Govt to open IT contracts to smaller players in procurement shake-up

The federal government hopes to free up a further $650 million for Australian small to medium enterprises each year as part of a tough new stance on procurement that will cap IT contracts at $100 million.

Assistant Minister for Digital Transformation Angus Taylor will today release a long-awaited report from the ICT procurement taskforce to reform how government buys from industry.

“The taskforce found a culture of risk aversion in government procurement had undermined the freedom to innovate and experiment,” Taylor said in a statement.

“If we are to reward the entrepreneurial spirit, a new procurement culture is necessary.”

The report is the culmination of several months of consultation with government and industry to address pain points in the current procurement model, and grow the portion of the Commonwealth's $6.5 billion annual IT spend won by SMEs by 10 percent.

It comes less than a week after the senate approved an inquiry into the government’s digital transformation efforts following a number of high-profile tech failures over the past year.

The report recommends capping IT contracts at $100 million or three years' duration to better allow SMEs to bid for smaller components of larger projects. The government has adopted this recommendation.

This threshold will end a repeat of large contracts like the $280 million My Health Record infrastructure deal with Accenture, or the $178 million deal with Telstra Health for the national cancer register.

It could also have implications for the government’s many outsourcing arrangements, which in some cases have been in place for more than a decade, such as the Department of Human Service’s $1 billion IBM support deal.

However, while it may sound ambitious, the reforms are more likely to merely formalise what the Digital Transformation Agency's Digital Marketplace has been trying to achieve since it was introduced in December 2015: break up complex projects into smaller components to give SMEs greater opportunity.

This will help the government funnel an additional $650 million to SMEs annually.

The report also makes a number of other recommendations, many of which the government has been unable to nail down since the 2008 Gershon review.

These include reducing the 70 government IT panels, developing ICT-specific procurement principles, placing a greater focus on building strategic partnerships, enhancing procurement skills in the APS, and creating new procurement methods.

A new sourcing measure, dubbed GovPitch, is one of the new procurement methods the government is already planning to introduce for SMEs to pitch their offerings directly to CIOs and senior officials.

The DTA has also been busy expanding co-ordinated IT procurement through a new software and licensing services panel that has opened aspects of the government's exclusive Microsoft arrangement with Data#3 to more suppliers.

It is also working with the Department of Finance to introduce a whole-of-government SAP licensing panel.

The government said work will continue over the next 12 months to deliver more pathways to improve co-ordination and reduce duplication of ICT procurement.