Background

As the primary social service delivery agency for the Australian Government, Centrelink is continually adjusting its service delivery approaches to fulfil its purpose which is ‘serving Australia by assisting people to become self-sufficient and supporting those in need'¹. These changes are largely effected through projects, which can be defined as ‘temporary endeavours undertaken to create a unique product, service or result'². During the 2005–06 financial year Centrelink managed 134 projects at a cost of $144.7 million, about six per cent of Centrelink's departmental funding.

A large proportion of Centrelink's projects arise from Budget measures. Generally these Budget measures are developed by those agencies purchasing services from Centrelink, with the funding provided to the purchaser agencies that then fund Centrelink to implement them. Each year new measures are introduced. Many of these measures require Centrelink to make significant changes to the services it provides, or the way that it provides them. Implementation of these measures requires Centrelink to complete projects within timeframes that are often dictated by the effective date of legislation, putting its staff and systems under considerable pressure.

This pressure can be increased through the funding arrangements under which Centrelink operates. Savings expected to be achieved from the implementation of measures are oftentimes ‘harvested' (that is, Centrelink's revenue is reduced up-front) in the expectation that Centrelink will achieve greater efficiency precisely in the way and at the time predicted when the Budget measures were costed.

As an agency of the Department of Human Services, Centrelink may also be required to undertake projects, or components of projects, to meet priorities identified by the department and/or its Minister. All of these various demands converge on Centrelink, but they can rarely be expressed in project terms, that is, as a requirement for products or services of a specified quality, to be delivered according to a predetermined schedule and at a specified cost.

Centrelink also implements projects using internal funding to progress initiatives in line with Centrelink's Strategic Directions, which set out Centrelink's purpose, strategic themes, strategic priorities and core business processes³. These projects make up a minor proportion of the total funding for all projects, about ten percent in 2005–06.

Centrelink's portfolio of projects includes projects which are:

• complex and/or broad in scope;
• critical to the delivery of government services; and/or
• material in financial terms.

Difficulties in delivering project outputs on time, within budget and to the required standard could create risks for government services and Centrelink's internal processes. Centrelink has recognised that, to manage these risks, the agency needs to implement an effective strategic project management approach that applies to all projects. Centrelink's current approach to project management is articulated in the Centrelink Project Management Framework (CPMF). The CPMF was introduced in 2000 and has been refined and developed over time. All projects in Centrelink are subject to this framework.

The CPMF is administered by the Centrelink Projects Office (CPO) within Project Coordination Branch (PCB). The CPO develops and maintains the CPMF and coordinates training, access to resources and support for project managers. In addition, the CPO provides secretariat services for the Investment and Major Projects Committee (IMPC), the senior executive body within Centrelink that selects internally funded projects and oversees all project management activities.

Audit Approach

The objective of the audit was to assess the effectiveness of the major elements of Centrelink's central, strategic level project management arrangements, as defined in the CPMF. It focused on how well:

• the CPMF supports better management and service delivery in Centrelink;
• the CPMF supports project managers and projects to comply with better project management principles, relevant legislation and guidelines; and
• Centrelink monitors project performance and encouraged the attainment of project objectives.

The primary focus of the audit was on Centrelink's strategic project management arrangements rather than on the effectiveness of project management at the individual project level. It included:

• a review of key documentation, including the CPMF;
• observation of project management practices and confirmation of findings with key staff;
• an assessment of the outputs and efficiency and effectiveness of the role played by the PCB and the key project information it produces in collaboration with individual project managers;
• analysis of a sample of 30 projects to review for adherence to the CPMF; and
• a more detailed review of four individual projects to gain additional information for an assessment of central, strategic project management arrangements.

Criteria for the audit assessment of the CPMF and the maturity of Centrelink's approach to project management were drawn from a number of better practice sources from the project management discipline.⁴

Overall Audit Conclusion

Centrelink has recognised the opportunities afforded by the use of widely accepted project management standards and better practice. The Centrelink Project Management Policy mandates a single project management framework—the CPMF. The framework can be adapted to the requirements of individual projects and specifies roles and responsibilities for the key stakeholders. Centrelink has adopted an internationally accepted standard, the Project Management Body of Knowledge (PMBoK)⁵ as the basis for its project management framework.

The CPMF has been operating since 2000 and Centrelink has been continuously improving this framework since then. The ANAO considers that Centrelink's CPMF has the major elements of a central, strategic level of project management in place but there is an opportunity for Centrelink to further improve the framework to make it more effective in supporting better management and service delivery in Centrelink.

The CPMF is appropriately structured to comply with best practice project management principles and guidelines but project managers do not always apply it. Centrelink's monitoring of project performance is moving to a more strategic level and this will, if successfully implemented, encourage attainment of project objectives.

Centrelink has established the Centrelink Projects Office (CPO) to centralise and coordinate the management of projects. The roles of the CPO are consistent with the roles for project management offices outlined in PMBoK at an operational support level—that is, as a provider of project management support to individual project managers. However, the ANAO found that the CPO will need further development to adequately undertake a central, strategic project management function as envisaged in PMBoK.

The ANAO also observed that the process by which authority is given to components of the CPMF (including policy, processes, procedures and workflows) and by which they are communicated to project sponsors, managers and staff, other than the methodology for IT projects, was not effective at the time of the audit. As a consequence, Centrelink project teams had not consistently produced key project documentation, required under the CPMF. Although Centrelink had acted to address this situation the processes put in place, to date, have not been effective.

While the ANAO recognises the efforts that Centrelink has made to implement strategic project management practices, through the CPMF, this audit has revealed that Centrelink has some work to do before reaching the higher levels of project management maturity, as measured by the Portfolio, Programme and Project Management Maturity Model (P3M3).⁶

In particular, the ANAO considers that Centrelink may benefit from a greater focus on:

• the improved definition of projects, or programmes of projects, funded from Budget measures;
• the improved use of programme level monitoring and reporting;
• improving the use and integration of IT tools to support project managers;
• the CPO working more closely in partnership with project sponsors and managers; and
• effective evaluation of projects at their completion.

Key Findings

Centrelink's Project Management Framework (Chapter 2)

Project management is a professional discipline and there is a substantial body of knowledge, including standards and better practice materials, on the subject. These include the Project Management Body of Knowledge (PMBoK) and Projects in Controlled Environments 2 (PRINCE2). Centrelink has adopted PMBoK⁷ as the basis for its project management framework.

Strategic project management involves the project portfolio (a structured grouping of programmes, selected to achieve the best overall business results for the organisation), programme (groups of projects aimed at meeting specified objectives or delivering a specific service capability) and individual project levels.

Centrelink gives effect to its approach to strategic project management through the CPMF, which incorporates policy, methodology and organisational level support for project management through the CPO. The CPMF is based on a lifecycle approach that requires projects to be managed through sequential steps. Centrelink has modified the generic lifecycle suggested by PMBoK to reflect the context of Centrelink projects and operational requirements. The CPMF defines two different project inception/definition approaches to be taken depending on whether a project comes from an external (Budget-funded, client agency) requirement or from an internal priority. It also incorporates a parallel lifecycle for the information technology component of projects.

Centrelink has put in place a number of systems and tools to improve project management. These include:

• the Centrelink Projects Register (CPR), which is a central project data repository that has been promulgated to individual project managers as an integral part of Centrelink's control framework for projects;
• Primavera, a project management suite of tools;
• Infolink, Centrelink's financial management information system, in which each project is set up as a discrete cost centre for the accumulation of costs. Cost and asset plans and expense and capital budgets for projects are maintained in Infolink and expenditure, savings and revenues from projects are tracked and reported using Infolink; and
• the Project Managers Team Room, an electronic forum for sharing information and a repository of project management tools and information.

The ANAO considers that the tools Centrelink has implemented are of a kind that can support good strategic project management and contribute to the type of project management culture Centrelink is seeking to implement. While Centrelink has not yet fully reaped the benefits of using the tools, the agency is continuously improving its use of them. However, the ANAO found that:

• the CPR is not properly maintained and it contains errors and omissions that make it unreliable as a source of monitoring information; and
• the Project Managers Team Room had not been maintained and so did not provide a useful tool for project managers.

The ANAO considers that the Centrelink Project Management Policy provides good coverage of the kinds of issues necessary to establish the basis for consistent, centrally controlled and strategic level project management. However, the ANAO observed that the way in which the CPMF has been promulgated did not in itself provide for fully effective control and transparency around projects at the strategic level. While Centrelink has other controls in place oversighted by the agency's Audit and Risk Committee to mitigate these risks, the ANAO considers that there is an opportunity for the PCB to strengthen the CPMF risk processes to better manage Centrelink's projects at the strategic level.

Project Definition (Chapter 3)

Good project definition and planning provide a solid and essential foundation for the achievement of individual project objectives and of broader organisational goals. Centrelink's approach is generally consistent with PMBoK better practice requirements. The CPMF requires the preparation of a project charter, project scope document (the business case) and project management plan in the Project Definition phase. These documents are for the consideration of, and approval by, the IMPC. However the project scope document is not a requirement in Centrelink for Budget-funded projects.

The ANAO reviewed a sample of 30 projects using the information held in the CPR to assess their adherence to the CPMF process and the CPO's control over key documents. The ANAO also analysed in more detail four of these projects to gain a more in-depth understanding of the efficiency and effectiveness of Centrelink's project management. The four projects were:

• Centrelink Academic Reassessment Transformation project (CART). This project sought to improve the correctness of payments to students and help students remain engaged in full-time or part-time study and/or part-time work by arranging for Centrelink to take information on changes in students' study loads in ‘real time' direct from the educational institutions, rather than waiting for students to advise Centrelink separately;
• Workload Management System project. This project was part of an initiative to introduce a workload and workforce management solution for Centrelink;
• Customer Account project. This was part of a series of initiatives to transition Centrelink to a simplified and streamlined way of doing business with its customers; and
• Australians Working Together – Transaction Capacity (AWT-TC) project. This was aimed at ensuring that Centrelink's technical infrastructure had the capacity to support the various 2001–02 and 2002–03 Australians Working Together Budget initiatives.

On the basis of analysis of these samples, the ANAO found that:

• the CPR contained a significant number of errors, omissions and variations in relation to critical project definition and planning documentation (such as business cases, cost estimates, business impact assessments, risk assessments and project management plans);
• in the case of AWT-TC, the CPO inappropriately defined this undertaking, which was a programme (or group) of projects, as a single project. In contrast this group of projects was appropriately treated by Centrelink's AWT IT programme office as a programme of linked projects rather than as a single project. This created a duality of governance arrangements that made it difficult for the CPO and the IMPC to monitor and control the progress of each individual project within AWT-TC and their contribution to the objectives for the AWT TC initiative;
• an initial internal scoping exercise for the Customer Account project was appropriate but changed focus when it became known that the Customer Account would become a Budget measure. Phasing the project on a financial year basis, rather than on suitable implementation and decision-making points (‘go/no go' points) also did not lend itself to efficient and effective project monitoring and control; and
• by not following a sequenced planning process for CART, especially by not including a detailed risk management plan in the Project Management Plan (PMP), Centrelink entered into a worthwhile project, but in a way that did not initially identify and manage the risks to achieving take-up by educational institutions and, therefore, to achieving savings targets.

Centrelink's limited influence in defining project scope and priority of Budget-related projects (except through consultation in the new policy process), and the consequent need for continual reprioritisation and reallocation of resources to projects after each Budget, presents some challenges for Centrelink in looking at the big picture, adopting strategic solutions, identifying interdependencies and scoping projects appropriately. The Department of Human Services advised the ANAO that, in its view:

The creation of the Department of Human Services in October 2004 has raised the profile of service delivery in the policy development process. The Department also closely scrutinises the progress of major policy implementation. In combination, these changes can be expected to progressively strengthen high level project scrutiny within Centrelink and ensure service delivery issues associated with policy implementation are effectively brought to the attention of policy departments. ⁸

Centrelink's internal financial management arrangements provide Centrelink with a means of ensuring that its allocations to projects do not exceed funding sources. They also help Centrelink to meet the requirements of client/policy agencies for reports on Centrelink's use of funds to implement Budget measures. These are important considerations, but aspects of the current arrangements lead to difficulties with the proper definition, including phasing, of projects. Within Centrelink, Budget measures tend to be equated with projects notwithstanding that Budget measures do not generally provide enough information on requirements, schedule and deliverables to be defined as a project.

It is not uncommon for savings to be harvested up front from Centrelink projects. Where this occurs, this simultaneously places pressure on Centrelink to manage Budget measures as single projects (to make the tracking of savings simpler) and creates pressures on the network. In particular, the network can come under significant pressure if the savings that have been harvested are not matched by actual savings generated by the projects in the network, such as in terms of reduced resource demands, or if these savings take longer than originally planned to be realised.

The CPO's approach of defining projects based on the source of their funding (that is equating Budget measures with projects) creates a risk that monitoring will be ineffective at portfolio of projects and programme of projects levels. While reporting on the use of Budget funding and the implementation of Budget initiatives is essential, structuring projects on sources of funding has led to the IMPC focusing primarily on following up on scheduling and funding issues, rather than getting any clear view of changes in capacity and achievement of benefits. Notwithstanding the need for Centrelink to report against Budget measures, projects should be defined in such a way that they can be adequately controlled, that is, to ensure that activity can be appropriately planned and resourced to produce the required results within a given time.

Project Monitoring and Review (Chapter 4)

On the basis of analysis of its sample of 30 projects, and the detailed examination of four of these projects, the ANAO found that the CPO did not use the large volume of monitoring information provided by individual project teams appropriately to advise the IMPC on the progress of the projects. As a consequence, the IMPC's monitoring and review has in the past been largely ineffective, because it had not been receiving sufficiently clear briefing, either to enable the committee to identify the broader issues affecting the agency's portfolio of projects or to support individual projects. These broader issues included delays in budget approval and allocation of funds, delays in procurement processes for capital and professional services, insufficient labour resources and conflicting development priorities.

The importance of taking a higher level perspective and addressing systemic issues when monitoring projects has been recognised by the IMPC. For the 2005–06 financial year, the IMPC adopted programme level reporting, instead of considering reports for individual projects as in previous years. The ANAO considers that the programme level of reporting provides the IMPC with a useful perspective on issues affecting projects and Centrelink's project portfolio more generally. The ANAO supports Centrelink's planned further modification of the portfolio/programme level of reporting on the basis of its experience with this approach in 2005–06.

In October 2005, the IMPC endorsed a benefits management policy for projects (although this is not yet reflected in the policy and methodology documentation for the CPMF). But this policy is not yet generally applied. In April 2006, the CPO reported to the IMPC that only 12 per cent of projects were managing and reporting benefits.

Notwithstanding that this policy is yet to be generally applied to Centrelink projects, the ANAO notes that the process of benefits realisation planning, monitoring and reporting that Centrelink is implementing has been positive for one of the ANAO's four case study projects, Customer Account. For example, it has allowed the agency to assess more objectively the outcomes of the Customer Account initiative, and learn lessons for the future development of online service capability.

Centrelink has committed itself to commissioning external reviewers to undertake Gateway reviews⁹ of all its medium and high risk projects¹⁰. Given the number of Centrelink projects currently rated as medium or high risk¹¹, this is a significant commitment. At the time of the audit, Centrelink was still working to achieve this goal. However, those reviews that have been undertaken to date of internally-funded Centrelink projects confirm the broader issues in project management identified in this audit and have already achieved positive results by identifying where problems are occurring and where remedial action is needed. The ANAO considers that there would be benefit in Centrelink reviewing its approach to the application of internally commissioned Gateway reviews, including considering the application of Gateway reviews at the programme of projects level.

Strategic Project Management Maturity (Chapter 5)

At the time of the audit, Centrelink had recognised there was an opportunity to improve its strategic management approach and had taken steps towards this. The agency's efforts in this regard are always likely to be constrained to some, perhaps ultimately a large, degree by the externally driven demands that Centrelink faces. But there is an obligation to manage Commonwealth resources properly, and Centrelink needs to proactively manage and be accountable for the results of projects.

Following the establishment of the PCB in May 2005, Centrelink has taken or continued a number of steps to further improve its strategic project management performance. These include:

• provision of reports to the IMPC at a programme of projects level rather than just at an individual project level;
• restructuring the PCB to include specific investment (portfolio level) and benefits (programme/project level) management functions;
• introduction of portfolio management, including piloting a value assessment model;
• development and introduction of a benefits management policy for projects;
• introduction of the Teamlink system, which links Infolink and Primavera so that financial and schedule information may be shared between those two systems;
• undertaking:
  • a review of the CPMF¹² and the PCB's and Centrelink's project management capability;
  • a review of arrangements for project manager training and support; and
  • a preliminary review of Centrelink's project management maturity using the Organisational Project Management 3 (OPM3) model.

The findings of Centrelink's own review of the PCB's and Centrelink's project management capability align very closely with the ANAO's findings from its independent and in-depth testing of Centrelink's project management approach. The finding of this review, that the PCB and the CPO have focussed in the past on the individual project level rather than on providing support for the governance and control processes that must take place to convert external demands into manageable projects, is consistent with the ANAO's conclusions.

Centrelink is continuing its improvement efforts through a six point plan to address the issues and improve the standard of strategic project management. In November 2006, in response to the ANAO's issues papers for this audit, the CEO of Centrelink advised:

The preliminary findings of the ANAO audit are consistent with issues Centrelink has identified through a process of critical self-review. In fact, the report notes that Centrelink has already “developed a six point plan to address the issues” raised in the report, and “improve the standard of strategic project management”. The …. Six Steps, were endorsed by the Investment and Major Programmes Committee (IMPC) in July 2006 and align with ANAO recommendations.

The target outcomes the agency has set for itself include:

• simple independently verified reports which lead to direct IMPC intervention when required;
• Steering Committees provide consistent oversight and management of projects and subprogrammes, are recognised as well managed, and support IMPC in its strategic management of Centrelink's portfolio of work;
• Project Managers comply with the CPMF and use the processes to effectively control and consistently manage Centrelink's projects;
• Centrelink has a project management capability that has a maturity rating of 4 and is a recognised professional career for staff;
• Centrelink has an integrated portfolio of projects which are assessed, prioritised and reviewed annually, and which contribute to strategic achievement of goals and outcomes; and
• Centrelink has a mature investment management capability that provides value and return on investment.

Centrelink also advised the ANAO that it has added seven specific action items to the overarching Six Step process as a result of the audit. Overall, Centrelink has been and is taking positive steps to improve its strategic project management over time.

Recommendations

The ANAO identified opportunities for further improvement of the CPMF and for the overall management of projects. In particular, the ANAO made two recommendations aimed at improving the CPMF and the definition and planning of projects.

Centrelink Response

Centrelink welcomes this audit report and the collaborative manner in which the audit has been conducted and in particular that throughout the report the ANAO has recognised and acknowledged the organisational commitment to continue to improve our project management discipline.

We continue to work on the processes, methodologies and issues that the ANAO has canvassed. We are in the process of implementing all of the recommendations. Project management competency in the organisation has been steadily maturing over a number of years, and the current transformation activities are logical steps to shift focus from project level activities to a portfolio viewpoint. Centrelink has also endorsed a strategy to improve project management within our organisation. This strategy is designed to respond to the draft recommendations and is underpinned by an Implementation Plan that institutes rollout and cultural change.

Footnotes

1 Annual Report 2005–06, Centrelink, 2006, p. 11.

2 Project Management Institute, A Guide to the Project Management Body of Knowledge Third Edition, Project Management Institute, Pennsylvania, 2004, p. 5.

3 Annual Report 2005–06, Centrelink, op. cit., p. 10.

4 These included an internationally accepted and utilised standard, the Project Management Body of Knowledge (PMBoK) which has been adopted by Centrelink as the basis for its project management framework. PMBoK has International Standards Organisation (ISO) 9001 certification and is an American National Standards Institute (ANSI) standard. Centrelink also applies PRINCE2 (Projects in Controlled Environments 2), which is a widely utilised project management method in both public and private sectors. PRINCE2 addresses the organisation, management and control of projects. It was developed by the Office of Government Commerce (OGC) as a United Kingdom Government standard for IT project management. The development of project management maturity models has also been a key development in recent years and are particularly relevant in assessing how well developed, or mature, strategic project management processes and approaches are within an organisation. Among these are Organisational Project Management 3 (OPM3) and the OGC's Portfolio, Programme and Project Management Maturity Model (P3M3). During the course of the audit Centrelink undertook a preliminary OPM3 review. The ANAO utilised P3M3 in making its overall assessment of Centrelink's strategic project management approach.

5 See footnote 4 and Chapter 2.

6 The Portfolio, Programme and Project Management Maturity Model (P3M3) developed by the OGC in the UK provides a descriptive reference model that organisations can use as guidance for improving their project-related processes.

7 As noted in footnote 4, PMBoK has International Standards Organisation (ISO) 9001 certification and is an American National Standards Institute (ANSI) standard.

8 Letter from the Acting Deputy Secretary, DHS, to the ANAO, 24 January 2007.

9 The Gateway Process is an initiative of the United Kingdom Office of Government Commerce (OGC). Gateway reviews of programmes and projects are undertaken at critical stages in their lifecycle to provide assurance that they can progress successfully to the next stage.

10 From the 2005–06 Budget cycle, the Department of Finance and Administration (Finance) has started to require that certain initiatives/procurements undertaken by FMA Act agencies undergo ‘Gateway' reviews. The Gateway process being implemented by Finance is an adaptation of the OGC Gateway process. Gateway reviews are required where: the risk of a project warrants its inclusion in the review process; and the project is either an information technology project valued at $10 million and over or a procurement or infrastructure project valued at $20 million and over. www.finance.gov.au/gateway/index.html.

11 29 out of the 30 projects in the ANAO sample were rated as medium or high risk.

12 At the time of the audit a revised draft of the CPMF had been prepared and a new Intranet site for it was being piloted.