Treasury review of 'back office' costs approved

The Cabinet has approved funding for a benchmarking study that could be the first step toward outsourcing or consolidating billions of dollars worth of public service spending on information technology, finance, human resources and other "back-office" tasks.

The funding approval has allowed the Treasury to go to tender for a consulting firm to carry out the "Administrative and Support Services Review", which will compare the spending of eight government agencies against their peers overseas.

The consultant will identify "discrepancies", extrapolate possible savings for the rest of the public service and develop a business case and options for improvement.

It will also be asked to come up with up to 10 "quick wins" to increase efficiency.

The agencies that have agreed to have their spending scrutinised include big spenders such as the Police and Defence Force, and together employ 33,500 staff.

Treasury's outgoing acting deputy chief executive, Peter Mersi, said in October that international experience suggested cost savings of 15 per cent to 30 per cent might be achieved through consolidation and outsourcing.

But he said such estimates needed to be treated with caution and the study might find agencies were already getting value for money.

He expected the benchmarking exercise would cost "less than a couple of million".

Information technology industry body NZICT has expressed concern about significantly reducing the number of IT suppliers to government, warning all-encompassing outsourcing deals could be inflexible and impede innovation.

Chief executive Brett O'Riley has floated an alternative arrangement under which agencies could buy services from a panel of pre-approved suppliers using standardised, simplified procurement contracts.

Who'll Be Studied
* The Police
* The Defence Force
* The Social Development Ministry
* Inland Revenue Internal Affairs
* The Economic Development Ministry
* The TreasuryServices

Under Review
* Information technology
* Finance Human resources, including payroll
*Procurement Corporate services – including travel, property management and corporate communications.

Options
* Centralising back-office functions through "shared services" arrangements
* Outsourcing them to the private sector
* Appointing "centres of excellence" within the public service
* Finding "quick wins"
* The status quo

- © Fairfax NZ News