Chapter 10: Outsourced services
Developments in the policy and operating framework
Outsourcing in the APS continues to receive considerable attention. Since June 2002, several reports on aspects of outsourcing in the APS have been released. The Government responded to the Senate report of August 2001 on information technology in the APS. The MAC released its report on the Australian Government use of ICT in October 2002. The ANAO looked at outsourcing as part of its annual reporting of financial statements of major Commonwealth entities. These developments are briefly discussed below. The ANAO also tabled two performance audits of ICT management, including in relation to outsourcing in the departments of Defence and Health and other agencies.1
The JCPAA is currently conducting an inquiry into the potential risks concerning the management and integrity of the Commonwealth’s electronic information. As part of the inquiry, the Committee is examining IT security, including in relation to external providers. At the time of preparation of the State of the Service report, the Committee had not yet reported to Parliament.
Government response to the 2001 Senate Committee Report—Re-booting the IT Agenda in the Australian Public Service
In August 2001, the Senate Finance and Public Administration References Committee recommended improvements to contract management and probity, data security, savings and intellectual property management. Accountability and transparency issues were also considered.
In June 2003, the Government responded, supporting most of the recommendations made by the Committee. The Government emphasised that the devolved management framework requires that each agency is responsible for managing its own procurement functions. The Government response highlighted the potential for unnecessary duplication of functions that would result from some of the (unendorsed) recommendations of the Committee. The response reiterated the role of the Public Service Commissioner in reporting on ICT outsourcing in the State of the Service report.
Management Advisory Committee report
The main objective of the MAC report, Australian Government use of information and communications technology (October 2002), was to provide an appropriate framework to guide agencies during the process of transformation to a devolved ICT investment and governance environment.
As a result of the report, a new ‘federal’ governance model was adopted. This model involves a senior advisory group known as the Information Management Strategy Committee (IMSC), supported by a Chief Information Officer (CIO) Committee. The IMSC will provide leadership and advice to the APS on ICT strategic and governance issues, including standards to promote interoperability. The CIO Committee will take a lead role in facilitating learning and information exchange among agencies. Agency heads retain responsibility for their ICT resources in line with their responsibilities for business objectives.
The report noted the need to identify key lessons of the early ICT outsourcing contracts, as they approach the end of their first cycle, to assist agencies entering into new and ‘second-generation’ ICT sourcing agreements. This was viewed as an initial priority that requires immediate investigation. The IMSC established a working group to investigate the issue of second-generation ICT outsourcing and develop templates to assist agencies involved in the process.
The report noted that contract management skills still needed to be improved in the APS, and recommended drawing on APS-wide experience in this area, complemented by work undertaken by the ANAO. Aworking group may be formed in the future by the IMSC for consideration of this.
Audit of financial statements of major Commonwealth entities
The ANAO (June 2003) conducted an audit of the internal environment of agencies to determine whether reliance can be placed on current control structures to produce complete, accurate and valid information for financial reporting purposes. The audit also sought to assess the impact IT outsourcing arrangements had on the maturity of ICT governance arrangements. It concluded that the cluster contract arrangements have generally had a positive impact on IT security practices in agencies. However, the audit found that some contracts do not adequately specify security requirements. The importance of disaster recovery planning to IT infrastructure outsourcing was also raised, both in terms of the need to be clear who is responsible for it, and as a matter to be specified in contracts.
1 ANAO, Management of specialist information system skills, Report No.56, 2002–03. ANAO, Health group IT outsourcing tender process, Report No.14, 2002–03.