This article was written by Prudence Buckland, Oscar Boag-Taylor, Rachael Lewis and Annabel Griffin.
Yesterday was an important day for everyone involved in Commonwealth ICT procurement – the Report of the ICT Procurement Taskforce was released, along with the Government’s Response to the Report, and policy announcements driven by the response. These developments will have significant implications for Commonwealth ICT projects and ICT investment.
The Report makes 10 recommendations to overhaul Commonwealth ICT procurement processes. The Government has accepted (a couple ‘in principle’ and ‘partially’) all of the recommendations. Commonwealth agencies will need to navigate a new framework for ICT procurement, which includes a new ICT strategy to guide procurement approaches, the simplification of ICT procurement practices and a mandated coordination process for significant ICT projects and ICT vendor relationships. It’s not clear yet how procurements already in train will be affected (including those that have already been through gateway reviews and approvals).
Important changes for large ICT procurements
For Commonwealth agencies, the most significant reforms relate to the term and value of ICT procurement contracts. The ‘ICT contract capped term and value policy’, which is yet to be released, will ‘cap’ ICT procurement contracts to a maximum value of $100 million and three years in duration – both tests will apply. Single large procurements will need to be divided to account for these limitations – with the aim of giving SMEs greater opportunity to bid for smaller components of ICT projects. In fact, the Government proposes to set a target to increase SME share of annual Commonwealth ICT spend to 20% (from the current 10%).
It is not clear how contract extensions will be dealt with under the proposed policy (i.e. whether they are permitted beyond 3 years) – however any extension will be subject to ‘service level agreements’. We expect this means satisfactory performance assessments are made before any extension is granted. Exemptions from the policy will require approval from the Minister for Finance and the Assistant Minister for Cities and Digital Transformation.
Introduction of annual targets for ICT procurement
The Government will:
- set annual targets for ICT procurement and require agencies to report on their contributions to achieving those targets;
- introduce targets relating to the quantum and timing of ‘benefits realisation’ (presumably a test of speed and success of implementation) for significant ICT projects; and
- introduce other targets to measure the ICT spend on agreed government priorities, the value of SME contracts and the number of agencies using / building common platforms.
All roads lead to data
Data-driven reporting against the proposed targets will be a focus. Strict controls and processes will need to be implemented by agencies to ensure that procurement spend and output can be measured and the associated reporting requirements satisfied.
Underpinning all of this is a proposal to create an inter-agency dashboard to track Commonwealth ICT spending, to facilitate greater portfolio and project level analysis of procurement investment.
Enabling access - simplifying panel arrangements
The Government wants to review and rationalise (with the aim of reducing) ICT panel arrangements. The Digital Transformation Agency (DTA) will work with agencies to review the current arrangements as those arrangements expire. The Government proposes to change panel arrangements to allow new suppliers to be added over the life of a panel arrangement, and to reduce the cost and time incurred by suppliers in joining panels.
What other changes are proposed?
The Government has flagged the implementation of several other measures in FY2017-18 to improve ICT procurement pathways including:
- standard ICT terms - developing standard terms for ICT contracts with a value of less than $200,000 – this will be supported by an online tool to assist suppliers with entry into contract.
- pricing adjustments - giving ICT suppliers scope to adjust their pricing during the life of a contract in response to demands of buyers and to foster competition.
- making it easier to buy COTs - development of a catalogue of commercial-off-the-shelf solutions, allowing Commonwealth agencies to quickly and cost-effectively identify suitable products and services.
Bringing together a ‘buyers group’
The Government will investigate the merits of establishing a ‘buyers group’, comprising representatives of agencies across the government who undertake significant and high-value projects. The Government anticipates that the creation of a buyers group will make it easier for agencies to promote a joint-agency approach to market, aggregating the Government’s buying power and minimising duplication.
The Government also proposes to investigate options for proof of concept procurements under a CPR limited tender (i.e. presumably even where the procurement value exceeds the current CPR thresholds), and an online platform for the receipt of unsolicited proposals. It is a longer-term objective of the Government to apply a strategic business partnerships model with respect to Commonwealth ICT procurement – where there are ‘significant’ procurements and relationships. It is not yet clear how ‘significant’ procurements and relationships will be identified.
So, what next?
The DTA intends to establish an ICT procurement transformation team to deliver the reforms – no written framework supporting the reforms has been released to date. A priority of the Government will also be the development of procurement capability within the APS (including probity, contract innovation and exchange of information capability).
The ICT procurement reforms are intended to grow the technical capability of the Australian economy and increase the spread of risk. The reforms are also intended to provide greater opportunities to SMEs to compete for government work and aggregate the government’s buying power. However, the devil is in the detail – and that will be needed to determine exactly how the reforms will be designed and implemented. Watch this space!