Commissioner of Taxation Rob Heferen has ordered an urgent full-sweep review of the Australian Taxation Office’s technology expenditure, infrastructure outlay and contract costs, calling in agency chief finance officer Janine Bristow to run the ruler over the agency’s massive tech shop.
The root and branch review comes as Tax looks for ways to reduce its reliance on outsourcers, contractors and internal service providers in what could yet be one of the biggest technology insourcing shifts across the Australian Public Service.
Updates to the ATO’s Senior Executive Service top brass obtained by The Mandarin reveal the recently appointed Tax boss has demanded an immediate hard-nosed assessment of where the ATO’s tech spend is at before the permanent appointment of any new tech chief.
“I have asked Chief Finance Officer Janine Bristow to conduct a review for a 6-month period, reporting through to Jacqui [Jacqui Curtis, enterprise strategy and corporate operations chief operating officer] from September 2024,” Heferen said in the update issued to senior executives.
“Janine will be undertaking a review of the cost associated with maintaining our current IT infrastructure, IT contracts and importantly the budget required to safeguard our technology, data and that of the Australian community.”
The launch of the sweeping Tax IT review and its handing to the agency CFO, who reports to the chief operating officer, indicates a degree of concern about the present tech settings and costs, with the ATO’s massive Enterprise Solutions and Technology Group (EST) clearly the subject of the examination.
“Janine will look at future needs and provide a realistic and strategic view of the budget requirements for EST moving forward. This will be critical as we manage budget pressures now and into the future,” Heferen said.
The overall stability of the ATO’s tech stack is of critical importance to the cash flow of the wider government because outages or availability fails can result in revenue collection and thus funding shortfalls.
Like other major transactional agencies, Tax still uses heavy-duty distributed computing assets that can scale rapidly and run at very high volumes to underpin a raft of major compliance measures, including Single Touch Payroll, that require withholding remittances each pay cycle to eliminate fraud.
Previous cost-cutting to so-called ‘big iron’ infrastructure has landed poorly for both agency heads and ministers in other agencies, the two most infamous being Centrelink’s online system choking under load during COVID.
Then-minister Stuart Robert initially claimed the outage was because of a denial-of-service attack when, in fact, the rig could just not cope with the load and was under-provisioned to keep costs down.
Prior to COVID was CensusFail, which saw a similar Australian Bureau of Statistics rig stall after insufficient high-volume headroom was provisioned. Both incidents brought into question whether a lack of technical understanding of the potential impacts of cost controls could have been easily avoidable.
By contrast, the ATO became the go-to agency for the roll-out of JobKeeper because it could scale hard and fast and deliver quickly.
The ATO’s management played a straight bat when queried over what has triggered the current IT review.
“The ATO technology and digital services deliver a reliable and contemporary client experience and keep pace with community expectations,” an ATO spokesperson told The Mandarin.
“As the ATO focuses on how its Digital, Data and Technology service will be delivered, significant investment will be required, and the CFO will be able to advise on this.”
“We are a leading digital business, known for technology-enabled innovation, integrity and insight. Our technology strategy will continue to guide investment in our key technology services while building the foundation for future capabilities and supporting our data and analytics capability,” the ATO spokesperson continued.
“In 2024-25, the ATO will reduce outsourcing of core work in line with the APS Strategic Commissioning Framework. Our targets for 2024-25 focus on reduced outsourcing of information technology, service delivery and data analytics work, with an expected reduction of $31.9 million in 2024-25 in outsourcing expenditure.
“The ATO digital strategy continues to drive digitalisation efforts with a focus on keeping our foundations strong while making the right incremental improvements and additions to our digital services,” the ATO spokesperson said.
The $32 million reduction in outsourcing costs was spelled out in the latest ATO Corporate Plan and is relatively incremental compared to the agency’s overall wage book of $1.56 billion recorded in tax’s last annual report.
Compare that to the $534 million in “contractors and consultants” and $548.6 million for “IT and communications” booked under expenditure on “suppliers”.
Just a 10% reduction in contractor costs would equate to $53.4 million, so perhaps the real question is whether Tax is prepared to pay an Individual Flexibility Agreement premium over Defence or Services to reduce the contractor headcount.
What is known is that IT suppliers are clearly in the crosshairs, and there’s no time like a leadership change to bring out the pencil sharpener.
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