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EXCLUSIVE: Analysis of IT contracts to support the new aged-care system show fees have ballooned to $685 million for just three multinational consultancies. By Jason Koutsoukis.
Aged-care contracts blow out to $685 million
Sweeping reforms to aged care have become a feeding frenzy for multinational consultants, with Accenture, Capgemini and Deloitte alone earning $685 million in fees since the start of 2022.
After Labor and the Coalition failed again this week to reach a final agreement on a bipartisan approach to the management and funding of aged care, legislation giving effect to the planned reforms has been pushed back to when parliament resumes next month.
However, work to build the IT systems that will underpin those reforms began on January 1, 2022, when Accenture was commissioned to develop a single software platform to enable aged-care providers to share information with the Commonwealth.
That 20-month contract for $18.1 million has since been varied five times and is now valued at more than $156 million.
“What the public will never know is that the GPMS [Government Provider Management System] is a horror show. It’s a bad product,” an IT contractor familiar with the project told The Saturday Paper. “They’re now working on a completely new version known internally as GPMS 2. And I can tell you, it’s not going well.”
Despite a well-documented history of misfires when it comes to Commonwealth IT projects, Accenture, which relocated from Bermuda to Ireland in 2009 for tax purposes, has been by far the biggest winner from the aged-care digital transformation.
Earlier this month the tech services giant inked a separate two-year deal valued at $289 million – its largest ever with a Commonwealth department or agency – to strengthen IT capacity within the Department of Health and Aged Care before the new Aged Care Act is scheduled to take effect on July 1 next year.
This was after the Australian National Audit Office published a scathing assessment in June of Accenture’s delivery of My Health Record (MHR), a national record system designed to improve the availability and quality of health information.
Accenture was chosen as that project’s national infrastructure operator in June 2012, in a contract valued at $47 million over two years. The final figure blew out to almost 16 times that.
“As at February 2024, arrangements with Accenture totalled $746 million for MHR NIO [national infrastructure operator] services between 2012 and 2025,” the ANAO report found, noting 13 contract variations over that period.
The report found the agency responsible for managing the project, the Australian Digital Health Agency, failed to document value-for-money considerations; did not review Accenture’s performance when it exercised an option to extend the contract; agreed to demands made by Accenture such as advance payment, thereby weakening the agency’s bargaining position; and found that some contract variations were made through a limited tender process that was only open to Accenture, in breach of Commonwealth Procurement Rules.
As for the platform itself, last year federal Health Minister Mark Butler observed My Health Record was “a pretty outdated, clunky, PDF format system” that was in need of a major overhaul.
Still, in a letter to Acting Auditor-General Rona Mellor in May this year, Accenture’s health and public service lead, Louise May, said Accenture had been “fortunate” to partner with the Commonwealth to “design, build and operate the My Health Record platform”.
“We are proud of the work that we have delivered in support of a more connected healthcare system that is accessible, progressive and secure,” May said.
Greens Senator Barbara Pocock, who has played a key role in exposing how multinational consulting firms interact with the Commonwealth, told The Saturday Paper that a big question for her was why repeat offenders such as Accenture were able to keep winning contracts.
“Just about every week we hear about another outsourced IT project that has gone off the rails costing taxpayers millions and sometimes billions in contract fees that deliver nothing,” Senator Pocock said. “It beggars belief that such huge amounts of money can be flushed away with absolutely nothing to show. If the government is serious about its commitment to rebuild the public service, it should include IT expertise as a matter of urgency.”
At the very least, Pocock added, the Commonwealth should be investing in procurement expertise to ensure that government departments could successfully engage private contractors without the risk of them manipulating under-resourced public servants.
“When we have the likes of Accenture responding to a report from the auditor-general that pinpoints a range of contract failures by saying they are proud of the work they delivered, it’s an indication that the consulting sector is in denial,” Pocock said. “The failures in IT procurement are mounting up and they come with a massive price tag that bleeds government money away from the delivery of services to the Australian community.”
As part of its current digital transformation program in aged care, the Department of Health and Aged Care has also awarded French multinational Capgemini contracts worth $108.7 million, including one contract signed in May 2023 that was originally worth $37 million and has since blown out to $74 million. Deloitte, which is headquartered in London, has won contracts worth $25 million for its work on future aged-care IT platforms.
In the case of Capgemini, the Department of Health and Aged Care recently disclosed that one of its executives had travelled to Paris to attend one of the firm’s annual get-togethers known as Spark Europe.
While the executive travelled to the event at their own expense, they did declare accepting a dinner invitation valued at $100.
“In their capacity as a departmental executive, the [executive] attended SPARK 2024 and made a site visit to a French health startup to learn about innovations in the digital health space,” a Department of Health spokesperson said.
“SPARK 2024 was an opportunity for the [executive] to personally network with IT leaders and learn from different examples of transformation globally,” the spokesperson added. “Through sharing knowledge and insights at this event, the executive is better informed about international best practice, better connected with international networks, and better prepared to lead the department’s sizeable and complex aged-care transformation program.”
Commonwealth outsourcing to multinational consultants has angered many Australian small to medium enterprises, who complain that such firms repeatedly fail to deliver value for money and also represent a wasted opportunity to boost Australian-owned companies.
The chief executive of one Australian IT company likened the pattern of outsourcing to a country club that admits only multinationals such as Accenture, McKinsey, KPMG, PwC, and locks out Australian businesses who can do the same work or better for a fraction of the price.
“Inside the country club it’s all very cosy – everyone is drinking champagne and talking about how much money they’re making,” the chief executive told The Saturday Paper. “But what’s worse is that for members of the club, their first loyalty is not to the taxpayer or Australia’s national interests but to their partners.”
The main goal, the source added, is to keep contracts going for as long as possible.
“Do you think anyone from one of these firms puts their hand up at a partners meeting and says, ‘We can deliver this contract on time and under budget’? No, of course not, because that would mean less money to pay the private school fees and the ski trips to Europe. Anyone who said that would be marched out the door immediately.”
According to Andrew Hammond, the general manager for the ACT and New South Wales for Australian software consultancy KJR, when a multinational consultancy wins a large government contract in Canberra, what usually happens is the multinational will then subcontract part of the work to smaller companies such as his.
“And if I look at our work in Defence, Defence is paying a premium because we’ve got a contract through two global entities that charge Defence, you know, probably double what we’re actually receiving to do the work. So there’s a definite and quantifiable cost to the taxpayer,” Hammond told The Saturday Paper. “If we were able to engage directly with Defence in this particular instance, they would have exactly the same resources to do the work for half the cost and 100 per cent of the outcome.”
Another indirect cost to the taxpayer of passing over local businesses, according to Hammond, is a lack of accountability.
“I’m sure these large foreign entities would say that you can deal with whoever owns the company, but let’s face it, it’s very seldom that a government agency would get to talk to the CEO of Deloitte,” he said. “Whereas for an Australian SME, nine times out of 10, you’re dealing with the person who owns the company and whose house is probably on the line if a particular engagement isn’t delivered successfully.”
Perhaps no case study rankles Australian executives more than the Department of Finance’s decision to engage German multinational software giant SAP to design a new IT system for parliamentarians and their staff to claim and process office and travel expenses, as well as administer payroll services.
Known as the Parliamentary Expense Management System, the project began in January 2018 and was originally budgeted to cost $38.1 million. Due to be completed by June 2020, the project ended up costing $74.3 million and was delivered three years late.
With only 2100 users submitting about 150,000 travel claims a year, the Australian National Audit Office found in a report published in January this year that even when it was completed, the system’s capability still did not meet all deliverables as agreed in the business case.
“The functionality delivered meets basic requirements to process office and travel expenses and payroll for parliamentary staff,” the ANAO report found. “There is a reliance on manual workarounds particularly for payroll services.”
David Forman, director of government relations for listed Australian IT company TechnologyOne, told The Saturday Paper that $75 million was enough to build an entire commercial finance system that could be sold to hundreds, if not thousands, of customers.
“If you are just building a parliamentary expense management system, the idea that that would cost upwards of $75 million, I don’t just know how you could possibly spend that much money on an expense management system,” Forman told The Saturday Paper.
“You could go out and buy an expense management system, off the shelf, as a small component of a finance system, for well below a million dollars for an organisation the size of the Department of Finance or Department of Parliamentary Services,” he said.
“I don’t know what it was that made them think that they were so unique and so special that they could justify spending that amount of money, and I don’t know why along the way nobody stopped and said, ‘Wait, is there a better way?’ ”
This article was first published in the print edition of The Saturday Paper on August 24, 2024 as "Aged-care blowouts".
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