Chapter 4

Digital capability

Accelerating the digital transformation

In order for the Commonwealth Government to meet the rapidly evolving needs and expectations of Australian communities into the future, digital services to citizens and internal digital capability must be delivered simply, securely and efficiently.
This will require an Australian Public Service (APS) equipped with a
well-developed digital and data capability – both in terms of infrastructure and workforce.
The Independent Review of the APS (Thodey Review) found that while the government had made significant data and digital investments over the past decade, the APS was not keeping pace with increasing public expectations in that realm and needed to accelerate its digital transformation.1
As the final report observed:
While pockets of excellence exist and are being developed across the APS, data and digital is underutilised in many areas, including in service delivery and policy and program evaluation.2
The Thodey Review identified that the APS's progress on data and digital initiatives had been impeded by a number of factors, including:
Whole-of-government digital and data functions are fragmented and incomplete, and the Digital Transformation Agency (DTA) lacks the authority and resources to drive the digital agenda.
The APS lacks the ability to attract, retain and nurture high-quality talent, along with the level of consistent leadership across government required for a culture of innovation and change across the APS.
The APS has slowly and inconsistently adopted modern digital toolsets such as business and data architecture, citizen life events and journey maps and human-centred design across agencies.
Many agencies rely on ageing and complex systems, and this leads to inflexibility and high running costs and constrains changes in policy.
Traditional governance, funding and procurement models incentivise large one-off change programs, rather than more flexible and agile delivery models.3
The Thodey Review concluded that the APS required a 'shift in trajectory' in order to realise its digital agenda. It outlined six key priorities with corresponding recommendations to drive this change:
strengthening digital governance
planning for a digitally enabled APS
building data and digital skills
delivering seamless services
supporting staff with common, high-quality services
better use of data.4

Chapter structure

Guided by the findings and recommendations of the Thodey Review, during its inquiry the committee chose to focus on three elements of the digital capability of the APS:
The need for strategic and significant investment in ICT (information and communication technology) capability.
The importance of a highly skilled digital and ICT workforce located within the APS.
The need to rethink ICT procurement.
This chapter will examine each of these elements in turn and conclude with the committee’s consolidated views.

The need for strategic and significant investment in ICT

Evidence before the committee indicated that the ICT capability of the APS was severely lacking and required significant investment to remedy.
For example, the Community and Public Sector Union (CPSU) submitted that high quality ICT was critical to the digital capability of the APS. However, it argued that decades of government underinvestment had resulted in substandard ICT systems which inhibited the ability of APS employees across many agencies to do their jobs efficiently on a day-to-day basis.5
Mr Michael Tull, Assistant National Secretary for the CPSU, explained:
Our members regularly report that they do not have the tools that they need to do their job effectively. Our submissions and the evidence that you will have heard from our workplace leaders give you a number of examples of where people are anchored to legacy systems or have to use multiple systems to get their work done.6
The CPSU also argued that due to inadequate ICT, services offered to the public by the APS were not to an appropriate standard, particularly when compared to the standard set by the private sector.7
The CPSU informed the committee that this was not a new problem. It noted that it had been raising concerns with substandard ICT and the associated impacts on the work, satisfaction and productivity of APS employees since 2008.8
The Thodey Review noted that there were numerous examples of ageing ICT systems across the APS. It stated:
Underinvestment has translated into minimal maintenance and upgrades of existing ICT platforms, resulting in ICT environments which are ageing and difficult to maintain. The fragmented and incoherent approach has resulted in an eclectic mix of technologies and systems that complicate the management and upgrade of the total ICT portfolio. This is stifling innovation and contributing to a slow degradation of service delivery to the Australian public.9
Additionally, the Thodey Review identified that limited work had been done by the APS to assess the overall budgetary investment required for digital transformation, including any efficiencies and savings that would result from transformation. It noted:
The APS has high run costs due to using out-of-date and old technology platforms, and investment in transformation offers an opportunity to bring down costs.10

Lack of data on whole-of-government ICT expenditure

In light of the evidence on ageing and substandard ICT systems across the APS, the committee sought to ascertain the current level of ICT expenditure across government agencies.
The Department of Finance advised that there was currently no central data collection process related to ICT expenditure across government.11
The Thodey Review pointed out that the last time the APS documented whole-of-government ICT spend was in 2015–16. It noted that as a result, there was no detailed inventory of the systems that existed across the APS, nor the associated risks, costs and upgrade needs.12
The final report observed that while a lack of data precluded it from estimating more precisely the funding required to digitally transform the APS, analysis suggested that raising APS spending levels to benchmark digital transformations in the private sector could be in the order of $400 to $900 million a year.13
To resolve the lack of information on government spend, the Thodey Review concluded that a 'comprehensive ICT audit' was urgently required to ascertain information relating to:
current and forecast ICT expenditure and assets;
systems scheduled for retirement or no longer supported by software vendors (and the associated risks);
future requirements; and
any urgent ICT capital investment needs.14
It also concluded that such an audit would enable the prompt development of a 'whole-of-government ICT blueprint' to guide future investment in digital transformation.15 These findings were encapsulated in recommendation 14 of the final report, which included detailed implementation guidance as follows:
Complete audit within six months; submit blueprint to Government by end-2020.
Keep ICT audit current and update the blueprint every two years.
Publicly release the blueprint. Build on the experience of countries like Singapore.
Ensure audit and blueprint are comprehensive — include ICT strategy and governance, projects, procurement, assets, systems and services, cyber security, and service -delivery models.
In treating risks of legacy and unsupported systems, seek to maintain the continuity of the business of government at all times.
Consider the 2012 Queensland Government ICT audit as a useful model in implementing this recommendation.16
In its December 2019 response to the Thodey Review, the government agreed to recommendation 14. It stated:
The Secretaries Board will conduct an urgent audit of government ICT capability, risks and needs and, in light of the audit, seek Government agreement to commission a longer-term ICT blueprint as proposed.17

Status of 'urgent audit'

At a public hearing on 5 March 2021, the committee sought information on the progress of the 'urgent audit'.
The DTA provided the committee with information on a Digital Review that it had 'just commenced'.18 It stated that the review would cover spend on ICT and digital systems, as well as capture information on workforce policy and processes.19
The DTA advised that as part of this process it was conducting a Digital Review Audit Data Collection Survey amongst APS agencies and that responses were due at the end of March 2021. It also noted that the Digital Review would be completed and provided to the Secretaries Board for consideration at the end of May 2021.20
The committee sought to gain clarity on whether the Digital Review was the 'urgent audit of government ICT capability, risks and needs' the government committed the Secretaries Board to in response to the Thodey Review.
The DTA indicated that the Digital Review would be the 'foundation' for the audit and that it could be asked to conduct 'follow-up reviews' by the Secretaries Board.21 It explained:
The digital review is being conducted to capture the broader strain of information that we believe is necessary to inform the audit. If there is information discovered as part of the review that requires further data to be captured and decisions to be made by secretaries, that is where the accountability lies. The DTA is not in a position to make APS-wide decisions on the implications of the review.22
In response to the committee's line of questioning, the Department of the Prime Minister and Cabinet (PM&C) attempted to clarify the scope and governance arrangements of the Digital Review.
Ms Tanja Cvijanovic, First Assistant Secretary for the Policy Innovation and Projects Division, outlined:
I think we're talking semantics about whether it's an audit or a review. The review will look at the stock and flow of digital and ICT investments, as well as workforce capability and other things, and the review might make recommendations to the Secretaries Digital Committee about actions that the public sector needs to take to improve the enterprise-wide approach to digital and ICT investments, and all that that means, including in relation to workforce.23
When directly queried as to whether the Digital Review constituted the 'urgent audit', Mr William Story, First Assistant Secretary for the APS Reform Office within PM&C, advised that 'for all intents and purposes', the Digital Review was 'fulfilling the functions of the audit'.24
During the course of the hearing, further discussion ensued as to whether the 'urgent audit' as characterised by the government would be an additional piece of work undertaken at a later stage informed by DTA's Digital Review, or whether it was likely that the Secretaries Board would adopt the DTA's work and consider the 'urgent audit' complete for the purposes of the Thodey Review recommendation.
In response, Mr Philip Gaetjens, Secretary of PM&C and Chair of the Secretaries Board, advised:
… Again, as chair of the [Secretaries] board, I'd like to see what they [the DTA] produce first and then I'll make a decision about what is necessary to meet the recommendations or the government response.25
The committee sought further information on the progress and status of the Digital Review in September 2021.
The DTA advised that 20 APS agencies had participated in the Digital Review Audit Data Collection Survey. It also advised that the Secretaries Digital Committee (SDC) had considered the draft findings and recommendations of the Digital Review, and that the DTA was currently responding to that feedback. The DTA noted that the Digital Review would be presented to the Secretaries Board once it has been agreed by the SDC, but did not provide an anticipated timeframe for this. It also reported that a decision had yet to be taken by the government as to whether the Digital Review would be made publicly available.26
In early September 2021 the committee put a series of questions to PM&C seeking a progress update and clarity on the status of the Digital Review. PM&C did not provide a response to the committee prior to the finalisation of this report in late November 2021.

Digital and ICT workforce

The capability of the APS's digital and ICT workforce was another area of interest for the committee. In particular it explored matters relating to:
the existence of skill gaps in the APS;
the externalisation of ICT roles across the APS (i.e. the use of contractors); and
the need to rebuild the internal ICT workforce of the APS.

Skill gaps

Evidence before the committee indicated significant digital, ICT and data skill gaps within the APS.
In 2019 the Thodey Review identified that there was a need to build data and digital expertise within the APS in order to provide improved services to Australians. It cited data from the 2017–18 State of the Service report that indicated that 65 per cent of APS agencies noted skills and capability as a barrier to using data, and 58 per cent thought that they were under-skilled in the digital aspects of delivering for the public.27
The Australian Public Service Commission (APSC) informed the committee that each year it asked APS agencies to identify their capability gaps through the APS Agency Survey. In 2020, out of 95 agencies that responded, 72 per cent identified 'critical skill shortages' in:
data (70 per cent);
digital (54 per cent); and
ICT (40 per cent).28
The APSC further advised that through the APS Employee Census it asked employees what skill gaps they identified in their immediate work group. In 2020, 46 per cent of respondents said their workgroup was experiencing skill and capability gaps, with the top gaps listed being:
ICT (33 per cent); and
digital (18 per cent). 29

The externalisation of the ICT workforce within the APS

The committee received evidence regarding the high numbers of external contractors working in ICT roles in the APS.30 Submitters contended that the critical shortage in ICT skills across the APS was compounded by a longstanding overreliance on external ICT personnel. They argued that this led to huge amounts of unnecessary expenditure and contributed to the progressive deskilling of the internal workforce.
Professionals Australia is a union representing 25 000 professionals involved in the fields of science, technology, engineering and mathematics (STEM). It claimed that the APS's current approach favoured 'buying in' or importing skills, rather than investing in creating a workforce of ICT professionals within the APS.31
The CPSU expressed concern that an overreliance on ICT contractors for core, ongoing work had caused the APS to lost sight of the benefits of in-house ICT development and resulted in a deskilled workforce.32
The CPSU also drew the committee's attention to the findings of the ICT Procurement Taskforce established by the government in 2016.33 The final report of the taskforce was presented in August 2017 and identified an overreliance on ICT contractors within the APS. The report detailed that:
…technical ICT capability gaps in the Australian Public Service have resulted from an over-reliance on ICT contractors — particularly for more complex, high-value ICT work. The Australian Public Service employs more than 14,000 ICT personnel, a third of which are contractors. The share of external ICT personnel has grown over the past five years and spend on internal ICT personnel has fallen accordingly.34
The report also concluded that the overreliance on contractors was unsustainable going forward, noting that:
It is expensive (the average annual cost of an internal ICT employee is around $132,000 while the cost of a contractor is around $214,00035), and causes ongoing erosion of ICT capability in agencies.35

The extent of the problem

The committee encountered difficulty in ascertaining the total government spend on ICT contractors, as well as the total headcount of external ICT personnel working in the APS. This was due to a lack of publicly available data as the APS does not centrally collect or collate this information.
Given the lack of an official government figure on expenditure, in January 2020 media outlet iT News estimated that the total government outlay on ICT contractors in 2019 'likely surpassed $1 billion'. It arrived at this figure by analysing separate batches of information provided by 35 APS agencies through the Senate estimates process.36
The article explained:
The new data, which has been compiled by iTnews, reveals that the 35 agencies spent just over $862 million on IT contractors over the course of the 2018-19 financial year, up from $636 million in 2017-18 and $583.5 million in 2016-17.
But the 2018-19 figure - which represents a $226 million year-on-year increase - does not include spending at two-thirds of Commonwealth agencies, including service delivery juggernauts, Services Australia and the Australian Taxation Office.
When taking into account the remaining agencies, IT contractor costs were almost certainly above $1 billion across the Commonwealth last year [2019].37
In an effort to gain an accurate insight into the headcount of contracted ICT personnel within the APS, the committee sought information from the DTA regarding the numbers of APS ICT staff and ICT contractors in each agency.
The DTA informed the committee that there were approximately 10 000 permanent public servants who identified as digital and ICT professionals.38
It also provided data collected in October 2020 for 77 agencies reflecting the average staffing level (ASL) for ICT roles for the 2019–20 year, broken down by APS employees and ICT contractors.39
The DTA advised that 'depending on agency needs', ICT contractors were used for specialised skills for short term projects, or for 'staff augmentation' during periods of high demand.40
Across the 77 agencies for which data was provided, the ASL was approximately 10 184 for ICT contractors, and approximately 10 020 for internal APS ICT staff.41
As the selection in the table below sets out, the figures illustrate that many of the core APS agencies are heavily reliant on ICT contractors, with contractor numbers dwarfing internal employees in some instances.
Table 4.1:  Average ICT staffing levels for the 2019-20 financial year
APS ICT staff ASL 2019-20
ICT contractor ASL 2019-20
Department of Defence
Services Australia
Department of Home Affairs
Department of Health
Australian Taxation Office
Department of Education, Skills and Employment
Department of Foreign Affairs and Trade
Department of Industry, Science, Energy and Resources
Department of Finance
Department of Agriculture, Water and the Environment
Department of the Prime Minister and Cabinet
Department of the Treasury
Department of Veterans' Affairs
Source: Digital Transformation Agency, answers to questions on notice, 5 March 2021 (received 24 May 2021).
Reflecting the figures provided by the DTA, Services Australia informed the committee that as at 31 December 2020 its Technology Services Group employed 2266 APS employees and 2443 non-APS employees (i.e. contractors). It advised that the Technology Services Group utilised the services of a range of external providers to assist in delivery, providing it with the flexibility to engage short-term specialist services.42

Rebuilding the internal workforce

In light of the skill gaps and chronic overreliance on external ICT personnel, the committee considered what was required to rebuild the capability of the internal APS ICT and digital workforce.
Submitters argued that there was a significant need for the APS to recruit a strong ICT workforce. For example, Professionals Australia asserted that the APS would be increasingly required to respond to threats and challenges that could only be met by a highly skilled ICT professional workforce. It emphasised that the government needed to prioritise investment in recruiting, reskilling or upskilling a 'sovereign' ICT professional workforce, rather than relying on external personnel.43
The Thodey Review also identified that work needed to be done to make the APS an attractive employer for those with ICT and digital skills:
Those with skills in high demand, for example emerging technologies, do not look at the APS as a potential employer. This is problematic, given the shortages in digital talent across Australia. Australia will require 100,000 extra technology-skilled workers by 2023, yet there are fewer than 5,000 local graduates from relevant fields each year.44
Evidence before the committee indicated that there were several elements that contributed to making ICT recruitment challenging, including a highly competitive labour market.
The APS Workforce Strategy 2025 (Workforce Strategy) released by the APSC in March 2021 identified that there was increased competition in the Australian labour market for ICT and digital technology skills due to a number of factors, including:
a current shortage of specialist skills;
strong predicted growth in demand for technology workers; and
the fact that developing professional expertise in those areas can take an estimated seven years or more.45
However, the Workforce Strategy also observed that despite operating in a competitive labour market and being faced with skill shortages, less than 50 per cent of agencies were 'actively and strategically' planning for workforce skills and capabilities.46 It emphasised the need to recruit strategically for the longer term:
The APS cannot continue to be overly reliant on recruiting from the labour market and only when a vacancy arises. We must be able to proactively and strategically recruit with a 5–10-year horizon in mind, to build strong capability pipelines for data and digital/ICT roles, and develop these capabilities internally through focused programs….47
The committee also heard that the APS was not seen as an attractive career option for ICT professionals due to the uncompetitive pay and conditions.
For example, Professionals Australia observed that lucrative private sector opportunities created by competition for their skills, combined with stagnant APS pay, acted as significant factors pushing ICT professionals out of the public sector, or preventing them for considering an APS career in the first place.48
The CPSU advised that the current APS bargaining policy49 prevented agencies from including tailored arrangements such as specialised pay structures in enterprise agreements, despite such arrangements forming a 'significant component' to attracting and building critical specialist capabilities within fields such as ICT.50
The CPSU reported that its members repeatedly raised uncompetitive pay and conditions as one of the major factors impeding ICT personnel recruitment. It identified that low pay rates for APS ICT positions compared to the private sector, as well as a lack of career progression (except into managerial roles) were common themes in feedback.51
The CPSU provided the committee with direct feedback from its members on the issue. For example, a CPSU member within Geoscience Australia stated:
We are having trouble attracting staff due to the pay we are able to offer in a competitive environment, particularly in IT security We have had several recruitments where we were unable to fill positions due to no suitable applicants applying.52
Additionally, a CPSU member within the Australian Criminal Intelligence Commission stated:
APS salaries and conditions can't compete with the market, especially for skilled technical people who do not want to move into management for salary progression (which is the only option). The APS is no longer perceived as a secure employer and opportunities are limited for reskilling in the ICT arena in the APS.53

The Digital Profession

As set out earlier in this chapter, the Thodey Review identified that there was a need to build data and digital expertise within the APS. To action this, it recommended that the APS apply a 'professions model' to establish a digital and data profession. It suggested that as part of this, the APS should 'create a genuinely compelling offer' for individuals to work in data, digital and broader technology roles in the public service.54
In its response to the final report, the government agreed to establish separate digital and data professions in order to 'build capability and support career paths in these critical areas'.55
As a result of this commitment, the Digital Profession commenced in April 2020 led by the DTA, and the Data Profession commenced in September 2020 led by the Australian Bureau of Statistics.56
The APSC explained that the Digital Professional Stream Strategy was a structured approach to 'build and uplift the core digital expertise of leadership and the workforce, and build specialist expertise in digital roles'. It characterised the strategy as:
….a deliberate approach to setting professional standards, implementing digital career pathways and addressing digital skills gaps. It will build networks and ways to strategically recruit, develop, grow and retain talent in digital leadership and the digital capability of our workforce.57
The DTA informed the committee that as at 12 March 2021, the Digital Profession had 1451 foundation members. It noted that foundation membership was open to anyone 'who would like to help shape the future of the Profession', including those in academia and private industry. 58
The DTA also flagged that a tiered membership model was intended for roll out later in 2021 to enable APS digital and ICT employees to join the profession as 'digital practitioners' with the option of becoming verified or accredited professionals.59
In terms of the make-up of the Digital Profession, the DTA advised that it captured which organisation a member belonged to, but not whether they were a contractor or APS employee. It provided the following breakdown of members by organisation type:
1077 employed by a federal agency;
77 employed by a state agency;
17 by a local government agency; and
280 members who are non-government (e.g. from industry or academia).60

Concerns with ICT procurement

The Centre for International Corporate Tax Accountability and Research (CICTAR) expressed concern about the high level of APS expenditure on external contracts for ICT services.61
It argued that an overreliance on ICT contractors:
did not provide taxpayers with value for money; and
did not built the long-term digital capability of the APS.62
Additionally, it also argued the many of the large multinational ICT contractors used by the APS had a track record of tax avoidance, giving them an unfair competitive advantage over Australian companies.63
CICTAR explained:
To the extent that outsourcing IT is required, Australian tech companies, without a track record of aggressive tax avoidance schemes, continue to face a major competitive disadvantage. Awarding contracts to these multinationals has been to the detriment of local companies that are capable of delivering the same services with higher standards and greater benefits to the Australian economy.64
As noted earlier in this chapter, there is currently no central data collection process related to ICT expenditure across government.65
Mr Jason Ward, spokesperson for the Tax Justice Network Australia (TJNA), estimated that based on a 2017 quote from the then Assistant Minister for Digital Transformation66, the government spends approximately $10 billion per year on ICT.67 Regardless of the exact figure, he submitted that such significant government expenditure should not be awarded to multinational 'tech giants' with track records of tax avoidance.68
When queried by the committee on the extent of the reliance on external ICT providers, Mr Ward stated that the APS was 'heavily reliant' on external providers and 'even more heavily reliant' on large multinational providers.69
Mr Ward acknowledged that there were times when it may be appropriate for the APS to utilise external services. However, he emphasised that an overreliance on external arrangements ultimately diminished the ICT capability of the APS over the long term in terms of both personnel and equipment:
Obviously some services would need to be brought in externally because of technical expertise, but relying on these companies undermines the capacity of the APS to develop its own technical skills and knowledge. There is a lot of overlap between the labour hire side of this and the IT side—lots of people. It's not just equipment; it's personnel coming in to run the technical capacity of the APS.70
CICTAR also stated that a significant feature of APS ICT contracts was the 'high level' of labour hire and temporary workers involved. It argued that this indicated that key work was being done by external contractors, and that as a result long-term knowledge and capacity were not being developed within the APS. It went on:
The use of external labour is likely to cost more than developing IT capacity within the APS and deepens reliance on future outsourcing contracts with costs escalating further over time.71

The case for smarter, more transparent procurement

As canvassed earlier in this chapter, submitters indicated that to the greatest extent possible, the APS should seek to build its internal ICT workforce in order to reduce its reliance on external ICT personnel.
CICTAR and the TJNA acknowledged that there may be circumstances where there remained a genuine need for the APS to procure ICT services from external providers. However, they posited that this procurement needed to be done in a way that benefited the Australian economy and foregrounded transparency.
For example, CICTAR recommended that where external ICT contracts were required, preference should be given to companies that make the greatest contribution to the Australian economy, measured in terms of:
technology transfer to the APS;
high-quality jobs created; and
income tax payments generated.72
It commented:
…there is a huge opportunity with federal IT contracting to boost innovation in Australia's economy and support domestic business, job creation and increase corporate income tax revenue to fund public services.73
Evidence from CICTAR highlighted the extremely low numbers of Australian companies receiving federal ICT contracts. Based on AusTender data released by the Department of Finance, CICTAR informed the committee that in 2020, 28 companies were awarded $4.4 billion in federal contracts for ICT services. CICTAR advised that of these 28 companies, only four were Australian.74
The TJNA also argued that where ICT outsourcing was necessary, the APS should focus on supporting domestic firms that contribute to the Australian economy.75 Mr Ward noted:
There are domestic firms with appropriate capacity and capability, but they can't compete with multinationals who don't pay taxes, exploit cheap foreign labour and can underbid on initial contracts.76
CICTAR recommended that where ICT contracts must be awarded to multinational companies, the government should, at a minimum, require those corporations to produce a copy of reporting under the Global Reporting Initiative (GRI) Tax Standard, or implement the standard within one year.77
CICTAR noted that the GRI Tax Standard includes public Country by Country Reporting (CbCR) on tax payments to governments. It explained that this would constitute an improvement over the current Organisation for Economic Co-operation and Development (OECD) CbCR standards, which are not public.78
CICTAR advised that the implementation of the GRI Tax Standard would not pose a reporting burden on large multinational companies as they were already required to report country by country tax payments to the Australian Taxation Office (ATO) and other tax authorities under the OECD's Base Erosion and Profit Shifting (BEPS) Action Plan. CICTAR further noted that current CbCR data is not accessible outside of the ATO, and is therefore not available to help inform APS procurement decisions.79
In summarising its position, CICTAR argued that any APS procurement of ICT should be seen as an opportunity to increase transparency, encourage responsible corporate behaviour, level the playing field for Australian companies, and ensure that 'tax dodging' corporations are not rewarded with federal contracts.80

Committee views

The need for strategic and significant investment

The committee considers that building digital capability within the APS is critical to the future ability of the APS to properly perform its functions.
The committee is reluctant to deliver detailed recommendations in relation to future directions because of the paucity of information either publicly accessible, provided to the committee, or discovered through the Senate estimates process.
The committee agrees with the Thodey Review conclusion that a 'shift in trajectory' is required and believes that building APS digital capability is a strategic level issue for the APS. It follows that ICT capability plans, investment and expenditure, as well as workforce capability development, should have APS-level oversight and accountability.
The outsourcing of ICT projects without a strategy to simultaneously build ICT capability creates dependency on external providers and hollows out capability, effectively constraining future decision making. Outsourcing creates a self-reinforcing spiral.
The committee is extremely disappointed by the apparent lack of progress made on the 'urgent audit' of ICT capability, risks and needs committed to by the government in December 2019 in response to the Thodey Review.
The committee recognises that the advent of the COVID-19 pandemic in 2020 presented unforeseen challenges that understandably necessitated a shift in work priorities for the APS and resulted in delays to some aspects of the APS reform agenda. However, while strategic oversight and scrutiny has stalled, expenditure is continuing apace.
Since the commencement of the Digital Review in March 2021, progress appears to be lagging and the government's inability to provide clarity on the status of the work is concerning.
Further, the government indicated in its response to the Thodey Review recommendations that the audit would then lead to the commissioning of a 'long-term ICT blueprint', to be updated every two years. The lack of progress and clarity around the 'audit' is clearly also delaying this process, and therefore impeding the ability of the government to look properly at ICT capability in the long-term.
The committee calls upon the government to immediately clarify the status of the Digital Review. The government needs to confirm whether this piece of work constitutes the 'urgent audit' it committed to almost two years ago.
The committee considers the findings and recommendation put forward by the Thodey Review to be abundantly clear — there is an urgent need for detailed information on the state of whole-of-government ICT. There is also a pressing need to develop an overarching blueprint to guide strategic investment and ensure that the APS has 'fit-for-purpose' ICT systems. The digital transformation of the APS cannot be efficiently and effectively implemented without these two elements.
As such, the committee urges the Secretaries Board in the strongest possible terms to swiftly finalise and release the Digital Review.
The committee also urges the government to be guided by the results of the ICT audit and develop a whole-of-government ICT blueprint as an immediate priority. The objective of the blueprint should be to provide leading edge digital capability in Australia by increasing APS digital and ICT capability and reducing reliance and expenditure on external firms in a measurable and planned way over a defined but ambitious timeframe.
The government must also commit the level of funding required to properly invest in the ICT capability of the APS and bring expertise back in-house. Only then will public sector digital services have a chance of matching the standards set by leading private sector companies.

Externalisation of the ICT workforce

The committee is extremely concerned with the high headcount and huge amount of federal expenditure on external IT contractors.
It is unacceptable that agencies like Services Australia have contractor numbers that dwarf internal employee numbers, nor is it in the interest of developing long-term capability.
The committee is strongly of the view that this overreliance on external personnel has hollowed out the ICT skills of the APS workforce and represents an inefficient use of taxpayer money.
It is clear that ICT contractors are being used for core, ongoing work and that the digital capability of the APS is inhibited by these arrangements.
The committee wishes to emphasise that this is not a new or novel problem. In 2017 the ICT Procurement Taskforce concluded that an overreliance on contractors had eroded the ICT capability of the APS and was 'unsustainable going forward'. The Thodey Review in 2019 then made similar findings. Another two years have passed and still, no real progress has been made.
The committee acknowledges that work is underway to identify and address the critical digital and ICT skill gaps within the APS. It considers the establishment of the Digital Profession a positive step.
However, the committee considers that significantly more must be done to recruit ICT professionals into the APS in order to build internal capability and lessen the reliance on external personnel.
Noting the challenges posed by a competitive labour market, the committee concludes that the APS must dramatically improve its offerings in order to attract talented employees with the requisite skills.
It is imperative that the APS become an employer of choice for ICT and digital professionals. The committee encourages the APSC to investigate methods to make this a reality, including through providing distinct career pathways, structured learning and development programs, and appropriate classification and remuneration scales embedded in enterprise agreements.

ICT procurement

The committee considers that APS ICT procurement, whether for personnel, equipment or systems, provides a valuable opportunity for the government to raise the standards of transparency, fairness and value for taxpayers.
The committee is concerned that domestic companies that abide by Australian tax law are at a significant disadvantage in obtaining federal ICT contracts while multinational competitors undercut them by minimising tax obligations and other corporate responsibilities. The fact that $4.4 billion in federal contracts was awarded nearly entirely to overseas companies in 2020 alone highlights the extent of this problem.
The committee feels strongly that multinational companies that engage in tax minimisation in Australia should not be rewarded with taxpayer money through large federal ICT contracts for the APS.
The committee sees merit in the recommendation put forward by CICTAR in regard to the implementation of improved reporting standards.
Additionally, the committee's strong preference is that the APS build and maintain ICT capability and lower reliance on external providers. The committee calls for greater scrutiny to be required in the awarding of external ICT contracts to ensure that technical capacity is built and sustained within the APS.
The current volume of ICT outsourcing, as illustrated by the evidence put forward by CICTAR, is far too high. The vast amount of APS expenditure on external contracts for ICT services does not provide value for money for taxpayers, nor does it build the long-term capability of the APS.

Recommendation 14

The committee recommends that the Australian Government immediately finalise and publish the Digital Review conducted by the Digital Transformation Agency.
In line with recommendation 14 of the Independent Review of the APS, the committee recommends the Digital Review include information relating to:
current and forecast ICT expenditure and assets;
systems scheduled for retirement or no longer supported by software vendors (and the associated risks);
future requirements; and
any urgent ICT capital investment needs.

Recommendation 15

The committee recommends that the Australian Government, as a matter of priority, use the findings of the Digital Review to develop and fund a long-term, whole-of-government ICT blueprint, as recommended in the Independent Review of the Australian Public Service.

Recommendation 16

The committee recommends that where ICT contracts must be awarded to multinational corporations, at a minimum the Australian Government must require those corporations to produce a copy of reporting under the Global Reporting Initiative Tax Standard, or implement the standard within one year.

Recommendation 17

The committee recommends that the Australian Government apply greater scrutiny in the awarding of ICT contracts to ensure that:
Australian companies are given the chance to compete on a level playing field.
External providers are only used when absolutely necessary to ensure that technical capacity is built within the APS.

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