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AGIMO proposes profound, far reaching changes to ICT Services procurement

by Staff Writers •
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The likely shape of one of the most significant reforms to arise thus far out of the Gershon Review has been floated by the Australian Government Information Management Office (AGIMO) as a discussion paper.   Over 1,000 IT services companies and all FMA Act agencies will be affected by AGIMO’s proposed Whole-of-Government ICT Services Panel (WISP).

Even though it is only a discussion paper at this stage, it signals a fundamental paradigm shift on the part of the Federal Government that will result in one of the biggest structural changes to the ICT market yet seen in Canberra. 

IT Services vendors supplying to State governments will find the environment being suggested by AGIMO’s paper familiar, as many of the proposed reforms have precedent in NSW and Victorian panel arrangements. However it will bring massive changes to way in which federal government agencies procure and those suppliers which have no state experience will find it a very different environment in which to do business. 

This is particularly true when it comes to the potential it has to eliminate procurement selections made on the basis of ‘preferred suppliers’ rather than on an assessment of value for money. 

Intermedium’s data shows there were 1,410 IT Services suppliers to the Federal Government in 2009-10.  There is likely to be significant rationalisation via the WISP, even if AGIMO makes the conditions of participation quite broad, as with a multi-use list.  For example, within the NSW government (the second biggest IT services market) 365 IT suppliers made it onto its Whole-of-Government IT Services Panel, 2020.

In late October 2010, John Sheridan, the First Assistant Secretary, Agency Services at AGIMO told delegates at Intermedium’s Year in Review Briefing that his agency intended to turn to them, as industry members, for advice on how to improve IT Services procurement.

On Friday 3 December, the discussion paper that Sheridan was alluding to was released on the AGIMO blog. The likely procurement of a whole of government ICT services panel was flagged in the agency’s Annual Procurement Plans for Quarter 4 of this financial year.

Notwithstanding the specific questions that the discussion paper invites industry to respond to, key elements of the discussion paper that industry should respond to AGIMO on include:

  • The suggestion that Labour Hire will be excluded from the panel;
  • The suggestion that the 3 biggest portfolio agencies could retain IT Services panels of their own;
  • The use of a series of IT categories that have been used for the Victorian government eServices panel;
  • The concept of suppliers and agencies rating each-other’s performance in the delivery of IT Services;
  • The idea that AGIMO should draw fees from both suppliers and agencies to cover the costs of managing the WISP;
  • The idea of using reverse auctions as part of the price decision mechanism; and
  • The idea of using electronic lodgement tools coupled with mechanisms that still allow for human decision making on qualitative aspects.

The WISP discussion paper has widely been viewed as good news for Small to Medium Enterprises (SME’s).  However a considered reading shows just how much will need to be resolved before design of the panel operation reaches its end point.  Thus AGIMO have made a smart move in opening the paper to industry comment.

Sheridan told delegates at Intermedium’sOctober conference that AGIMO had received feedback from many IT Services suppliers about the difficulty they faced in entering the government market.

In his Blog he explains that while the average contract value for ICT Services is $185,000, “the median value is only $40,000 [and] 72% are valued at less than the $80,000 that normally delimits the requirement for open tendering”.

This means that most ICT Services contracts only require three quotes to be evaluated before a vendor is selected, rather than an open approach to market.

As Sheridan told the conference in October, this is not a fair mechanism for SME’s.

“If you’re not known to the people putting out these quotes, it is very hard to get noticed, to get a recommendation, to get work, to get referenced as a consequence of that work, and then eventually to get into the market,” he explained.

This fact goes some way to explaining why there were more than 17,000 ICT contracts (across Hardware, Software, IT Services and Telecommunications) let in 2009-10, but only 137 requests for tender issued, according to Intermedium research – indicating that most procurement is occurring off these panel contracts, via the request for quotation mechanism. 

This is one of the reasons why Don Easter, the Government’s Information Technology Supplier Advocate, has welcomed the paper.

“With SMEs often driving the niche innovation in the government IT market, both government and industry will share mutual benefits from procurement practices that are more efficient and transparent and which foster greater competition,” he says.

“I encourage SMEs to take advantage of their empowered voice through AGIMO’s blog and to provide constructive advice and feedback straight to AGIMO.”

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