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DHS Managed Telco Services deal likely to top $832 million

by Paris Cowan •
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A new level of insight into the Department of Human Services’ (DHS) Managed Telecommunications Services agreement with Telstra has emerged via contract notices published on AusTender in the weeks following the Minister’s initial announcement of the $474 million deal.

According to the formal AusTender notice, the full value of the contract will be $832.7 million if it goes for its full permissible term of 8.5 years. This revised figure includes an 18 month transition in period, the five year contract term valued at $474 million, and two options to extend of one year each. It also includes GST, which was excluded from the $474 million outlined by Minister for Human Services Kim Carr in a media release.

Intermedium believes that this agreement is likely to go its full allowable term, based on close observation of telecommunications managed services contracts in the Federal Government over several years.

Included in this figure is the total value of telecommunications carriage under the contract.

A separate AusTender contract notice has revealed that this component of the deal is worth $125.9 million over six years to June 2018, or $21 million per annum, inclusive of GST.  Although these services will also be provided by Telstra, the Department of Finance and Deregulation requires that all data carriage be sourced under a separate agreement signed under the terms of the Internet Based Network Connections (IBNC) Panel.

As with all IBNC contracts, it has been entered into by Finance on behalf of the DHS.

The IBNC panel is emerging as one of the stars of the Federal Government’s coordinated ICT procurement suite, and is on track to produce savings of around $50 million over a period of four years, according to the Australian Government Information Management Office (AGIMO).

“The arrangement Finance [on behalf of DHS] has entered into with Telstra will significantly contribute to achieving this target,” said First Assistant Secretary John Sheridan.

The $832.7 million also includes $87.5 million worth of mobile carriage costs, or $17.5 million per annum over five years, a spokesperson for the DHS has told Intermedium.

Mobile carriage services will also be channelled through a whole-of-government agreement, the Telecommunications Commodities, Carriage and Associated Services Panel, whilst still being provided by Telstra. Telstra is a member all three mandatory telecommunications panels managed by AGIMO.

In a statement on the contract, Minister Carr revealed that DHS would join the federal market’s pervasive trend by transitioning its voice carriage to digital VOIP services.

“[The contract] will well and truly bring the Department into the 21st century, merging voice, mobile and data services across a single data network for the first time," he said.

He also explained that the deal represented the consolidation of “20 existing telecommunications contracts” signed by the various DHS agencies prior to their integration.

Intermedium’s contracts database can reveal that this tranche of now consolidated contracts includes a three-year telecommunications managed services contract signed between Optus and Medicare, valued at $92.2 million according to the most recent figures on AusTender (but listed as being worth $119.7 million over the same term in Senate Order Reporting). It is due to expire at the end of 2012.

Optus also has a $65.6 million contract for Data Network Replacement originally signed with Centrelink, which will expire in 2014. The scope of this too is likely to now fall to Telstra, as is SPT Telecommunications’ segment of the same deal, worth $52.1 million and also expiring in 2014.

NEC will also lose a strong supply relationship with the original (pre-integration) Department of Human Services, under a $28.6 million contract which will expire at the end of this year.

Other significant deals that are likely to form the 20 contracts referred to by the Minister include:

  • $9.5 million with NEC for ‘Telecommunications’ – expiring December 2012;
  • $9.1 million with Uecomm (now owned by Optus) for ‘Data Network Communication Services’ – originally signed by Centrelink and expiring December 2012; and
  • $584,758 with Optus for mobile phones – signed post integration and expiring March 2013.

Telstra has been the incumbent telecommunications managed services supplier to Centrelink since 2004 under a deal valued at $345 million. Telstra had also an $86.2 million contract with Centrelink for outbound calls and mobile services. Both have now expired.

Related Articles:

Telstra and Optus do battle over major Defence contract

DHS puts 20% of Telco market up for grabs

Optus at Medicare, Telstra at Centrelink: What will the future hold under DHS?

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