Question 21a and 21b.

Q21a. There is a strong trend to remove government from the business of ICT. To

what extent has government transferred any costs of GEMSD to the private sector or other funding bodies?

Q21b. What GEMSD projects should be government funded or kept government

only?

Question 21a: Summary

In general local participants believe government is actively trying to transfer costs and risk to the private sector. Ten participants (1, 2, 3, 5, 6, 8, 9, 11, 12, and 13) were able to provide examples of cost and/or risk transfer from government to private parties through simple mechanisms such as ‘individuals, and companies, keying data and printing (8)’ or more formal Public Private Partnership (PPP) agreements. However, two participants (4 and 7) saw PPP as mostly not working, ‘Victorian government does not have a good track record of PPP (7).’ suggesting what services have gone out to the private arena are coming back into government.

Of those participants who believed government is transferring cost and risk out of government 3 main sub-themes developed. The first was outsourcing, seven local participants (1, 4, 5, 6, 8, 9, and 13) identified various forms of outsourcing and taking non-core business out of government. ‘Vicroads for example it doesn’t in- source anything, it out-sources all of its ICT (6),’ and in land settlement the ‘financial settlement manager transferred the costs and risks to the banks in the private sector (1).’

The second was government becoming a wholesaler of information to the private sector. This sub theme was supported by three participants (1, 3 and 12). One

explained ‘we went first to the market with an expression of interest to value adders… (and ) now getting quite strong and extremely large investment coming through from the private sector… so we wholesale that report for $1.00 and they have on sold it to someone else (3),’ The same participant identified a hidden benefit by selling the same information to multiple ‘value adders,’ ‘we have got 10 purposes for it as opposed to what was before one (3).’ They did qualify it was advisable that ‘we will not do exclusive deals (3)’ with private partners to achieve the wholesaler result. The final sub-theme was to spread the cost and outsourcing across government, this was seen as a variation on outsourcing by using other government departments and agencies with specific skills or infrastructure to contract work for government entities. An example cited was a department becoming the educational publisher for all of government and perhaps other levels of government across the country, competing with private suppliers for work, ‘I have always contemplated a digital publishing, education publishing market in Victorian government (2).’ Another general qualifier for outsourcing specified by one participant was, outsourcing infrastructure ‘aught never be located outside the physical jurisdiction of the (10)’ government.

Of the overseas participants one suggest that ‘about 90-95% of all ICT related activities are outsourced to the private sector (OS3),’ however they did acknowledge that in remote or ‘local authorities in small cities continue maintaining small

technology departments (OS3)’ to provide ICT infrastructure and services.

Another raised a theme previously not identified by local participants suggesting ‘the moment you go into a public/private partnership there is always the issue of

intellectual property, who owns it? Who has ownership of the data? Who has ownership of the system (OS2)?’

Question 21b: Summary

Three major themes arose from this question; the need for a central or government role in service provision; impediments to successful outsourcing; and factors supporting successful outsourcing.

In relation to the central or government role in service provision seven (2, 3, 4, 6, 7, 8 and 9) local participants supported and had comment on this role. The sub-themes identified that government should control strategic direction of the GEMSD services (4) and should retain the policy role (3 and 7). Similarly government must have close contract management and supervision of those services that are outsourced to private sector bodies (2, 3, 4 and 9). Issues such as security and privacy must remain in government (7) as well as all licensing and regulatory requirements (8). One participant felt it was essential for government to maintain all directories especially those that contain electronic postal and personal addresses (9).

There were three perceived impediments to successful outsourcing: a lack of

appropriate regulation and governance (1); political perceptions that private providers often make it difficult for government to relinquish its responsibility for fear of liability (11); and there is a perception of bias and partiality by private service providers (8).

There were likewise three factors supporting outsourcing of GEMSD services: already there is a large amount of services outsourced and working effectively (3); anything other than policy, strategic direction and contract management is capable of being outsourced (3); and there are in-place appropriate regulations and governance to accommodate outsourcing (1).

Overseas participants offered two opinions: In any outsourcing or devolution of responsibility there are inherent ‘normal business risk (OS1)’ which must be addressed. Also the issue of ownership extends beyond systems and procedures to incorporate data generated, listings and ownership of liabilities present and past (OS2).

5.8.2 Question 22.

The initial investment in GESD has been quite high. Are we seeing any cost recovery in the Victorian experience?

All participants answered this question drawing good comment from local participants with a rich diversity of response. There were only seven (1, 3, 5, 6, 11, 12 and 14) with a definite ‘yes’ theme to this question, four (2, 4, 7 and 13) definite ‘no’ and two (8 and 9) undecided.

Of the ‘yes’ theme, six (1, 3, 5, 6, 11, and 14) were able to offer evidence of cost recovery. However of the ‘no’ theme, little evidence was offered generally surmising ‘I don’t think enough work has been done (4),’ or ‘it is not being measured (7).’ Participant seven did justify their response ‘one of the reasons the performance is not measured is cost control. GEMSD is seen as intangible assets so their accounting practices are terrible (7).’

In the ‘yes’ theme group there was a division on the definition of cost recovery in GEMSD. Emergent sub-themes became apparent and were classified into three areas: cost recovery in successful projects; some projects are non-profit orientated; and wider benefit recovery or ‘triple bottom line’.

In the cost recovery in successful projects sub-theme, the most obvious evidence cited was the VOTS land exchange project which recovered all GEMSD costs of $92 million in three years and redirected profits into the ‘SPEAR service which does not have any fees attached to it, so in essence, is almost a community service (1).’ The non-profit orientated projects such as emergency services generated two

arguments suggesting we ‘don’t expect cost recovery, the private sector would step in and deliver the service if it were profitable to do so (5),’ or ‘government provide the service because it is cheaper for government to do so and because the community expects it of government (5).’

The ‘triple bottom line’ group were concerned with ‘achieving stated government policy (2),’ delivering ‘non-financial benefits (8),’ and ensuring ‘better informed decision making (12).’

In addition to these sub-themes there were some new propositions formed. The foremost of these was the ‘visionary devolution of responsibility (2),’ which was seen as a mature GEMSD system of cost and resource sharing across government, joining up projects across government regardless of traditional departmental or agency base in order to reduce cost and deliver a better service to customers and recover costs as well (2).

One participant warned of becoming a ‘cash cow’ by moving to the next level of GEMSD sophistication suggesting ‘we have got more complexities because of identity fraud and risks changing (11)’ thereby actually increasing costs overall and being unable to recoup these costs long term.

The overseas participants had three main points to make; ‘GEMSD services… caused other quality benefits. The clear cost savings have so far come from government to business services (OS1);’ ‘improved cost efficiency, though tough to measure, is one of the main reasons of any GEMSD initiative (OS3);’ and ‘I think we have been profitable ever since the first day and that is partly because of the government ownership, they were the driving force (OS2).’

5.8.3 Question 23.

What regulatory checks and balances have had to evolve with GEMSD projects? Four themes emerged from interviews with local participants. Firstly this role should be exclusively in the hands of the Office of the Chief Information Officer in the department of Premier and Cabinet (1), secondly ‘the main balance and checks is the auditor general who has jurisdiction and quite a lot of say over the way all electronic systems are built and run (9).’ Third, ‘surprisingly few’ checks and balances are applied in GEMSD to ensure success, continuing that most are forced upon them by other jurisdictions such as the national Australian Competition and Consumer Commission (ACCC) in areas of ‘pricing, competitive neutrality, legislation (1).’ Finally ‘only superficial ones… we will be putting in place a website management framework which will go through and have key standards congregated which agencies will be required to meet and they will be required to report on them on a regular basis and that will be phased in over the next twelve months (4),’ suggesting there is little in place but the situation is getting better (4 and 8).

Overall local participants subscribed to the belief that GEMSD would be more successful with regulatory check and balances to ensure operational standards and maintained service levels, with eleven supporting the theme (1, 2, 3, 4, 5, 6, 8, 11, 12 and 14).

Overseas participants were hesitant in responding to this question with only one response, suggesting each jurisdiction is responsible for their own checks and balances to ensure successful GEMSD (OS2).

5.8.4 Question 24.

Is there scope for a single audit trail in GEMSD?

Local participants agreed a single audit trail for GEMSD would help with success with nine (1, 3, 4, 5, 7, 8, 9, 12, and 14) supporting the issue. Whilst others (2, 11 and 13) felt either the cost of audit trails are too high or ‘to achieve what (12)?’

Suggesting that not every department and agency would be suited to lengthy audit trails particularly in areas such as health ‘The audit trail you would want in health for example I suspect would be longer and deeper than you might want in education. You might want twenty years of medical records and adaptations of images (2),’ implying difficulty with storage and management.

Of those participants who agreed with a single audit trail, five (2, 7, 8, 9, and 12) confirmed ‘if they can get all GEMSD into one big system, then things like audit trails, archiving, version control and maintenance of data can become much more manageable (2).’ Suggesting across government management control and

administration is not only achievable, but worthwhile.

Overseas participants were divided on this question with two (OS2 and OS3) agreeing a single audit trail is worthwhile, however OS2 was concerned about the possible financial cost of implementation ‘but there is a cost element involved in it (OS2).’ One overseas participant was opposed to the single audit trail suggesting there is no reason for single audit trail in GEMSD (OS1).

5.8.5 Question 25.

How do governments perform ongoing benchmarking or audit of GEMSD services? This question evoked strong opinion from local participants and was seen as an area significantly lacking in format, procedure and recognition. Eleven (1, 2, 4, 5, 6, 8, 9, 11, 12, 13 and 14) identified benchmarking and audit as necessary for GEMSD success ‘yes, yes, yes, I think it’s very important (1)’. Of these, (1, 2, 4, 8, 11, 13 and 14) believed it was not being performed well ‘we do not audit well at all and we do not keep historical data (5),’ or it has been done ‘badly up until now (8).’ Another group (4, 6, 8, and 11) believed there is a foundling movement occurring within government ‘that is beginning but not actually happening at the moment (11).’ Four acknowledged overseas benchmarking and audit techniques (1, 2, 4, and 14) as being

better than those occurring locally. One participant suggested ‘I don’t think anyone in Australia can teach us much about it (2),’ implying it is not performed well in

Australia, while others (7 and 9) simply passed responsibility to the Auditor General ‘Victoria has ongoing audit of its services both by internal audit and the auditor general there is no ongoing benchmarking; it is done on an ad-hoc basis (9).’ When more specific questioning pursued GEMSD benchmarking it became obvious there was little being done locally, however the majority believe it is essential for successful GEMSD (1, 2, 4, 5, 6, 8, 11, 13 and 14) ‘there has been no real

benchmarking so I don’t think we have performed well (8)’ in this area. One

participant offered ‘they have had bugger all take up because they have not provided enough proactive assistance in rolling out (1)’ good benchmarking practices. Six participants (1, 2, 4, 5 and 12) believe international benchmarking is useful in successful GEMSD though one believed ‘less than 1% of people that are interested in the stuff look outside (5).’ At the same time three (1, 4, and 12) qualified their belief by cautioning ‘it can be difficult to compare across service areas (1),’ ‘we are quite different from our competitors (12).’

Overseas participants were similar in opinion asserting information was kept by agencies and departments but the ‘usage is not measured systematically (OS1).’ Again caution was suggested in cross jurisdictional comparison re-iterating ‘we are different from others (OS2).’