Incompetence as virtue
The traditionally staid Institution of Engineers Australia has identified
a trend in government: once you get rid of people with specialist technical
skills, you make mistakes which could have been avoided.
This is bad news for both the current Coalition federal government and
the Labor opposition, both committed to massive “outsourcing” of key areas
of technical knowledge based on the claim that it provides substantial
savings.
Outsourcing was well and truly in place by the time of Labor's federal
election defeat in 1996. In the information technology (IT) field, Labor
had identified $1 billion in savings, which it planned to make over five
years. The alternative Coalition policy was to make the savings in three
years.
The claimed potential $1 billion in savings was based on one submission
to a review of IT expenditure in the early 1990s. This was then loudly
proclaimed as fact. Ironically, the release of the review's report coincided
with a downturn in IT expenditure of hundreds of millions of dollars a
year, so according to one view the savings were actually achieved almost
immediately, by simply spending less.
IT services can be, and year after year are, delivered more cheaply
by applying new technologies and methods. So, when a potential outsourcer
promises to deliver existing services more cheaply, they are just announcing
what will happen in any case.
Despite this, the cost of IT services constantly rise because of rising
expectations for information technology reducing jobs and costs. In the
government arena this means that the cost of providing a particular service
may fall each year, but more and more services are demanded.
Based on its pre-1996 election promises, and the desire to hand over
profitable enterprises to its big business friends, the federal government
continues its search for the $1 billion saving. It even has an agency devoted
to this, the Office of Asset Sales and Information Technology Outsourcing
(OASITO).
The health sector is a case in point. For months, the IT departments
of health and aged care and the Health Insurance Commission were decimated
as many dozens of staff were forced to spend thousands of hours taking
part in OASITO activities. Three companies, IBM, EDS and CSC submitted
tenders for the deal worth hundreds of millions of dollars. Everyone knew
it was IBM's turn to win.
Keeping the services in-house was not an option, even if it could be
proven cheaper. Once the evaluation was completed, the whole process was
held up while the government cooked the books to add an extra few tens
of millions to the alleged savings from the deal.
In practice, these deals probably add 30-50% to the cost paid by the
government for information technology, although commercial confidentiality
will prevent real figures emerging. While the government continues to claim
to be delighted at the pretended savings, the outsourcing industry itself
changed tack a couple of years ago and stopped mentioning cost savings.
Instead, it started to focus on less measurable benefits.
The outsourcers' business model is to take over services for some organisation,
get rid of a chunk of the staff and then get the rest to do the same amount
of work. What actually happens is that as soon as IT staff get wind of
outsourcing, those with the most marketable skills leave. These tend to
include the top technical specialists. So EDS, which won the South Australian
government contract that began the Australian outsourcing trend, has to
hire contractors to meet its basic contract obligations.
Outsourcing or not, they still need to find workers to do the work.
By Greg Harris
