Snare your share of the government pie

Everyone wants a piece of some lucrative government action. Government is big and so are the related contracts.

In the past, it seemed that local ICT suppliers had been consistently locked out of chunky government deals.

But times have changed and today there are increasing opportunities for Aussie companies to get their slice of this massive IT expenditure pie.

 At first glance it might seem that only those companies large and powerful enough can hope to bid against foreign suppliers or large multinationals.

 Yet NSW-based box builder Optima Technology Solutions is on the rise, basing about 60 percent of its $130 million business on government relationships accumulated over 14 years. The Sydney headquarters of the company housing 200 staff is planning a move to larger NSW premises.

 Stuart McCullough, manager of strategic development at Optima, says opportunities to do deals with the Federal Government in particular have increased since October. 'Also, the South Australian Government has undone things regarding EDS, opening up that market for people like us,' he says.

 McCullough says NSW departments of police, commerce, education, correction services and ambulance services have been especially receptive to Optima offerings over the years. 'They've been very keen and working to give local companies a good look-in,' he says.

 He puts the box builders' success down to relationship building, reputation, investment over time and size. 'We've spent a lot of money on SAP to provide the logistics and back-end system,' he says. 'Because Optima is a contract manufacturer, we can take orders for 10,000 to 20,000 systems.

 In a recent order for Defence we rolled out 25,000 systems over three months and all on time.'

 This year will see Optima ship more than 100,000 systems into governments across Australia, McCullough says. 'There's been probably over 500,000 of our systems in government in Australia [in total],' he says.

 Using recognised, branded components may also contribute to the company's success. Optima generally uses Intel CPUs, chipsets and motherboards 'that enable us to lock in long-term platforms', McCullough says.

 Local box builders can gain by offering customised hardware – such as an anti-theft desktop case Optima has offered to education departments – and flexible value-added services, he says.

Optima also has its own R&D facility in Sydney, although McCullough could not say whether it was as big as that of Ipex, another large local box builder with plenty of government expertise.

 He says seven-tenths of government tenders are decided on price, however – a factor which again favours large bidders but does not daunt McCullough. 'There's no reason why we can't offer the same technology with the same service at a low cost, delivering on time, made in Australia, supported in Australia and paying our taxes here,' he says.

According to McCullough, Optima is the first local company to decide to focus strongly on notebook production. 'Optima … has entered into an agreement with the world's largest notebook manufacturer to achieve this. This is being done without any government support.'

 It sounds a bit too good to be true, and if you ask McCullough about barriers to entry, it is. Although he says he does not see any barriers to entry as such, he has less than positive things to say about the attitude of some government staffers. 'We don't see any barriers at the moment other than educating – if we get the chance to – ill-informed decision-makers who have a closed-minded preference for multinational corporations without objectively evaluating local alternatives,' he says.

McCullough does not believe any company producing less than 80,000 to 100,000 systems a year is going to be able to take advantage of government business.

 One reseller, who did not want to be named, says, for example, that his company has scaled back on chasing business with the Queensland Government, claiming that state has stopped spending money on IT infrastructure. 'The [Queensland Government] hasn't had its May/June IT spend,' he says. As a result, the proportion of sales revenue generated for the reseller from this market has fallen from 30 percent to 8 percent, he says.

 But the Federal Government at least has introduced various initiatives aimed at cutting the cake more fairly.

The gradual disintegration of large whole-of-government, single company contracts in favour of contracts delivered via multiple business partners will undoubtedly favour local companies with the right blend of skills.

The federal minister for Communications, Information Technology and the Arts, Senator Richard Alston, says Australian SMBs can and do win Australian government IT contracts.

 Since the Humphrey review into whole-of-government IT outsourcing, IT procurement was devolved to individual government agencies, resulting in increased opportunities for smaller Australian IT suppliers, he says.

 'For example, Volante recently won a $9.4 million contract to supply IT desktop and support services for federal electorate offices around Australia. In addition, larger IT contracts valued at $20 million or more must include a minimum level of SMB involvement; that involvement being 20 percent for software and services contracts and 10 percent for hardware contracts,' Alston says.

 He points out that, with most of this period's IT outsourcing contracts half-completed, SMB participation in core contracts has reached $317 million, while total local content in these contracts has hit $730 million, close to the targets set. 'For example, under the ITO, Ipex both won the prime Group 8 contract and also benefited as a sub-contractor under the Cluster 3 and Tax Office contracts. As a result of EDS's global partner program under the ITO, Tower Software has won a $30 million contract with the US Navy and Marine Corp,' Alston says.

 Last year, the Federal Government announced a package aimed at assisting Australian SMBs to get a bigger piece of the government pie, by establishing key industry alliances and improving provision of government information on ICT contracts, including seminars and guides on the bidding process, Alston says. As part of the package, an online tender notification system will be built into the new Commonwealth Electronic Tender System.

'[Also] SMBs are being showcased to government purchasing officers. Three seminars have already been held and a major workshop will be held in Canberra on 23 July 2003. The seminars will be repeated in response to demand,' Alston says.

 The Federal Government is also working on ways to make more effective use of IT-related intellectual property created as a result of government procurement, develop common-use purchasing templates, examine indemnity and insurance issues, and better monitor SMB participation in government ICT procurement, Alston says.

 However, opposition IT spokesperson Senator Kate Lundy points out Howard Government promises to enhance access for SMBs do not necessarily play so well in real terms. She cites one contract with CSC in particular, where the requirement for local IT content has shrunk from 17.6 percent to 1