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Treasury fingers the biggest loser: government ICT costs

Treasury fingers the biggest loser: government ICT costs

by Paul McBeth

April 13 (BusinessDesk) – The government’s best opportunities for back-office savings lie in improving its complex and divergent information and communications technology services, where savings of up to $236 million a year are available, according to The Treasury.

A report benchmarking administrative and support functions of state sector agencies finds savings can be made through bringing back-room services closer together.

The 33 agencies measured in the report spend an annual $1.85 billion on back-office functions, or about 9.8% of their total operational costs, of which $1.05 billion is spent on ICT The report’s ICT section, authored by Department of Internal Affairs deputy chief Stephen Crombie, recommends standardising ICT services to bolster efficiency and cut back on costs.

ICT staff also need to lift their game, with increased labour productivity flagged as a means to squeeze more out of the sector. That means government IT teams will need a more coordinated approach across the entire State sector, particularly in infrastructure initiatives, platform development, and software acquisition. If successful, the government’s spend could be cut by some $124 million.

“Current operations can be run more efficiently by collaborating for common services and reducing the variability in the efficiency of ICT processes,” Crombie said. “Reducing complexity in the ICT environment is not a quick fix. It requires agencies to move to a more common, standardised environment as current applications reach the end of their life.”

The Treasury report also flags savings in the way government manages property, suggesting annual rental costs of $205 million could be cut by $43 million by paying lower rents and allocating no more than 16 square metres per staffer.

In December, Cabinet approved setting up a property management centre of expertise, housed in the Ministry of Social Development. The annual $174 million spent on human resources could be reduced by $33 million through greater integration across the government sector, while a $15 million reduction in the $152 million spent annually on finance operations is available, the report says.

Expenditure of some $201 million on corporate and executive services, including information management, communications and legal, could also be trimmed by an annual $21 million by greater cross-agency integration.

Finance Minister Bill English said the increased transparency from the report should lead to change, either through government initiatives or agencies adopting tougher standards off their own bat.

The government is looking to trim spending by as much as it can to deal with a ballooning cash deficit after it front-loads the cost of the Feb. 22 earthquake in Christchurch and tries to stave off a credit rating downgrade.

While direct departmental comparisons are in many cases not meaningful, the report finds that the larger an agency is, the more efficient its back-office support spending is.

In small agencies, for example, senior staff costs are more than six times higher than in large agencies, suggesting small numbers of highly paid staff with a small number of support staff.

(BusinessDesk) 15:23:57

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