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Defence contracts IT overhaul balloons by $40 million

Defence contracts IT overhaul balloons by $40 million

New IT system to be delivered five years late

© Commonwealth of Australia, Department of Defence

© Commonwealth of Australia, Department of Defence

A project to overhaul the IT system used by the Department of Defence to handle its base services contracts has run almost $40 million and five years over budget, according to a new report by the Australian National Audit Office.

The development of the integrated IT system, the Garrison Estate Management System (GEMS), charged with facilitating the planning and delivery of Defence estate maintenance contracts, was approved by the government in December 2010, with a total budget of $121.29 million.

The new system was proposed as part of a broader Defence base services contracts reform program aimed at delivering around $20 billion in savings by consolidating numerous regional contract procurement processes.

The funding allocation included a capital acquisition budget of $84.39 million, $20 million in net personnel and operating costs for sustainment for 10 years, and contingency of $16.9 million.

Since 2010, however, the total project budget has increased to $135 million, and Defence currently expects the new system to be deployed nationally at the end of 2017, five years late.

Now, the Audit Office says that the Department of Defence has not effectively implemented the planned Estate Management IT system.

When additional project costs and other costs are taken into account, upgrading the system has cost the taxpayer $39.81 million, or 32 per cent, more than initially planned, according to the Audit Office.

In its report, the Audit Office suggested that the budget blowout and late delivery of the new system is due to additional costs that were not anticipated in the original business case, such as additional computer hardware and software requirements, and the engagement of external service providers.

“The significance of introducing the system to the broader Defence information technology environment was underestimated and resulted in additional work,” the Audit Office said in its report, Design and Implementation of Defence’s Base Services contracts, published on 14 December.

In 2013, Defence internal reporting noted that the reasons for project delays included a lack of understanding of the complexity of the project and the business impacts, inadequate internal stakeholder engagement in the first 18 months of the project.

Defence also flagged that the project was hampered by its project team lacking the required expertise, and sub-optimal contractor performance, which has not been managed effectively by Defence.

According to the Audit Office, at the end of June 2016, Defence had spent and committed $92.7 million to design and implement the new integrated Estate Management IT system, not including Defence Project Office personnel costs.

Additionally, delays to the development of the integrated IT system have cost Defence $26.1 million for the development and maintenance of an interim IT system and reimbursements to contractors, the Audit Office said.

The Department’s interim Estate Management IT system, known as IBIS, remains in use - as does its predecessor, the Defence Estate Management System (DEMS) - but has limited functionality, with the Audit Office saying that the system does not support service providers to effectively communicate the status of work orders to Defence customers, or enable Defence to collect and analyse data relating to its estate and the Base Services contracts.

“The interim system holds key data sets relating to the Defence estate, but it does not provide the functionality promised by the new integrated system,” the Audit Office said.

Among the local IT partners that have won contracts associated with the GEMS project is CSC Australia, which was awarded a $28.7 million deal in early 2011 for management advisory services related to the development of the system.

In response to the Audit Office’s findings and recommendations, Defence has agreed to monitor and report on the performance of its base services contracts and finalise its contracts governance plans.

The Audit Office's findings and recommendations follow comments by former CEO of the government's Digital Transformation Office, Paul Shetler, suggesting that government procurement and funding processes, "drive a culture of blame aversion which creates the perverse outcomes and actually increases risk".

“The history of the past several years of government IT failure is testimony to that," he said in early December.

"This is further complicated and exacerbated by the lack of technical and contract management expertise in government," he said.

The Audit Office's report comes as Defence calls for feedback from Australia’s IT providers over the development of its proposed IT supplier panel overhaul, replacing its expiring Applications Managed Services Partnership Arrangement (AMSPA) scheme.

The Department has flagged that it plans to spend $20 billion on IT over a 10-year period, as it undertakes a major technology overhaul.

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Tags Australian National Audit Office (ANAO)department of defencecontractsgovernment

More about Australian National Audit OfficeCSCCSC AustraliaDepartment of DefenceNational Audit Office

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