news An extensive review of the Australian Taxation Office’s colossal $814 million Change Program IT platform overhaul has found the program broadly to be a success, with the initiative delivering on most of its objectives and making a return on its investment in just four years, despite a history which at times seemed close to going off the rails.
The Change Program was kicked off in 2004, when it had an initial budget of $445 million. This figure was subsequently increased by several hundred million, both due to increased legislative scope of the reform, but also budget overruns. The ATO’s major partner for the initiative was IT services giant Accenture. The objective of the program is to migrate away from the ATO’s decades-old technology platform and on to a more modern architecture that was to deliver the agency improved flexibility in the way it conducts its business.
For the first few years of its life the Change Program appeared to be broadly on track, with the ATO conducting regular briefings with the IT media to give updates on its progress with the initative. However, throughout late 2009 and early 2010 the project hit a series of roadblocks which resulted in very public delays to the ATO’s core work of processing Australian tax returns. In addition, the ATO’s extensive community of tax accountants became quite disgruntled with the ATO over the delays at times, threatening to sue the agency at one point. The problems resulted in the ATO having to hire around 800 extra staff to do manual processing work at one point.
An Australian IT industry sub-contractor who preferred to remain nameless wrote in a Delimiter commentary in April 2010, during the height of the problems: “There is absolutely no question that the Change Program is a failure. It’s over budget by hundreds of millions of dollars, it’s late, and by late I mean publicly announced “delayed” so many times that it’s hard to remember what decade it’s meant to be delivered. And now we hear that the first instalment of the software has miserably failed the very customers who paid for it. We’re close to a billion dollars spent already, and we’ve barely switched the thing on.”
However, in a review of the benefits realised through the program over the past 18 months since the project was formally completed on 30 June 2010, technical and management consulting firm CPT Global wrote that the program was expected to hit return on investment goals in a relatively short time frame.
“At its completion in June 2010 the Change Program actual costs were $814 million, of which $597 million was self-funded by the ATO from the expected efficiency gains,” the firm wrote in the report published this week and available in full online. “Based on this conservative estimate of annual tangible financial benefits, this represent a return on investment period of approximately 4 years based on the ATO self-funded costs.”
“The Change Program has significantly revolutionised how the ATO develops and delivers its services to its customers, which is evident through the assessment of outcomes and benefits at this time,” the report added.
“The new ATO service delivery framework introduced by the Change Program has provided the basis for further realisation of benefits by providing the foundation for other ATO innovative initiatives such as enhanced fraud detection, analytics and leveraging of pre-filling concepts that were not specifically included into the scope of the Change Program but have enhanced the outcomes and benefits. The Change Program has provided the ATO with an integrated technology and business delivery capability that provides the basis of future efficiency dividends.”
The report listed a number of benefits which were already accruing to all stakeholders in the project, ranging from the ATO itself to the Government, businesses (including tax agents) and taxpayers. in general.
The project’s expected financial benefits were originally set at $182 million per year, but in practice it was generating $147 to $153 million per year in actual tangible financial benefits, the report noted, with intangible benefits including the ability to deliver new taxation policy changes faster, the ability to conduct faster processing during tax times, better management of the ATO’s national workforce, and an increased transactional processing capability.
Perhaps most importantly, there is an implication in CPT’s report that the implementation of the Change Program was somewhat inevitable, given its previous decaying systems.
“The pre-Change Program ATO service delivery framework of business systems, infrastructure and organisational model was inefficient and inflexible, took too long to respond to government policy initiatives and the community was getting less effective and efficient services,” the report states.
“The ability of the Tax Office to keep on extending the life of the National Taxpayer System (NTS) through future Tax Time releases was a major risk and limited the ability to introduce new taxation reforms. NTS was 7.5 million lines of code and increasing in complexity with each Tax Time cycle – the risks and time for introducing new policy changes was increasing.”
“The Integrated Core Processing (ICP) component of the Change Program is 1.5 million lines of code and many of the cyclic changes for Tax Time are implemented through configuration files and forms. While NTS is not fully decommissioned at this stage, it now is subject to minimal changes and is intended to be decommissioned as part of the ATO Online 2015 (IT forward plan).”
The publication of CPT’s report this week is the second time the ATO’s Change Program has received a tick of approval. In May 2011 then-Assistant Treasurer and Minister for Financial Services and Superannuation Bill Shorten published a review of the program delivered in December the year before by Inspector-General of Taxation Ali Noroozi. The review was initially commissioned in mid-2010 by Shorten’s predecessor Nick Sherry, who had requested a review of the Change Program after its high-profile implementation glitches.
In his report, Noroozi wrote that the ATO generally developed appropriate mitigation strategies to deal with the program’s risks – which were significant in such a large and complex ICT project.
In relation to the botched income tax release component of the program, which caused much of the problems, Noroozi wrote that the ATO faced little choice but to go live with the upgrade when it did, despite the problems it faced. “However, as acknowledged by the ATO, significant risk of potential adverse impact on taxpayers and tax practitioners could have been better communicated to them,” the inspector-general wrote.
I have been heavily critical of the ATO’s Change Program at various stages of its implementation. In April 2010, at the height of its problems, I compared it to Customs’ Cargo Management Re-engineering project, the botched implementation of which plunged Australia’s ports into chaos just as the rush of retail inventory was due to hit Australian shores for the 2005 Christmas season.
However, I think it’s time to agree that the Change Program was largely a success for Tax, and one of the few examples we have in Australia of huge IT project implementations done largely right. The complexity of this project was staggering, and public sector executives such as Defence CIO Greg Farr (who helped oversee the Change Program at Tax for many years in his previous ATO role) and ATO CIO Bill Gibson deserve significant credit for keeping this project on the rails.
Perhaps some of that expertise could now be exported to Australia’s State Governments, who have conclusively demonstrated over the past year that they cannot deliver on virtually any major IT project implementation.