Nor did all agencies handle issues of staff transition adequately. Many former staff were left with a sense of betrayal and feelings of being unappreciated. Some agencies - including the Department of Veterans' Affairs and the Health Insurance Commission - did all the right things, including communicating well about the future of staff and using the clean break system. In most cases, staff in these agencies were reasonably well aware they would still have a job.

However, one agency promised on its formation that it would never outsource then broke that promise. It promised staff would be retained despite the outsourcing, then broke that promise. It promised it wouldn't outsource anything else, then broke that promise.

"What all that does is builds up what they call ‘survivor shock', which means that the people who haven't yet been outsourced promptly expect that they will be next, despite what management are going to say. They are either going to have problems of stress and morale and they leave. Good people, not just from IT but right across the organisation, will start to leave as soon as they can. And these agencies are now starting to pay the price."

What Auditor-General Barrett did correctly focus on, Lewis says, is the importance of maintaining the capability for contract management. Without good contract managers in the agency, and good account managers within the outsourcer, you're in serious strife because you're dependent on the contract to maintain the relationship.

"Even if you're in a partnership, that contract is important because the organisation becomes really vulnerable to that link between contract management and account management," says Lewis. "And it's certainly my experience there have been some agencies with less than adequate contract management skills, and some vendors with less than adequate account management skills."