Contracting out of Government Services - Information Technology

PREFACE

The committee's inquiry into IT outsourcing[1] by the Commonwealth was added as paragraph (g) to the committee's general inquiry into contracting out on 27 May 1997 with a requirement to report by 22 September 1997. The full terms of reference for the inquiry are at Appendix A of this report The committee was given extensions of time to report on this part of its reference until 10 October 1997. It is the committee's intention to report on the remaining part of its reference by the end of the current session of Parliament.

The committee has sought to avoid duplicating consideration of issues between the two reports thus matters not specific to information technology will, as far as is practicable, be dealt with in the second report.

The committee conducted two days of hearings specifically on IT outsourcing on 4 July 1997 and 5 September 1997 in Canberra. In addition, at the previous five days of hearings on the general terms of reference, many of the issues with regard to IT outsourcing were also canvassed. The Finance and Public Administration Legislation Committee has also considered IT outsourcing quite extensively during its examination of the estimates of the Office of Government Information Technology (OGIT) and the former Departments of Finance and Administrative Services. This committee has drawn on that evidence in preparing this report.

In addition to the evidence received by the committees and published reports and papers, this report also draws on the Cabinet submission on IT outsourcing considered by government earlier this year. There are arguments for and against using this document. Its release was clearly unauthorised and the committee does not support the leaking of confidential documents. However the document has been in the public domain for some time now. It has been widely circulated and has been extensively quoted in the Parliament and in the media.

The committee recognises that confidentiality encourages frank coordination comments on proposals before Cabinet and that a fully transparent process might lead to more sanitised responses. However it is regrettable that the debate on an important issue such as this cannot, officially, have access to the full range of expert views from within the public sector.

The coordination comments in the cabinet submission by Commonwealth agencies on the IT outsourcing proposal are absolutely central to this committee's inquiry. They provide a much more useful and, given the source, thoughtful appreciation of controversial aspects of the proposal than this committee could obtain through a public hearing with many of the same agencies. To ignore the comments would be to deprive the committee and the public of a valuable source of information on the subject. There appears to be nothing in the coordination comments that needs to be kept out of the public domain for security or genuine commercial-in-confidence reasons. Given the importance of the outsourcing proposal it is in the public interest that the views of the agencies most directly involved be considered by the committee.

In presenting this report the committee is sensitive to the comment by a writer on computer matters in the Australian newspaper that the one area of IT in which Australia leads the world is the preparation of reports.[2] The committee has sought to avoid reproducing at length the work of others. The work of the Industry Commission on competitive tendering and contracting canvasses the general issues relating to public sector outsourcing while the Information Technology Review Group's Clients First report has examined the Commonwealth's use of IT and the future directions in which it could go. There is a vast and ever-expanding body of academic literature on the subject which analyses the success or otherwise of outsourcing as a management technique and seeks to identify all the factors to which managers considering outsourcing should have regard. Industry development options have recently been examined in the Mortimer and, more specifically, Goldsworthy reports. This report is focussed narrowly on the current outsourcing of government information technology by the Commonwealth. It does not purport to provide a blueprint for 're-engineering the delivery of government services' or to equip this country to participate in the 'global information economy'.

Footnotes:

[1] The committee has used the term outsourcing throughout this report as a shorthand for the process of market testing, competitive tendering and contracting.

[2] Stewart Fist, 'Flabby IT reports go flip-flop' , The Australian, 2 September 1997, p. 50.