news The Queensland Government has engaged consulting firm EY (formerly Ernst & Young) to conduct a strategic review of its CITEC IT shared services business, in a sign that it is considering following the recommendations of the Costello Commission of Audit report and selling the business to the private sector.
The so-called Costello Report was published on 30 April this year by the Queensland Commission of Audit, which was set up by Queensland’s new LNP Government after it took power in early 2012. The commission is chaired by Costello, with commissioners Doug McTaggart, a leading executive in the financial services sector, and Professor Sandra Harding, vice chancellor and president of James Cook University.
New Queensland Premier Campbell Newman asked the commission to report on the Queensland Government’s current and forecast financial position, and to make recommendations on strengthening Queensland’s economy, restoring its financial position, and ensuring value for money in the delivery of frontline services.
Among other conclusions in its interim report delivered last year, Costello and his commissioners pointed out that the state “continues to operate commercial business operations in direct competition with private businesses operating in open and competitive private markets”. “These government businesses are providing services principally to internal government clients,” the report stated, “and there is no justification as to why these services cannot be sourced directly from commercial private operators.” Amongst the government business units cited as examples in the report were CITEC and Queensland Shared Services.
In its final report, the Commission recommended hat “the Government discontinue the role of CITEC as a centralised provider of ICT services within government, and initiate a processto divest the CITEC business within two years.”
At the time, Queensland appeared reluctant to fully accept the recommendation, stating: “The Government accepts this recommendation but notes that additional policy work is required to understand the implications and consider broader issues. It notes that CITEC is only part of a broader services provision and ICT asset environment in the Queensland Government, and as with other recommendations relating to ICT and corporate service provision, notes that a detailed implementation plan which first and foremost establishes an orderly process to manage the implications of this recommendation is needed.”
However, in an email sent to CITEC staff yesterday, the group’s general manager Dallas Stower appeared to signal that moves were afoot to examine the potential for a CITEC sale.
On 24 June, according to Stower, Andrew Garner, the director-general of the Department of Science, Information Technology, Innovation and the Arts, had given a briefing to staff noting that an independent industry advisor would be appointed “to assist CITEX with a strategic assessment of our business”. EY (formerly Ernst & Young) had been appointed to conduct the review, Stower added.
“The aim of the independent industry engagement is to strategically assess CITEC’s business position with a view to making recommendations to the Government as to the best options for the divestment of CITEC as per Recommendation 149 of the Qld Commission of Audit Report. The EY consultants commenced their engagement yesterday and I expect that they will take some 4 -5 weeks to complete the strategic assessment.”
Stower noted that over the past several weeks, senior CITEC staff had been collecting “key information about the CITEC business for review by the advisors”. “The information has included key financial data, HR establishment, Product, customer and contract data. The package of information provided to the advisors will assist them in understanding the nature, size and complexity of the CITEC business,” Stower wrote.
Garner, the director-general of DSITIA, has close professional links to EY. The executive was recently appointed to his post, with his most recent role having been at EY as the firm’s lead Queensland Government partner, as well as leading its Queensland advisory practice. However, there is no suggestion of impropriety in the appointment of EY to the CITEC work. EY has previously conducted similar work in the state; for example, auditing the problems suffered by Queensland Health in its disastrous payroll systems upgrade.
As I wrote in June 2012:
“I am strongly of the view that the once-hyped IT shared services paradigm is virtually dead in Australia’s public sector and should be abandoned. I would support a recommendation by the Queensland Commission of Audit that the state’s internal IT services units be privatised or sold off to commercial IT services firms.”
It’s good to see Queensland progressing this one. I would suspect that likely buyers might include Queensland-based diversified IT firm Data#3, as well as some of the major global players — Fujitsu, perhaps, which has proven itself willing to buy local firms recently, or NEC, which has also been on the acquisition trail.