. . . ' ..

Office of Sha

Strategic Overview

Shared Corporate Services Reform

, " . ' . ' t ' . . . . ~ ., '

. Ron M'ance ' , " "

Executive Director 21 August 2006

1

. . . . ..

Gove:mment of Western Australia

Whole of Government Reform Agenda

-Machinery of Government (MOG) Reform in 2001

-Functional Review Taskforce (FRT) Report tabled in December 2002 inclusive of 89 recommendations that encompassed:

-Structural changes ego Education and Training, Industry and Technology

-Agency program and activity reforms

-Corporate Services Reform Agenda

-Establishment of the Office of e-Government

-Procurement Reform Agenda

-Other opportunities. eg'. regional.()pportunities : , -,' ."

-'Cabinet endorsed the adoption of a "shared services" approach for Corporate .' .. Services to commence in 2003 .' , . " . .... .

-Functional Review Implementation Team (FRIT) established in January 2004

-Office of Shared Services established 1 July 2006

2

Shared Services - Drivers for Change

The WA government sector is out of step with corporate service delivery trends in Government and the private sector.

-Data collected in 2003 demonstrated the sector was maintaining extensive and disparate business systems. For example:

*21 different finance systems and 12 payroll systems were in the largest 49 agencies (many more across the 120 Agencies of State); *One agency, Health, had 3 different Finance systems and 22 independent and customised operations of one HR product.

-In addition, processes were non- standardised and inefficient within the sector: . . . *the cost of processing. an invoice in government T~nged from · · . .

. .. $2.44 to $33.51 perinvoicei ·with an average cost of $5.44·; . . . . *processing payroll runs varied from 1 FTE processing 12b.,.1·30 staff .

-' . . .. '. . .

through to 800-900 staff. ,

-Many agencies were below scale to support efficient processing.

-Limited whole of government reporting capability. 3

Shared Services - Vision

-Freeing up agencies to focus on the achievement of their strategic goals and core service delivery to the WA community

-Providing customer-centred corporate services within a specialised business unit that creates value to clients (i.e. via the 3 Shared Service Centres established)

-Optimising technological investments (i.e. through one whole of government business system and aggregated licensing arrangements)

-Increasing efficiencies, creating significant cost savings. (Le. $5Sm annually ' . . ' . ' .

.. " from 2008~09). . "

~Continuousimpr6vement of 'processe~ and activities '

-Taking a whole of cluster focus and achieving whole of government benefits

4

IlArnnnition of local policies

Agencies retain . strategic functions

Shared Services - Features

Shared

Independent Provider

Service management focus

Lean flat organisation

. .

. Synergies hmovation and be~t practice

Enhanced career paths

Aligned standards of control

Critical mass of skills

Unresponsive

Remote from agencies

Developed from Shared Services. Adding value to the Business Unit 1999 PWC and James SLush

5

Government of Western Austra lia

Consolidate

Standardise

. Simplify .

Automate ·

Shared Services - Principles and Approach

• Reduce physical locations & improve productivity • Eliminate duplication • Distribute workload

.

• Standardise policies & business rules • Minimise number of IT systems • Adopt best achievable practices

• Organise around end-to-end processes • .. Re-engineer new processes • . Reduce process complexity .

• . Reduce volu·m~ handling • Integrate systems • Reduce paper-flow / use employee self-service

6

Government of Western Austral ia

Shared Services - Scope

What's in Scope? -Most General Government agencies, with some exemptions granted via

ERC I Cabinet

-Generic Corporate Services Functions ie. HR; Finance; Information Management and ICT (supporting CS)

-In the Health Cluster, supply has been included

What's not in Scope? .. . ' -Public financial and n·on-financial .corpprations " . .

ego Port Authorities,Water Corp, Western Power .

'-Agency' Core Functions . ' . ' . .

-Strategic aspects of Corporate Services within Agencies

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Shared Services - Governance

Strategic Management Council

Whole of Go¥ernl1lent Snared Corporate Services Steering Committee

Customer Entities i . e. T AFE Colleges

Education & Training SSC

Customer Entities Customer Entities i.e. Hospitals i.e. General Agencies

ealth Corporate Networ Office of Shared Services

Govemrnen t of Western Australia

I

Business Operations

Mr O'Neill Fernandes

.. Manager

. . ~ I

+:-+ . Finance .. . :. Human Resources' .:. Administration . :. Accommodation

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-oi

:~ .

"

-

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Office of Shared Services

Minister for Public Sector Management

.1. I

MrRon Mance l1 Internal Audit I

Executive Directo~

~ I

I I '- -...,

, ,~

1 Program Office

~ leT Services ,~ Shared Services Centre

Mr Paul Stafford ! ~ Mr Tony Mills Ms Noelene Jennings 1

Ii •

• General Manager Director Director ' . Mr Gary Stainton

~~" General Manager

~ '--'F- 1, . ~~. ---. .J j;. .-- I ' ~ - ~

. .., -'0- .

". Clienl'~ency services "', . .:. '. Shared Corporate .:. · ICT Support ~:.

Services Project .:. System Management .: . Finances . :. Continuous I . : . Capacity Planning I .: . Human Resources Improvement .:. Contract Management .: . Payroll

I I. I I --'"

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Shared Services - Benefits to Government

-Provides greater visibility and transparency of service levels and performances; -Allows for Agencies to focus on their own core service delivery to the community of Western Australia; -Provides greater flexibility and responsiveness to machinery of government changes; -Achieves improved information and knowledge management across government; -Supports increased workforce mobility across the sector to meet changing demands; -Enables leverage of specialist skills to achieve sector wide improvements; -Enhances the career opportunities for corporate services ~taff'through the ,

, establishment of thethree Shared Service Centres, given the core focus oreach is: , corporate services; "

-Delivers consistent and lower cost "back ~office'."corporate serVices; and -Provides one whole of government Business Solution and one IT Software and Maintenance Agreement for the sector's corporate services.

10

Government of Western Australia

Shared Services- Background Information

-The implementation of shared corporate services across the public sector is considered a 'once in a generation opportunity', to deliver significant cost efficiencies and enhanced service capability, which will have significant benefits for government and its employees.

-The sector currently spends approximately $317 million per annum on its corporate services, involving more than 5,000 FTEs. Approximately $30 million is also estimated to be spent every three years by the sector on upgrading or renewing its disparate, disconnected, highly customised and high cost IT systems to support corporate services. A moratorium was put in place in 2003-04 on this IT expenditure, so this wastage has been, and will continue to, be avoided.

-Signif.icant savings to government.of approximately $55 million savings per annum . from 2008-09 have already been built into the Forward Estim·ates and are able to be . . redire.cted to front line Health, Education and Training and Law and Order serVices .. . . . .

-The aggregation, simplification and autonicition ·of e·xisfing inefficient, -hlgh cost back · office activities will also bring about more effective ways of working and provide government with a much more effective means of capturing and reporting on resource utilisation.

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Govel'llmetlt or Western Australia

2005

Shared Services - spend, reform investment and savings

Corporate Services Spend, Reform Investment and Savings *

-~

S42m

S 120m Investment ----:-+ .

. Pro Cess;

I1g .. $~ 63rn

In -Scope Corporate Services - Processing and ICT

*for all three SSCs - HCN, ETSSC, OSS (inc ICT costs)

2008/9

Savings $55m

II)

CIJ u .-o

Shared Services - Benchmarking Approach

Process Efficiency Savings Example

Agencies Relative to Each Other

External BenchmaliK

> c: ~~I~======~~==========~I '0 / \:31... "

• -- - CIJ - - tnternal Benchmark-: E - Popl!Jl-ation -- ~_AA-" ~ ~~ - - fo-r Setti~g

-~ __ Benc:hmark - -

A~A~~A~ :

}j.

Agencies

A"~ .. ~j.j. ... ,

A~A

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Govermnent of'

Western Austral ia

lo­etS Q) ~ lo- 25 000 Q) a.

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Shared Services - Benchmarking Approach

I--+- Total - External Benchmark Internal Benchmark I

Processing AP Invoices

t lo-Q)

Average number of invoices processed per FTE I---~-------+- per year was - 16 000, i.e. 10 per hour

a. ~ 16000 Vl Vl Q) U

, , 0 , , "-a. ~, , 10000 u · --o > c --a.. «

::t:t::

5000

Agency

Accounts Payable - Invoices processed per FTE per year

w l­lL... --co ~

o ~

5..... Q) 0-~

C :::s o u

"'0 .... CO

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Shared Services - Benchmarking Approach

1-.- Total - External Benchmark Internal Benchmark 1

1000 Processing Payroll Runs

--f--::-±:------- ---- Ranged from 120 staff processed / FTE to 900 staff / FTE with an average of 409 staff / FTE.

Agency

Payroll Data - Headcount per Total Payroll FTE

Shared Services - Significant Contracts

Two major contracts have been signed to support the design, build, test and implementation of the whole of government business system solution:

-A 10 year contract valued at $66.8 million to supply, implement and support the whole of government Business Solution was awarded mid 2005 to Oracle Corporation Australia Pty Ltd and ASG (Asia Pacific) Pty Ltd; and -A contract of $87.8 million (over 10 years) was awarded in December 2005 to ASG (Asia Pacific) Pty Ltd for the provision of application and infrastructure management services for the computing and telecommunications structures. This contract also involves an alliance of partners called WAGlobal incorporating CSC, IBM, Amcom, REDhat and HP.

Important associated features are: -One Licence Agreement has been achieved across the sector for corporate services. Previously there had been over 60 different arrangements in place. ~The Contract negotiated 'with Oracle provides fora'nilual maintenance support ' costs of 18% per year for the first 5 years and after that Oracle can only increase the cost annually by the CPI rate. No other govt agency currently pays less than 22% per year at present. In many cases the % being paid is much higher as over the years agency contracts have been in place, the % has gone up each year by the CPI rate - a number in excess of 30%. 16

Gove-mment of Western Australia

Shared Services - Current Status

-All three Shared Service Centres are established and now operating: - Two are operating on existing systems i.e. Health Corporate Network (HCN), Education and Training Shared Service Centre (ETSSC); -The third, the OSS Shared Service Centre, has gone live with Finance services to the OSS itself (as a test bed), using the new whole of government Business System. The Department of Fisheries will be the first pilot agency, going live in late October 2006.

-The whole of government Oracle Business Solution for Finance, Human Resources and Payroll services has been designed, built and tested, for implementation by the Office of Shared Services. This Oracle e-business suite is to be implemented progressively within all three Shared Service Centres.

-By building one whole of government Business Solution and standardising and simplifying processes, costs of $12 million in IT and $43 million in processing will be saved per annum o(i.e. t~e identified savings of $5S million) ~ Seoe ooslide 12 ° °

-The Government has provided $120 million for one "Whole of Government" Business Solution implementation and for three Shared Service Centres to be established. This expenditure will cover the design, build and test of the system, the establishment of the IT environment, establishment of the staffing for the SSC (Cannington) including the Contact Centre, staff training and agency roll-in including system interfaces. Funding is also being provided for the Supplier Orientation and Information program.

~~ Govemrnen t of Western Australia

Shared Services - System Functionality Releases

c o R E

B U I L D

Agency Specific Build

Agency Roll-in

Release 1 A

Finance & "Thin" HR

II Release 1 B I I Finance & FuHHR

including Payroll

Release 2

Finance & Full HR including

Payroll

Project Billing &OTL

i Expenses; OSHIWC; WAGN; CEMLls; Reporting; Labour Relations; Pricing & Charging

Interfaces; Payroll Awards & Agreements; Reporting To be built on an as needs basis in time for each agency roll-in

OSS; Fisheries I lOSS; Fisheries DPC Satellites, DPC, DTF Satellites, DTF

DCA, DoCEP, DCS, DLGRD, DoTAG, DoTAG Satellites, DRGL, MRWA, WATC (plus some smaller agencies)

Shared Services - Potential Issues and Risks

The Reform Project has strong project management and risk mitigation strategies built into planning at both the wider project level and individual workstreams . . Despite this regime, the following are highlighted:

-Implementation Timeframe: Given the complexity of the system build and test some slight slippage is occurring, which cannot be foreseen ego the complexity of the payroll functionality (number,comp/exity and nature of application of Awards).

-Project Expenditure: careful monitoring and regular reporting to ERC continues to be a priority.

-055 Recruitment, Selection and Appointment: common to all WA Industry, labour market pressures are affecting staff ,appointments and retention. of staff within

. the p~blic sector. . '.' . . " , ' . . .

-Resourcing: attraction and retention of skilled resources continues to be an issue for both the government and vendors, due to labour market pressures.

-Agency Concerns: managing expectations is challenging, with training needs and service delivery and effectiveness high on agencies priorities. 19