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CASE PROGRAM

2014-163.1

Arriving at SmartGate: the automated passenger processing project (A)

On 2 March 2009, the Prime Ministers of Australia and New Zealand, Kevin Rudd and

John Key, shared a cup of tea and an informal chat at Mr Rudd’s official residence, Kirribilli

House in Sydney. It was the first time the two had met in Australia since John Key had been

elected in a change of government in November 2008. Mr Key was also Minister of

Tourism; Australia was New Zealand’s biggest tourist market, and the conversation turned to

ways to streamline and simplify trans-Tasman air travel. Their joint press statement included

a commitment to “reduce remaining barriers at the borders to ensure that people and goods

can move more easily between the two countries”.1 When, on his return to Wellington, John

Key asked chief executives what they could deliver by the end of the year, Customs Chief

Executive Martyn Dunne replied: “SmartGate”.2 The automatic passenger clearance system,

seven years in development, was being rolled out for use at Australian airports. In nine

months, how could New Zealand Customs catch up?

“A near domestic travel experience”

Airports and governments alike, from a tourism and trade perspective, want the passenger

experience at the border to be as pleasant as possible. For visitors to New Zealand, one of the

biggest frustrations was the time it took for international travellers to be processed through

Customs. People might wait an hour or more at busy airports like Auckland. With tourism

already worth $10 billion3 to the New Zealand economy and the expected influx of

This case was written by Janet Tyson, Australia and New Zealand School of Government, drawing on material

prepared by Dr Elizabeth Eppel, Victoria University of Wellington (VUW), for the report Realising benefits from

six public sector technology projects, published by the Office of the Auditor-General (OAG), Wellington, 2012.

The case has been designed to prompt class discussion, not to evaluate any managerial decision. The assistance of

the Office of the Auditor-General, Dr Elizabeth Eppel, Professor Miriam Lips (VUW) and Germana Nicklin

(Customs and VUW) is appreciated, as is the contribution of John Kyne, Bruce Thomas and Geoff Wilson, but

responsibility for the final content of the case rests with the author.

Cases are not necessarily intended as a complete account of the events described. While every reasonable effort has

been made to ensure accuracy at the time of publication, subsequent developments may mean that certain details

have since changed. This work is licensed under Creative Commons Attribution-NonCommercial-NoDerivatives

4.0 International Licence, except for logos, trademarks, photographs and other content marked as supplied by third

parties. No licence is given in relation to third party material. Version 13082014. Distributed by the Case Program,

The Australia and New Zealand School of Government, www.anzsog.edu.au

1 Key & Rudd – Joint Statement on Strengthened Trans-Tasman Co-operation, 2 March 2009, accessed from

http://www.beehive.govt.nz/release/key-amp-rudd-joint-statement-strengthened-trans-tasman-cooperation 2 Comment by official present. 3 Unless indicated otherwise, all figures in New Zealand dollars.

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international visitors for the Rugby World Cup in 2011, there would be greater and greater

pressure on border processing personnel and facilities. Automated passenger processing

would help to give trans-Tasman-travellers a “near-domestic travel experience”.4

In 2007, Australia had installed its first “SmartGate” automatic passenger processing system

at Brisbane international airport, and was rolling it out progressively, to finish in Darwin in

2011. The system, which cost $A68 million and took seven years to develop, used

advances in biometrics (face recognition) and the e-passports being introduced as traditional

documents expired.5 Instead of facing a Customs officer, passengers put their e-passport into

a kiosk, which read its microchip to confirm their identity through a link to the PACE6

database, then generated a ticket to take to a gate to activate a camera. If their identity was

deemed to match, the gate opened for entry to Australia. The process usually took a few

minutes.

Improving the efficiency of border clearance procedures for both passengers and freight

across the Tasman was already a strategic priority for New Zealand Customs.7 Numbers of

passengers and volumes of freight crossing the Tasman would continue the upward trend

already putting pressure on existing processing facilities, and the service was continuing to

work “on automated and non-automated mechanisms for processing passengers more

effectively and efficiently”.8 The Border Sector Governance Group, established to promote

greater collaboration in border management, was following Australia’s development of

SmartGate with great interest.

By late 2008, there was a SmartGate being trialled in New Zealand. The Australian Customs

and Border Protection Service (ACBPS) had lent it to their New Zealand counterparts to

determine whether the same system could interface with CusMod, the New Zealand Customs

integrated border management system. As the trial progressed successfully, Customs

recommended that New Zealand should purchase the system,9 and began planning for

possible implementation, at the same time building a relationship with Sagem (now Morpho),

the SmartGate supplier.

Collaboration in the Customs “family”

Customs and border control agencies around the world, as members of the World Customs

Organisation, have a tradition of collaboration and co-operation, seeing themselves as part of

“the Customs Family”.10 New Zealand Customs and the ACBPS had, in addition, a strong

history of reciprocal assistance that had developed out of the Closer Economic Relations

(CER) agreement of 1983, followed by a non-binding Customs Co-operative Agreement in

1985. This harmonised most aspects of the movement of goods and craft across the Tasman.

4 Maurice Williamson, Minister of Customs, in NZ Herald ‘SmartGate System goes trans-Tasman’, 1-08-2011. 5 By 2015, 100 percent of passports in Australia and New Zealand would be e-passports. 6 Passenger Analysis Clearance and Evaluation. 7 “Our key challenge is to effectively support growth in New Zealand’s international trade and tourism by

facilitating flows of people, goods and craft into and out of New Zealand, while mitigating risks to New

Zealand’s sovereignty and national interests.” New Zealand Customs, Annual Report 2007-2008, p 1. 8 Ibid. p3. 9 Processing passengers faster at airports, Part 5, Realising the Benefits from six public sector technology

projects (Office of the Auditor-General, Wellington, 2012). 10 Nicklin, G. Anatomy of Border Management in a Single Economic Market, Presented at the World Customs

Organisation PICARD Conference, St Petersburg, 18-20 September 2013, p4.

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Unlike the majority of Customs agencies, those in Australia and New Zealand both managed

immigration as well as craft and freight, although they differed in legislative mandate and

operational functions. New Zealand Customs was an agent for 21 other government agencies,

from Inland Revenue to Justice and Social Development, and the CusMod system was set up

to implement some 76 pieces of legislation.

When Prime Minister John Key and Minister of Customs Maurice Williamson asked for

action on automated passenger clearance systems, it was a window of opportunity Customs

had been waiting for, with a business plan already in draft. The department followed through

by making sure it had a good understanding of the politicians’ vision for trans-Tasman travel.

The Prime Minister, invited to use the trial gate, became and remained an enthusiastic

supporter for the project.

The first business case for SmartGate went to Cabinet in mid-April 2009. While Treasury

was “lukewarm” about likely costs and benefits, it conceded there was a political priority for

other elements such as an improved passenger experience, and an appetite for a bold

approach that would deliver results, SmartGate Project Sponsor John Kyne recalled.

The project team would report weekly to the Minister, and the Department of Prime Minister

and Cabinet kept in close contact (Exhibit 2).

John Kyne described an “intense planning process before, during and after the Cabinet paper

[seeking funds to implement SmartGate].” From the outset, Customs’ Chief Executive made

it clear that the project was a top strategic priority for the whole organisation - a challenging

but achievable campaign that, managed effectively, would meet the government’s

expectations.

As Programme and Information Systems Manager Bruce Thomas recalled:

“We had a common organisation view of where we were going. Our CEO was very good at

rallying the troops and making the direction clear and making sure everyone was on board - Having the ‘heart and soul’ of the Chief Executive, and the total support of the senior management team gave the project team the confidence to move quickly and decisively.”

Also crucial was the early decision to set up an interagency Steering Committee to oversee

the project. Partners11 such as the Ministry of Agriculture and Forestry (involved in

biosecurity clearance), the Department of Internal Affairs (making the transition to e-

passports) and the Immigration Service of the Department of Labour (working on biometrics)

were all preparing for future developments. The Steering Committee, meeting at least

monthly, could focus on outcomes that were in the common interest; sometimes agreed only

after robust debate.

Organisational support and priority enabled Customs to take an innovative approach to

managing a vast and complicated project proceeding in several different directions in parallel

– and to a timeframe that called for procurement, airport construction, IT development,

systems integration and staff training to be completed in six months.12 Bruce Thomas

recalled that, between May and November 2009,

“… we needed to negotiate a contract with the supplier of the equipment; back to back we

needed to negotiate a maintenance contract for the life of the equipment; we needed to agree

11 In 2014, the agencies are the Ministry of Primary Industries, the Department of Internal Affairs, and the

Ministry of Business Innovation and Employment. 12 Project Management Institute of New Zealand, NZ Customs Service application for Project of the Year

Award 2010, p6.

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with the airlines and airport companies about what we could do in the airports, we needed to

negotiate with contractors over refurbishment of the Customs area at the airport.”

Virtual team does the business

At various stages of the SmartGate project, up to 80 people from Customs, other agencies and

vendors were involved. However, Project Sponsor John Kyne, Project Manager Bruce

Thomas and Programme Business Manager Geoff Wilson were the only permanent

employees. The project operated with a “virtual team”, the Customs members of which also

continued to be involved with their normal work activities.

This had the benefit of allowing those staff to work with the processes, reporting and support

mechanisms available within their usual teams. Rather than defining and implementing new

systems and processes, the project manager could rely on proven work practices – for

example, Customs’ expertise in managing risk and facilitating trade. Equally essential was

being able to rely and build on established relationships with IT experts and agency partners,

as well as key stakeholders like the airlines and airport companies. Airports are integrated

systems, where change at any one point will impact elsewhere. “As one airport CE said to us,

there’s no point shaving six minutes off the arrival time if everyone is then queuing longer for

their baggage,” John Kyne recalled. “Airports are also commercial operations, and border

control does not earn them any revenue.”

Talking with airport companies confirmed that, while all were planning new building, the

new space would primarily be reserved for shopping and other revenue gathering activities.

The predicted increase in passengers would have to be processed with little or no increase in

space to do it. Similarly, SmartGate would have to fit with future thinking such as integration

with airline check-in and boarding systems.

A different passenger experience

“From the start, we wanted to make sure that passengers using SmartGate had a quite

different experience from those going through the manual process,” Geoff Wilson said.

“We wanted it to be less intimidating, less official and more inviting. We gave a lot of

thought to what the SmartGate precinct would look like, with carpet and pictures. We knew

some people would be reluctant to use new technology, so there would be an important new

role for Customs staff in providing a different sort of customer service.” Passenger

management was another new area, and Customs took advice from Air New Zealand, which

had introduced circular groupings of check-in kiosks to improve passenger flow.

Customs’ commitment to a speedy implementation of SmartGate indirectly compelled some

of its partner agencies to match the pace of progress. The Ministry of Agriculture and

Forestry, for instance, wanted assurance that its biosecurity risk management practices would

not be compromised. Within the department, too, John Kyne acknowledged that the pace of

change was “too fast for some people”. But not for the leadership, which actively ensured the

“heart and soul” of the organisation remained committed. “We had the resources of the

organisation at our beck and call.”

Bruce Thomas recalled:

“We could request the right people for the project. ‘I need a policy analyst to work with us on

changes of legislation - OK, here you go.’ We had people who knew the business and knew

the technology and understood what needed to be done…and what was going to work and

what wouldn’t.”

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At the back of everyone’s mind was that the Customs brand as a trustworthy organisation

would be at stake if they failed to deliver on their ambitious promise. “Customs is a risk

management organisation - that is what we do,” Geoff Wilson said.

“A key part of our discussions was how to understand and manage unintended consequences.

We are always thinking of what can go wrong and making sure that we have contingencies.

We also accept that things will go wrong and it is our job to fix them. It was risky to go for a

December start date, but we had a Plan B.”

Cabinet had supported Customs’ decision to short-circuit normal procurement processes for

the SmartGate technology.

While alternatives to Morpho as a supplier had been considered, there was no other viable

option, especially given the intention to leverage on the transTasman experience. The early

decision to go with the technology used in Australia, and the trust relationship that had been

built since the arrival of the trial SmartGate, proved its value. “The supplier began

manufacturing the required equipment before the contracts were agreed or the order finalised,

which was essential to meet the tight deadline,” Bruce Thomas recalled. The relationship

contract ultimately negotiated centred on achieving common goals.

“We entered with an understanding that Morpho had commercial imperatives. We had some

challenging discussions over what that meant. We recognised that Morpho’s commercial

success with this enterprise would directly affect the ongoing service quality we receive. We

needed this to be successful for us, and for them. We made it clear from the outset what

business outcomes we wanted to achieve, and also where we thought there were opportunities

for us to help Morpho. What does Morpho need from us, what do we need from them, how

can we make this work over time? For example, they didn’t have support systems in NZ so

we suggested that they may want to establish broader relationships with some of our existing

contractors/suppliers.”

It was essential that Customs did not interfere with the existing relationship between Morpho

and the Australian Border Control Protection Service as it set up its own relationship with

Morpho. Throughout the project, Customs always acknowledged the value of the head start

that ACBPS had given them, by allowing them to build on the $68 million and seven year

investment in SmartGate across the Tasman. The ongoing Australian connection was

enormously helpful, Geoff Wilson reflected. “Just one of the benefits of building on the

Australian experience was that a lot of the risks were well identified beforehand.”

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Exhibit 1: SmartGate arrival at Auckland Airport

Source: New Zealand Customs Service

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Exhibit 2

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