Should IT suppliers get a bonus for delivering projects under budget?

Six IT firms in the running for WA’s lucrative ‘GovNext’ infrastructure panel have been asked to pitch ways they could be incentivised to deliver projects under time and budget, including taking home a slice of any underspend.

Last week, WA government CIO Giles Nunis was quizzed by members of the parliament’s public accounts committee on how the GovNext procurement strategy was unfurling.

Nunis revealed he was considering a structure of bonuses based on practices he's seen in both the commercial sector and the roads construction trade.

He said his vision was an approach where WA government vendors are rewarded for taking on more implementation risk in order to achieve better outcomes.

“If [a project was] $150,000 or $200,000 under budget, then we should be able to provide that as a bonus—not the entire component but an agreed component—to the vendors,” Nunis told the committee members.

“That actually gives them an incentive because $50,000 that hits the bottom line is a considerable contribution.”

Within the government, however, “we do not do that very often," he said.

The six shortlisted suppliers for the GovNext data centre and network panel - Dimension Data, Telstra, IBM, Atos, Datacom, and NEC - have been briefed on Nunis’ suggestion and asked for their feedback.

The GCIO said to date the industry had been receptive to the idea.

“They are certainly very interested in that because then they have a greater incentive to deliver to government within the time and structure we are seeking.”

Nunis said he expected contracts to be signed with “two or three” final GovNext vendors during early September.  Earlier this month his office sent formal requests for proposal to the six remaining frontrunners, seeking their final pricing structures. They are due back by June 15.

However, he warned that he was expecting to obtain continuous downward pressure on the prices offered by the GovNext infrastructure suppliers, in exchange for the WA government aggregating and guaranteeing demand.

He said any discounts offered to one agency would become “the new ceiling” for the whole-of-government arrangement.

The GovNext procurement scheme will cover everything from data centre and cloud services to network services for the state.

Nunis flagged its potential to reduce “thousands of servers” hiding under desks in the state government.

“That is a big shift … which is why the savings would be substantial,” he said.