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HP Enterprise Services wins final ATO outsourcing arrangement contract

by Aleks Vickovich •
Free resource

The Australian Tax Office (ATO) has confirmed that it intends to continue its long-standing relationship with HP Enterprise Services (formerly EDS), naming the supplier as the preferred tenderer for its Centralised Computing Services (CCS) needs.  

A spokesperson for the ATO has told Intermedium that “earlier this year the ATO commenced negotiations with HP Enterprise Services Australia Pty Ltd and IBM Australia Limited.

“As a result of these, it was determined that the solution presented by HP Enterprise Services currently represents the best value for money outcome for the ATO,” the spokesperson said.

Negotiations are continuing between the ATO and HP Enterprise Services over the finer contractual details.  It is expected that the contract will be for a period of up to five years, with possible extensions, and will commence when the ATO’s incumbent outsourcing arrangement with HP Enterprise Services ends in 2012.  The scope of the eventual contract will cover services including:

  • Data centre;
  • Mainframes;
  • Mid-range computing;
  • Data warehouse;
  • Storage and management;
  • Solution support;
  • Release and change management;
  • Software management;
  • Security and disaster recovery; and
  • Monitoring and support.

The announcement follows some reportedly warm words from ATO Acting Assistant Commissioner David McMillen about HP Enterprise Services at last week’s Gartner Symposium in Sydney which led to speculation that HP Enterprise Services may have taken the lead in the race with IBM for the ATO CCS contract. 

The ATO has been the most substantial procurer of HP Enterprise Services’ services since first entering into its outsourcing arrangement with the supplier (then EDS) in 1999. Between 2005 and 2010, the ATO accounted for up to 85 per cent of the supplier’s Australian Government business and the outsourcing arrangement has had a total contract value of $3.3 billion over its lifetime.

While HP Enterprise Services has been the key supplier to the ATO for its outsourcing needs, in recent years other suppliers have been invited into the fold.

In October 2007, following a commissioned report by Boston Consulting Group (BCG), the ATO announced that it would disaggregate its outsourcing arrangement, splitting it into three distinct tranches with separate contracts worth a total of $1 billion.  This decision saw an end to the ATO’s single-supplier arrangement with HP/EDS. 

The first tranche of the procurement was enacted in February 2008, with the issue of a tender for Managed Network Services.   The scope of the project included network (WAN/LAN) management, videoconferencing and remote access gateway services. 

After only three weeks, the ATO released a shortlist of preferred suppliers which included Telstra, Optus, Dimension Data and CSC.  In May 2009, Optus was ultimately awarded the contract, thought to be worth $55 million per year and potentially up to $385 million over the course of its 5 to 7 year life.

Subsequently, the ATO embarked upon the second tranche with a contract for end-user technology and support awarded to Lockheed Martin in July 2010.  The $283.4 million five year arrangement effectively cemented the US security giant’s entry as a serious player in the Australian government ICT market.   The contract covers the provision of computers, equipments and office machines and support of back-end infrastructure.

With the signing of the third contract, the ATO completes its ICT outsourcing reform project and officially shakes its former status as the last of the Tier One agency (those contracting more than $100m per year on ICT) to retain a whole-of-agency ICT infrastructure outsourcing arrangement.   

At the same, it furthers the longstanding relationship between the ATO and HP Enterprise Services and will allow the company to retain its position as a key supplier in the federal government ICT market. 

However, despite this initial win for HP Enterprise Services, the ATO spokesperson made clear that the agency will “reinstate the other shortlisted tenderer if a value for money proposition cannot be achieved with the preferred tenderer”.

  • Federal
  • IT Services
  • Treasury
  • ATO
  • BCG
  • CCS
  • csc
  • David McMillen
  • didata
  • HP Enterprise Services
  • IBM
  • Lockheed Martin
  • Optus
  • Telstra
  • Data Centres