The IT outsourcing does not fulfil any of these pre-conditions for success. For example, the benchmarking process is being done in conjunction with the tender evaluation process, preventing the establishment of a business case, before the request for tender is prepared. The contracts are for five plus two plus two years in duration regardless of the policy directions set by current or future governments making a mockery of any notion of stable requirements. In addressing the third point identified by Professor Lacity, the contract management capability within departments is vastly compromised in many cases by virtue of the clustered structure requiring ‘management via committee’.

Evidence gathered via the Senate Budget Estimates hearings shows that once departments and agencies are lumbered with outsourcing they cannot achieve the pre-determined. The Department of Health and Community Services offers a useful insight into how vulnerable the departments and agencies are to not only losing strategic control of their information management, but how exposed to cost blowouts they’ll have to absorb.

The Department of Health and Community Services are participants in the recently signed Health Group contract, consisting also of the Health Insurance Commission (HIC, which runs Medicare) and Medibank Private. In a press release titled ‘IT outsourcing boosts small and medium business’, The Minister for Finance announced a $350m five year contract with IBM GSA.

The Minister said that the Government would save $54 million as a result of this contract being signed. Out of this $54 million, Health’s share is to deliver $16.5 million in savings. However, since the 1997 budget, Health has had their budget reduced specifically by approximately $1 million the fiscal year 97-98, $2 million in 98-99, and $3 million in 99-00.

The contract was signed mid 00-01 fiscal year, meaning that around $6 million has had to be absorbed by the department to date. As the timing of the clusters is in the hands of OASITO, this delay was not the fault of the Health. However it is Health that has paid the penalty of having to find the $5.9 million from other programs as a result.

As mentioned, Health’s share of the $54 million in savings is $16.5 million. The Department of Finance has also already reduced Health’s budget by $3 million per annum for the next five years. So Health needs to find $15 million in savings just to break even. If they manage to find the additional $1.5 million, the difference between the anticipated savings and the budget cuts, then this would mean they are ahead. Unfortunately for Health, because they have already had to absorb $6 million, they are left with a net loss of $4.5 million for the hassle.

In addition, given that evidence to date is showing that other departments and agencies are not finding any bottom line savings, rather their IT expenditure is increasing, the prognosis for health is not good on the fiscal front.

The experience to date shows that any political justification of the program in relation to cost savings has lost all credibility. The residual aspects of the program also fail the public interest test as they pre-determine a lack of strategic control that could undermine the ability of the Department or Agency to manage information effectively. This takes me to the second issue I mentioned: the impact on the ability of the administration to strategically manage information with the program in place.

The contracts themselves are drafted from a singular model prepared by OASITO with the assistance of their imported lawyers. This model contract prescribes quantifiable standards of service through Service Level Agreements or SLA’s. It is highly prescriptive and contains penalties and sanctions for breaches.

This prescriptive nature of the contracts means that broad service outcomes are often not defined, and only when disputes between vendor and client arise, are the different expectations of vendor and client brought into the open. When there is no black and white, it is often the party with the most leverage and, if litigation is involved, the deepest pockets that prevails.

If Government departments were a business or business unit in a larger corporation in the private sector, this approach is analogous to allowing an outsider with little experience in the jurisdiction to draft the key legal document that will determine information management for the business over the next five to nine years.

When put like this, in an age of such rapid progression in information technology and changes in the underlying information architecture from tightly proprietary to open, interoperable platforms, these contracts are like putting up fences around proprietary solutions, defying the trend to increase interoperability.

At the same time significant demands, accompanied by political expectations, are being placed on the agencies and departments to participate in the transition to e-government. This requires achieving high levels of interoperability at all tiers of the architecture. As a result an explosive situation in developing in the contractual management stakes. Vendors and their sub-contractors desperately trying to hang on to miniscule margins are pitted against bureaucrats inexperienced in contract management living on the fiscal highwire. With a contract styled by a third party serving neither interest setting the rules of the match, it is not surprising that the wheels are falling off.

This is not just my assessment. Australian National Audit Office has embarked upon an extensive inquiry into contractual management issues arising from the implementation of the Coalition’s IT Outsourcing Program. The terms of reference include investigating the operation of the fist three contracts let under the program, Cluster 3, Tax Office and Group 5. These three contracts cover thirteen departments and agencies. The contracts have a duration of five years, with two plus two. The ANAO was initially due to report in March year, but successive delays have meant that the report will not be tabled in parliament until later this year.

Needless to say I am looking forward to their findings. I believe it would be highly irresponsible for the Coalition to continue with the program until the ANAO’s findings have been analysed. The stakes are particularly high for Centrelink, or Group 1. In admirable defiance of OASITO’s homogenous and outdated contract model, still-closed tenders were returned to vendors as Centrelink grapple with the challenges facing information management within an agency for whom service delivery to citizens is their raison d’etre.

Centrelink know this. Department Secretary Cheryl Vardon said at Senate budget estimates hearings the following:

"The chief information officer has worked very hard to make sure that IT backs up behind the business agenda, and we promote inside our organisation one business. Her (the CIO) job is to make sure that any contract – and we are talking about infrastructure – follows in behind the concept of one business, and they would have to absolutely part and parcel of the IT strategic plan. Our future lies in our control of information for a number of reasons in terms of management of our customers personal records but it is also about the techniques that we use for electronic service delivery"

The vendors know this. Those already trapped in contracts belonging to the pre-internet age know this. The departments and agencies being bullied into groups and clusters as we speak know this. The innovative IT SME’s told me about it years ago! Even consultants know what is happening!

We are at risk of losing the policy tools needed by Government to effect positive change in the experience of citizens. This is occurring at a time where governments around the world are waking up to the information society. Governments elsewhere are brimming with ideas that will enable them to provide opportunities for the people they represent.

Labor will inherit what the Coalition leave for us – hopefully sooner rather than later. It is plain to see why our call at the last election to halt the IT outsourcing program and review it immediately makes sense. With time marching on the evidence only grows as to why this course of action is highly desirable.

Labor will need to manage the transition to our model for information management in the federal government administration. This challenge is significant, but we are starting from a position of strength. We understand the strategic importance of information management. We know that our depth of understanding will determine our ability to adapt the administration of the Australian Federal Government for the future needs of citizens, community and business.

We need to build a government service delivery model that has a primary focus on the needs of people. We need to ensure the communication infrastructure is appropriate and effective on both sides of the delivery model – the administration end and, with equal priority, the citizens. Consideration of new models and methodologies to allow government to procure the best on offer from the private sector whilst serving the public policy outcomes is our challenge.

How we forge public/private sector relationships in pursuit of outcomes that serve the interests of both parties requires a deeper look at the layers of downward pressure on innovation that exist in a multi-tiered competitive tendering model. We must consider the evidence gathered from the operation of new relationship models as they develop. This is happening already in defiance of OASITO, with Centrelink, for example, exploring an ‘alliance’ model. Other emerging sourcing options have attracted descriptions such as strategic sourcing, value-added outsourcing, co-sourcing, multi-sourcing, and flexible sourcing.

We need a model that defies any reduction in interoperability. Citizens, business and government all need to ‘talk the same language’. The underlying architecture must be built on standards of interoperability to allow for further progression at the applications level that will facilitate new, innovative service solutions.

The building blocks of information, the data need to be managed with the highest level of diligence. Data protection and privacy issues are worthy of diligent attention at both the political and administrative level. These are some of the principles that need to underpin information management. The policies that will give substance to these principles are the subject of our ongoing endeavour. From more an operational perspective, testing a sourcing proposition by meaningful benchmarking and preparing a business case as opposed to reacting to a distant mandate would introduce a responsible process to determine whether or not the public interest is being served by the exercise.

It is worth mentioning in this context the additional policy aims that can be pursued synergistically through a government strategy for information management. The need to grow Australia’s IT capability is at the forefront of our concerns. Not only is the information and communication industry building the infrastructure for the knowledge society, it is the fastest growing. In Australia, over 7000 information and communications technology companies were created in the five years alone and the rate of growth for the industry exceeds 12% per annum.

Despite this growth, a burgeoning IT&T trade deficit continues to dog Australia. With exports receipts around $ 4 billion, imports are pushing $40 billion of the next few years. This points to a major macro-economic disincentive to ignore opportunities for growing our local industry.

Surely we can put the expenditure of taxpayers money to work for growing the businesses and therefore the jobs of the future? I have never heard one single Australian IT company argue for an unfair advantage. Why is it that local companies have to fight for the right to work?

With external sourcing a permanent feature of the government information technology ecology, contract management capability and process require urgent attention. It is clear that the massive, clustered mega-contracts are serving little purpose. Indeed, one of the greatest criticisms of the Coalition’s IT outsourcing is the way it structurally favours large, usually multinational, IT corporations.

In an attempt to deal with the anger felt by the local IT&T industry, the Coalition created an industry development model clause in an attempt to mandate inclusion of SME’s. This was met with a less than enthusiastic response from multinationals and SME’s alike. The multinationals disliked the intervention and local industry felt it further marginalised their involvement by implying exclusion from ever pursuing a prime contract, even as part of a consortium.

Breaking up the clusters will help remove the barriers to SME participation. These barriers include the bid costs and liabilities associated with the mega-contracts. A model that allows horizontal efficiencies to be attained whilst not disrupting the vertical strategic directions of agencies and departments is conceivable.

In reference to the earlier point regarding the need to develop strategies to grow the Australian IT&T industry, it was way back in the Senate Committee for Finance and Administration IT outsourcing Inquiry conducted in 1997 that a successful IT SME described a government contract as an ‘export credential’. His experience was that the best evidence of his capability to potential clients off shore was the fact that he had secured and was performing in government contracts. His ability to do this, no doubt facilitated by the open reporting on performance within the Australian government, enabled him to build the export side of his business. This demonstrates synergies for growth that can be developed if a model that allows all participants in IT outsourcing to have a contractual relationship with the client department or agency, rather than just the prime.

One of the more recent tragic ironies in the IT outsourcing policies pursued by the Coalition was the decision to allow each agency and department to develop their own internet e-commerce solution. This decision defied the trend to put everything in massive, clustered contracts. The irony is that more than ever, the internet interface between government and citizens will require consistency for ease of use.

For example, Victoria is a global leader in the use of MAXI, their state government portal. With innovative applications incorporating e-commerce solutions and powerful search facilities sitting behind this portal, the ubiquity of the entry point demonstrates a commitment to putting the experience of the citizen first. There are also many international examples where governments have shown active leadership. Ireland set up an Information Society Commission, a body charged with the responsibility of advising government on how to integrate the information economy via the internet into government service delivery.

Despite the Coalition’s rhetorical claims to understand we are an information economy, it is clear they do not. The National Office of the Information Economy, NOIE, was promoted by the Coalition as their vehicle for change as the information society developed. However, after the last election NOIE status and funding was reduced. Other vehicles, such as the Office of Government On-line, whilst distracted by Y2K issues, was shackled by the IT outsourcing debacle in any attempts to implement change within the administration. The distinct lack of leadership also rates a mention, as does the blatant unwillingness to act on the clear lessons that have emerged as a result of many failings of the IT outsourcing program to date.

As I said at the start, as a civil, information society, we build a democracy to give accountable structure and process to our life experience. Labor’s vision for a knowledge nation is built on an understanding that information is central to the human condition and we understand that how we manage it will contribute significantly to determining the quality of life of the citizens of this country.