Centrelink IT overhaul to cost up to $1.5bn

The IT industry is set for a windfall with the Commission of Audit strongly recommending a complete overhaul of Centrelink’s ageing payments system, expected to cost up to $1.5 billion.

The Commission says the government should appoint a “highly credentialed business technology expert to oversee the new system design”, working with the Department of Human Services.

As reported in The Australian this week, potential winners from the project could be IBM, Oracle, SAP, Fujitsu, and consultancies like Accenture.

“It is expected that a replacement system will cost around $1.2bn to $1.5bn,” the Commission’s report released today said.

“The Commission sees little option but to make this kind of investment for such an important and complex IT infrastructure project.”

The welfare agency’s Income Security Integrated System was developed to calculate and administer social welfare payments around 30 years ago, and is written in legacy code under the “Stratplan project”.

The report noted that the system was “inflexible and expensive”.

“The system adds significant costs for processing payments, maintaining the ICT system, producing letters and responding to appeals and reviews, and it increases the need for debt recovery.”

It warned that the system posed a “significant risk to a core function of government”.

The system is managed by Computer Corporation of America, which was acquired by Rocket Software in 2010. Model 204 is a database management system developed by IBM for its mainframes and compatible hardware.

The Commission is in agreement with Human Services that welfare payments should be simplified, but concedes it’s no mean feat.

“Even with a more simplified payment structure, redesigning the IT system is a significant undertaking that will require expertise from across the public and private sectors,” the report said.

The system is large and complex with 34 payments and 38 add-on payment types. The report outlined three key considerations in the development of a new system.

“Whether the complicated web of government payments can be simplified in parallel with the introduction of a new IT system -- a question of both policy and administration.

“Delivering a design that allows welfare policy changes to be incorporated into the payments system more easily and without the risks that come with the existing ISIS.

“How to achieve the best blend of private and public sector expertise in the development and management of a very complex IT system,” it said.

The report said the complexity of the payments architecture and interactions between payments creates “customer confusion, errors and rework, and requires a highly knowledgeable workforce to provide support”.

“The complexity of the current system arises from a multitude of policy decisions about the structure and goals of the welfare system and ad hoc changes to payments over decades.

“Many of them are enshrined in legislation,” the report said.

Outsourcing of the payments system could be on the cards, the report said, but noted that redesigning such a complex IT system in parallel with the simplification of welfare policy would complicate any decision about outsourcing.

Treasurer Joe Hockey had flagged the need for “billions of dollars” to be spent in order to refresh or replace the old ISIS system, which runs on a mainframe.

Mr Hockey said the Centrelink system didn’t have the capacity to respond to government policy changes, a clear indication that the May budget could contain funding for the upgrade.

ISIS makes more than $400 million worth of payments each day to individuals.