Ministry of Social Development's $2.6b transformation: what would we get for the money?

Sunday, 13 August 2023

It’s impossible to observe staff at the Ministry of Social Development’s contact centre in Lower Hutt handling calls from beneficiaries without coming away with a lot of respect for the work they do.

The complex interactions between different types of benefits and the fact they may be responding to someone trying to do several things at once, means they commonly have to click through 10 different software systems to access and update information during a call.

But, at the same time, they need to maintain the “human intelligence” to communicate effectively and show empathy with some of the country’s most vulnerable residents, who may be confused and stressed by the process and who, like any of us, may make mistakes or change their minds during a call.

MSD reports that at least 62% of people on a main benefit – such as the likes of Jobseeker Support and Sole Parent Support – have accessed a mental health service in the past three years and there is a “persistent, increasing group of people with multiple needs”.

“These include chronic and co-morbid health conditions, physical impairments, generational welfare dependency, and children growing up in poverty and housing instability, including homelessness. These needs are in addition to the need for financial support and employment.”

While few might disagree MSD’s staff and beneficiaries deserve quality technology and support, the projected $2.1 billion to $2.6b cost of the planned overhaul of the ministry’s systems and processes has many perplexed and the National Party uneasy.

So what will the public get once the Ministry of Social Development’s (MSD’s) revamp, Te Pae Tawhiti, is complete in nine years?

Just like Inland Revenue, which spent about $1.7 billion on its Business Transformation project, the ministry fears that if it doesn’t spend the money, there is a risk some of its IT systems might just fall over.

Also, like IR, Te Pae Tawhiti programme director Craig Hill promises there will be service improvements and argues MSD needs to spend the money in order to be able to implement new government policy quickly.

But unlike the tax department, which partly justified its transformation project by the savings it would make from job cuts, MSD envisages ploughing back the staff time it expects to save from new technology into better assisting its more vulnerable customers.

A 227-page “detailed business case” for the investment provides a withering assessment of the ministry’s current processes.

MSD appears particularly concerned about the state of the IT systems that manage student loans and allowances, which Hill describes as “end of life” and are an early priority for replacement.

It took about 230 staff, 26 months and $8.2m to implement the Families Package in 2018 that introduced, among other things, the Best Start tax credit and Winter Energy Payment, it notes.

The ministry reported that, on average, nine “internal hand-offs” were required to grant a main benefit.

It bluntly concluded its “fragmented approach” did not meet the needs of New Zealanders and it lacked the “agility and flexibility required to provide personalised or proactive support”.

Hill says the ministry is running 480 software applications “from some very modern ones to some that are 40 years’ old and designed before the internet”.

“There’s a massive complexity in how our business processes operate, because of the way in which those systems over the years have been connected together.”

MSD appears to blame that, indirectly, for the results of an internal survey that suggests it isn’t paying 43% of beneficiaries the right amount of money.

It says that beneficiaries were overpaid a total of $340m in the year to the end of June last year, resulting in them having that debt to pay back.

But the bigger issue may be that many beneficiaries are not claiming all the help they are entitled to.

To be clear, the fact the ministry may only be paying 57% of beneficiaries correctly is not because its computer systems are making errors, as such.

But Hill says the ministry is confident it could more than halve overpayments if it had “modern systems” that allowed it to better share information with IR.

Overpayments could still occur due to beneficiaries’ circumstances changing or them giving the ministry wrong information.

Similarly, the main reason for underpayments is beneficiaries not claiming their full entitlements, for a variety of reasons, rather than computer error.

But MSD believes that would happen much less often if more of its services were available through online self-service, its software provided better automated prompts, and if staff who were helping those who needed personalised assistance weren’t having to repeatedly switch between systems.

One of the main objectives of Te Pae Tawhiti is to provide a Client Engagement Practice, which MSD describes as a “transformed, evidence-based, best-practice model for how we engage with our clients to help them in a mana enhancing way to achieve their aspirations”.

What does that mean in practice, given that the interventions the ministry is empowered to make cost taxpayers’ money, are defined in legislation and that there would therefore appear to be a limit on MSD’s ability to be proactive or go “above and beyond the call of duty” in the assistance it provides?

Hill’s response suggests that it envisages providing better information to beneficiaries about their options, rather than the Government having any grand plan to give MSD more discretion to offer people new types of support.

The most visible improvement for less vulnerable Kiwis should be more online self-service options, for example for students claiming loans and allowances and for superannuitants.

“Our current digital channels are not full digital channels; there are only a limited number of services that you can access through them and typically you'll get through halfway through a transaction before you have to start again in another channel,” Hill says.

“The experience of our clients is typically that they then have to repeat their story over and over again.”

Another key objective is to develop a Digital Employment Platform that will automatically match job-seekers to advertised roles in a “smart way”.

Jobseekers will be “matched to and notified of suitable jobs based on their individual circumstances and skills, be able to apply for opportunities online at any time, check on the status of their applications in real time, and generate a CV themselves using the information already in their profile”.

Hill rejects the suggestion that MSD could instead outsource the running of that service to Seek or Trade Me through a periodically reviewed competitive tender.

“We've looked at what those things provide and we're confident we need something which is a unique public platform.”

He expects roughly half of the funding for Te Pae Tawhiti would need to be spent on IT systems and services that it bought in, and the other half internally, for example on process changes and training.

But does MSD really need to spend such a huge amount of money, and how likely is it that the project would succeed?

The systems that MSD requires are complex, but without the functions that they need to perform being cutting edge.

At the core would be a new rules engine to determine entitlements, what is in effect a payroll system, a customer relationship management system to manage its interactions with clients, and the jobs-listings service of course.

But Hill says some of what makes the job challenging are its “very complex and difficult rules engine”, the fact it is handling what is often people's most sensitive personal information, the systems it needs to prevent fraud, and the “massive set of knowledge bases” that provide information about what people are entitled to and what services are available from MSD and its partners.

Perhaps pity the ministers who have had to start making calls on the basis of a detailed business case which, despite its length, lacks detail, and which was assembled with the help of consultants who will have known what buttons to press.

So far, the Government has committed $183m to the first phase of Te Pae Tawhiti, while the National Party has withheld judgment on whether it would continue with it until after the election.

If MSD’s management has let the ministry get into a dilapidated state, that might appear to raise the question of whether it was qualified to direct a $2.6b transformation project.

But no department ever got a massive capital investment approved after claiming in a business case that its technology wasn’t great but that it was just about muddling along okay.

Could MSD tackle some of the confusion beneficiaries currently have about entitlements just by providing clearer written information in the first place, instead of figuring it needs to free up more staff time to explain things over the phone?

“I think both of those things are needed,” Hill responds.

“The Social Security Act is a big piece of legislation, there's an enormous amount of rules and often explaining them is pretty hard to do.”

What about the Government simplifying the benefits system, before better automating it?

“We are working with government to be able to say ‘in these areas, if these things were simplified’, it would make it a lot easier for us,” Hill reveals.

“But ultimately, those are choices for government, not for the ministry to make,” he says.

MSD future services manager Geoff Cook adds also that government decisions can change over time.

“We have to be able to cope with whatever a particular government does.”