Strong rumours circulating Canberra suggest that Datacom Systems is the successful bidder for the Department of Health’s (Health) managed services tender. Health would not confirm or deny the rumour, but told Intermedium that a single preferred supplier was selected prior to Christmas and that negotiations are underway with this supplier.
“For probity reasons we can’t confirm the preferred tenderer until the evaluation process is complete,” said the spokesperson, who added that Health expects a contract will be signed by the end of March 2015.
Health is a Canberra outsourcing pioneer; IBM has been its supplier of infrastructure services since 1999 when the then Department of Health and Ageing (DoHA) co-signed the Group 2 IBM outsourcing contract with Medicare Australia (then HIC).
The agreement was worth an estimated $351 million and included mainframe, midrange, desktop, data communications and cross platform services management.
Health extended its contract with IBM in 2003 (five years; $126 million), 2008 (three years; $126 million) and in 2010 (four and a half years; $120 million).
Prior to the release of the Request for Tender in May 2014, Paul Madden, Health’s Chief Information and Knowledge Officer told Intermedium that "we won’t care how, where or on what equipment this service runs, provided it meets our service levels, key performance indicators and enables us to achieve our business outcomes.”
Health is seeking five core outcomes from the service arrangement:
- Reliable and available services;
- End user satisfaction with the services;
- Secure services;
- Demonstrated improvement in the value of the services; and
- A strategic and trusting relationship.
Intermedium noted at the time that Health becomes the first Federal government agency to seek a fully-fledged infrastructure-as-a-service (IaaS) offering.
The scope of the RFT did not extend to mainframe services. It does, however, include Enterprise Data Warehouse infrastructure support services. ICT consulting and ICT solution design services are also included in the requirements.
Health is a radically different agency to what it was for the majority of IBMs contracting period. The Machinery of Government (MoG) changes that occurred after the election of the Coalition Government in 2013 have significantly altered the requirements of the agency.
MoG changes include the move of the Aged Care function and its substantial client-facing activities to the Department of Social Services (previously FaHCSIA). In addition, the absence of the requirement to manage a mainframe environment suggest that the future contract may be significantly lower in value than the IBM ones.
Madden told Intermedium in May 2014 that Health was looking for one supplier to move away from “multiple contracts with multiple players and multiple arrangements” in favour of a “more integrated approach over the full life cycle of the contract – start to finish.”
If Datacom is confirmed as the successful tenderer, the decision has cracked open the profile of the IaaS market in Canberra. CSC, Unisys, HP (as EDS) and IBM were the original providers of managed services to the larger Canberra agencies post 1998 and the group was later joined by Fujitsu, courtesy of its Defence end user business. A number of these previously strongly incumbent suppliers are struggling through a major dry run, failing to retain their business at the re-compete.
Lockheed Martin emerged with its first big IT outsourcing win in the Australian Government market in 2010 when it won the Australian Taxation Office’s (ATO) End User Computing (distributed computing) tranche of the ATO’s IT infrastructure outsourcing arrangements, held since 1999 by HP (as EDS). Lockheed Martin’s End User Computing bundle consists of two contracts which have a combined initial value of $283.4 million over five years.
In a recent interview with Intermedium DIBP CIO Matt Yannopoulos indicated that the new agency will rationalise its managed services currently provided by CSC, Unisys and IBM:
- Unisys holds a $104 million end-user computing contract with DIBP that expires in 2018;
- CSC holds a $100 million mainframe services contract at DIBP expiring in 2018; and
- IBM holds a $336 million IT Services contract Australian Customs and Border Protection Service (ACBPS) expiring in June 2016.
In late 2014 Fujitsu and Unisys were excluded from competing for the Department of Defence’s (Defence) end user computing environment for which they are the current incumbents. The restricted Request for Tender (RFT) was issued only to members of Defence’s Applications Managed Services Partnership Agreement of which neither Fujitsu nor Unisys are members.
Datacom is a sub-contractor to Lockheed Martin at the ATO and has had a string of Canberra wins recently, including with CrimTrac, the Department of Environment and the National Health and Medical Research Council (NHMRC).
Datacom’s Canberra sweet spot appears currently to be where the annual contract value (ACV) is between $1.7 million and $21.8 million, if the following contract history is a guide.
A $20.9 million five-year contract with CrimTrac for the provision of ICT management services covers a range of managed infrastructure, platform and project services. The contract works out to be roughly $4.2 million per year, slightly more than the existing $22.1 million ($3.85 million per year) arrangement with Logica (now CGI) which expires in March 2015.
Datacom’s contract with Environment for desktop, LAN, helpdesk and midrange services was extended in July 2014 and is currently worth $160 million. It covers the period from June 2009 to October 2016, providing an average ACV of roughly $21.8 million.
A $5.2 million managed services contract with the National Health and Medical Research Council is also held by Datacom for services between July 2014 and July 2017, with an average ACV of roughly $1.7 million.
Datacom’s Computer Services contract with the Australian Competition and Consumer Commission (ACCC) is set to expire in May 2016 after another extension in November 2014. The TVC of the contract is $24.3 million between March 2012 and May 2016, and the average ACV is $5.8 million.
2015-16 is likely to see the Australian market ripen further for small to medium enterprises (SMEs) with many jurisdictions’ ICT and / or procurement strategies specifying a higher level of engagement with SMEs.
Perth-based Kinetic IT, for example, has won Victoria Police’s $164 million Information Technology Service Contract (ITSC), replacing the four previous contracts with a single end-to-end arrangement.
Datacom’s similarly profiled competitors include ASG, CSG (now part of NEC), Oakton (now part of Dimension Data), CGI (post its Logica acquisition) and new Canberra market entrant VTS, which acquired Dataflex.