WA shared services under scrutiny
The path to shared services is rarely smooth sailing. In April this year, the WA Department of Treasury and Finance and its service provider picked up an award for ‘Excellence in People and Communication’ at the Shared Services and Outsourcing Network awards. ASG runs the entire shared services delivery program across the whole of government in WA, including application support for all back office activities such as HR, payroll and financials, with infrastructure housed in its data centre.
But despite the award, an inquiry into the costs and benefits of shared services in the public sector by the Economic Regulation Authority (ERA), the independent economic regulator for the state, found the Department of Treasury and Finance Shared Service Centre (DTFSSC) is not operating effectively or efficiently under the existing setup.
“Without substantive reform the effectiveness of the DTFSSC is likely to deteriorate further as more agencies are serviced,” the report reads. “Rolling-in to the DTFSSC has had a detrimental impact on the operations of the majority of rolled-in agencies.”
WA State Government Premier, Colin Barnett, announced the state will move to disband share services across agencies entirely. Shared services were initially introduced in the state in 2003, which were estimated to provide savings of $56.6 million each year through the consolidation and standardisation of “back office” functions including finance, human resources, payroll and procurement across the whole-of-government.
The ERA report found that shared services in the state had to date delivered a net present value of $345 million to the WA Government between 2005-06 and 2010-11. As a result, rolling-in additional agencies under the current arrangements would be unsustainable and without benefits.
“The Authority examined a range of approaches, including continuing the current arrangements, providing HR/payroll services through an alternative provider or by agencies, and decommissioning,” the report reads. “The Authority concluded that decommissioning DTFSSC is the least cost and most certain option for delivering corporate services, across a range of assumptions.”
- The DTFSSC is not operating effectively or efficiently under existing arrangements;
- Without substantive reform the effectiveness of the DTFSSC is likely to deteriorate further as more agencies are serviced;
- Rolling-in to the DTFSSC has had a detrimental impact on the operations of the majority of rolled-in agencies;
- As implemented thus far, the provision of shared services within the public sector has resulted in a net cost to Government. Between 2005-06 and 2010-11 the DTFSSC component of the project has delivered a net present value of −$345 million; and
- Rolling-in more agencies under the current arrangements is unsustainable, as it would result in a net cost to the State, rather than a net benefit.
Read more about shared services in Australian government in shared services navigate a rocky road.
ASG’s general manager for sales and delivery, Murray Rosa, had said the award, for a service that has been running for five years using Oracle’s eBusiness Suite on IBM infrastructure, was a fitting reward for a lot of hard work.
“The program is getting to a point now of returning some real benefits and you can see the light at the end of the tunnel,” he said.
Rosa agrees that it is important to take into account the individual complexities and differences that arise between agencies. To date, 56 agencies have been rolled into the program, with another 30 remaining. The arrangement has survived two reviews before the current ERA report.
“The challenges that Queensland has had with its program has fuelled the constant scrutiny on that initiative,” Rosa said.
Read Part 2 - Government shared service layers.
Additional reporting by Chloe Herrick