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Federal Govt Takes New Outlook on Outsourcing

The Federal Government has developed a new framework to apply to future IT outsourcing tenders, in a bid to surface from criticism of its initial $5 billion plan to outsource IT needs.

The system aims to be streamlined, with simpler outsourcing contracts and lower bidding costs "without sacrificing industry development objectives such as regional and small to medium enterprises development," claimed Minister for Communications, Information Technology and the Arts, Senator Richard Alston.

The new IT outsourcing industry development framework responds to the changes to the IT Outsourcing Initiative which will see agencies with the responsibility for executing the Government's policy for outsourcing, and the Government said that it has developed these changes in consultation with current and prospective outsourcers, SMEs, multinational service providers and some of its departments and agencies.

The new outsourcing framework adopts a two-tiered approach to tender content. For contracts less than $10 million, the only requirement will be that the contactor and any sub-contractors be endorsed under the Government's Endorsed Supplier Arrangement (ESA). For contracts worth more than $10 million, the contractor and sub-contractor will need to be endorsed under the ESA, and will be required to specify the industry development activities involved in delivering the contract in terms of SME involvement, Australian Value Added content and the amount of this content provided by SMEs. The Department of Communications, IT and the Arts will help to evaluate the industry development elements of these larger contracts.

Strategic industry development objectives currently pursued on a per-contract basis will be incorporated into a new strategic industry development framework, that will apply to companies with larger sales to the Government. This arrangement will replace the existing Partners for Development program and out-of-scope contractual obligations. These new strategic industry plans will be the mechanism for promoting companies' contribution to the local information and communications technology (ICT) sector, and will include objectives such as R&D and SME and regional development.

The focus on contracts seems a shift from the Government's previous IT outsourcing plan, for which the MP in charge, Federal Finance Minister John Fahey, was responsible. The main criticisms of the previous IT outsourcing program came through the so-called Humphrey Report released by Australian Stock Exchange chairman Richard Humphrey, that accused the Government of a lack of focus on managerial and operational aspects as it concentrated on meeting contractual obligations and deadlines with contractors.

With the changes to its approach and with the current local economic climate, Alston said that small firms will stand to gain. "The devolved environment is likely to result in increased opportunities for SMEs, as agencies outsource through smaller contracts. The Government expects to see more SMEs being lead contractors on Government contracts."

Alston added that the Government has commenced an investigation of any impediments to SMEs selling IT goods and services to Government, "with an action plan addressing any impediments identified to be prepared". He said that the Government would also be implementing an online notification system to alert SMEs to relevant IT outsourcing opportunities, a system that would also ensure agencies have information about SMEs that may be interested in tendering for contracts.



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