news The Department of Defence has taken the unusual step of abandoning plans to go to market for one of the three major tranches of IT outsourcing programs it has been evaluating over the past several years, opting instead to renew a contract in the area with Unisys, despite the fact that it will shortly be forced to re-examine the deal anyway.
As part of its broader IT sourcing reform program, Defence had been planning to bundle two major end user computing contracts currently held by Fujitsu and Unisys into one larger contract and take it to market under the banned of “distributed computing”.
The Fujitsu contract — which Defence renewed in May 2013 — has been in place since 2005, when it was originally won by KAZ, since bought by Fujitsu, and is believed to come up for renewal sometime this year. It covers desktop support of Defence’s far-flung operations around Australia as well as some support of some central resources. The Unisys contract, which has been around for around five years, covers IT support services including network security and infrastructure support, as well as server and desktop support.
In a statement issued today, Defence noted that it was currently undertaking a “significant” Information and Communications Technology (ICT) transformation program.
“As the projects currently underway require a focused and sustained effort, Defence has decided not to proceed with the planned market testing of the Distributed Computing Bundle,” Defence wrote. “Defence has exercised a contract extension under the existing Unisys Regional ICT Services Agreement for on-site support services until October 2016. A decision on the longer-term delivery of ICT services through a Distributed Computing Bundle will be made over the next 24 months.”
In a separate statement, Unisys said that the contract extension it had signed with Defence was worth about $52 million and would see the IT services company continue to provide IT support for 100,000 end users at 460 Defence locations across Australia.
Under the contract, Unisys will continue to provide IT support services including network security and infrastructure support, as well as server and desktop support, to all sections within the Australian Department of Defence including the Australian Defence Force – comprised of the Royal Australian Navy, Australian Army and Royal Australian Air Force. Unisys also provides support for joint service and international military exercises, and has supported emergency disaster responses such as the recent bushfires in the Blue Mountains and Queensland floods.
Unisys wrote: “Since taking on the contract in 2008, Unisys has standardised IT support processes nationally, refining delivery processes and procedures to deliver a high-quality service experience more efficiently.”
Hmmm. It’s quite hard to know what to make of this.
If this contract renewal was being conducted by a less competent department within the Federal Government when it came to IT, I would suspect that such a department wanted to avoid going through a formal tendering process despite the legal necessary of such a situation and the commercial need. We’ve seen this sort of behaviour before with long-running IT services contract renewals — most notably with the Department of Health.
However, Defence is another kettle of fish. Its CIO Group team is sophisticated and very intelligent, and I rarely see it make moves that aren’t completely warranted. It’s very difficult to achieve substantive IT change within an organisation as large and complex as Defence, but the CIO Group is slowly moving the bar — day by day, inch by inch.
In this sense, I think what the CIO Group has discovered is that they’re already getting very decent value from the Fujitsu and Unisys relationships, and that disrupting those relationships too much by centralising already huge contracts is not going to be worthwhile. I suspect that disrupting those contracts too much would result in other Defence IT projects potentially suffering. In terms of other upgrades going on, it’s a critical time for Defence, and I suspect the CIO Group has discovered that it’s not worth upsetting the boat.
A key indicator of this is the December 2011 report, Oversight and Management of Defence’s Information and Communication Technology. This report, produced by the Federal Government’s chief auditor, warned that the Department of Defence’s ICT operation was teetering on the brink of a dangerous precipice.
The report stated, with reference to Defence’s broad reform agenda: “At the time of its March 2010 progress report to the Government, Defence considered the Strategic Reform Program to be as complex an organisational reform agenda as had ever been undertaken in either the private or public sectors in Australia,” the report states. “Delivering ICT reform in Defence is a challenge of a very high order, entailing the simultaneous remediation of existing systems, the development of ICT systems critical to the SRP reform streams, and the achievement of savings at the upper bounds of feasibility.”
“More than two years into the reform process, ICT continues to represent a material risk to the timely achievement of the SRP investment and savings targets set in support of the longer-term objectives of the  white paper.”
Defence’s ICT environment, the report further stated, suffers from relatively immature governance processes, the lack of a department-wide view of ICT interdependencies and competing priorities, complex and “sometimes confused” accountability structures and a high level of demand on its ICT staffing resources — “currently some 350 staff short of projected requirements”.
With respect to the eight major SRP reform streams which depend for their success on associated ICT projects, “schedule slippage is already evident”, and project failure could have a domino effect on other projects. “In this challenging environment, strong leadership focus will be required to deliver the benefits envisaged for the Defence organisation from the ICT transformation program over the next ten years,” the report stated.
In this context, it’s not hard to see why Defence has taken a conservative approach with these two contracts. I would expect to see them both notionally put out to tender in some lightly reworked form and probably re-won by Fujitsu and Unisys, or perhaps even Defence get the required ministerial approval to avoid tendering the deals at all.
Again, if we were seeing this behaviour from most other departments, I would say this would not be a good outcome. But given the delicate balancing act going on at Defence right now, I think it’s probably the right choice. Unlike most other IT departments, Defence’s CIO Group usually very much knows what it’s doing.