Report: Gershon cuts deeper for some

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Report: Gershon cuts deeper for some

Reinecke report recommends changes for AGIMO.

IT spending cuts triggered by the Federal Government's response to the Gershon report were far from even across agencies, according to the text of the Reinecke review into the program, released today by Special Minister of State Gary Gray.

The report [PDF] also recommends a clearer and more effective role for the Australian Government Information Management Office (AGIMO).

The Reinecke review revealed the havoc that confronted several agencies when required to implement the recommendations to achieve Gershon's proposed savings.

Estimates generated from the application of savings targets (15 percent from large agencies and 7.5 percent from small agencies) were predicted to generate about $140 million in total cost savings in the first year and $400 million in the next and subsequent years.

Savings of $1 billion were identified and taken out of agency forward budget baselines through to 2012-13.

Reinecke reported that many agencies found the first round of budget savings relatively easy to achieve as it came from the normal contingency 'headroom' ICT managers allowed for in most projects.

But targets for the second round savings proved more difficult to achieve and invoked different responses from agencies.

The report revealed that some agencies took advantage of a change in methodology between phases one and two to cite "substantial service impairment" as grounds for moderating individual agency targets.

"Four agencies claimed that some of the proposed measures to meet their savings targets would impair service delivery and their targets were reduced accordingly by the Government," the report said.

Reinecke reported that some agencies "gamed" the distinction between BAU [business as usual] and non-BAU spending "as agencies sought to minimise their savings target."

He noted however that "the close involvement of the ICT review teams set up to implement Gershon tended to suppress this temptation."

A number of agencies revealed in Reinecke interviews that they had been unable to fund the savings targets from their ICT budgets and had supplemented them from non-ICT sources.

"The extent to which this practice was widespread was difficult to gauge, but it is contrary to the spirit if not the letter of the Gershon Report's efforts to heighten the efficient use of ICT," he stated.

Ultimately the major variable between agencies in many cases came down to a matter of timing. Those that had only recently reviewed and overhauled their ICT systems and/or virtualised server farms found it hard to cut spending further, whilst those coming to the close of outsourcing agreements found it easier to negotiate lower prices.

Reinecke found that not all agencies expected a positive long-term impact from the cuts.

A common concern was that no savings arising from investment in ICT were taken into account when setting budget targets for agencies.

An anonymous agency CIO commented that "Gershon has taken the CFO view that ICT is a cost centre", a perspective that ignored the role of ICT in underpinning productivity growth.

However, results from findings from data collection and benchmarking revealed that overall expenditure was stable and identified the following trends:

  • Contractor numbers fell by six per cent while agency ICT staff numbers rose by about the same.
  • Software applications dominated agency ICT spending, accounting for more than one third of the spend.
  • Large agencies were about half as expensive as small agencies in end-user infrastructure costs.
  • Virtualisation increased and the unit cost of data storage fell.
  • End user devices grew by five percent per full-time employee, although mobile phone cost per handset use fell by ten percent and there was a slight fall in the ratio of printers per person.

Analysis of ICT benchmarking data for 51 APS [Australian Public Service] agencies for the year ended  June 30, 2009 found that the number of contractor positions had reduced by six percent or 2,783 full-time employees compared to 2,951 the previous year.

Over the same period, the number of APS staff employed in ICT jobs rose by nine percent to 9,633 full-time employees compared to 8,870 the year before.

Reinecke estimated that the contractor reduction program will return $33 million to the budget between 2009 and 2011.


In the wake of the program, Dr Reinecke urged a review of the role of AGIMO.

"A common conclusion drawn from this range of views was that AGIMO did not currently have either the right mix of skills or sufficient resources to cover the full span of its responsibilities from developing policy to supporting delivery," he said.

"The continued implementation of the Gershon Report's recommendations would require AGIMO to have strong business and technical expertise and knowledge of the practical issues faced by agencies. Policy development required a different set of skills that stretched beyond familiarity with business and technology issues."

He proposes the creation of another Government IT czar to be called a "Chief Technology Officer" (CTO) - to work alongside the present Chief Information Officer (CIO). "AGIMO should be more closely integrated with Finance to provide implementation support under the leadership of a Chief Technology Officer," the report recommended.

Reinecke also proposed  the Government CIO establish a dedicated ICT policy unit to support agency secretaries' leadership of the Gershon reform program.

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