Services Australia IT contractor costs double in two years

Services Australia has almost doubled its spending on IT contractors in the past two financial years, pushing the yearly cost of its external tech workforce past the $500 million mark for the first time.

Answers to questions on notice from senate estimates reveal IT contractor costs at the former Department of Human Services have ballooned from $257.8 million to $513.9 million since 2016-17.

In the last financial year alone, the agency’s spending on IT contractors soared by 35 percent or $178.5 million – its most significant increase since at least 2013-14.

The new data, which was published several weeks late and only after iTnews highlighted the agency’s tardiness, confirms that the government’s outlay on IT contractors surpassed $1 billion last year.

As revealed by iTnews last week, IT contractor spending increased by $226 million at 35 non-corporate and corporate agencies in 2018-19.

Taking both this data and Services Australia’s spending figures into account, IT contractor costs across the government climbed by at least $404 million last year.

Services Australia joins the long line of agencies, including the Department of Home Affairs and Department of Health, which have doubled their IT contractor spending in recent years.

The significant surge in spending comes as the agency reaches the half-way point in its billion-dollar welfare payments infrastructure transformation (WPIT) program, which began in 2015-16.

One of the biggest IT projects across the government in several years, the program is reforming Centrelink’s payments system, including the underpinning income security integrated system (ISIS).

Another project that could explain this significant increase in IT contractor spending since 2015-16 is the essential remediation work to shore up the country’s legacy Medicare payments system.

At more than 30 years of age, the system is increasingly temperamental, with the number of outages and technical problems increasing year-on-year. It will reach end-of-life at the end of this year.

Only once in the last six years have the agency’s external contractor costs fallen when the figure fell from $353.3 million in 2015-16 to $257.8 million in 2016-17.

Prior to 2015-16, the agency averaged $183.7 million on IT contractors between 2013-14 and 2014-15.

Services Australia has also revealed that its IT contractor workforce is now a similar size to that of its internal IT workforce.

The department said that a total of 3230 IT contractors had worked at the department over the course of the 2018-19 financial year. Together, the contractors worked almost 3.49 million hours.

In late 2019, Services Australia revealed that it was restructuring its chief information officer group for the second time in less than a year.

The CIO group “operating model redesign” comes as the agency prepares to take up a new digital-first, one-stop shop government model.