Health refutes reports of IBM extension

Australia's Department of Health and Ageing (DOHA) has denied reports that it had extended its IT outsourcing with IBM beyond the end of the current fiscal year (30 June 2011), when it was scheduled to be renewed.

An article in The Australian earlier this month suggested that IBM and DOHA had renegotiated a long-standing IT outsourcing deal for four years.

The Australian's report was based on text within DOHA's incoming Ministerial brief [see page 190] following the Gillard election victory, which advised Health Minister Nicola Roxon that Finance Minister Lindsay Tanner [pictured] had already approved a four-year extension to the existing deal.

"The Department has approval from the Minister of Finance and Deregulation to re-negotiate the Services Agreement with IBM Australia for the provision of ICT Services for an additional four-year term whilst ensuring alignment with Commonwealth Coordinated Procurement Arrangements," the briefing said.

This week, a spokesman for DOHA told iTnews that the department's IT future was still very much up in the air, with an announcement to be made at some stage in early 2011.

The spokesman said that the department merely asked the Department of Finance for permission to renegotiate with IBM, in case "it was deemed appropriate" to do so during any "formal sourcing process".

iTnews has revealed that the department has spent $1.5 million in 2010 on external consultants to develop a sourcing strategy. In late November, Health hired its first CIO in five years, Paul Madden.

In late October, iTnews reported that DOHA representatives had refused to answer questions about its outsourcing future in Parliament.

The incoming brief valued the most recent extension with IBM (from 2008 to 2011) at $126.6 million.

The Department has repeatedly obtained approvals to re-sign with IBM under clause 8.33(e) of the Commonwealth Procurement Guidelines, under which agencies are able to purchase directly (without a tender):

"for additional deliveries of property or services by the original supplier or authorised representative that are intended either as replacement parts, extensions, or continuing services for existing equipment, software, services, or installations, where a change of supplier would compel the agency to procure property or services that do not meet requirements of compatibility with existing equipment or services."