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

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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