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Justin Hendry

IBM contracts surge after whole of government deal

Canberra’s largest government agencies have stuck multi-year deals with IBM worth more than $350 million following the arrival of the renegotiated whole-of-government agreement earlier this month.

The Department of Defence and the Australian Taxation Office signed contracts with Big Blue just days before the Christmas and New Year’s shutdown, while the Digital Transformation Agency inked its contract on the last day of 2022.

The contracts come less than a month after the DTA signed the next iteration of the federal government’s deal covering IBM software, hardware, services and cloud offerings, at an estimated cost of $725 million over five years.

The new deal replaces the 2018 arrangement with IBM, which more than doubled in value to $2 billion over its five-year lifespan despite being introduced to deliver “significant savings” to agencies by leveraging demand across government.

Another contract with the Department of Home Affairs published earlier this month, which was previously connected with the former umbrella agreement, has also been amended to be included in the new deal.

At $192 million, Defence’s new IBM contract for “computer services” covered by the whole-of-government arrangement is the largest of the contracts, making up approximately 26 per cent of the total $725 million arrangement with IBM.

It is also around $77.5 million less than the department’s contract under the 2018 arrangement, which is valued at $269.5 million over five years and will run until the end of June 2023, when the former agreement expires.

The ATO, meanwhile, will drop $113.7 million on “IT software” supplied by IBM under the agreement over the next five years – around $50 million less than its 2018 contract, which runs until the end of June 2024.

Home Affairs’ slice comes in at $67.6 million – or around nine per cent of the new IBM arrangement – which is consistent with its previous $62.1 million contract under the 2018 arrangement.

The contract is the department’s second largest IBM contract to date after the $924 million mainframe contract that climbed $235 million in 2021, when it decided to maintain the environment until July 2025.

The DTA will spend $13.4 million on “IBM software, hardware, services and cloud offerings” over the next three years, whereas its previous contract with Big Blue was worth $27.2 million over five years, according to AusTender.

Canberra’s four biggest agencies – the ATO, Defence, Home Affairs and Services Australia – were all involved in the renegotiation of the 2018 IBM late last year. Services Australia is the only one yet to publish contracts with IBM under the new deal.

Services Australia is one of the largest users of IBM services across the public sector, and signed more than $180 million worth of contracts under the 2018 arrangement, including $49 million for private cloud server upgrade in mid-2022.

Last month, DTA chief executive Chris Fechner told a parliamentary inquiry into Commonwealth procurement practices that a damning audit of agency had had a material impact on its relationship with other agencies.

The audit found the DTA fell “short of ethical requirements” by bypassing Commonwealth Procurement Rules in a series of ICT-related procurement between 2019 and 2021, including the myGov upgrade.

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