Uncontested IBM retains Health outsourcing

Brett Winterford | Dec 23, 2010 6:34 PM
Still no tender process after 15 years with IBM.

Australia's Department of Health and Ageing has re-signed IBM to provide its IT services for at least another four years in a deal valued at $109 million.

By the time this agreement expires in June 2015, IBM would have remained the incumbent provider to the Department for 15 years.

During this entire period, DOHA has never released an open tender for the provision of IT services despite strict Commonwealth Procurement Guidelines requiring contracts be market tested.

On this occasion - as with the last $126.6 million extension signed in mid-2008, DOHA officials have successfully sought permission from the Minister for Finance to allow the contract to be signed untested via the use of clause 8.33(e) of the Commonwealth Procurement Guidelines.

DOHA released a pre-emptive press statement today to defend its decision to source its IT services directly for a third time in a row.

"The Department, together with its IT sourcing consultant, considered the procurement options available under the Commonwealth Procurement Guidelines," the statement said.

"A cost-benefit analysis of the options to source ICT services at the expiration of the current agreement was undertaken and it was concluded that the most efficient and cost effective option was to negotiate a new contract with the current provider for a term of four years.

The department claimed it had undertaken "detailed analysis" to conclude that failing to market test the contract would reduce risk at a time of "major IT change" stemming from the Federal Government's Health Reform program.

The Department said that aside from mainframe, mid-range and desktop maintenance, its $109 million would pay for a mainframe software upgrade and storage upgrade, IPv6 networking upgrade, a security compliance initiative and a move to virtual desktops.

It also said that sourcing direct from IBM without going to tender would reduce the apparent "risk of integrating and managing multiple vendors," despite hiring its first CIO in five years in late November.

Sourcing directly would also provide "minimal disruption to departmental operations through avoiding complex and lengthy transition arrangements," DOHA said.

Somehow the direct sourcing with IBM would also provide "opportunity to maximise the leverage from Whole-of-Government procurement initiatives," the release said, without providing further details.

Strategic advice: Keep status quo

iTnews has previously revealed that DOHA spent $1.5 million in the last 12 months on strategic ICT procurement advice.

That advice had recommended the department use 'selective sourcing', to rely on access to existing Federal Government agency procurement panels, or to finally attempt an 'open market tender.

Just two days ago the Department had maintained publicly that it had not signed with IBM and that one of these approaches might be considered. The Secretary at DOHA, Jane Halton, and COO of DOHA's business division Margaret Lyons refused to answer questions on the department's IT procurement plans in Parliament.

But with its current agreement with IBM due to expire in June 2011, these recommendations were passed over.