SA shared services to fall $85m short of savings target

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SA shared services to fall $85m short of savings target

Five years on, no return on investment.

The South Australian government’s shared corporate services scheme has yet to return a dividend to the budget in the five years since it launched, despite originally targeting $190 million worth of savings between 2008 and 2011.

Shared Services SA was born during the 2008-09 budget, as a measure to rationalise IT, payroll, finance and procurement services in the state’s public sector.

The SA Department of Premier and Cabinet’s (DPC) own budget figures claim to have returned $229 million through the Shared Services South Australia (SSSA) program as of 30 June 2013.

But in his latest report to parliament, the state’s Auditor General Simon O’Neill took issue with the calculation and said a significant portion of the savings were not directly related to the shared services reforms, but have been conveniently added to its budget figures regardless.

One example is the $25 million to $27 million saved each year from a whole-of-government ICT efficiency program, which began 12 months before SSSA.

“Those savings were attained without any transition or reform activities occurring,” O’Neill said.

Savings that can be directly credited to shared services reforms, which include the whole-of-government roll-out of eprocurement and the consolidation of payroll, accounts payable and finance functions, are shown to have generated just over $53 million as of 30 June 2013.

This means the government has yet to break even on its implementation spend of $86.5 million.

“To 30 June 2013 the cost of reform has exceeded the savings achieved through the shared services reform process,” the report states.

Current projections suggest savings are expected to fall $83 million short of targets by 2014-15.

Even though the scheme is anticipated to start clawing back some financial ground in the coming years, the DPC concedes that by 2016-17 it will still be $85 million below the original target of nearly $560 million that was due to be achieved nearly ten years after commencing.

“This indicates that the savings benefits of the shared services reform process can be substantial, even though it has taken several years to realise and much longer than anticipated when the reform process first commenced,” the report stated.

Despite the uphill battle, however, the Auditor-General has encouraged the government not to give up momentum on the project.

“The return of unspent implementation funding for SSSA may indicate that the government considers the reforms are substantially complete. I am of the view that there is still considerable reform required in terms of system and process rationalisation,” he warned.

Other states have recently begun the process of dismantling their own shared services organisations (QueenslandNSW and Victoria) due to underperformance, in favour of a move to outsourcing.

No relief from Health’s Oracle pain

In the same report, the Auditor-General offered a bleak update on the SA health department’s efforts to get its new Oracle financial system implementation back on track.

Started in 2010, the roll-out of an integrated ledger system based on Oracle software was supposed to be completed by the end of that year for $22.9 million.

In December Health added a third phase onto the still unfinished project, and revised the budget up to $62.5 million.

This “significant” cost increase has been put down to “an underestimation of the magnitude of the change and work required to standardise historical practices and processes, and an inadequate cleansing of data on conversion from the legacy systems into the [Oracle Corporate System]”.

Original budgets also failed to take into account the upgrade of servers, operating systems and data networks that would be required to run the new OCS database.

The delayed roll-out is also beginning to threaten the state’s biggest IT project, the Enterprise Patient Administration System (EPAS), which will become the foundation of SA’s input into the nationwide Personally Controlled Electronic Health Record.

The implementation schedules of EPAS and OCS are being re-coordinated to avoid parallel transitions within the same health site at the same time. 

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