Gershon fallout: Contractor cuts realistic?

Article appeared in: ZDNet.com.au
Author: Liam Tung
Date: 20th October 2008

Two local ICT companies have raised concerns around Sir Peter Gershon’s recommendation, released last week, that federal government agencies should cut IT contractor levels by 50 per cent over the next two years.

“The consequences of adopting Gershon’s recommendations as a firm target is likely to include further increases in [government ICT] skills shortage,” said chief operating officer of ICT recruitment firm Peoplebank, Peter Acheson.

Acheson said there was currently a shortage in government agencies of around 1,000 people, representing a quarter of its total ICT labour force. “Imposing permanency targets that effectively mean lower salaries for those currently on contractor rates would only serve to further increase the shortage, with the further consequence that departments would find it near-impossible to achieve key IT deliverables,” he said.

One such agency that has become highly dependent on contractors to meet its deadlines is the Department of Immigration and Citizenship. Thanks largely to the Systems for People IT refresh which began in 2006, its annual intake of contractors has gone from 800 in 2003 to 2,500 a year every year after. DIAC currently employs 7,000 full-time staff

“It’s basically contractors coming in to work on a short-term project and going out,” Mark Handley, director of protective security at DIAC, has said about the situation.

The short-term nature of the work required for this type of project justified the continued use of contractors, said Peoplebank’s Acheson.

“Much of the Federal Government’s immediate need is for short-term project work with specific skills requirements. This doesn’t warrant the engagement of permanent staff, which is why contracting is a preferred method of engagement — it provides workforce flexibility, reduced overall risk and the ability to quickly restructure as needs change.”

However, the dependence on short-term contractors has also left DIAC exposed to short-term fluctuations in the price for skilled IT labour, which in turn had threatened the project’s viability. Midway through the IT refresh DIAC realised it faced a possible 22 per cent increase in labour costs. The projected shortfall in funds resulted in a $25 million bailout package awarded to it in order for the project to keep going.

On the other hand, some government agencies have begun to change the discourse used for projects once positioned as “short-term”.

Australian Taxation Office chief information officer Bill Gibson recently said the five-year $724 million Change Program would be called a Change Agenda going forward in order to suggest its ongoing nature.

“I don’t really want to refer to it as a Change Program,” he said. “Only in that it really is an ongoing change, a much broader thing, an agenda; we’re branding it as a Change Agenda. This is trying to help people understand that change doesn’t stop.”

A recommendation by Gershon that has found industry support around the use of contractors is that the government needs to better develop long-term careers for ICT staff within government.

“We support the view that the government should focus on ICT career, training and development within government ranks,” said Martin Aungle, Dimension Data’s corporate communications manager. “We believe that this will have a positive effect for the sector as a whole by encouraging more young people to consider an ICT career,” he said.

But before the government committed to an actual reduction figure, Aungle said it should investigate further what skills are actually required in-house.

“The government really needs to investigate what skills are needed in-house, what skills they need to develop internally and what skills they need to source from third parties,” he said. “Also, there don’t seem to be any recommendations made around a more effective skills transfer and education process as part of the process of service delivery.”