Government looking at centralising back-office operations to save billions

The government is looking at centralising back-office operations like human resources, payroll and IT systems in a bid to cut duplication and save billions of dollars.

It was revealed last week the public service was a target in the upcoming Budget, with 8700 roles gone over three years and most departments' budgets shrunk by 2 percent.

In an April briefing to the new Public Service Minister Paul Goldsmith, the Public Service Commission said it would soon seek out all-of-government suppliers for human resources and payroll systems.

That was part of the commission's effort "to standardise and streamline back-office systems" which was expected to save $160 million over a decade "through de-duplicating legal, procurement, configuration, and other costs".

Goldsmith said he expected department bosses to be communicating with each other about the most efficient ways of doing things.

"Sometimes there are very small agencies repeating the functions in back-office areas where some overlap between different entities would make sense, and that's what we'd expect them to be considering."

The briefing also referenced the "digital government target state" - essentially, the streamlining of digital services to ditch "inefficient agency siloes" and save money.

That would largely be done by creating "digital clusters" - 10 of which should be underway by June 2028 - which would see groups of agencies sharing IT systems, saving a forecast $5.9b over 10 years.

The commission had sought Goldsmith's endorsement on that proposed approach, the briefing said.

It said multi-agency technology solutions may cost more or "take longer in the short term" but would save money and deliver clear benefits.

However it also warned: "While initial progress is being made within agency baselines, targeted investment - both centrally and at an agency level - will be needed over time to realise the full benefits of the centralised approach."

The briefing told Goldsmith there were opportunities for him to lead change towards a unified, digital-first public service.

It wanted the service to be "a magnet for the best and brightest".

The commission said those opportunities lay in three main areas: transforming the operating model, strengthening integrity and ethics to combat corruption, and ensuring sustainability by "managing agency performance and the Public Service workforce".

The current system dated back to the 1980s which was "highly decentralised" and difficult for New Zealanders to navigate, it said.

"One of the problems with the current operating model is that it creates too many agencies that are often too small to perform to expectations or to be sustainable in the longer term."

Goldsmith said the government wanted fewer agencies as part of its public service shake-up, but it was still working out the right number.

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