The program of coordinated telecommunications procurement instigated by the Australian Government Information Management Office (AGIMO) is starting to have a real impact on government expenditure, according to John Sheridan, First Assistant Secretary Agency Services.
“We have only a couple of agreements signed (or on the cusp of being signed) for internet based network connections, but already we are talking about six figure savings per annum per contract over what agencies were expecting to spend, or in what they were already spending,” said Sheridan.
“Very material savings have been generated already and we are quite pleased with the effect that this is having,” he said.
This panel success has also extended to the Telecommunications, Commodities, Carriage and Associated Services (Mobile) panel.
“We know that there are some small agencies whose mobile phone bills we have reduced by fifty per cent,” he said.
AGIMO has also confirmed to Intermedium that it has reserved the right to conduct Best and Final Offer or ‘BAFO’ rounds to extract the best possible prices out of the recently established Whole-of-Government telecommunications panels, which include the the Internet Based Network Connections (IBNC) Panel; the Telecommunications Management (TMAN) Panel; and the Mobile panel.
Clauses relating to the deployment of BAFO price mechanisms are included in the tender documents for both the IBNC and Mobile Panels.
They permit AGIMO to approach panellists for revised pricing, beyond the original quotation, as and when it believes it necessary or appropriate to do so.
When asked if telco BAFOs were likely he said, “it depends,” but also added that telecommunications procurement wasn’t as suited to the BAFO mechanism as was the market for desktop hardware.
“Having just kicked off the IBNC panel, we are going out for quotes for the work.
“Some of these quotes are for multi-million dollar projects over several years, so there is not a huge requirement in these circumstances to consolidate demand and get a consolidated offer.
“If your compare using a BAFO to buy a PC to using a BAFO to buy five years worth of internet carriage, it is a very different arrangement,” he said.
“We have got the ability to roll-out the BAFOs and we might in the future – but we haven’t needed to yet.”
The model for a whole-of-government panel BAFO mechanism emerged in November 2010. At the time, Intermediumreported that regular BAFO rounds were being staged as part of the contracting process governing the whole-of-government Desktop Hardware Panel.
In the case of the Desktop Panel, AGIMO approaches agencies for a forecast of their desktop requirements for a nominated quarter. Panellists are required to provide their BAFOs based on this aggregated demand, and in a ‘sudden death’ bidding process the supplier with the lowest quote wins the right to provide the selected good across government for the period.
Thanks to this feature, the Desktop Hardware panel has emerged as one of the most striking success stories of the coordinated procurement program, allowing government agencies to buy PCs at a rate 49 per cent below the Australian average.
When asked how much of this could be attributed to the BAFO mechanism, Sheridan said it was “about a hundred per cent”.
The telecommunications panels have the potential to significantly alter a market which had previously featured enormous managed services agreements.
Contracts, such as the $331 million, eight-year agreement between Centrelink and Telstra, seem set to be reshaped by the clutch of whole-of-government telecommunications panels which are mandatory for use by all FMA Act agencies.
When the Department of Human Services went to market in November 2010 for a five-year telecommunications services supply arrangement to cover the whole portfolio, RFT documents noted that fixed data carriage and mobile voice and data requirements would be excluded from the contract’s scope.
Instead, the Department said, arrangements were already in place to source these items through the IBNC and Mobile panels established by AGIMO.
However, Sheridan said that the panel arrangements would be flexible around agency needs and opportunities to leverage economies of scale would still be seized upon.
“The question when it comes to telecommunications procurement is: ‘will there be one contract, or one throat to choke, or could there be other arrangements established? The answer to this is ‘it depends’,” he said.
He explained that if agencies were to approach the market for more than one of the panel offerings, then suppliers would have the opportunity to submit discounted prices to come into effect in the event that they win multiple tenders.
“If a supplier is offering a bundled price there will be a place in their response to put either the different prices that apply as a consequence of getting both parts of the contract, or the discount that applies to each component as a consequence of getting both parts of the contract,” he said.
According to Intermedium’s Analyse IT contract database, the 2010-11 Federal Government telecommunications market was worth $827 million, with over 1,800 individual contracts signed.