Audit report to gov’t: get close to suppliers

A new report on the Australian federal government’s IT outsourcing policies has given credit to the role of the Department of Communications, Information Technology and the Arts (DCITA) in monitoring the effectiveness of its contractors, but says the government should increase the department’s scope to ensure suppliers meet Australian industry development requirements.

The Australian National Audit Office (ANAO) report, which was released on Tuesday, recommended the government increase the amount of information required from its outsourcing partners, as current levels do not identify whether suppliers are meeting Australia’s industry development commitments and SME participation as established in their original contract plans.

In particular, the report criticized changes introduced by the revised Procurement Policy Framework in June 2002. These saw the introduction of voluntary guidelines setting out the government’s expectations for strategic industry development (ID) activities by its ICT suppliers. While these revised arrangements have simplified the ID requirements, “partners will only have to contractually agree to minimal mandatory SME participation levels”, the report states.

As a result of these changes, the role of the Department of Communications, Information Technology and the Arts (DCITA) has also diminished to that of an advisor, thereby allowing suppliers to escape repercussions if they fail to maintain sufficient industry development levels – such as adequate local SME participation.

Since being launched in the 1997-1998 Budget, five contracts have been executed under the Whole-of-Government Information Technology Infrastructure Consolidation and Outsourcing Initiative (the Initiative). These include contracts for the Cluster 3, ATO, Group 5, The Health Group and Group 8 agencies. The combined contracts are worth A$1.2 billion (US$720 million). Suppliers range from Computer Science Corporation (CSC) and EDS to IBM GSA.

One of the key objectives of the government’s outsourcing initiative was to enhance the growth and competitiveness of the Australian IT &T industry by promoting the involvement of SMEs and Australian content in its external contracts. To fulfil this objective, all contractors are required to submit an industry development plan, and expected to meet annual development targets set by the government.

Although the five current contract holders have continued to submit annual ID reports, shortfalls found each year have not be addressed by reinforced ID commitments or plans, the report states.

To combat the reduction of Australian skills, goods and services in outsourced agreements, the ANAO says suppliers must submit more information to the DCITA on SME participation levels, the categories of goods and services to be supplied under those contracts (such as hardware or software) and annual reports of achievements against the protracted SME participation levels.