Issue No: 128 (25 March 2008)
The Medium - Your Channel To Government ICT Information
Following a very well received briefing in Canberra last week (Signals from the first 100 days), this week we look at the impact on ICT of cuts to Government spending already announced, and more on the way in the May budget. We suggest that any downturn in ICT procurement that will result may bring a sanity check to a market that has been rather “overheated” in recent years.
Top 5 Contracts
Centrelink leads the way this week with two hardware contracts worth $12.5m (Sun Microsystems) and $5.8m (Hitachi Data Systems). The ATO reported a contract with Booz Allen Hamilton worth $5.1m for "IT Strategic Advice (ELIM Project)". The ABS reported a 2001 contract with SAS worth $993,973 and a contract with Fujitsu $749,668 for "Cisco Hardware".
Regards
Fleur Bayley
Editor, The Medium
www.intermedium.com.au
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Budget Cuts Not all Bad News for ICT
The Minister for Defence, Joel Fizgibbon announced that his Department had been ordered to cut expenditure by $10 billion over the next 10 years. This is not an isolated incident. A number of major cutbacks have been announced by the incoming Government, and more are on the way in the May budget.
ICT will not be immune from these cuts, but there are signs that the expected downturn in ICT procurement activity may bring some rationality to a market that has become rather “overheated” in recent years. The Rudd Government has announced its intention to achieve cuts in the budget of 1.5% of GDP, amounting to savings of up to $4 billion, or even more.
The Government has made it quite clear that some areas of expenditure will be quarantined from budget cuts. The previous Government’s promised tax cuts will be honoured in the budget; the Rudd Government has made a commitment not to cut Defence (opeartional) spending; and it has made an undertaking to implement all election promises. However, the Government has already imposed a one-off, additional 2 per cent efficiency dividend on all agencies, a requirement to cut administrative costs by 3.25 per cent. The only area that will be exempt will be Defence's operational areas.
Although there’s been a commitment to no 'involuntary' redundancies in the Federal public service, it seems clear that the Government intends to reduce staff numbers. One of the areas likely to be most affected by the Defence cuts will be civilian staffing.
Some of these proposed cuts will certainly flow through to ICT. With possible cuts to public sector staffing numbers and cuts to several costly projects including the Access Card, the level of Federal Government ICT spending during the remainder of 2008 is expected to slow.
However, the ICT market was already witnessing a greater than expected drop in some areas during the lead-up to the December 2007 election. This appears to be the result of saturation in an already overheated market.
IT skills shortages as well as market saturation in some areas have contributed to problems with some major projects. For example, when DIAC recently went to the Government for additional funding for its Systems for People project, it cited increased labour costs as one of the reasons that additional funds were required.
ICT cuts of some sort now appear certain, but these cuts will not impact all sectors of the market in a uniform manner. In areas where skills shortages were already evident, these budget cuts may simply moderate overall resource constraints and lower the risk profile of strained project plans.
The Federal ICT is now a very mature market, and we can expect a great deal of resilience despite the expenditure cuts. Long term contracts, in place for outsourcing, hardware and software, are unlikely to be significantly affected by spending cuts.
With ICT now such an integral part of government business, it will not be possible to make large cuts across the board. A significant level of ICT equipment and services are now required for the business of government to continue. In addition, the new programs promised by the Rudd Government will involve a significant element of ICT. Even those projects that have been scrapped will require provision of some ICT to complete that task.
These days, any change creates more IT work. Kevin Noonan
Head of Consulting, Intermedium
Federal Budget Briefing
Intermedium will conduct a comprehensive analysis of the Federal Budget, and the ICT implications of the budget announcements at a breakfast briefing in Canberra on Wednesday, 21 May. Click here to register your interest.
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ATO Briefing on End-user Outsourcing
As part of a three-stage market test for its IT outsourcing procurement, the ATO has scheduled an industry briefing for the second tranche, for End-user Computing Services, in Canberra on 9 April 2008. Read more |
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Four Shortlisted for ATO Managed Network Services
The Australian Taxation Office took just over three weeks to arrive at a shortlist for the first tranche of its major IT outsourcing arrangement. Read more |
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Vendors Need to Work Together to win Outsourcing Deals
According to an interview with Bill Gibson, CIO of the ATO (reported last week in ZDNet), vendors will in future be required to work more closely together in order to secure Federal Government business. Read more |
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Expiring contracts: A Great Source of Information About Opportunities
Each year, Federal Government agencies enter into thousands of individual ICT contracts (more than 15,000 in the 2006-07 financial year). While many are for “one off” requirements (fixed term projects, system implementations, etc), a large number are to meet on-going requirements. Tracking contracts that are due to “expire” is a valuable source of intelligence regarding the likely procurement plans of your clients and prospects. Read more |
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Victorian Auditor Finds Serious Shortcomings in Records Management
The Victorian Auditor General’s Office (VAGO) has just released a report into records management within Victorian public sector agencies. It found serious shortcomings in the record management by many agencies, and made some sweeping recommendations for improvements. Read more |
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Tender Spot is a list of significant Federal and State ICT tenders currently open. Tender Spot should not be regarded as a substitute for your usual tender notification service/s eg TenderLink because it is only a weekly update.
Highlighted NEW tenders this week
ATO Industry Briefing - End-User Computing Services 09-04-08
NHMRC Supply of Information Communication Technology (ICT) Services 29-04-08
WA Public Transport Authority Supply and Installation of an IT Storage Area Network 24-04-08
Click the following 'read more' icon for the complete listing and full description of all tenders, including those due to close in the coming week.
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FEDERAL GOVERNMENT CONTRACTS PUBLISHED THIS WEEK Each week, Intermedium analyses all ICT contracts as reported by all federal government reporting agencies and as published in AusTender. This contracts data is built into a comprehensive series of reports. Each month, Intermedium updates the ICT procurement plans released by the federal government agencies in its scout IT spreadsheet analysis. More information. For a sample of scout IT click here.
Each week, the Medium Newsletter gives you access to all government reported contracts valued at more than $250,000 as published in AusTender for the previous week. Click to download file.
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