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Health’s ICT Services procurement: “I’m expecting something very different”

by Judy Hurditch •
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"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,” Paul Madden, Chief Information and Knowledge Officer at the Federal Department of Health (Health) told Intermedium. 

He elaborated that Health’s intent in running an industry briefing on 16 April for its upcoming ICT Services procurement was to reinforce the fact that the major shift Health is seeking is to obtain is a fully managed service with an outcomes based contract. 

In so doing, Health becomes the first Federal government agency to seek a fully-fledged infrastructure as a service (cloud) offering.

“The nature of the partnerships and the names of the contenders are likely to be very different from what we would have expected just two years ago”, Madden told Intermedium. 

Madden said that the industry briefing on 16 April, attended by 39 companies which were represented by approximately 130 individuals was “to put industry on the front foot with regard to Health’s agenda before putting the RFT to the market”. 

The industry briefing will be followed a Request for Tender (RFT) scheduled for release on 30 May 2014.  A further industry briefing is currently scheduled for 11 June, with the RFT to close on 8 August 2014.

IBM has been the incumbent supplier of infrastructure services, since 1999.  According to Intermedium’s 2011 Federal Government Infrastructure Outsourcing Report, in 1999 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. 

Following that initial contract, (and the separation of Medicare from the arrangement), Health has periodically extended its contract with IBM:

  • In 2003 for five years at value of $126 million;
  • In December 2008 for three years at a value of $126 million; and
  • In December 2010 for four years at a value of $109 million  

The current arrangement, which now extends to 30 June 2015, encompasses ‘mainframe, midrange, network, storage and desktop support, and end-user computing services, including the roll out of a desktop virtualisation solution, new security compliance initiatives, and mainframe and storage updates’, according to a 2010 IBM press release.   

However the scope of the new services requirement has significantly altered, reflecting the fact since the election of the Coalition Government, the Department has been through a substantial Machinery of Government (MoG) change with the move of the Aged Care function and its substantial client-facing activities to the Department of Social Services (previously FaHCSIA).

This MoG, and the expectation that the upcoming Budget will outline specific priorities, has led to a determination to build heightened levels of efficiency, flexibility and responsiveness into Health’s future ICT Services arrangements.   “Looking back 12 months ago we wouldn’t have anticipated losing the Aged Care function,” said Madden, by way of illustrating that agencies need to be prepared for any type of change to policy or function.

The major alterations to the scope of the services sought under the (end May 2014) RFT is the absence of a requirement for mainframe services, and the inclusion of the Enterprise Data Warehouse infrastructure support services. Overall ICT Consulting and ICT Solution Design services are also included in the requirements.

“The mainframe is being decommissioned as we speak and an embargo on mainframe development started some time ago,” Madden said. “Mainframe processing is still occurring for Aged Care payments, but these are now the policy responsibility of DSS, and the Department of Human Services continues to be responsible for the Aged Care payment processing and is currently redeveloping the payment processing system”, Madden added. 

Madden expects the mainframe to be shut down by the end of the year.

As-a-service solution provider

According to the industry briefing, Health’s strategic ICT intent is to commoditise infrastructure service delivery; consolidate its applications and platforms into a few, key COTS products; seek external capabilities for specific solution requirements and define a new role for the ICT function within the agency.

According to Madden, Health is now predominantly a policy setting agency, not a service delivery agency, although it does have grants management functions and a major reliance on data analytics and modelling.  “It is this redefined role that is informing our future ICT requirements”, Madden told Intermedium.

Health understands that its desire to move away from the current data centre, infrastructure and network support arrangements to a more efficient fully hosted environment under the scope of the new ICT Service arrangement would involve considerable complexity during the transition in period.   It is for this reason that it has indicated the initial contract period would be five years. 

“We will look to respondents to outline what they require in terms of contract extension periods to provide an adequate return on their investment in moving us away from our legacy environment”, Madden told Intermedium.

Only one supplier will be contracted to provide the ICT Infrastructure Services and ICT Support Services sought.  Madden said Health was “looking for a more integrated approach over the full life cycle of the contract – start to finish”.  Health was very keen to move away from its current situation of “multiple contracts with multiple players and multiple arrangements” as it saw this move as the clearest way of generating internal efficiencies, including through a reduction in the number of staff required to manage the multiplicity of arrangements.  However, Madden was not able to indicate the final number of Health staff that would be involved in the management of the new services arrangements or the quantum of savings generated.

Health envisages the use of two physical locations for its data centres to meet the Government’s relevant policies with regard to various data, security, accreditation and disaster recovery requirements. The specific design solution (eg whether or not to go ‘hot to hot’) is expected to be worked through as part of the RFT process, Madden said. 

Whole of Government arrangements

Acknowledging the increasing momentum for ‘Connected Government’, Madden said opportunities to utilise Whole-of-Government (WofG) solutions as a means of achieving efficiencies within Health would continue to be pursued.

He said that Health already utilises the Grants Management solution managed by DSS as well as the Parliamentary Workflow system provided and supported by the Shared Services Centre (shared with the Department of Education).

Madden conceded that agencies in a position to provide shared services might consider responding to Health’s RFT.  The possibility of adopting shared IT services with another agency had been considered as part of an independent review conducted in January and February 2014, and the advice of that review was that there could be very long term benefits available, which would be outweighed by high level of up front investments, and that proceeding down the open market approach, greater level of efficiency could be delivered sooner. By way of example, the management of the Health’s fully virtualised desktop environment was not in the current capability set of any agency providing shared services.

However, Madden acknowledged that Health would comply with any requirements if it emerged that the Government were to pursue “a bigger shared services agenda”.


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