The Federal Department of Health and Ageing (DHA) has signed a $109 million extension of its IT Infrastructure Services contract with IBM, taking the term of supply through to 2015.
At an average of $27.25 million per annum, this falls in mid-range for Infrastructure Services contracts, which vary from around $1 million per annum in small agencies such as the Australian Research Council (ARC) to $60million per annum at agencies such as the ATO (with Lockheed Martin for End User Technology and Support and Enterprise Service Management Centre).
A spokesperson for DHA defended the decision to extend the contract without seeking a market test.
“Detailed analysis revealed that the direct source option would significantly reduce the risk to the department at a time of major IT change as a result of the Government's Health Reform Program, and would be less expensive than an approach to the market,” she said.
While not cited as a reason by DHA, the move gives newly appointed CIO Paul Madden a chance to evaluate DHA’s ICT landscape and does not lock him into a direction that he may not have wanted to pursue.
Madden is likely to want to critically evaluate DHA’s ICT capability, architecture and strategic directions before setting an ICT strategy in place, as his fellow ATO alumnus Greg Farr did upon assuming the CIO role at Defence.
Also potentially under consideration is the possibility of moving DHA’s ICT infrastructure management to the Department of Human Services as the Department of Veteran’s Affairs has already done.
DHA’s latest infrastructure services contract brings the total duration of the DHA/IBM supply relationship to 15 years (1999 to 2015). It has been renegotiated twice in this timeframe. The Commonwealth Procurement Guidelines allow for such extensions to existing arrangements without an open approach to market, and it is understood that DHA has won approval for this course of action from the previous Minister for Finance and Deregulation, Lindsay Tanner.
Intermedium’s analysis of DHA’s total ICT contracts (i.e. all other ICT contracts plus infrastructure services) shows that between 2003-04 and 2007-08, the percentage of DHA’s annual contract value won by IBM ranged between 39 percent and 58 percent.
DHA’s average annual ICT contract value since 2003-04 has been $94 million.
In 2008-09, when the Department last signed a multi-year ICT Infrastructure Services contract with IBM, the supplier attracted 87 percent of DHA’s total ICT spend for that financial year. This contract was originally signed for $70 million, but was later expanded to $126.6 million according to DHA’s Incoming Government Briefs.
It is not unusual for a government agency to procure a large portion of their total ICT requirements from a single supplier, and there are several long standing infrastructure services agreements in place in the Canberra market share this longevity. According to Intermedium’s upcoming ICT Infrastructure Services Report, these are:
- CSC at the Australian Electoral Commission (13 years);
- Unisys at the Australian National Audit Office (13 years);
- CSC at IP Australia (13 years);
- IBM at Medicare (12 years if it runs its course to Dec 2012)
According to IBM, the new agreement will provide DHA “mainframe, midrange, storage, help desk and end user computing services, including the roll out of a desktop virtualisation solution, new security compliance initiatives, and mainframe and storage upgrades”.
The desktop virtualisation will form part of the Desktop Futures program being rolled out at the Department from the first quarter of 2011. A thin client solution will be implemented right across the Department, in order to enable staff mobility and minimise support costs.