the same. This followed the preceding five-year period where spending was at an average of around $6 billion to $6.5 billion.

The obvious question arises: Where did this additional $3 billion land?

Let’s assume that investments some of the giant ICT replacement programs – like that in Centrelink – accounted for a chunk. And that cost over-runs of these same projects accounted for some more.

You might also assume that the cost of just keeping the lights on of these ageing systems gets significantly higher – even dramatically higher – with each passing year after a period of neglect and under-investment.

But $3 billion is a magnificently huge chunk of Australian dollar change. Now that the DTA apparently has this whole-of-government visibility of the Commonwealth’s gargantuan ICT spent, you would hope that some public light will be shed on these numbers.

And maybe that will happen as part of the budget process.

We do know that the Martin Parkinson-led ICT Procurement Taskforce carried out from within the Department of Prime Minister & Cabinet will release a report in April, just ahead of the May budget. Perhaps this will shed some light.

The ICT Procurement Taskforce, which was a 2016 Coalition election commitment, is understood to be planning to be planning to release a first-stage set of recommendations in April with further refinements to be delivered later as part of a stage-gate process to be managed by the DTA.

The point here is that the decentralised nature of ICT spending now has a central gate-keeper. As Angus Taylor’s remarks make clear above, the DTA is now structured to give an unprecedented review and oversight powers to the agency.

So the $3 billion figure was the sobering, somewhat confronting detail to come from Angus Taylor’s speech (which is well worth reading, containing a lot more detail in it than we have seen from the Minister’s office in months.)

But for smaller local suppliers, Mr Taylor also revealed at least some of the thinking behind making government a friendlier customer.

He restated the government’s goal to spend 10 per cent more of its ICT budget with innovative SME’s – a move that would in itself be a largest investment in local tech than even the National Innovation and Science Agenda.

The DTA’s Digital Marketplace is the starting place for this effort. Mr Taylor said the reform of ICT procurement would necessarily include breaking large projects up into smaller contestable pieces to open them to SMEs. And it would involve the reform of panel contracts.

The taskforce is thought to be looking at the SME ‘sweetspot’ for contracts valued between $80,000 and $5 million. These are for projects solutions that can often be turned around quickly and could be carried out by smaller agile providers.

The problem is that these panels are most heavily used by government, and that the inflexible and expensive nature of these panels restrict the competition and innovation that can be applied to the solution.

Put simply, smaller companies are often overlooked in favour of bigger providers with a presence in Canberra.

“I love this [Digital Marketplace] project because it demonstrates how technology can level the playing field and the government can stimulate innovative companies without resorting to handouts,” Mr Taylor said.

“If we want to transform the entrepreneurial or digital government sector in Australia, the most important thing we can do is to be a better customer and that’s exactly what we’re seeking to do.”

That sounds like a plan.

Do you know more? Contact James Riley via Email.

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