Senator PAYNE (4.48 p.m.) —The uninformed listener may perhaps be excused for thinking that Chicken Little is in the chamber this afternoon, worried that the sky is going to fall in, because that would seem to be the case from what Senator Lundy has spoken to us about this afternoon in relation to IT outsourcing. In fact, the casual reader of her comments today, if there are any, may decide that there is nothing in the world good about the concepts of IT outsourcing in this particular IT initiative. Okay, take it from the position of the casual reader. If the casual reader then moved on perhaps to look at the Labor Party's platform from their most recent national conference and the remarks they make in relation to IT outsourcing, they may end up a little confused by the inconsistency. Nobody can blame them. Of course, the Labor Party platform makes it quite clear that they continue to support IT outsourcing and do not call for its ditching, as Senator Lundy herself has in the past.

Accusations and rhetoric are pretty easy to put on the record. It is substance that is often the challenge. Let us see if I can at least try to meet that in my remarks this afternoon. This outsourcing initiative is in fact a groundbreaking policy implementation. As the ANAO itself concludes in its report:

This is a complex and unprecedented program. Five contracts covering 23 Commonwealth agencies have been awarded at a total contract value of around $1.2 billion. There are tenders involving seven more agencies in progress and preparations are well under way to commence another two group processes involving 11 agencies.

This is a program of government that involves a long-term view. The IT outsourcing initiative is a fundamental plank of what is a far bigger reform picture, and we are not surprised that the opposition is not able to contemplate that larger reform picture.

The recognised lifting of the outsourcing market in this country has been attributed in no small way to the activities of this government. Outsourcing is in fact an essential part of macroeconomic reform. In the end, it is in fact not noise, colour and movement that is important, as the opposition might have you think; what is important is that what we are developing is a skills base and an industry. We do recognise and recognise seriously that the involvement of Australians in information technology is the future of this country.

What outsourcing has provided is an opportunity to leverage those skills across the economy, to expand into a global market—placing people with those skills, members of the Public Service in particular, at the forefront of an enormously growing industry with the skills and opportunity to take Australian expertise to the world.

Senator Lundy criticised briefly industry development benefits of IT outsourcing and indicated that, in her view, they were quite limited. But there are some that I would like to place on the record in this context. From the five contracts, for example, currently in place, the outcomes in relation to industry development from the IT outsourcing initiative include: 30 per cent of the contracts, goods and services to be provided by Australian SMEs; and 75 per cent of the goods and services to be produced in Australia. In addition to that, successful bidders have committed to further industry development initiatives which will generate approximately $90 million in strategic investment, 390 jobs in regional Australia and exports or import replacement programs to the value of $280 million—in anyone's book, fairly substantial and significant contributions in this process.

The IT initiative itself structures its outsourcing contracts to suit the needs of the Australian IT&T industry and Australian SMEs in particular. A multinational company, several of which Senator Lundy referred to, cannot win an outsourcing contract unless they give contractual commitments to assist the development of Australian industry, to partner with Australian SMEs to provide jobs in regional Australia and to provide Australian value added content, strategic investment and export or import replacements—a couple of facts that were not put on the record in the previous speech.

Let me say that I think the scale and enormous importance of the IT&T industry to this country are undisputed, and certainly the figures reflect some very beneficial effects that Commonwealth outsourcing is having for the industry. One of the goals of the initiative is to lift the capability of local industry to the next level in terms of size and ability to handle complex work. So SMEs, small to medium enterprises, teaming with multinationals gives those SMEs the opportunity for skills and knowledge transfer by working with experienced large-scale outsourcers. As a result of the outsourcing tenders completed to date, SMEs have picked up in excess of $400 million of work that they would not have if it were not for the initiative, and those opportunities will continue during the remainder of the initiative.

You just need to look, for the benefits of the initiative, at the recently announced group 8 process result where IPEX, an Australian SME, was selected as the preferred tenderer to provide the IT services to several Commonwealth agencies. I thought that Senator Lundy's comments, which were unsupported, anecdotal comments in relation to IPEX, were unfortunate, because if you disparage an Australian company in that way on the record, without backing up what you are saying, you leave people wondering what the result of the tender process is. The result is quite clear: the winner is IPEX—and that is an important decision for Australian companies in this particular business.

I referred already to the creation of jobs in regional Australia, almost 400 of those, many of them here in Canberra. But did we hear an acknowledgment of that from the senator for the Australian Capital Territory? No. We also have within the initiative the government's small agency program, which gives SMEs an opportunity to bid as prime contractors.

I would also like to put on the record just a couple of examples through the industry development framework for the IT outsourcing initiative where the government has secured commitment to certain projects above the provision of services to the Commonwealth. I think even the most critical observer would recognise the value of these. Take, for example, in cluster 3 CSC, the Hunter Technology Centre: a commercially viable training centre, developed in collaboration with a Newcastle-based educational body, to ensure that quality IT skills are available for regional employment growth in both CSCs and other locally based IT companies' activities. It is likely to have the following areas of specific focus: utilities, defence-related projects, health care and year 2000 code rectification.

Look, for example, under group 5 at Advantra, the Australian IT Technical Assistance Centre in Brisbane. This call centre is unique in Australia in the sense that it is going to provide services to both the Australian and Japanese markets in their respective languages. Staff will need to be skilled in IT and the two languages. Also under group 5 and Advantra, there will be sponsorship of IT students at the Australian National University—sponsorship of two honours degree students in the computer science and information technology faculties at the ANU as well as additional sponsor prizes for tertiary students from these faculties. It is going to provide further incentive and generate interest amongst students who are undertaking studies in these particular areas. I happen to think that these components of the industry development framework are important ones which have been ignored by the opposition in their comments on this particular motion this afternoon.

Finally, under group 8 we return to IPEX and their graduate training program. They have committed to undertaking a new graduate training program based in Melbourne. It is a program which will employ at least 12 graduates a year, will provide for an extensive training course with hands-on experience with technology, applications and methodologies from the world's leading IT vendors. On completion of the training course, IPEX will return graduates to their home state to work with IPEX and clients. They have also committed that 20 per cent of employment created through that initiative will be in regional Australia. In terms of the sorts of issues which are discussed in this context, I think these are very important to put on the record. I am pleased to have the opportunity to more fully address some of those questions this afternoon.

The government has recently enhanced the IT outsourcing industry development criteria even further. We have established a register which will encourage major projects and provide greater recognition of industry development commitments in regional Australia. That announcement was made just recently by the Minister for Finance and Administration and the Minister for Communications, Information Technology and the Arts. This project register will formalise consultation processes, which were previously adopted by OASITO and the Department of Communications, Information Technology and the Arts, for the management of industry development. It will be consistent with the probity and policy objectives of the IT initiative.

The ministers, at the same time as making that announcement, also announced an expanded view of regional outcomes under the industry development framework of the IT initiative in which recognition will be given to business flowing to regional enterprises and additional regional investment as well as to regional employment growth in all future tender processes. The political imperatives based on the needs of Australian people who live in rural and regional Australia are acutely recognised in this process, which I think is very important. It was a glaring omission in Senator Lundy's remarks that she did not put that on the record.

I want to talk briefly about the government's response to the ANAO report this afternoon. There was no acknowledgment, or very limited acknowledgment, in Senator Lundy's remarks that the government has even commented on the ANAO report into the initial contracts let under the IT initiative when, in fact, they have done so comprehensively. In a collective response, which has been agreed by the Commonwealth agencies involved in those contracts, the Commonwealth has agreed to adopt the majority of the report's recommendations. Again, the casual listener to the previous remarks would not have even known that that was the case. That, of course, would have been inconvenient to put on the record.

Senator Lundy spent a great deal of her time speaking about savings and making some comments on the report's findings in that regard. It is important to note that page 14 of the report states:

That said, it is important to note that the Government's objectives in pursuing the IT initiative were broader than the achievement of savings ...

And the report refers to paragraphs 2 and 3, which I would also like to make reference to. I quote directly from page 11 of the ANAO report:

2. In the 1997-98 Budget, the Government announced the Whole-of-Government Information Technology Infrastructure Consolidation and Outsourcing Initiative (IT Initiative). The measure was directed at achieving long-term improvements in the structuring and sourcing of information technology services across agencies to facilitate greater integration in the delivery of programs and realise significant cost savings.

3. The IT Initiative is based upon a framework in which the information technology infrastructure and telecommunications requirements of Commonwealth agencies are gathered into a number of groups to be offered to the market. The overall strategy is to replace service delivery by agencies through component procurement with a service purchasing approach under which an external service provider (ESP) has end-to-end responsibility for delivering an integrated suite of services. This framework was expected to produce significant benefits, including financial savings in ESP charges; reduced tender costs to Government and industry; increased opportunities for rationalisation and standardisation between agencies; and efficiency in contract management. The IT Initiative was also seen as an opportunity to enhance the IT&T industry in Australia, particularly in regional areas.

So, far from totally concentrating on the question of savings, as Senator Lundy largely chose to do this afternoon, it is important to record that the report itself acknowledges that the government's objectives in the IT outsourcing initiative are far broader and much more significant than has been acknowledged previously. A reading of the report itself shows that the implementation of the initiative has been demonstrated to have a fundamental soundness and that cluster 3, the ATO and group 5 tender processes have been conducted to the highest standards of probity and integrity. The government remains very committed to the initiative.

A rhetorical question that Senator Lundy threw into the air is one that I am happy to respond to. Our commitment is there because it is a commitment that has facilitated the reform of what was a completely ramshackle IT landscape which the government inherited from the Labor Party. We came from a zero base when we had to commence the IT initiative. Under the previous government, there was a lack of accountability and discipline taken in relation in the provision of IT to Commonwealth agencies. Agencies were not even required to take a strategic approach to their IT needs. Under the previous government, agencies did not fully understand the cost of the provision of their IT infrastructure; they did not measure the level of the infrastructure services required or the level of service achieved by them; and, in the end, they had no way of verifying whether their IT infrastructure arrangements even represented value for money. Under Labor, there was no direct policy for using the IT purchasing power of the Commonwealth—not insignificant—to help build a strong and competitive Australian IT industry.

It is this government's initiative that has provided agencies with the tools that are required to assess the cost effectiveness of the IT infrastructure services, delivered through service standards that are precisely measured, that are reported and that are contractually enforceable. So, by any measure, to address the barren field that we had to start with was an enormous task for the coalition government. The report does acknowledge that when it states that the initiative has involved the tendering of an unprecedented volume of work to the industry. It also importantly acknowledges, and this has not been acknowledged on the other side, that the audited contracts have at this stage operated for relatively short periods. Their longer term effectiveness in delivering expected financial and service benefits will be determined over their five-year contract term.

Taking into account the findings and recommendations of the report, and taking into account the fact that the government has agreed to adopt the majority of the report's recommendations in its collective response, the government is satisfied that the initiative's stated objectives are being achieved—and I have enumerated those. Significantly, I should also put on the record that the report notes that the substantial benefits flowing to the industry as a result of the initiative have in some cases exceeded contractually committed levels. The tenders for the IT initiative so far have resulted in plans over five years for around $90 million in new strategic investment, some $900 million worth of products and services actually sourced in Australia, almost $300 million in new exports or import replacement activities and about $400 million worth of work for Australian SMEs—again, not insignificant results and results that the government is very happy to have on the record.

The stated objectives that Senator Lundy referred to as being failed in this case actually might imply to the casual listener that the opposition is really interested in the cost of providing IT infrastructure to Commonwealth agencies. But a brief examination of the record of the Labor Party in government would certainly indicate that this was not the case while they were in office. As I have said, under the Labor Party there was a lack of accountability, a lack of discipline and no strategic approach in relation to the provision of IT to Commonwealth agencies. Without any idea of the cost of providing IT or the level of services required or achieved by information technology services, there was no way of verifying whether their arrangements were in fact value for money. It is only because of the initiative that we can actually answer some of these questions.

The ANAO report does raise some issues in relation to the final method evaluation methodologies adopted in the audited tender process. It is important to note that, in each case, the government's reported savings were derived on the basis of methodologies that were determined in accordance with expert advice and following consultation with agencies, including DOFA and the Treasury. The government's assessment of savings in that regard has been consistent with government policy. We believe the Commonwealth is well placed to meet the total savings that have been set down over the full period of the initiative, and that is the important thing which has been ignored in much of this debate. It is useful to note for the record that, even under the ANAO's own calculations, the IT initiative has delivered narrowly defined savings of more than $100 million over five years for only the first three contracts let under the initiative: the cluster 3, the ATO and the group 5 contracts. Two other contracts, the group 8 and health contracts, have also been let and have achieved substantial savings—and, of course, there are other tenders to come.

It is important to say that to date the Labor Party have opposed virtually every aspect of the government's IT initiative and, in doing so, usually try to score cheap political points off the whole process. They have opposed the policy of Commonwealth agencies taking a strategic approach to their IT requirements. They have opposed millions of dollars in savings being delivered to Australian taxpayers. They have opposed the innovations that have occurred in service deliveries to Commonwealth agencies. They have opposed the enormous benefits which have flowed to Australian SMEs and the Australian IT&T industry in general as a result of the contracts awarded to date.

I have put those numbers on the record already but, in reiterating the benefits, I want to show that it is impossible to ignore the upside of this story—but, of course, Senator Lundy has managed to do that. While opposing IT outsourcing, the benefits that the reform brings and the initiative shown, the Labor Party have still made it abundantly clear that they would not discontinue outsourcing should they form government. I referred briefly at the beginning of my remarks to the policy Labor adopted at their August national conference: that outsourcing will proceed as long as it provides savings, is accountable, ensures quality of service and promotes Australian industry development. Even further, their policy goes on to say that they purport to `ensure that the purchasing power of government is used to nurture and support our domestic industry'. They also say:

Labor believes that the purchasing power of the Federal Government and other levels of government should be used to provide expanded opportunities for local industry and to achieve savings in the purchase of goods and services for the public sector.

These are the very objectives that this government has set out to achieve to date. As with the GST, Labor oppose the idea of outsourcing in opposition but, of course, would continue to implement it in government.

I have not had an opportunity to discuss matters relating to the scientific group 9 outsourcing but I am sure my colleagues will take those up. Mr Fahey has tried very hard to make offers to the CSIRO staff association for a meeting on this important issue and has been conveniently ignored. (Time expired)