The Guardian January 23, 2001

IT outsourcing scam goes bottom-up

by Peter Mac

Federal Finance Minister John Fahey's latest scheme to let private firms 
cream off the most profitable parts of the government's multi-billion 
dollar computer (IT) operations has come to grief  and with it the 
Minister's own long-term career prospects, it seems.

The Government's IT outsourcing program, which has been running for three 
years, was originally described by Mr Fahey as having the potential to save 
the nation a billion dollars over five years.

The program involved transferring responsibility for the administration of 
IT work in virtually all government departments and agencies to private 
firms, thus creating further massive redundancies in the emaciated ranks of 
government employees.

However, implementation of the program was widely criticised from the 

In 1997, many government departments warned that the scheme would 
compromise national security, privacy laws and other legal obligations on 
government, and would not deliver cost savings, a claim which was confirmed 
last year by a report from the Auditor-General's Department.

One of the complaints which has now surfaced is that the scheme, which 
centralised the IT operations of government agencies into a few enormous 
operations, effectively excluded local companies from winning contracts and 
restricted the competition to international IT firms.

Not long after implementation of the scheme, the Department of Trade and 
External Affairs was exempted from compliance with it, presumably after 
complaints from foreign governments that they were not willing to have 
confidential information about international relations put at risk, even if 
the Howard Government was.

Last year the CSIRO complained in confidential documents that the scheme 
posed a considerable risk to its reputation as "an impartial and 
trustworthy source of scientific information and advice".

The scheme would also have put at risk the confidentiality of records held 
by Centrelink on millions of Australians.

The Auditor-General's review concluded that outsourcing in this area had 
such potentially significant consequences which, "if not adequately 
managed, especially at transition, (the risks) could lead to a substantial 
impact on individuals, the community at large and the broader economy."

Undaunted, the Minister then ordered a full review of the scheme, only to 
have the review (the "Humphrey Report") confirm these adverse conclusions, 
much to his horror.

After receiving the report he is said to have claimed that the scheme would 
have worked fine but for "the reluctance on the part of agencies to accept 
government policy".

Public service unions, however, are pleased with the report, which they see 
as reflecting their own concerns about the scheme.

The National President of the Community and Public Sector Union, Mr Matthew 
Reynolds, commented: "We were pleasantly surprised at the independence of 
the review."

As a result of the release of the report current tenders for outsourcing 
work have been frozen.

These tenders involve Centrelink, the Department of Family and Community 
Services, the Department of Education, Training and Youth affairs, the 
Treasury and the National Library.

It is expected that most federal government departments will now be given 
the formal option to continue their own in-house IT operations. Some or all 
of the IT contracts which have already been let may be suspended.

However, the situation is not all sweetness and light. The Minister has not 
been sacked, nor is he likely to be, and despite the damage to the 
Government and the strained relationship between Fahey and the PM the 
Government remains committed to handing over its IT work to the private 

It will undoubtedly pressure agency heads to conform to that policy.

Once Fahey had recovered himself, after the release of the Humphrey report, 
he jauntily remarked: "All that's changed is that the policy is not going 
to be centrally managed." And that spells more bad news for the taxpayer 
and for government employees.

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