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Shared services: efficiency or softening up for outsourcing?

It’s too early to tell if the Commonwealth’s new Shared Services Centre will be the panacea of costly machinery of government changes, or a flash in the pan destined to be wiped out in the next ministerial reshuffle. The first report of its progress was released this month, and its clients list is growing.

Born of the decoupling of the super-department of Education, Employment and Workplace Relations in December last year, the SSC remains legally and practically part of both Education and Employment — an exercise in Clayton’s outsourcing and a test of the Commonwealth’s contestability chops. The SSC was tasked with maintaining the existing economies of scale gained from DEEWR’s previous merger of corporate and IT services, and kept more than 600 employees shared across the two founding departments.

For now, the SSC is only providing services that were previously in place for DEEWR, but has already pitched itself to other agencies as an innovative, efficient and low-risk alternative. Education’s first SSC report explains:

“By setting up the SSC the departments aim to avoid extra costs by maintaining existing economies of scale and enabling a focus on synergies and process efficiencies that will, over time, deliver better services at reduced cost.

“The provision of services through a shared service arrangement is not new to public sector administration; there are significant lessons to be learnt from other jurisdictions in Australia and internationally.

“As well as continuing the business of providing services to customers, the SSC is focusing on a range of separate projects to develop and define how it works. The projects include the provision of risk and business model plans, customer, people, finance and recruitment policies; and a service catalogue.”

DEEWR’s 2012 experiment “Parliamentary Workflow Solution” could be seen as a shared services canary of the SSC’s progenitor. The whole-of-government scheme to manage parliamentary document workflow across agencies and ministers was planned as a five-year project covering 41 agencies. To date, more than 15 Commonwealth agencies have had PWS fully deployed, in addition to lead agency the Department of Finance. A further 15 agencies have begun transition.

The system has already processed more than 35,000 records, and been shortlisted as a finalist for the Excellence in eGovernment Award in 2014. The SSC is continuing this rollout as one of its 16 current projects.

Another of its pilot projects could be critical for departments that deal with high volumes of information or transactions. The centre is trialling SAS Visual Analytics as a tool to manage, share and analyse large amounts of data, spotting patterns and improving the department’s advice to government. The intent is to provide solid evidence for program design changes in real time rather than just reporting on the past.

In the status update this month, the SSC reported two sites have already shown significantly faster production of complex reports and more sophisticated use of available data, “such as using trend data and undertaking risk profiling to target possible cases of fraud”.

The SSC’s other projects include:

  • A pilot of mobile computing tools to provide access to key business applications for employees away from the office;
  • A pilot of cloud computing in situations where privacy and performance constraints allow;
  • An upgrade of performance monitoring of IT services; and
  • An upgrade of the secure IT environment used by employees to collaborate on “protected” classified materials.

Two months ago the SSC acquired its own chief executive, Delaine Wilson, who previously established shared services for Auckland Council and New Zealand Post. Wilson declined an interview request from The Mandarin.

Whether the SSC can genuinely create new efficiencies and innovation, or just repeats the experiments of the past, is hotly contested. If these services can be separated from the department, why can’t they be outsourced from government altogether?

Chris Aulich, professor in public administration at University of Canberra’s Institute for Governance and Policy Analysis, says the shared services experience is still relatively undocumented compared to Australia’s experiences with privatisation of public sector back office services. Former Finance Minister John Fahey “got it wrong” on whole-of-government IT outsourcing, for instance, as governments tended to confuse the drivers of efficiency gains.

“In the end it is about regulation, competition and contestability rather than ownership,” Aulich told The Mandarin.

Aulich offered four principles of outsourcing and contestability:

  1. If environments are not contestable or competitive, then it is unlikely that savings can be made and/or quality is retained or improved.
  2. Cost savings should not, by themselves, be a criterion for judging success because savings can be at the expense of quality or, worse, client/citizen responsiveness.
  3. There is considerable evidence that the reorganisation in preparation for outsourcing can be as effective in improving services as the actual outsourcing itself.
  4. There is no evidence that ownership accounts for differences in performance between public and private providers — differences that do exist typically relate to the task asked of public providers (eg Australia Post’s universal postal rates) or the regulatory environment in which the organisations operate.

Author Bio

Harley Dennett

Harley Dennett is editor at The Mandarin based in Canberra. He's held communications roles in the New South Wales public sector and Defence, and been a staff reporter for newspapers in Sydney and Washington DC.