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ATO Centralised Computing deal with HP passes $1 billion mark

by Paris Cowan •
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A major IT outsourcing deal signed between the Australian Taxation Office (ATO) and HP has exceeded $1 billion in value thanks to the addition of an integrated multi-vendor environment to the contractor’s list of responsibilities.

The centralised computing contract was originally signed in December 2010 for $738.8 million.

However, AusTender records reveal that the deal’s value was increased by $76 million back in June 2012. In October 2012 a 12 month extension was also applied to the contract’s term, taking its expiry out to 2018 and adding another $192.2 million to the value of the deal, and taking the combined total of the amendments to more than $268 million.

A spokesman for the ATO said that the amendments reflect “natural growth in demand” at the agency, as well as the cost of developing a supplier management solution that will help the ATO to stay on top of its four-pronged ICT Sourcing environment.

“Each year, new projects, management of our IT infrastructure (for example, our move to a new data centre and the introduction of new servers) and commitments to government, all impact on the overall value of our Centralised Computing services contract.

“We currently have four major vendors for our service management centre, end user computing, managed network services and centralised computing services. The development of an enhanced multi-vendor environment for Centralised Computing will be undertaken by HP Australia Pty Ltd, the ATO and all service providers and is expected to take 12 months to develop and embed in the ATO,” he said.

The 12 month extension has been applied to reflect the greater period of time needed to complete this expanded program of work.

The contract amendments make the centralised computing contract just the second current ICT deal in Canberra to pass $1 billion. At the beginning of 2011, an extension to the managed services deal signed between IBM and Centrelink (now integrated into DHS) took the value of this contract to $1.1 billion. It will expire in June 2016.

These two contracts will soon be joined by the Department of Defence’s Terrestrial Communications deal with either Telstra or Optus, which is due to be announced any day and which has already been foreshadowed as topping $1 billion over its term.

The contract amendments also take the full value of the supply relationship between the ATO and HP (formerly EDS) to $4.3 billion, according to contracts published on AusTender. Prior to the agency deciding to break its ICT needs into three separate tranches in 2007, HP had been the sole vendor managing the ATO’s full ICT infrastructure since 1999.

It won back the centralised processing tranche in 2010. Lockheed Martin was awarded $300 million worth of contracts covering end-user computing in September 2010 (which have since also increased by more than $15 million), and Optus was awarded the telecommunications component for $217 million over four years in June 2009.

Most recently, the ATO has signed a three-way deal which will see it outsource its contact centre functions  to operations outsourcer Serco, call centre specialists Stellar and Datacom.

Under the deal Datacom will deliver a specialist contact centre solution.

“ATO required an outsource support partner that can scale with shifting requirements. Our strength is our integrated multi-channel technology that automates back of house functions and integrates with front house service to provide a faster more efficient customer experience,” said Datacom Group CEO Jonathan Ladd.

The ATO has not provided a value for its arrangement with Datacom. However the original approach to market estimated that the full value of the three-way deal would be in the vicinity of $264 million for the five year term. By subtracting the values of the Serco and Stellar deals from this value, Intermedium estimates that the standing offer arrangement between the ATO and Datacom will be worth roughly $47 million.

Related Articles:

The biggest year on record: Tax Office spends $2.1 billion on ICT

IBM Contract with Centrelink Passes $1 Billion Mark Following Further Extension

ATO reveals IT Application Services Panel

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