WA's GovNext IT buying scheme overstated savings

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WA's GovNext IT buying scheme overstated savings

Auditor finds savings model 'unrealistic'.

The WA government’s transformed IT buying regime GovNext has come under fire for overstating proposed savings and ignoring the concerns of agencies.

The state’s audit office today released its long-awaited review [pdf] into the implementation of GovNext-ICT, revealing serious misgivings over the program’s underpinning value assumptions.

GovNext was established by the former Barnett government's Office of the Government Chief Information Officer (OGCIO) in 2016 to transition agencies from an owner-operated IT model to a consumption-based approach.

It was pitched to save as much as $80 million each year, whereas the cost of continuing to own and operate infrastructure was estimated to be $3 billion over the coming 10 years.

But today auditor-general Caroline Spencer found that while GovNext will deliver savings to government, these would be less than what was originally stated in the business case.

The finding is sharply contrary to the largely positive independent review of the GovNext infrastructure overhaul earlier this year, which found the program was generally well-planned and the business case strong.

The latest audit reveals that “assumptions used to develop the business case did not fairly reflect agency ICT services or pricing, and presented a best case picture of potential savings”.

It said the business case had estimated annual savings of up to $82.3 million if agencies ‘transformed’, but “recognised that this model was unlikely to be fully adopted”. 

A conservative figure of $68.4 million was also given if agencies were to partially ‘transform’.

Some of the savings gaps are yawning in proportional terms.

Agencies that purchased network services, for instance, achieved average annual savings of 22 percent instead of estimated savings of between 37 percent and 46 percent.

Even the basis for these savings were sharply criticised, because the OGCIO “created an unrealistic view of potential savings” by using “the least expensive quote to estimates costs for cloud and the majority of network service areas”.

In many instances agencies have ended up paying more for GovNext services than first estimated.

The audit also highlighted that agencies see barriers to the program, partly because of their lack of understanding about the benefits, which has resulted in low take-up rates.

Trust does not appear to be in abundance.

“Many agencies we consulted are reluctant to buy services while several barriers to adoption remain unresolved, including advice and assurances around security and service continuity,” the audit states.

The audit said this was because initial planning and ongoing engagement had focused largely on savings, with “the potential to deliver other benefits was only partially explored with agencies”.

Responding to the findings, the Department of Premier and Cabinet – the now home of the renamed Office of Digital Government – agreed that the program would not reach the savings first envisaged.

“There is now little double that the projected $65 million savings over three years, which were claimed in 2016, will not be achieved,” it said.

DPC said it recognised the limitations and had already “taken a number of steps to improve the government of GovNext and increase the rate of adoption by agencies,”

This includes repositioning the Office of Digital Government to respond to and resolve agency concerns to overcome what it described as a “culture of resistance” to the program.

“This contrasts with previous perceptions of the former OGCIO, which (to a greater or lesser extent) was viewed by agencies as driving a very firm agenda of implementation, without full regard to their day-to-day operational concerns,” it said.

“This approach has arguably resulted in a culture of resistance to GovNEXT ICT across some parts of Government.”

The audit has recommended DPC recalculate expected savings from the program by the end of this year, including proving that “benefits exceed the costs of migration to this model”, and better educate agencies on the benefits of the program.

DPC has agreed to all recommendations.

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