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Finance reports $2 billion in ICT savings, deems panels a success

by Pallavi Singhal •
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A Department of Finance spokesperson has told Intermedium that the Government has achieved over $2 billion in savings “from 2008-09 to 2015-16 through more efficient and effective management of ICT, including those savings achieved through implementation of the ICT Reform Program”.

Over the eight years cited, this represents average annual savings of $250 million. Over the same period, Intermedium’s data indicates that the per annum average spend with ICT suppliers, as measured by the total value of AusTender-reported contracts was $4.5 billion. Intermedium therefore infers that the average annual savings made by Finance represent 5.5 per cent of the per annum average total spend.

Finance’s total savings add up to over $13 billion, achieved “under the government’s broader efficiency agenda…by delivering better government practices and efficiency reforms to areas including travel, ICT and property management”, according to the Department’s 2012-13 Annual Report.

These savings have been the sum of a number of Finance-led whole-of-government initiatives aimed at achieving efficiencies in areas of ICT procurement and general agency operations. Many of these initiatives have resulted from the Government’s ICT Reform Program, including the establishment of Finance’s suite of ICT panels which continue to yield greater-than-expected savings, according to the Annual Report.

As a consequence of the introduction of mandatory panels for the procurement of a range of ICT goods and services including ICT hardware, telecommunications, software licences and cloud services, the number of Federal Government Approaches to Market (ATMs) has dropped dramatically. In the 2012-13 financial year, the number of open ICT Requests for Tender (RFTs) dropped by 12 per cent from the previous year to 173 individual requests, according to Intermedium’s 2012-13 Annual Market Overview Report. This followed a 36 per cent decline in RTFs in 2011-12, which saw 196 ICT RFTs. ATMs are now instead issuing only to panellists.

After an initial surge in contracting, the total annual value of contracts signed through mandatory panels has shown a steady decline, predominantly due to agencies entering multi-year deals when panels are first established, thereby obviating the need to re-contract in the short term.

The effects of this on the market are particularly noticeable in arrangements that impose mandatory contract terms, such as the first Data Centre Facilities Panel. Contracting under this Panel has almost completely dried up following a number of 10-year deals that were signed soon after the establishment of the panel in 2012.

The success of Finance’s panels in achieving savings across a range of ICT procurement areas utlising traditional term-based panels, comes as a number of States, move towards a ‘continuously-open’ model. Such ‘continuously open’ arrangements are largely confined to the provision of IT Services and include the NSW Government’s ICT Services Scheme, the Victorian eServices Register and Queensland’s 2013 ICT Services Panel.

Although Finance has also taken this approach for its Data Centre as a Service (DCaaS) multi-use list, recent approaches to market for a new Data Centre Facilities panel and Mobile panel have adhered to the conventional set-term model.

ICT Reform Program

In addition to Finance’s panel successes, a spokesperson has confirmed that all 42 actions under the 2008 ICT Reform Program have now been completed.

The Reform Program emerged from the recommendations of the 2008 Gershon Review of the Australian Government’s use of ICT, which included:

  • A phased reduction in the “business as usual ICT budgets of the 28 large agencies by 15 per cent on average from 2007–08 actuals”, which led to the introduction of federal efficiency dividends;
  • Taking a whole-of-government approach to data centre requirements, including the potential consolidation of data centre infrastructure;
  • Greater approval requirements for agency “opt-outs from agreed whole-of-government activities”; and
  • The establishment of the Secretaries’ ICT Governance Board (SIGB) to set and oversee whole-of-government strategies.

The Gershon Review also recommended the establishment of ICT panel arrangements to “make better use of the Government’s collective buying power”.

“This includes the introduction of whole-of-government panel arrangements for ICT commodity-based procurements where true economies of scale are achievable,” stated the Review.

“Next, I recommend improving procurement arrangements for ICT commodity products and services, and volume sourcing arrangements for key items of software.”

Desktop Hardware panel

The Desktop Hardware and Associated Services panel has achieved savings of $27 million over three years since its inception in 2010. It has reduced the cost of desktop computers for Government agencies from 55 per cent above the Australian average price to 50 per cent below the average price, according to Finance.

According to Intermedium’s data, around 1,100 contracts worth over $150 million have been signed through the panel, with the bulk of procurement occurring in the 2011-12 financial year, which saw a total contracting value of $71.9 million. Agencies signed contracts worth a total of $29.6 million in 2010-11, and $42.5 million in 2012-13.

The largest Government buyer off the agreement is the Department of Human Services (DHS), which has signed 43 contracts worth a total of over $68.7 million. The Department of Defence has signed around 350 contracts with an aggregate value of $23.8 million.

Leading suppliers are:

  • Acer, which has won around 80 contracts worth $64.6 million;
  • Dell, which has signed around 384 contracts with a combined value of $35.2 million; and
  • Hewlett-Packard, which has signed around 305 contracts worth $31.5 million.

The panel is due to expire in August 2014.

Internet Based Network Connection Services panel

The Internet Based Network Connection (IBNC) Services panel is on target to achieve its savings target of $54 million over its four-year term from July 2011 to 2015, according to Finance.

Intermedium data shows that the panel has facilitated around 180 contracts worth a total of $251.4 million. Of this, $203.4 million is accounted for by contracts signed in the 2012-13 financial year. Contracts worth $25.2 million were signed in 2011-12, and the remaining contracts have gone through in the first half of the 2013-14 financial year.

The largest individual agreements include:

  • A $125.9 million deal between DHS and Telstra for a six-year period from July 2012 to June 2018;
  • A $23.3 million contract between the Department of Parliamentary Services and Telstra, from September 2012 to 2015; and
  • A $10.7 million contract between the Department of Agriculture and Optus, from August 2013 to June 2017.

Microsoft Volume Sourcing Arrangement

The recently-signed Microsoft Volume Sourcing Arrangement (VSA) II is expected to achieve savings of over $100 million during its three-year term from July 2013 to June 2016, according to the Annual Report. The contract covers bulk procurement of Microsoft software licences, services and maintenance and “secures significant discounts for the Commonwealth”. VSA I was in place from February 2009 to June 2013, and achieved savings of over $107 million.

Data Centre as a Service MUL

The Data Centre as a Service multi-use list for the procurement of cloud and cloud-like services through 12-month (or less) contracts worth up to $80,000, has also been cited as a success in both the Annual Report and by Australian Government Chief Technology Officer John Sheridan. Sheridan announced on the Finance blog that 22 contracts worth a total of $1.05 million have been signed through the multi-use list, marking its success as a “research tool [for agencies] to examine the options available from the emerging cloud services market place”.

A further breakdown of services that have been procured through the multi-use list, according to a Finance spokesperson, includes:

  • Ten Platform-as-a-service contracts “for hosted environments such as content management, business intelligence, open data, and secure document management platforms”;
  • Eight Infrastructure-as-a-service contracts for “hosting Government Websites solutions”; and
  • Four Software-as-a-service deals for “customer relationship management, business process modelling and a crowd sourcing solution”.

Data Centre Facilities panel

The Data Centre Facilities panel has achieved savings of $24 million between April 2012 and June 2013, and “is expected to achieve the target of $1 billion in costs avoided by 2025”, according to the Annual Report.

Since its establishment in March 2011, contracts worth a total of $317.7 million have been signed under the agreement, including the DHS’s $223.7 million 10-year data centre lease agreement with Canberra Data Centres.

A number of smaller agencies have also entered into 10-year leases through the panel, including the Bureau of Meteorology, the Family Court of Australia, and five other agencies covered under a Finance consortium lease.

Contracts worth a total of $270.4 million were signed in the 2011-12 financial year.  However, contracting through the panel fell to $47.4 million in 2012-13.

Finance issued an ATM in September 2013 for a new whole-of-government panel for Data Centre Facilities Supplies that provides more “scalable and flexible” options than the existing panel.

The new arrangement abolishes the 10-year lease term required under the Data Centre Facilities panel, providing contract options for one, two, three, five or ten year terms. The new panel will operate alongside the existing panel, which is due to expire in February 2017.

Mobile panel

Finance issued an ATM in November 2013 to replace the whole-of-government Telecommunications Commodities, Carriage and Associated Services panel with a new Mobile Panel, which will be mandatory for the procurement of mobile carriage services, end-user devices and hardware services. The Panel will also offer a range of mobile related services, including enterprise mobility management and wireless access point solutions.

Internet Gateway Reduction Program

Finance has also been responsible for coordinating the Internet Gateway Reduction Program, which is expected to yield savings of around $25 million by the end of 2014.

All seven lead agencies have now finalised internet gateway arrangements, which are being provided internally or through external suppliers.

The program was established in 2010 with the aim of reducing the number of gateways used by federal agencies from 124 to between four and eight.

“The reduced number of internet gateways will allow government to have improved security through a more consistent approach to gateway management, accreditation, monitoring and incident response,” said the spokesperson from Finance.

“Cost avoided will be in areas such as staff reductions, improved gateway utilisation and lower certification costs.”

Related Articles:

Dell and NEC quit Finance’s data centre panel

Finance flags November ATM for expanded Mobile Panel

Finance evaluates future of Telecommunications Arrangements

For more information, please contact the Editor (02) 9955 9896.

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