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Defence’s $870 million Centralised Processing Services deal split into two contracts

by Pallavi Singhal •
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The $869.7 million agreement between the Department of Defence and Lockheed Martin for Centralised Processing Services has been split into two contracts for transformational and ongoing services.

According to a spokesperson for the Department of Defence, a contract notice on AusTender worth $159.2 millionspecifically relates to “transformation activities”, while the other valued at $710.5 million pertains to “continuing services being delivered under the Centralised Processing Services Contract”.

The inclusion of GST in each of the contract notices puts the total cost to Defence at $869.7 million. The actual value to Lockheed Martin is around $800 million, as announced in September 2014. This includes a $150 million share for NEC as a support partner. ASG, Dell, Deloitte, Canberra Data Centres, Cisco, ISI, NetApp, VMware, and EMC have previously been identified by Defence as Lockheed Martin’s subcontractors for the project.

The agreement covers the consolidation of Defence’s 280 data centres into 11 domestic and three international facilities, and the integration of infrastructure and service management that is currently divided between various Defence security domains.

Centralised Processing forms one tranche of the Department’s three-tranche Strategic Reform Program, which aims to outsource the provision of ICT infrastructure in three distinct bundles. Telstra is currently responsible for the delivery of the Terrestrial Communications tranche, which covers a transformation of the Department’s network infrastructure and the provision of new telecommunications capability, under a $1.1 billion 6.5-year contract signed in 2013.

The outsourcing of the remaining Distributed Computing tranche, which covers service desk support, hardware management and updating software, was deferred in January 2013 due to a heavy project load and budgetary constraints. In the interim, Defence has extended related contracts with its existing providers Unisys and Fujitsu for a total cost of approximately $90 million.

Defence’s three-tiered approach is modelled after the Australian Taxation Office’s (ATO) outsourcing of its ICT environment under Managed Network Services, End-User Computing Services, and Centralised Computing Services tranches. Lockheed Martin is currently also responsible for the ATO’s End-User Computing tranche. Centralised Computing Services are provided by Hewlett-Packard, and Managed Network Services are supplied by Optus.

Defence’s Strategic Reform Program was developed in 2009 with the aim of introducing greater efficiencies and improved service delivery across the Department. The program aims to achieve total savings of around $20 billion over the ten years to 2019, of which approximately $1.9 billion will be from ICT-related savings.

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