Defence renews IBM contract for $264 million

Australia’s Department of Defence has awarded global services behemoth IBM another six years to its long-term contract for hardware and software services, extending the deal out to mid 2020 at a cost of $264 million.

The decision marks 15 years since the agency last took the contract out to the open market.

Defence last gave IBM a five-year, $348 million extension to the contract in December 2011, following a similar five-year, $269 million deal signed in July 2008.

Under the latest contract extension, IBM will provide support and services for existing IBM hardware and software, technical support for Defence’s mainframe environment, and support for its fleet of IBM servers.

Defence systems remain wedded to IBM infrastructure, which allowed the department to use a loophole in Commonwealth procurement rules that stipulate agencies must go to the open market for goods and services worth more than $80,000.

An exemption for direct supply is allowed in cases where it could be argued that a change of supplier would mean purchasing goods or services incompatible with existing equipment. 

Given Defence’s existing significant investment in IBM products and platforms, shifting to a new supplier would lump the department with a “significant cost and risk premium” compared to the cost of maintaining the existing arrangement.

A Defence spokesperson told iTnews the IBM renewal had been made with “full consideration” of procurement rules requiring agencies to provide value for money.

“The Department of Defence has also taken into consideration ease of implementation and compatibility to the existing environment, requirements for administration and support and existing corporate knowledge of Defence’s systems and operations,” the spokesperson said.

Defence last tested the open market for its IT infrastructure in 1999.