Why government "risk mitigation" rarely delivers

Recent state and federal government initiatives to embrace the potential of small companies in providing more innovative solutions to government technology are to be applauded. But a bureaucracy’s worst enemy is sometimes itself.

When I hear of a government panel and policies for vendor selection I immediately jump to the conclusion that it will be biased in favour of the entrenched suppliers, so it’s a pleasant surprise to discover a distinct, considered effort by the Department of Finance in its Cloud Procurement Discussion Paper, released on August 5.

Standing up for the small guy

The discussion paper is broken into two objectives, to “provide simple access to cloud procurement” for government and to “support a flexible, agile and competitive marketplace for cloud services”. The paper suggests some initial product categories that will be allowed to participate in the scheme and outlines at a high level how its objectives will be fulfilled.

From the perspective of smaller vendors, which the initiative is designed to engage, two key elements of the paper stand out.

First, future policy will look to discourage government procurers from dictating the technologies used in the cloud provider’s solution. As one of the primary benefits of cloud is leaving the nitty-gritty to someone else, this will allow government access to potentially better solutions.

Second, the paper identifies and addresses some of the hurdles that would prevent start-ups and small businesses – which are where innovation generally comes from – participating in the panel.

The government is looking to fund the scheme by charging vendors $250 to participate. The Department states that it has specifically chosen a relatively small fee to enable broad participation. Had they gone for a higher fee they surely would have locked themselves into mostly incumbent, slow moving vendors.

Instead, at $250 they’ve made it easy for companies on the leading edge of innovation, with tight budgets and uncertain returns, to participate. No business case needed.

That is, no business case needed until a leading edge company considers the cost of navigating the paperwork and red tape involved in dealing with government, especially in new areas where the details are notoriously uncertain.

In New South Wales the state Minister for Finance and Services, Dominic Perrottet has announced “changed risk parameters” alongside the ICT scheme released last year, which is promising, and indeed they have reduced the upfront paperwork required to participate. But red tape doesn’t end with qualification.

I’ve seen first-hand government accepting terms from a large, established US-based cloud service provider, while insisting on long contractual negotiations with a local provider of a similar nature. The reason is as simple as it is perverse: the local provider was willing to meet with the procurement officials, while the US-based company wouldn’t even provide a phone number, so the department had no option but to put their credit card in.

This is effectively a penalty on smaller local businesses which collaborate with the department.

The eHealth fiasco 

It should also be noted that extensive “risk mitigation” has not saved government agencies from debacles in the past. The Personally Controlled eHealth Record System has been a disaster from start to finish, something which can’t be blamed on its catchy title alone. Qualification criteria, contracts and extensive consultation could not ensure a product which all stakeholders were happy to use. A lean approach which evolved to the needs of the intended end-users might have.

So if the Department of Finance is serious about becoming more innovative, it must find a solution to the red tape issue.

Additionally, it must open up the categories of the initial cloud panel further, as the variety and ‘newness’ of services will be limited by the small number of categories defined. The proposed categories are established services, with little scope for innovation. For example, the category compute is largely solved by Amazon and Microsoft whilst cloud CRM and ERP have mature providers like Salesforce and NetSuite respectively.

This may incline decision-makers towards conservative solutions. For the government to “support a flexible, agile” marketplace it really needs an open category to capture the value of rapidly evolving new services that will help to speed up internal processes and facilitate better service delivery for the state.

Both state and federal government will no doubt move forward with cloud services and newer technologies as a result of their initiatives. The issue of categories is easily surmountable. However, the red-tape, paperwork and risk mitigation required most likely means they’ll maintain their role in adopting already widely accepted cloud services rather than leading the charge or even becoming fast followers.

That locks us all out of better services.

Scott Middleton is the CEO and founder of Terem Technologies, an Australian company that specialises in developing custom software and technology solutions for corporate innovations and high-tech ventures.