The $484m all-you-can-eat digital deal for Human Services

By Tom Burton

Friday March 11, 2016

Canberra’s mega Department of Human Services has signed an innovative five-year, $484 million technology and services deal with IBM that lets the agency choose from a broad portfolio of services, products and expertise, rather than pre-described specific deliverables.

The procurement agreement is the first of its kind worldwide and provides the department with flexibility to consume products, services and expertise through a capacity on-demand model, supporting DHS’ major ICT transformation program. DHS includes the Department of Social Services and the Department of Health, as well as Medicare, Centrelink and the management of the child support program.

“The IBM agreement creates far more flexibility for the agency to exploit the depth and capabilities [of IBM] …”

The portfolio is undertaking a major transformation shifting users to digital platforms as well as replacing its creaking welfare platform that carried $166 billion in payments last year. The portfolio managed 124 million self-service transactions and engagements in 2014-15. Former ANZ bank CIO Gary Sterrenberg (pictured) is leading the major ICT overhaul.

This agreement does not cover the actual replacement of the payment platform (known as the Welfare Payments Infrastructure Transformation program, or WPIT). A tender for an off-the-shelf system is being evaluated for this platform. Some $60 million has been allocated to support the first tranche of this work.

“The Department of Human Services has a culture and record of innovation that we are proud of. We are always open to sharing our learnings with other government departments – both here and overseas,” DHS CIO Sterrenberg said.

“This innovative and flexible agreement allows the Department to use products, services and expertise through an on demand model. It ensures value for money for government in maintaining the Department’s existing spend with IBM, with the opportunity to realign technology and services to areas which provide better outcomes for our customers over the five year term. ” 

“The ability to adapt to rapid changes in technology is critical for future technology transitions, catering for our future business requirements. The full integration between IBM’s software, hardware, and support will play a major role in the roll out and improvement of apps, engagement channels, and other digital services. The Department is now in the unique position to use and change our current commitment to IBM products at any time to reflect our evolving business environment. We also have the flexibility to remove technology services to repurpose funding to more critical initiatives.”

The IBM agreement creates far more flexibility for the agency to exploit the depth and capabilities of the big American technology services firm rather than having to specify up front the actual product or service deliverables.

Cost and time blowouts are notoriously common in large government ICT contracts, with the Victorian Auditor-General, Dr Peter Frost, this week finding major problems across numerous agencies. Frost identified one contract for a new infringement system by the Department of Justice and Regulation that had to be cancelled after six years and a $60 million spend.

Much of the contracting problem comes from the traditional procurement system, which pushes agencies to have to tightly specify up front their requirements so they can be tendered in the open market and then have to make costly amendments to the contract to cater for changed requirements as these evolve during the delivery phase.

‘Redefining human services’ with cognitive

“Through our partnership,” IBM Australia and New Zealand managing director Kerry Purcell explained, “DHS will redefine human services for the cognitive era — delivering more accessible services for all Australians, and using these interactions to inform a new wave of public sector digital innovation.”

IBM itself is undergoing major change, with a $4 billion investment over the last 18 months into the health sector and a slew of acquisitions in the cybersecurity space. It also is focusing strongly on analytics using cognitive computing (self-learning computers) to create intelligent services and capabilities such as large-scale image reading, voice recognition and drug testing . IBM has also partnered with Apple and has rapidly developed over 100 enterprise productivity apps which connect back into enterprise systems.

IBM has based one of its 12 global research labs in Melbourne with a strong focus on the use of cognitive computing to help oncologists stay on top of the nearly 50,000 new research releases each year.

The deployment of large-scale cognitive systems promises to radically change the nature of government, enabling agencies to identify and much more sharply focus on the key drivers which underpin major social problems, as well as using smart analytics to aid areas such as emergency services and public safety. The Victorian emergency services are considered world leading in their use of cognitive computing and analytics to better deploy services. The Department of Immigration and Border Protection is also piloting the use of predictive analytics to identify early suspicious activity and entrants.

New South Wales has built a new data analytics centre and has a dozen data-led projects now under way, overseen by the newly appointed chief data scientist, former CSIRO executive Ian Oppermann. NSW passed pioneering legislation late last year to enable agencies to better share data for managing problems that typically cross multiple portfolios, such as children at risk.

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