As much as $1 billion to help the Department of Human Services to finally replace its vintage core computing platform for Australia’s welfare system could be on the runway for this year’s Budget.
Senior officials at the welfare juggernaut have revealed the business case for the big rebuild has finally gone to the government, a move likely to finally put procurement wheels in motion if Cabinet gives the all clear.
A Senate Estimates hearing on Thursday heard that Human Services’ had sent across the business case for the system in early February with the Department now waiting for a decision from the government on whether and when it will proceed.
Human Services agencies, especially Centrelink, have been labouring under the constraints of the 1980s era mainframe application known as Model 204 which, although robust, is fast running out of people with sufficient old-school hand coding skills to keep it running.
The tipping point for the decision appears to have been the release of the much awaited McClure report which recommends a bottom-up overhaul of Australia’s welfare system based on a far simpler payments architecture – rather than maintaining the legacy hairball of individual benefits that has been built upon over the last few decades and costs around $3 billion a year to administer.
“The new system will be the most fundamental structural reform of the income support system since its inception. Redeveloping the income support IT system in conjunction with income support payment reform is necessary for Centrelink to provide simpler, easier to manage claims and support services,” the McClure report said.
“In addition to the redevelopment of the IT system, the ability to capture and integrate real time data, particularly income data from the Australian Taxation Office, would significantly reduce reporting requirements for people receiving income support and reduce the likelihood of debts being incurred.”
While the business case for an upgrade is still under wraps, what has become clear is that $3 billion cost of administering around $150 welfare payments could be reduced substantially.
On Thursday Human Services Secretary Kathryn Campbell was, with some diplomacy, making it plain in her evidence that that a McClure-grade overhaul of welfare benefits on the present Model 204 based system, rather unfortunately known as ISIS, could spell trouble on financial and functional levels.
Pursued by Labor’s shadow Human Services Minister, Senator Doug Cameron, both Ms Campbell and Human Services’ Chief Information Officer, Gary Sterrenberg, agreed they didn’t reckon it was a good idea to advise the government to build a new system on ISIS.
Ms Campbell told the Committee that in the event of a big change, it would be better to invest in a new system.
Responding to Senator Cameron, Mr Sterrenberg confirmed that the “build component” of the of the new system would take around three years – but cautioned that this did not include the procurement lead time.
Asked by Senator Cameron whether the present system was stable, Mr Sterrenberg said it was, but agreed with the idea that needed to “be put out to pasture” and that a new system was needed.
Asked if there was no real capacity to within ISIS implement the McClure report’s recommendations, Ms Campbell cautioned that the document was a report to the government and not of it – but noted hypothetically retrofitting ISIS wouldn’t be a good investment.
Industry sources have indicated to Government News that they believe the delivery of the business case to the government this month is the strongest signal so far that Canberra will finally bight the bullet on the massive rebuild this Budget.
One of the key reasons for holding-off on the project is that it inherently fraught with big risks risk that could quickly come back to destroy ministerial careers should the project end up sideways.
One risk is millions of pensioners and welfare recipients not getting money, too little money or too much money on payday – the equivalent of an apocalypse on talkback radio and tabloid media.
And there’s good reason to tread warily.
Big ticket rebuilds pushed by multinational technology companies and consulting firms as a panacea to policy and administration problems have a achieved a solid track record of blowing-up budgets, timeframes and political and bureaucratic reputations along the way.
Recent examples include the Department of Immigration’s notoriously troublesome Systems for People – hastily introduced after the Cornelia Rau scandal — and Customs’ Integrated Cargo Management System, which choked on traffic when it went live causing cargo to pile up on docks across Australia.
At the Australian Taxation Office, a core tax processing system rebuild known as the Change Program too so long to deliver its masters eventually admitted parts of it would be obsolete almost as soon as they were delivered because of the Henry Tax Review.
In Queensland the Department of Health’s attempt to acquire a new payroll system chewed up a remarkable $1 billion prompting the since dispatched Newman government to launch a Royal Commission into what was later found to be Australia’s biggest public sector software disaster.
But for Human Services, time might just have run out in terms of changing over a clearly underpowered and worn out engine.
In a novel mix of petrol head and tech nerd metaphors, Human Services Minister Senator Marise Payne conceded to the Estimates hearing that a comparison of Model 204 to a turbocharged Commodore 64 computer that ran in the Daily Telegraph had been attributed to her.
But she took issue with the tabloid for truncating the revved-up description, quipping she had also added air dams and a spoiler.
Federal Treasurer and Australia’s inaugural Human Services minister, Joe Hockey, is well versed in complaining about Centrelink and its mainframe.
“The mainframe for Centrelink, which provides services to millions of Australians is aging, it is in bad shape, only Centrelink and the Pentagon in the United States are the only two customers in the world of this one company that maintains the Centrelink mainframe, which is extraordinary,” Mr Hockey said at the time.
The Treasurer added Centrelink’s “infrastructure has been run down” and said that fixes at both Human Services and Tax would cost “billions”.
However despite hitting out at Labor for stalling on sorely needed overhauls the Abbott government subsequently parked the upgrades for another year after its first Budget.
For Centrelink, German enterprise software house SAP is regarded as hot contender to get the work and has invested years of lobbying and pre-sales effort in preparing the ground to score the big-ticket refresh.
A key reference project is the Commonwealth Bank of Australia’s highly successful rebuild of its core banking system on SAP’s platform, a project success that is the envy of institutions around the globe for the competitive advantage and cost-to-income reductions it delivered.
Spearheaded by former CBA CIO Michael Harte – whose services were snapped-up by Barclays upon successful completion – the key elements of the Commonwealth’s platform are that it delivers both real time transactions and is able to map individual customer relationships so it differentially price offers for products and services.
Put simply, the CBA system’s architecture is centred around the customer as opposed to the banks products – a similar problem that Human Services and Tax are facing.
A win for SAP at Human Services would also give it a substantial marketing advantage over competitors including database giant Oracle at a time when governments around the world are seeking to consolidate their software and infrastructure to drive down so-called ‘lights on’ costs by as much as 50 per cent.
The McClure reports recommendation to move to a ‘real time’ footing between welfare agencies and the ATO is especially significant because, if adopted, it could also trigger another very big refresh at the ATO so that customer data could be exchanged as and when their circumstances changed
“We have got no choice. The question is how we do it and how we try and ensure we have better service delivery into the future,” Mr Hockey said of the need for systems replacements.
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