Why public service IT salaries must rise to meet Morrison's service delivery vision

When David Thodey hands down the root-and-branch review of the Australian Public Service to succeed the Coombes review, there will be a raft of recommendations for collaboration, modernisation and automation.

But for all the great insights, intents and suggestions that Australia’s public and its bureaucracy will receive from the nation’s nerd-in-chief, one stubborn factor ultimately dictates whether the big service delivery uplift demanded by Prime Minister Scott Morrison this week will materialise.

That factor is labour, and the rising price of recruiting and retaining tech talent across the APS.

There’s a growing gap between public sector pay rates for tech roles and those of the private sector, especially banks, services companies that have gone digital and even mining and infrastructure.

It’s a persistent problem that’s been hobbling innovation in government for at least 10 years, the stop-gap being hiring of contractors or hiving-off ‘project’ work to systems integrators and IT services firms, who then compete directly against government for the same talent.

(There are also some pertinent geographic factors too, namely the Canberra ‘loading’, but these have always existed, and are far from restricted to IT professionals).

This week Morrison confirmed the push to modernise public services using technology will continue, even accelerate. He has a mandate and is not afraid to use it, not to mention political capital to spend.

The question is whether he’ll be able to source permanent tech talent and leadership renewal at a price the Department of Finance and the Australian Public Service Commission can stomach, or be forced to swallow.

The abrogation effect

The history matters here, because the road to where we are today is punctuated with the wrecks and shallow graves of well-intended initiatives and measures that have created a sub-optimal outcome for taxpayers and governments alike.

Any hard-headed insight into why so many parts of the federal government have struggled over the last three decades in terms of systems and capability upgrades, especially public facing ones, can largely be traced to decisions made in the mid-1990s to divest internal tech capability.

In politics there’s always someone to blame, but the reality is big bang outsourcing for the most part had early bi-partisan support federally and it soon spread like a bad rash across banks and major corporations.

Many organisations, like the government, have since rued their divestment mania and spent years rebuilding internal strategic and operational technology capability rather than seeking to buy it as a low-cost commodity.

The Commonwealth Bank and Westpac are two key examples.

Importantly, the decision to pursue ‘Whole of Government’ outsourcing would, within less than a decade, render crucial parts of the government’s tech estate largely devoid of internal tech development capability and make them captive to major vendors and outsourcers.

Exodus

Notably, some larger agencies rebuffed the wholesale outsourcing push on the basis such a move was too risky - including Defence, Social Security (Centrelink) and Health (Medicare). And they were right.

But Tax, Customs, Immigration and dozens of other agencies in clustered groups all wound up in the hands of multinationals like EDS, CSC, Telstra and a raft of other smaller competitors.

The hallmark of this great push was a wholesale forced exodus of essentially a generation of computing infrastructure, architecture, programming and design talent that had been quietly building up over 15 years.

The grey beards took their redundancies and headed to the South Coast or their bush blocks. The middle-agers found their jobs transitioned into outsourcers, albeit often with public sector conditions and entitlements coming along for the ride, to the frustration of their new bosses.

What younger talent remained just left Canberra or drifted into safer parts of the public service, especially after the 1996 change of government resulted in widespread labour shedding across the APS under a public service chief know lovingly as Max the Axe.

For many tech professionals, Canberra literally became a fly-in, fly-out contracting town. There’s a reason why you see SAP billboards as soon as you come off the airbridge at the airport.

Left behind

By the early Noughties, as the dotcom-era internet morphed into Web 2.0, ministers and their agencies realised they were being left behind, and so was core government infrastructure.

With major IT firms holding the whip hand on labour supply, the result was a cycle of ‘big bang’ upgrade projects like the ATO's Change Program, Customs’ Integrated Cargo Management System, Immigration’s Systems for People and Treasury’s Standard Business Reporting, which has since begat the single touch payroll.

As cost blowouts, delays and functional problems abounded, John Howard’s public service chief Peter Shergold winced at the capability gap and started trying to restore some level of coordination and capability.

The dotcom-esque National Office for Information Economy, in what was the Department of Communications, Information Technology and the Arts, was chopped off and sent to the hard heads at the Department of Finance under the newly formed Australian Government Information Management Office (AGIMO).

Frustrated with the effects of outsourcing and the lack of electronic service delivery, Shergold in late 2006 observed that agencies needed to start enabling online transactions rather than spending millions on largely static websites. But his days at the top were numbered.

AGIMO’s big chance to shake things up came in 2007, with the election of the Rudd government and a wholesale review of the tech estate and who held it.

The result was the Gershon review, a thoroughly underwhelmingly piece of imported managerialist claptrap that was so shallow in terms of its technical understanding of computing and networking it completely missed the emerging megatrends of cloud, mobility and web services.

Mind the gap

Gershon, however, did identify a skills gap while nosing around why so much public money was going to contractors that the government wanted to cut off the payroll.

Worse still, agencies competed for the same limited labour pool, driving up contractor prices.

AGIMO suggested the creation of IT apprenticeship programs, but did so at a time when rapid growth in the corporate and consumer tech sectors was running so hot that local supply was often exhausted and had to be augmented with the 457 visa scheme.

It was hardly an executive fast track either.

Although volatile, often lumpy, the price of contemporary local tech skills started to rise, with mid to senior corporate IT management roles, especially in finance, racing away from anything comparable in government.

In banks, CIOs were stating to command million dollar salaries. The most senior public service roles didn’t even come near. The public-private IT pay gap soon morphed into a chasm.

Unfettered by APS pay grades, contractors and consultants continued to fill the void, and their pockets.

AGIMO later conceded that with a raft of major government projects underway, Commonwealth agencies might also need to use the 457 visa scheme given that outsourcers and vendors were themselves importing labour.

It was not a very palatable option for a Labor government propping up the economy with make-work schemes in the face of the GFC.

Centrelink’s circuit breaker

Policy development and attention fell off after agencies and industry threw the Gershon review back at its makers, with Centrelink questioning why a long data centre moratorium was needed as it struggled to keep its ageing shed in Bruce powered-up.

When a sub-station transformer near Centrelink’s data centre fried itself and the agency’s mainframes were without power from the grid, its CIO John Wadeson made the prudent call to ram through a pension and welfare payment batch run early to make sure people would be paid.

On Capital Hill, the penny dropped that urgent investment in welfare technology renewal was now an urgent matter, data centre buying ban or not.

As Labor oscillated between leaders, the seeds of WIPT and far wider adoption of cloud were sown. In the space of a year, a data centre drought became a goldrush.

Abbott kicks, Turnbull dreams, Shorten flops

And then came Tony Abbott and the Commission of Audit that observed a lot of money could be saved by automating large parts of the welfare system.

Not a major fan of technology, the PM - who once professed he was “no Bill Gates” - tasked business ally Tony Shepherd with identifying inefficiencies. Shepherd found plenty, but also noted Centrelink’s dated infrastructure and architecture were holding back automation.

The McClure report into the operation of the welfare system, also commissioned by Abbott, observed the welfare system’s business rules and processes were essentially a hairball and needed to be pared back to basics.

(Whether Morrison will bite that welfare system simplification bullet is an open question, but his description of WPIT in public as a “beast” demonstrates he appreciates it.)

With Turnbull taking the government’s tech policy reins, first as minister and then as leader, the notion of digital, tech-enabled government seemingly overnight went from a third order issue to the main game. ‘Innovation fatigue’ became an APS meme.

Turnbull’s approach, exemplified by the Digital Transformation Office, later the Digital Transformation Agency, was radical, fast and highly ambitious.

It also parachuted in overseas talent, namely Paul Shetler, who was not hostage to the public service’s internal network politics and resistance to rapid change. If Gershon was disliked, Shetler was loathed by change-resistant parts of the APS, especially in the welfare fiefdom.

The Commonwealth’s great digital rehab program lasted less than a parliamentary term at policy top billing, oscillating through as many leaders and ministers as the Coalition as along the way.

Life after the DTA

Public servants joked that DTA had been put on the ‘unattached list’: where bureaucrats are sent when their agencies or roles are abolished before another permanent home for them can be found.

DTA has now landed in the belly of Morrison’s ‘beast’, the department formerly known as Human Services.

Along the way though, DTA scored one of the most capable tech leaders the APS has produced in recent time, Randall Brugeaud, who courageously accepted the hospital pass to lead the DTA as its chief sponsors in the executive branch departed.

Brugeaud had been slated to lead a major tech and data overhaul at the Australian Bureau of Statistics, but in the spirit of true public service took one for the team to stabilise a rudderless ship.

Personable, committed and pragmatic, he is viewed as a potential Secretary material because of his discipline, foresight and technical aptitude, not just across technology but agency operations.

Like Matt Yannopoulos, the former Defence CTO who is now COO at Health, Brugeaud has a bright future ahead of him irrespective of whether he stays in the public sector or heads across to private enterprise to earn a market competitive wage, like the RBA’s former CIO Sarv Girn.

The problem is Morrison doesn’t want a couple of dozen of tech practitioners of the calibre of Brugeaud, Yannopoulos or Girn; he wants literally hundreds if not thousands of them and he wants to bring them from outside the APS.

The PM rammed this point home hard during his APS address this week, advocating for an injection of “mid-career” talent entering public service ranks from the outside to bolster the APS gene pool.

“We need the public service to be more open to outsiders,” Morrison chided, saying that for the public service to succeed it must “draw from more points on the compass than those who have only ever worked in the public service.”

“The APS needs to be world-class at collaborating with external partners on all the challenges we face as a country – everything from grasping the productivity opportunity of the digital economy, to ending the export of waste to using Big Data to dramatically improve service delivery,” Morrison added.

“While some of our brightest minds will want a lifetime career in the federal bureaucracy, many of you here, many Australian’s won’t. And we need to find ways for smart, dedicated Australians to see a stint in the public service as part of their career journey.”

The man now leading the the strategy development taskforce for Service Australia, Martin Hoffman, is one such creature, having migrated from being the chief of digital media play ninemsn to Prime Minister and Cabinet a decade ago.

Hoffman was most recently the secretary of the New South Wales Department of Finance, Services and Innovation, the device delivery reform model Morrison is trying to transplant into Canberra.

Hoffman is familiar with the notion of the Canberra bubble, taking a dig at it two years ago.

"Now I work in NSW I realise that Canberra doesn’t matter,” Hoffman joked in a 2017 speech. 

"The need for external perspective, fresh thinking and cultural diversity appears to a blessing for NSW.

“I joke, respectfully among my friends in Canberra, that there is a risk of hereditary caste of Commonwealth public servants,” Hoffman said.

“Their grandparents moved to Canberra, they had children that became public servants, they had children that became public servants in the Canberra bubble … it’s a beautiful place.”

“I think some greater churn is important, in NSW you get that,” Hoffman said.

Lesser known is that NSW public servants are often better paid than their federal peers.

And in the area of technology, agency chiefs have the ability to go above pay bands to hire the talent they need in a competitive market. Joining the public service does not mean taking a vow of poverty.

A degree of pay parity for technology skills on par with private sector could go a long way to fulfilling the laudable aim of cross-fertilisation, especially if the government is hoping to pull-in decent customer experience and transactional talent.

A public sector pay boost would also likely save money because efficiencies would be realised faster.

Just imagine if Centrelink actually paid out the right money the first time round so that it didn’t have hire a phalanx of debt collectors to hound money out of often vulnerable people with an error rate often as high as 20 percent.

Now that really would be a service delivery revolution.