Getting the government onside

In the first of a series on IT outsourcing, Julie-anne Sprague examines who’s bidding for the major contracts.

MOST local IT outsourcing companies agree that government contracts account for a large slice of work in Western Australia.

The government spends about $140 million a year purchasing information, communication, and technology services.

Thanks to a new government tendering framework, SPIRIT, more WA firms have an opportunity to grab a piece of the lucrative outsourcing pie.

Since SPIRIT was launched last July (aimed at removing large contracts and making the tendering process available to all service providers) about 294 suppliers have qualified as approved suppliers.

But just who is winning the work is unclear.

Major outsourcing heavyweight Computer Sciences Corporation Australia (CSC) still holds the major government contracts – the BDMW and BIPAC. Together they are worth $40 million a year and were awarded in 1996.

While those contracts have been re-tendered, no supplier has been appointed at this stage.

According to a Department of Industry and Resources spokesman, the tendering process is at various stages of the evaluation progress.

He said two companies had reached the preferred-supplier stage and were negotiating final contracts, one was awaiting an endorsement of their preferred supplier, three were presently under evaluation, and one was scheduled to issue a tender in April 2003.

The spokesman said one contract had been withdrawn due to the abolition of the Department of Industry and Technology.

He said an estimated 100 contracts had been awarded to suppliers under the SPIRIT framework.

Recent SPIRIT wins include: Optus Networks’ $7.3 million contract to supply, install, and maintain a prisoner telephone system for the Department of Justice; and Communications Australia won a $138,000 contract for the supply and installation of voice-logger recorder equipment to the WA Government Railways Commission.

Uniysis West chief executive officer Murray Rosa, who has been named a preferred supplier for one SPIRIT tender, said 2003 looked promising for further gains in the outsourcing arena.

“We have done a lot of work building our profile in the SPIRIT initiative,” he said.

“We have just secured one of the first preferred supplier agreements and we will sign a contract shortly. We are waiting to hear other responses to our tenders.”

Mr Rosa said private enterprise was also strong and was particularly pleased with the extension of its IT service contract with joint venture partner BankWest.

“That was a $26 million extension and BankWest has committed to this until 2007,” he said. “We have bought all the assets and it shows the commitment we have in this market-place.

“We have had a comfortable quarter and we are looking for more to happen in the next two quarters when those tenders come up.”

Amcon Solutions Group (ASG) chief executive officer Geoff Lewis agrees that the outsourcing market is strong in WA.

“For ASG we are going along quite nicely. Things look quite optimistic, I think the market is turning,” Mr Lewis said.

“We are the sort of size that engages well with firms that exit in WA.”

He said what resulted from Australian Stock Exchange managing director Richard Humphry’s ‘Humphry Report’ (released in 2001) typified the change in what companies sought from outsourcing.

The report highlighted that expected savings to be generated from massive government outsourcing had yet to be realised.

Mr Lewis said government departments and private organisations were opting to have more strategic outsourcing contracts, usually smaller contracts, rather than one large contract.

He said ASG has won preferred-supplier work from the State Government (through the SPIRIT program) but could not comment further on the details.

“We [ASG] have had a very successful 2002 and it is looking good for 2003,” Mr Lewis said.

Change Corporation director Stephen Langsford said the out-sourcing model had changed in recent times.

“What we are seeing is the model is being more focused on shared benefits,” he said.

Change was registering for and engaging in work under the SPIRIT program, Mr Langsford  said, although he would not provide further details.

Margaret River-based Queensberry Information Technology director Craig Fisher said his firm was waiting for South West contracts to become available through the SPIRIT program.

However, he was upbeat on the climate for outsourcing services.