$2.6b upgrade at Social Development Ministry: Nats and local suppliers respond

Thursday, 27 July 2023

The Cabinet has agreed to press ahead with an overhaul and upgrade of the technology systems that deliver services to jobseekers, beneficiaries and students that it expects to cost between $2.1 billion and $2.6b over nine years.

The National Party has indicated it may not be onboard and local technology suppliers are voicing concerns over how the project could be structured.

The expected cost of the initiative makes it even larger than Inland Revenue’s Business Transformation programme, which was completed at a cost of about $1.7b.

Social Development Minister Carmel Sepuloni told Cabinet that the ministry’s existing systems were limiting its ability to “achieve the Government’s vision for the welfare overhaul”.

The Te Pae Tawhiti transformation programme, which would be carried out in three phases – which the ministry is calling horizons – would enable more “integrated, easier to access and joined-up services and supports across income support, employment and housing”, she said.

The first phase would provide a modern, easy-to-use online experience for 130,000 students interacting with the ministry and provide jobseekers with “greater awareness of and access to jobs, support and training opportunities in their local area through proactive digital contact”, she said.

It would also overhaul the systems that the ministry uses to deal with 2000 partners it works with and would mean staff would need to spend less time on administrative tasks, she said.

National Party social development spokesperson Louise Upston was non-committal on whether it would continue with the project if in government, saying it was a “considerable expense”.

“We will consider the work programme carefully but are not in a position to commit, or otherwise, at this point in time,” she said.

Breccan McLeod-Lundy, co-chairperson of NZRise, which represents locally-owned technology companies, said he wasn’t aware of any local suppliers that had significant engagement on the project with the ministry to date, which he said could be of concern.

It was important the work programme was explicitly structured so local suppliers could compete, he said.

“I saw some language that suggested they thought opening it up to consortia would mean local companies could form a big consortium, but that is actually really hard,” he said.

“Technology comes a long way quickly. If the country is going to spend this much, we shouldn’t just leverage off an ‘off-the-shelf thing’ they did five years ago in another country.”

It was especially important local businesses were involved, given the ministry was part of the social fabric of the country, McLeod-Lundy said.

“Breaking it up and making it accessible is the key thing. If $1.3b ends up on a single contract, that is a problem for everyone as it is not a way to manage risk.”

The Cabinet paper stated that about $183m would need to be spent on the project over the next two years, most of which would be paid for from the ministry’s existing baseline funding and Budget contingency funding.

“At this stage, it is estimated the cost for the whole programme across all three horizons is between $2.1 to $2.6 billion,” the Cabinet paper stated.

The project is expected to result in more people taking up their full entitlements to government support, which would increase the funding the ministry needed to receive.

Sepuloni said the financial impact and timing of that was uncertain, but would be monitored closely.

The Ministry of Social Development said in its business case for the project that it currently delivered services using “over 75 core applications, providing over 380 technology services”, some of which were more than 30 years old.

Making service changes in those systems was “expensive, difficult and can result in errors”, it said.

“Over 40% of total case management time is spent managing the currently overly complex transactions needed for hardship grants and requests for supplementary assistance.

“This transactional focus is taking attention away from the areas where we can have the biggest impact,” it said.

The transformation programme would “progressively deliver major benefits” over its three phases, including ongoing benefits from “improved employment outcomes” that would add up to $1.2b three years after the programme was completed, it said.