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Justin Hendry

DTA renews government-wide IBM deal for $725m

The federal government has inked a fresh deal with technology giant IBM at a cost of $725 million over the next five years after the former whole-of-government arrangement doubled in value to more than $2 billion.

The Digital Transformation Agency revealed the next iteration of the whole of government agreement with Big Blue on Monday following six months of negotiations that began in earnest in August 2022.

Estimated at $725 million over five years, the new contract for IBM software, hardware, services and cloud offerings is around 25 per cent less than the first iteration of the IBM arrangement when first signed in 2018.

But, as reported by last year, the previous arrangement more than doubled in value to $2 billion over its five-year lifespan, meaning the cost of the new deal is almost certain to climb over the next five years.

The 2018 whole of government deal has also continued to grow since talks began with IBM in mid-2022, with the Department of Home Affairs one of the last agencies to sign a $67.6 million contract under the umbrella agreement.

Digital Transformation Agency chief executive Chris Fechner and IBM Australia managing director Nicholas Flood. Image: IBM

In a statement, the DTA said the new arrangement – one of several panels that agencies can use to buy from IBM – offers “greater flexibility for agencies to transfer assets and enable reuse opportunities” and “streamlines contracting to reduce the time, effort and resources required”.

All four of Canberra’s biggest agencies – the Australia Taxation Office, Department of Defence, Department of Home Affairs and Services Australia – are said to have been involved in the procurement process.

It is unclear whether the value creep associated with the previous arrangement has been addressed, with the agency only saying that the new arrangement “offers the best possible value for taxpayer money”.

DTA chief executive Chris Fechner said the new arrangement is the “right fit for the current context and requirements for its participating agencies”, offering “important continuity for the business systems that support critical government services”.

“Through the Commonwealth negotiating as one entity, the contract will continue to give government agencies better value for money and more flexibility when sourcing commonly used IBM products and services,” he said.

As with the previous arrangement, the DTA and IBM are also “discussing opportunities to explore emerging technologies like quantum computing and artificial intelligence”, the DTA said. It similarly offers training and certifications through an IBM Digital Skills Program to “uplift digital capability”.

IBM Australia managing director Nicholas Flood said the new arrangement would “continue supporting the Australian Government in their work to drive accelerated adoption of innovative technology to modernise government services”.

“We will continue to work with government agencies to explore how emerging technologies could help transform service delivery to create a more secure, sustainable, innovative and skilled Australia,” he said.

The new deal comes just weeks after procurement expert Catherine Thompson said that the lack of a formalised procurement pathway in the federal government meant agencies are like “lambs to the slaughter” to corporate sector procurement professional.

The comments were made during the parliamentary inquiry into Commonwealth procurement practices in the wake of a damning audit of the DTA that exposed systemic problems at the agency responsible for advising government on technology.

“Ninety per cent of a negotiation is won or lost before you actually sit at the negotiation table. It’s about your command of the fact base and your strategy,” Ms Thompson told the committee in December.

In her submission to the inquiry, Ms Thompson called for an overhaul of technology buying to shift the paradigm from acquiring goods to using ICT procurement as an “instrument of social and economic policy”.

“[The federal government] does not prize procurement expertise and has not made procurement a profession within the APS. It cannot therefore recognise that its expectations and implementation of procurement lag decades behind leading private sector practice,” she said.

“It is wedded to the existing ways of doing things, because it cannot conceive of alternatives, and it has so far stood fast against all attempts at reform.”

DTA CEO Chris Fechner also told the inquiry last month that the audit had harmed the agency’s “psyche” and had a material impact on its relationship with other agencies as the finding “goes to [the DTA’s] credibility”.

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