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IBM Contract with Centrelink Passes $1 Billion Mark Following Further Extension

by Staff Writers •
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Centrelink has extended its longstanding ‘computer software, hardware and services’ arrangement with IBM Australia, pushing the total value of the contract over its life to over $1 billion and the expiry date out to 2016. The enterprise licencing arrangement, which covers the mainframe environment, has a history going back to 1997, although this particular contract has a start date of 2005.

In an amendment posted on AusTender on 11 January 2011, the end date of the contract was extended by a further 18 months from 30 December 2014 to 30 June 2016, and the cumulative value of the contract was increased to $1,061,760,216.18.

Centrelink’s 2009-10 Senate Contract Listing placed the value of the agreement between 2005 and 2014 at $868,071,078.46.  This means the 18 month extension represents a further $194 million for IBM.

Intermedium’s contracts database reveals that Centrelink has also contracted with IBM for IT specialist personnel services and contractors, business analyst services and mainframe relocation and cabling over the last three years, in addition to mainframe management agreement.

In addition to their $1 billion arrangement with Centrelink, IBM has significant contracts with other agencies within the Department of Human Services (DHS) Portfolio. 

Senate Reporting indicates that IBM has provided ICT services to Medicare since December 1999. The current contract, which started in 1999 has an end date of 31 December 2012.  It is worth a cumulative total of $614.2 million.

IBM has a four-year $90 million outsourcing agreement for ICT infrastructure and services with the Department of Veterans Affairs (DVA), expiring in April 2011.  

According to the DHS 2009-10 Annual Report, DVA entered into a shared service arrangement with DHS in March 2010, following evaluation of a formal proposal from DHS.  “The transitioning of services from DVA to DHS is planned to occur in 2010–11, with an arrangement to extend for an initial period of five years. The services in scope for a shared service arrangement are not visible to customers and comprise ICT infrastructure environments and operational support,” the report states.

The DHS portfolio is currently undergoing major structural change in line with its ICT infrastructure reform plans as outlined in the Service Delivery Reform Project Overview, published as part of the Managed Telecommunications Services (MTS) Request for Tender (RFT) in December 2010.

As outlined in the MTS RFT, the reforms will result in the consolidation of multiple ICT infrastructures of DHS portfolio agencies into a single platform. Under the plans outlined in the Overview, the current outsourcing arrangements will cease, and all ICT infrastructure will be managed internally.  

However, this does not mean that opportunities for service providers cease altogether.  According to the Overview, DHS will replace current arrangements with, “one integrated, high quality ICT infrastructure technology and business capability – internally managed with the assistance of selective co-sourcing providers”.

While other DHS portfolio agency ICT managed services contracts are coming to a close this year or in 2012 (e.g. IBM with Medicare, the Child Support Agency with HP Enterprise Services), the fact that this contract with IBM has been extended where the others have not suggests that DHS’s intention is to retire other arrangements in favour of consolidating the services supplied by IBM under the umbrella of this one contract. 

Centrelink was contacted for comment but declined the invitation.

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