Government ICT contractor numbers decimated

Stan Beer
Tuesday, 11 August 2009 09:12

IT People - Enterprise

Australia's largest supplier of ICT contractors for the Federal Government sector claims that contractor numbers have been decimated as a result of a recent review of staffing needs. ICT contract recruitment specialist Peoplebank described the “most significant reductions in ICT labour hire in over seven years” as a result of the Gershon Review which came into force in late 2008.

British consultant Sir Peter Gershon was hired by the Government in April 2008 to conduct a review of its information systems resources, including labour. The ensuing recommendations, adopted in November 2008, involved a drastic reduction in ICT contractor numbers and a boost in permanent ICT staff.

Peoplebank, Australia's largest ICT recruiter, derives the vast majority of its business from the supply of contractors, with the Federal Government being by far its largest client.

According to the Peoplebank Intermedium Federal ICT Labour Hire Index, released today, a continuing correction in the public sector ICT contractor market over the past 12 months has seen the Index fall by more than a third from September 08 to May 09. Peoplebank predicts this is likely to continue until 2010.

"The sustained reduction in ICT spending over the past 24 months has resulted in the most significant reductions in ICT labour hire spending in over seven years," Peoplebank stated.

“It’s clear that Federal agencies are embracing the recommendations, outlined in the Gershon review, to cut costs through strategies including replacing contractor with full-time APS personnel. Additionally, some agencies are responding to budget pressures by keeping their IT spend to ‘business as usual’, and deferring new projects,” said Peter Acheson, COO of Peoplebank.

“This, combined with the economic uncertainty of recent times has placed downward pressure on both demand and contractor rates. This is in marked contrast to the national market, where a rise in demand for ICT contractors in June 2009 saw overall levels rising by around 5 percent for the quarter.”

Acheson is skeptical about the aims of the Gershon, expressing long held doubts about the viability of maintaining a large permanent ICT workforce in Canberra at the expense of contractors.

"There is no question that the Gershon review and everything that has gone on around that has certainly had substantial impact on IT contractor numbers in Canberra," Acheson told iTWire.

"I think the wholesale swap-out of contractors to permanent ultimately is just not achievable."

The Peoplebank Intermedium Index, calculated on the number and value of ICT contracts, reveals a market that peaked in 2006 and has been in significant decline in the past 12 months.  Key findings include:

·         The Index at May 2009 – which stood at 1,050 - represents a fall of 54 percent since the 2007 peak, and a fall of over 35 percent since July 2008.

·         There was a 63 percent decline in the value of ICT labour contracts in June quarter 2008-09, compared with the same period in 2007-08.

·         The number of contracts reported has almost halved from 1,040 in the June quarter 2007-08 to 544 in the June quarter 2008-09.

·         There has been an overall reduction of the number of 12 month contracts being offered compared with three to six month contracts.

·         Findings support Peoplebank’s observation of contractor rate reductions of up to 20 percent (as at the end of June 09, compared with the same period in 08).

·         Evidence that Federal agencies are reducing their reliance on contract ICT labour includes evidence in the 2009 Federal Budget of continuing growth in permanent public service staff numbers over 2009-10, as well as ongoing recruitment campaigns by large Agencies for skilled ICT staff.

The volume of new contracts being written and the reduced average value have provided substantial downward pressure on contractor rates which will be evident in the Q1 and Q2 reporting periods for 09/10.

However, there could be light at the end of the tunnel.

Despite the downturn, there are strong prospects for ICT contractors in Canberra, says public sector market research group Intermedium’s Head of Research & Principal Consultant, Tim Conway.

“Over the medium to longer term – and in particular, in the next four years - we are likely to see demand for ICT skills surge on the back of a number of major projects, including infrastructure spending initiatives announced in the 2009-2010 Budget, the National Broadband Network and parts of the recent Defence White Paper and Capability Plan.

“These projects will collectively will generate more than $13.8 billion in ICT activity – half of which will come to market by 2013 – suggesting a boom market for ICT skills over the medium term,” he says.