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Defence accounts for a third of Federal Government ICT procurement in 2008-09

by Staff Writers •
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The Department of Defence (Defence) remains the largest procurer of ICT goods and services, but only with the help of the Defence Materiel Organisation (DMO) according to Intermedium’s latest analysis of the Federal Government’s procurement market.

Excluding the DMO figures, Defence procurement (as measured by total contract value) continued the modest recovery that commenced in 2007-08 from its low in 2006-07. 

Without the help of DMO’s numbers, Defence, at 21% of the total market, just lost out to the Australian Taxation Office at 22% as the market dominator.

In 2008-09, Defence and DMO signed contracts with a total value of $1.568 billion, which was down slightly from their $1.699 billion total contract value in 2007-08.However, when the total contract values are apportioned over the term of the contract to derive an annualized spend estimate, 2008-09 was the highest Defence/DMO spending year yet.

Defence/DMO’s $1.568b in total contract value is nearly one and a half times the ATO with contracts worth $1.075 billion in 2008-09. 

The big contrast between the two is the number of contracts that both transacted in 2008-09 as a proportion of the total Federal Government market.  Defence accounted for 22% of the total number of ICT contracts, whilst the ATO, which has long had both a rigidly locked down standard operating environment (SOE) and a limited number of strategic suppliers, accounted for just 3% of total number of contracts. 

Greg Farr, Defence’s Chief Information Officer, had deep experience of the ATO’s approach to strategic supplier management prior to moving to Defence in November 2007.  It is no surprise therefore that Defence’s s ICT agenda, as articulated in its ICT Strategic Plan, is to move in the same direction as the ATO and rationalise the number of suppliers.    Telecommunications Services was the highest value category with a total contract value of $545 million including two large carriage services contracts with Telstra for $126.7 million and $42.1 million respectively.   In fact, of the top suppliers to Defence and DMO in 2008-09, three supplied Telecommunications related services (of these two were fore satellite or satellite financing) and the other two were software related; a very unusual outcome in a market normally dominated by large IT Services contracts.   

This information is sourced from Intermedium’s annual overview of the Defence / DMO procurement market.  For more information on this report, contact sales on (02) 9955 9896.

Defence recently released an update of its the Defence 2009 Capability Plan.  Intermedium's Defence IT will reflect these changes.

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