ATO extends $1bn Optus megadeal for another 18 months

The Australian Taxation Office has extended its decade-long managed network services megadeal with Optus while it continues searching for telcos to make up a new multi-sourcing arrangement.

The national revenue agency handed Optus an 18-month extension earlier this month at a cost of $141.5 million that extends the existing deal until 30 December 2021.

It brings the total value of the contract - which covers voice and data carriage, telephony, wide and local area networks and contact centre infrastructure - to $1.13 billion over 11 years.

The contract was set to expire on 30 June 2020 to make way for six new managed network service bundles that the agency approached the market for last December.

Each of the bundles, which will be provided by a different service provider, are intended to be “smaller, more modularised and better market aligned” than the current arrangement.

The ATO said this will “enable best of breed and focussed service delivery, in turn providing better value for money”.

The bundles will cover data carriage, fixed voice, mobile services, network management, unified communications and contact centre services.

But with that procurement still incomplete, a spokesperson told iTnews that the Optus contract had been extended for 18 months “to support a successful transition to a new supplier”.

“During this period, Optus will continue to provide services, hardware, and software to enable the delivery of services ... until new supplier arrangements take effect,” the ATO said.

“This is a very normal business practice for managing any potential transitioning of services.”

The spokesperson said the extension included two work orders, only one of which has been extended for 18 months: BAU services during the transition period.

BAU services account for the majority of the contract at $85.3 million, while the second work order for the renewal of managed network services (MNS) software licenses and maintenance is valued at $43.3 million.

The renewal of MNS software licences and maintenance is for 12 months, though the "Cisco A-Flex enterprise licence agreement and telepresence" contained within will stretch for 36 months.

The spokesperson said this agreement was extended for 36 months “as it represented better value for money”.

The spokesperson also stressed that the extension did not mean there had not been any delays to the procurement, including RFT SPC-2896-1 or RFT SPC-2896-2.

“The procurement activity is currently ongoing. We are unable to provide further information at this time.”

The agency has previously declined to reveal whether any suppliers have been shortlisted, despite original tender documents stating that this would happen by May 2020. 

Optus has held the ATO’s managed network services deal since the agency split up its monolithic IT outsourcing agreement with IT services company EDS (now DXC) in 2009.

The deal, which is one of three IT outsourcing agreements slated for refresh over the next year-and-a-half, is the first to be market tested by the ATO.

The other two bundles are held by Leidos (end user computing), which was extended until November 2021 last year at the cost of $87 million, and DXC (centralised computing).