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Suspension of Medicare Outsourcing Fuels Speculation on Portfolio IT Consolidation

by Staff Writers •
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Medicare announced recently that it was suspending its planned procurement of IT outsourcing services, and will re-evaluate its ICT procurement strategy. This has led to speculation that the agencies within the Human Services portfolio may move to consolidate at least some of their IT functions.

The Federal Government has made clear it intention to consolidate procurement in order to reduce expenditure and achieve interoperability. Merged/simplified front-line functions have been on the cards since the creation of the Department of Human Services. If this were to happen, it would make sense to also consolidate some back-office functions and ICT contract arrangements.

From an ICT supplier perspective, Human Services is quite complex. Each of the agencies originally came from different portfolios, and have brought with them quite different ICT infrastructures.

Medicare (then Health Insurance Commission) was originally located within the Department of Health and Ageing (DHA). Together, DHA and Medicare co-signed a five year IT outsourcing contract with IBM GSA (estimated at $351m) in 2000. IBM GSA currently provides the ICT infrastructure and services including storage, desktop, security, helpdesk support and mainframes. This contract has now been extended to March 2009.

Medicare also has an arrangement with Optus for the supply of voice and data services.

In October 2005, the Health Insurance Commission (HIC) became an FMA Act statutory agency, changed its name to Medicare Australia, and became part of the Department of Human Services (DHS), but retained its outsourcing arrangement with IBM.

Medicare began market testing in June 2007 for a replacement for its long-standing outsourcing contract with IBM, with an expected tender release date of 30 June 2008. The agency listed replacement of its IT outsourcing arrangement in its 2007-08 procurement plan, and announced that a series of industry briefings would be conducted in February 2008.

Then, on 12 March, Medicare announced that a decision was made to review Medicare Australia's procurement strategy. A new Advance Notice for the industry briefing will be published at a later date once this review has been completed.

Since the break with Medicare, DHA has charted a separate course with its own ICT outsourcing plans. In May 2007, DHA released a tender for consulting services to assist with a review of its IT requirements, and has provided an industry briefing outlining its outsourcing plans.

Today, the Department of Human Services operates as a loose grouping of agencies. Each of the constituent agencies has continued to procure independently. For example, DHS listed only two ICT items in its 2007-08 annual procurement plan, both of which were related to the Access Card project. Medicare, Centrelink and Child Support Agency (all agencies within DHS) listed a number of their own ICT procurement requirements.

The IT requirements of the Child Support Agency (CSA) are provided by EDS under a contract that commenced in 2006 when CSA was part of the Australian Tax Office. A 12 month extension to this contact is due to end in June 2008, but the agency has not included any IT infrastructure items in its 2007-08 procurement plan, suggesting that the contract provides an option to extend for a further 12 months. However, it may also suggest that CSA’s IT requirements could be bundled together with Centrelink and Medicare.

With the failure of the Access Card project, Human Services now has few ICT requirements but has a large ICT executive. In the current climate of fiscal conservatism, the Department appears to have the critical mass necessary to manage some form of ICT rationalisation.

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