Optus on CITE

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Optus has scored the contract to build the Construction Industry Trading Exchange (CITE) e-business platform, but to get to the potential $150 million per year savings, the system will have to filter down to some very low tech operations, according to S2 principal analyst Bruce McCabe.

CITE chairman Mike Rollo said non-residential construction is a $30 billion per year industry in Australia where document exchange costs amount to around half of one percent ($150 million) of the total costs incurred by the industry.

Making documents available online, and notifying all interested parties of any changes amount to considerable time savings, he said.

Despite being driven by some of the heavyweights of the Australian construction industry, Rollo said the CITE system has been structured to be open to all members of the industry. "We don't want a club," he said.

However, the system's attempt to include everyone is also its biggest challenge, according to S2's McCabe.

"It's the biggest challenge for a lot of projects, but it will be worse in building construction because a lot of those guys are operating with a mobile phone and not much else," he said.

The CITE system stands a good chance of success if it sticks to doing a small number of things well and is accepted as being good for the whole industry, rather than just for a few key players, McCabe said.

"Adoption is the critical success factor," he said. However, McCabe said with names like Baulderstone Hornibrook, John Holland, Leighton, Thiess and Transfield, behind the project, the CITE system has a better chance of being adopted than some of the proprietary systems that it is competing against.

Not actually being owned by any one player is also an advantage, he said. "If you are going to secure other players in the industry and minor ones, they will not support something they feel is lining the pockets of their competitors."

The CITE system will be rolled out in three phases. The first will involve electronic document exchange, which will be followed by electronic tendering, and eventually, online purchasing.

McCabe said it is essential that the first two phases are bedded down before the more ambitious procurement project begins.

He said the project also needs to be integrated with government e-procurement systems, given that governments are such large users of construction services.

Optus will work with partners EU Supply for tendering software and AEC/communication to supply the document management software.

The procurement portal will be developed by Hothouse.

The contract with Optus will last for five years, but is a renewable "evergreen" arrangement. Fees will be based on a transactional system, although there will be no fee charged to respond to tenders or requests. Optus received no initial consideration for the contract said Optus business director Robert Parcell.

Optus will host the CITE exchange at its Sydney data centre. The project is expected to go online in Q1 next year after trials of the Optus system have been completed.

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