Lundy pans Government IT outsourcing

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The federal government IT outsourcing initiative has drawn fire from the opposition with the release of a report stating the big five contractors have failed to fulfill industry development targets.

None of the prime contractors for the five big Government IT outsourcing contracts - CSC, EDS Australia, Telstra Enterprise Services (TES) (formerly Advantra), Ipex ITG and IBM Global Services Australia (IBM GSA) - have met all of their contractual obligations to the local industry, the 2001-02 Industry Development Progress Report found. All five have failed on some of the contractual obligations, which include missed employment, payments to SMEs and local value-add targets.

The report, issued from the Department of Communication and Information Technology, presents information on the Commonwealth Government's IT outsourcing initiative commenced in 1997 and details the industry development outcomes achieved from 2001 to 2002.

According to the findings, "out-of-scope" commitments - that is activities not related to the contracted services - did not result in the expected creation of new jobs. Only 946 out of 1706 IT and support jobs where outside of Melbourne and Sydney.

Shadow Minister for Information Technology Senator Kate Lundy panned the Government's industry development requirements, labelling them a "sham". Citing the report, Lundy accused Minister for Information Technology, Senator Richard Alston of failing to "ensure IT outsourcing industry development commitments are met".

Lundy said IBM GSA has been a "particularly poor performer - failing three out of ten out-of-scope requirements, and failing to provide data on a fourth". Significantly IBM GSA was unable to provide data on an initiative requiring Telstra to award contracts on the basis they require one percent of labour to be from regional small to medium-sized enterprises, the report claims.

Lundy said other breaches included: payments to small and medium-sized enterprises (SMEs) was $1.6 million less than target requirements; marketing agreements to Wizard Information Services and Approved Systems were not met; and failure to provide assistance to Synergy Plus in year two of the contract.

"These breaches have had adverse impacts on three Australian ICT small businesses, with the report noting that one of those businesses subsequently became 'under external administration'," Lundy said in a statement.

“The only response from the Department for Communications IT and the Arts to these and other breaches has been to discuss the issues with the offending parties - not even a slap on the wrist, let alone any meaningful sanctions,” Lundy said, calling on the Coalition to ensure that outsourcers deliver on their industry development commitments in full.

However in the report the Department stated: “Where there have been specific areas of under performance or where commitments require change in the light of market conditions and agency purchasing patterns, the Department has successfully negotiated equivalent [Industry Development] commitments. Negotiations in some areas are still continuing”.

Lundy also detailed shortfalls from the other contractors, including Computer Sciences Corp shortfall in total net employment of 67.5 jobs and regional employment of 27 jobs; EDS Australia payments to SMEs was $4 million under target requirements; Telstra Enterprise Services' "regional employment" occurred predominantly in Canberra and Brisbane; and Ipex's value add was 22.3 percent less than the target requirement.

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