Corruption crackdown on IT contractors in NSW

By Julian Bajkowski

Fresh from making findings of corrupt conduct against former New South Wales Cabinet ministers and Labor Party power brokers, the state’s unrelenting watchdog against dodgy dealings in the government has turned its spotlight onto the often creative industry of IT contracting.

The NSW Independent Commission Against Corruption (ICAC) this week set out what it calls “five key levers” the watchdog says must be carefully managed “in order for government agencies to minimise the corruption risks involved in managing information technology (IT) contractors.”

"For public sector managers, the oversight of IT projects and engagement of IT contractors is fraught with risks of delays, cost blowouts and failure to achieve project goals," the ICAC paper says.

"The rapidly evolving IT field renders impractical many attempts to directly manage the technical aspects of IT projects – a problem heightened for managers with core expertise that is remote from IT."

They’re not kidding either. The state government has played host to a multitude of errant technology projects over the last decade that have ranged from a courts and legal case management system that delivered little more than write-offs and litigation between the government and suppliers to the bizarre, decade long fiasco Tcard that was supposed to deliver smartcard transport ticketing.

Not that technology is an easy or consistent business.

The ICAC manual says that “decades of disruptive technological shifts and constant innovation have led to unrelenting change in organisations being driven by an area that is outside the expertise of most operational managers”

This disruptive innovation, it says, also hits the IT industry and results “in the perpetuation of a somewhat immature industry structure with many micro firms.”

“Some 20,000 IT firms exist in Australia, with 85 per cent having fewer than five employees and only 500 firms having more than 20 staff.”

The ICAC is particularly interested in the potential for corruption that stems from the proliferation of more than 2000 specialist IT recruitment firms, many of which are simply owned by independent contractors themselves.

“The resultant heavy reliance on contract IT specialists to design and implement highly innovative projects means that traditional methods of project control such as budget, specifications, timeframe, cost and measurement of deliverables become elastic and are rendered less effective,” the ICAC said.

“As these controls weaken, the ICAC has seen opportunities for profiteering and corruption increase; contractors can over-service, over-price and under-deliver.”

As a result, the watchdog is spelling out a simple five step program for government officials to follow.

ICAC says that after consulting chief executives, operations managers, IT managers and auditors “about how to control IT contractors” it found the following consistent key levers:

  • linking of business case to project controls
  • separating design and build
  • guarding the "gateway" through which contractors enter the organisation
  • managing the project management
  • ensuring a clear exit strategy is in place

The NSW Minister for Finance and Services, Andrew Constance said ICAC’s report “highlights some of the challenges involved in successfully managing IT projects in the public sector.”

Mr Constance replaces former state Finance Minister Greg Pearce who was sacked from Cabinet by Premier Barry O’Farrell for not disclosing a possible perceived conflict of interest that stemmed from a board appointment to well-known IT basket case Sydney Water.

“The NSW public sector needs better project management when investing in information and communications technology (ICT) and we are building the capability of our staff to effectively manage IT projects, contractors and vendors,” Mr Constance said.

“We support ICAC’s finding that a well-designed business case is essential to avoid issues such as scope creep, unnecessary customisation, corruption risks associated with hiring specialist contractors and underquoting to lock-in future business.” Mr Constance said.

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