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Telstra and Optus do battle over major Defence contract

by Paris Cowan •
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The Department of Defence is close to selecting a single preferred vendor to take over the supply of its Terrestrial Communications service bundle, in what is likely to be one of the highest value telecommunications contracts we will see in the Federal Government market this year.

Defence says that it expects to announce its choice in the middle of 2012.

The shortlist of suppliers in the running for the contract has been whittled down to two since the tender process commenced. With phase two of the tender evaluation now over, Telstra and Optus are the only remaining bidders, with Dimension Data and Fujitsu having departed from the Request for Tenders (RFT) at an earlier stage.

As the contract award date draws closer, both Telstra and Optus have begun recruitment drives to staff their obligations under the Terrestrial Communications bundle in the event of their success.

Telstra is advertising for Project Managers, Principal Engineers, Operations Support Engineers and Contract and Program Managers to join its Defence Engagement Group, which it describes as being “at the forefront of an amazing bid opportunity that places Telstra at the heart of a very important customer – the Department of Defence”.

New staff are expected to start in early 2012-13 if the Telstra bid is successful.

Optus is also pursuing “exceptional and highly motivated professionals to join Optus' Defence Bid to create a state-of-the-art network,” according to its own advertisements. It is looking for candidates across IT Transformation, Change Management, Human Resources and Training, among other areas.

The Terrestrial Communications project, or JP 2047 Phase 3 as it is identified in the Defence Capability Plan, aims to implement major transformations to the voice and data network environment at Defence, including:

  • the replacement of legacy WAN architecture and other ageing network infrastructure with a consolidated next generation network;
  • the establishment of a single set of standards and products to simplify the network environment and boost its efficiency; and
  • the ability of Defence users to connect to Defence networks at any time, including through wireless technologies using both Defence and personal devices;

As it has done via the Applications Managed Services Partnership Arrangement (AMSPA) in the past 12 months, Defence hopes to clarify accountability and streamline procurement processes in the terrestrial communications space by appointing a single supplier who is responsible for the end-to-end provision and sustainment of the service bundle. Thus, many of the functions within the bundle may become accessible to the market only by subcontracting through the successful bidder.

Defence has said that in the 2008-09 financial year, the services falling within the Terrestrial Communications bundle cost them $156 million. How the annual value of the final contract will compare to this roughly indicative value will depend on the success of the consolidated procurement model when it comes to driving down costs.

Intermedium has also recorded sustained rate of growth in expenditure by the Tier 1 agencies[1] when it comes to telecommunications. According to the latest Telecommunications Market Report, the annualised value (where the value of multi-year contracts is divided evenly across the term) of the Tier 1 Telecommunications market has grown on average 14.9 per cent in the five years to 2010-11 inclusive.

The Terrestrial Communications project is one of three key tranches of the Department’s ICT Reform program, which aims to contribute $1.9 billion to the $20 billion in savings sought through the ten-year whole-of-Defence Strategic Reform Program (SRP). It is being established in parallel with the Centralised Processing bundle, for which a shortlist of three tenderers has just been revealed, and the Distributed Computing bundle, which is due to get underway in 2012-13.

The Department of Human Services, which can account for up 20 per cent of the total value of the Federal Government Telecommunications market, approached the market for telecommunications managed services late in 2010, and is also expected to announce its choice of contractor this year.


Related Articles:

Three IT giants shortlisted for Defence Centralised Processing Project

DHS puts 20% of Telco market up for grabs

Victoria reviews $461 million telco arrangements

[1] Procuring $200 million and above per annum

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  • Federal
  • Telecommunications
  • Defence
  • Centralised Processing project
  • Defence Strategic Reform Program
  • Department of Defence
  • DHS
  • dimension data
  • Fujitsu
  • JP 2047
  • Optus
  • Telstra
  • Terrestrial Communications