Eight years after it was begun and with its credibility in tatters, the Western Australian State Government today announced it would cancel its controversial plan to provide shared corporate services to its departments and agencies through a centralised platform.

The move represents the second cancellation of a technology shared services project in the past year, after the Queensland State Government broadly walked away from its own shared services project in the wake of the disastrous problems with Queensland Health’s payroll systems implementation and a number of damning audits into the state’s technology projects.

Western Australia’s own shared services project was kicked off back in 2003 with the aim of consolidating financial, procurement and human resources back-office functions from agencies to three shared services centres — covering the health and education portfolios, as well as a number of other agencies. At the time, the state aimed to cut about $55 million out of its annual $315 million corporate services bill.

After a competitive tender, in June 2005 the state government awarded Oracle a $66.8 million contract to build the integrated system, with Perth-based company ASG and sub-contractor CSC picking up a $87.8 million deal six months later to provide infrastructure support and take over the system after Oracle had finished implementing it.

However, the project quickly got bogged down with delays and cost over-runs, leading to a series of damning audit reports on its implementation that cited inadequate governance arrangements, complex software development requirements involving the key Oracle platform being used and constant turnover of key contractor staff.

Today, the state’s Economic Regulation Authority gave the State Government the hammer to nail the lid shut on the non-health and education components of the troubled project.

An extensive report published by the authority (PDF) recommended the project be halted immediately, with no further agencies to be rolled in to use the shared systems. It also stated that a decision needed to be made about the project’s future — as to whether it should continue, and in what altered form.

Critically, the report found that in financial terms, there had been “no net savings” to the government from establishing the non-health and education portion of the program, known as the Department of Treasury and Finance Shared Services Centre (DTFSSC), nor were there likely to be future savings from rolling in additional agencies to the new systems.

In actual fact, up until 30 June this year, the DTFSSC is expected to have cost the WA Government $189 million in capital costs and $254 million in operating costs. The agency has only received $43 million in revenue from agencies. Four years after the initial 2007 due date, only 58 of the planned 80 agencies to use the new platform have been rolled in — and the majority of those are small to medium-sized agencies.

The ERA’s report states its conclusions bluntly:

“Had the costs of the shared services project been able to be assessed more accurately and comprehensively in 2003, the shared services project would not have proceeded. Furthermore, given current information, the DTFSSC should have been decommissioned following the 2007 review.”

The report also states that agencies believe that the level of cooperation and understanding between their staff and those of the DTFSSC is “minimal”, and that the situation is likely to get even worse in future, with deteriorating service levels, costs increasing and more problems on the horizon.

“Therefore, the authority recommends that the current roll-in of further agencies ceases immediately,” the agency wrote.

WA Premier Colin Barnett and Finance Minister Simon O’Brien immediately backed the ERA’s report. “The ERA’s analysis indicates that decommissioning the OSS represents the least cost and most certain option for delivering corporate services,” Barnett said in a statement.

“The Government has accepted in principle the recommendations from the ERA. Many, if not most State Government departments reported the OSS has not delivered what was intended. There remains considerable work to progressively decommission the Office of Shared Services, including how to best leverage off existing systems and continuing procurement services. The impact on the budget will also need to be fully considered.”

An implementation committee chaired by the director general of finance, Anne Nolan, will guide Western Australia through the decommissioning progress, with representative directors-general and chief executives from various affected agencies as well as an independent member. Work on the process will start immediately.

“I would like to emphasise that the staff at the OSS have worked very hard and their efforts have been valued by the Government,” said O’Brien. “Some current staff at OSS will continue to work on the procurement process while others will be redeployed to recommence corporate services in Government departments.”

It appears as if the health and education shared services centres, which have been more successful than the DTFSSC, will continue with their work — but without the planned integration with the DTFSSC systems.

The news is likely to send shock waves through Australian governments at a number of levels, with most of the states having their own shared services projects, and the Federal Government itself currently facing a massive integration project at the Department of Human Services, the new super-agency formed from the merger of Centrelink, Medicare, the Child Support Agency and others.

Image credit: Robert Linder, royalty free

Related posts:

1. ON HOLD: WA slams brakes on shared services
2. SA Coalition slams shared services “disaster”
3. ASG inks $80m WA shared services renewal
4. Video: WA Premier cans shared services project
5. WA shared services disaster a warning to others

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1. Dominic Wallace
   Posted 08/07/2011 at 7:31 pm | Permalink | Reply

   Academic research in the private sector indicates that up to 60% of mergers and shared services projects fail to deliver the expected outcomes and the main reason is frequently the resistance of senior and middle managers who will lose from the merger. Looking at the recent study form ACELG the same problems appear to have occured in this setting too.

   No matter how much money, resource and programme team expertise you may have, spend 80% of the project time on getting the people on board. Then everything else follows.

   Dominic Wallace, lecturer on the Postgrad Certificate in Shared Services, Canterbury Christ Church University, UK