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Federal Government crippling a local industry…

By johnyboy - 8 December 2011 25

The Federal government over the last 5 years has gradually increased its spending on internal video production units. The small production industry, (yes, there is an industry here in Canberra – but largest on a per-capita basis) is starting to feel the pain from the decrease in video production outsourcing by government departments.

Some departments are spending big money on the establishment of these units, by way of expensive broadcast equipment, then the staffing budget to operate the equipment. The capital cost to set up these units is usually above $1 million.

The local industry is feeling the pain and is literally competing against the government to pitch on work.

DEEWR established a large production unit a few years back and is known to be pitching against private industry for other department production projects. This is hurting local production companies, because they just can’t compete on price.

The production industry in Canberra employs some 100-200 people at a conservative guess. Production company owners aren’t supportive of the magnitude of some of these commercial-scale government production units.

What’s the problem, you say?

Well, the problem is three fold:

Cost vs outsource

The cost to open and run a unit would far out weigh the cost to outsource. The demand for projects to a department could at one stage justify the establishment of a unit, but as we have seen with DEEWR, the demand decreases and then the department is stuck with expensive broadcast equipment (one broadcast camera kit costs $85,000-$150,000). The unit then tries to justify its existence by pitching for work, alongside the commercial companies, for government jobs.

Quality of work

As with private enterprise, it’s a competitive market: meaning quality must always be maintained. Secondly, because profits are not required and high-performing environments are not maintained, the quality of work by the units is low.

Government competing against private industry

Government should support industry, and it does. But, in this case, it is an oversight by the executive level and the sums need to be done to see that creating a production unit just does not make sense. Outsourcing on demand makes much more sense financially and quality-wise. Secondly, government should not work against locally owned, small family businesses.

What’s Your opinion?


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25 Responses to
Federal Government crippling a local industry…
PM 3:25 pm 08 Dec 11

I agree, JB. It’s a disgrace.

Bluenomi 3:24 pm 08 Dec 11

Having worked for both an external and internal production house I have to say internal pays much better so I know which I’d prefer…

dtc 3:12 pm 08 Dec 11

johnyboy said :

amarooresident3 said :

On top of that, the procurement work that would have to be carried out to produce the same volume of material would cost a fortune in staff time if you had to farm it out to the private sector.

Well, this is a great point. Sometimes, it seems, that this work is not done, even if outsourcing will save money in the long run.

Well, its a great point only because Agencies, when faced with (a) an easy way to comply with the Commonwealth Procurement Guidelines (eg establish a panel and then sole source jobs under $80k) or (b) a very complicated and inefficient way to procure (eg: run multiple or mini tenders for every job regardless of size), will always pick option (b), probably with associated RFT and contract documents and quotes and purchase orders and multiple other requirements. Agency procurement methodology is a significant and uncosted expense, for both the PS and the contractors. And in the end a lot of contracts are awarded to the firm they wanted to give it to anyway.

As an aside, if the Commonwealth competes against the private sector it is meant to be on the basis of “competitive neutrality” eg: all costs included and not borne by the Departmen, compliance with same laws, pricing to return commercial profits. Check out the Productivity Commission website – and complain to them if this is not occuring.

Mysteryman 2:27 pm 08 Dec 11

davo101 said :

Mysteryman said :

Updates, announcements, changes to policy, new ideas and procedures, are all being broadcast by video on demand services on daily and weekly bases. Portfolio ministers are making weekly “news-style” address to staff to keep them informed and up-to-date, as it’s effective without being time consuming, for staff members across multiple locations to access and ingest.

Ouch, the pain, my head. Why bother writing these things down when you can force people to watch them as a video. Who needs to be able to search, skim, or cross-reference when you can have it all in an amorphous blob delivered to you at one-third the speed?

I’m so glad my employer has no money. Imagine the agony if the CEO’s weekly email was delivered as a video presentation.

Yeah you’re right. And you know what? We don’t need email, either. Carrier pigeons and smoke signals worked fine. Who cares if it’s faster, more effective, and more useful to type and send an email. We don’t need that. People need to stop being lazy. Hand write and post letters, for goodness sake. I don’t care if it takes days for the correspondence to arrive, why should employers? And the internet.. what a waste of time that is…

/sarcasm.

This isn’t the 60s. There’s a reason for the increase in video content and it’s because it works.

Classified 2:05 pm 08 Dec 11

realman said :

Imagine if they started doing that with medicines, cars and planes.

This sounds like a massive conflict of interest – collect taxes from industry and then finance the less talented and highly advantaged competitor…

If you want to see it on a very grand grand scale, have a look at what Centrelink is doing with IT outsourcing.

p1 1:32 pm 08 Dec 11

The cost to open and run a unit would far out weigh the cost to outsource.

This is a pretty vague statement. It may be true. But then again it may be totally false. How can we really know? One thing I do know, is that there are not many departments or agencies that would consider bringing such a function inside unless they were damn sure it would save money in at least the medium term.

Deref 1:26 pm 08 Dec 11

“Cost vs outsource

The cost to open and run a unit would far out weigh the cost to outsource…”

Evidence? It would seem to me that, if they’re doing enough work to warrant in-house facilities, in-house could well be cheaper. Happy to be proven wrong, but let’s see the evidence.

“Quality of work

As with private enterprise, it’s a competitive market: meaning quality must always be maintained.”

Every private business maintains the highest quality because of competition? Seriously?

“Government competing against private industry”

Everything Government does could be done by private industry, but there are lots of good reasons why it’s not. Simply saying that PE can do the job isn’t sufficient.

Your first point is potentially valid – if you can demonstrate that you can do as good or better for less, then you have a case. Otherwise not. It’s a pretty fair bet that the department concerned has crunched the numbers and come out with the in-house solution. They could be wrong, of course, but you’d need to demonstrate it.

breda 1:23 pm 08 Dec 11

I guess the main question is – do the in house operators tender for work based on comparable costs to private sector organisations? Presumably, they don’t pay the same taxes and charges as private companies, and probably have subsidised overheads as well from the larger organisations they are part of.

I don’t mind them using spare capacity to tender for outside jobs, but only if it is a level playing field. Otherwise, our taxes are just subsidising them to put their private sector competitors out of business.

johnyboy 1:14 pm 08 Dec 11

amarooresident3 said :

On top of that, the procurement work that would have to be carried out to produce the same volume of material would cost a fortune in staff time if you had to farm it out to the private sector.

Well, this is a great point. Sometimes, it seems, that this work is not done, even if outsourcing will save money in the long run.

davo101 12:59 pm 08 Dec 11

Mysteryman said :

Updates, announcements, changes to policy, new ideas and procedures, are all being broadcast by video on demand services on daily and weekly bases. Portfolio ministers are making weekly “news-style” address to staff to keep them informed and up-to-date, as it’s effective without being time consuming, for staff members across multiple locations to access and ingest.

Ouch, the pain, my head. Why bother writing these things down when you can force people to watch them as a video. Who needs to be able to search, skim, or cross-reference when you can have it all in an amorphous blob delivered to you at one-third the speed?

I’m so glad my employer has no money. Imagine the agony if the CEO’s weekly email was delivered as a video presentation.

amarooresident3 12:27 pm 08 Dec 11

As a DEEWR native I reckon the inhouse production unit is more than cost effective given the amount of work they produce. Barely a day goes by without a new video production on one topic or another, not to mention all the other audio visual work they do.

On top of that, the procurement work that would have to be carried out to produce the same volume of material would cost a fortune in staff time if you had to farm it out to the private sector.

And no, I don’t work in the video production unit

dpm 12:25 pm 08 Dec 11

Wow, it almost looks like JB posted this! 😉
I have to say though, the title should be a bit more specific. e.g ‘Federal Government crippling a local production industry’.
Let’s face it, the Federal Govt (through PS jobs) indirectly funds many local industries (housing, taxis, cafes, restaurants, fyshwick ‘massage’ parlours etc!) that would struggle without pubes!
It really depends on what magnification you have your ‘Canberra analysis’ microscope set on…

EvanJames 12:20 pm 08 Dec 11

I’m really surprised they’re doing this. The costs of set up would be astronomical, and the usage of the staff and equipment would be sporadic, unless they start inventing things for them to do.

You’d figure that production of videos would be a no-brainer to outsource. In-sourcing of IT support and development would make a hellava lot more sense, and yet so few of them are doing that.

Mysteryman 11:45 am 08 Dec 11

Interesting post. As someone who has worked/does work in this industry there are a couple of points/thoughts I’d like to make.

Firstly, the quality of work. There are a couple of production houses in Canberra that produce very good work. So good that they don’t rely on government departments to keep them afloat. There are, unfortunately, a lot that produce some pretty average work and charge “public service” money (read: way more than it’s worth) for their product. The amount of money available to private enterprises contracting to government departments has created a situation which doesn’t foster hard work, innovation, or value for money, but rather the attitude of “it’s government, they can afford to pay more”. I have seen the quality of work some of the government departments are producing and it’s considerably better than much of the work I’ve seen come from private enterprise.

Secondly, I’m of the opinion that if a business relies on the government to get by, then they need to re-examine their business model. The only reason many of these small production houses exist is because of the budget changes that occurred over the last 10-20 years which saw many government departments shut down their own production departments and outsource the work. I know of a few small production companies in Canberra that were set up by public servants who saw the opportunity to provide to the government agencies the work that was previously being done in house. Should they be protected now that government agencies like DEEWR and Human Services are switching to an in-house model? Personally, I don’t think they should.

As far as government competing against private industry… if you can provide a good service at a good price, you should get the job. The in-house production arms of agencies like DEEWR and Human Services tender for jobs with other agencies, but they still have to find a way to do so without running at a loss. Having a large production suite with lots of great equipment isn’t cheap. I don’t imagine that they’d be undercutting the competition. A small company competing with a government agency may be at a disadvantage when it comes to very large scale jobs, but for other smaller scale jobs they may be better placed to provide faster turnaround at lower cost.

The other point that should be raised is that many government departments are facing an increased need to video production work. The increasing reliance on intranets has seen the dissemination of information increase dramatically. Updates, announcements, changes to policy, new ideas and procedures, are all being broadcast by video on demand services on daily and weekly bases. Portfolio ministers are making weekly “news-style” address to staff to keep them informed and up-to-date, as it’s effective without being time consuming, for staff members across multiple locations to access and ingest. Having an in-house production facility makes sense as these smaller jobs are regular and often time-critical. Outsourcing them would likely be less efficient and more time consuming.

Anyway… these are just my thoughts and observations from my time working in this area. I’m sure there are other people with differing views/thoughts. It would be interesting to hear from them, too.

realman 11:31 am 08 Dec 11

Imagine if they started doing that with medicines, cars and planes.

This sounds like a massive conflict of interest – collect taxes from industry and then finance the less talented and highly advantaged competitor…

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