CenITex outsourcing needs to be reversed: Review

The decision to outsource Victoria's IT service CenITex was not in the state's best interests, according to a review commissioned by the Department of Premier and Cabinet.

Victoria's state IT service, the Centre for IT Excellence (CenITex), should cease its outsourcing project and revert back to a government IT service, an efficiency review commissioned by the Victorian Department of Premier and Cabinet (DPC) has said.

The review (PDF) found that the proposal to outsource CenITex should not proceed, because the business case does not fully account for the amount of work and cost required within departments to achieve the required level of standardisation.

"There was also limited confidence that outsourcing all of CenITex's services to one provider would deliver value for money," the report said.

In the future, a new governance framework that applies benchmarking, performance measurement, and testing against the market will be put into place.

According to Special Minister of State Gavin Jennings, market testing of some CenITex services and other business support services will provide opportunities for vendors and save 480 CenITex jobs.

Project Atlas -- the project to outsource CenITex -- was paused during the eight-week review, and will not pick up again, with implementation of the new governance framework to commence immediately.

The Centre for IT Excellence has a history of controversy. In May 2012, the IT agency slashed 200 jobs and cancelled 80 vacancy advertisements in a bid to balance the budget of the troubled and costly IT shop. This came after CenITex employees had been outed for having exorbitant salaries and contract fees for services rendered, with some salaries reportedly worth AU$500,000 per year.

Later in October, the Victorian Ombudsman released a report that had listed a number of breaches in the CenITex procurement process, revealing that up to AU$4 million worth of IT contracts were awarded without due process.

The following year, the state government tendered for an IT service provider to replace CenITex, which was to move into a broker role as a result. The state invited expressions of interest in September 2013 from companies wanting to provide IT services to the various agencies and departments.

The move came after the state government allocated AU$19 million in its 2013-14 Budget for implementing the IT Strategy, calling on highly experienced providers of IT services with proven track records in the delivery of reliable, effective, and innovative IT solutions to respond to the tender.

Later in 2013, the government's chief technology advocate Grantly Mailes added another notch to his belt in his appointment as the new chair of CenITex. Mailes was already performing as chief technology advocate to the Victorian government since the role was created for him back in March the same year in an attempt to deliver better services, reduce waste, encourage innovation, and improve IT procurement across the government.

In December, three further members were appointed to the CenITex board. Coles group general manager Conrad Harvey, former Department of Business and Innovation deputy secretary of innovation and technology Randall Straw, and former Goldman Sachs JBWere CIO Dr Richard Tait joined Mailes in a move by the government to fix the troubled IT service.

At the beginning of 2014, the state government continued to push for greater industry involvement in developing the IT sector, while it also continued its overhaul of CenITex.

"Our project is to essentially unpack the way in which CenITex operates, and put a number of those services in the private sector marketplace," Victoria's then Minister for Technology Gordon Rich-Phillips said at the time, conceding that service delivery "is an area in which, frankly, as a government we haven't kept pace".

Rather than getting replaced, the Coalition government decided to outsource the operation of CenITex, a move that was announced in the 2014-15 Victorian Budget, handing the responsibility for the AU$6 million outsourcing project to the Department of State Development, Business, and Innovation in a project now known as the annulled Project Atlas.