[LINK] Companies told to stop prep

[Chirgwin, Richard]

>"Most of the big vendors would have priced their existing outsourcing 
>contracts based on an expected growth of similar business," he said.

To put it another way: some of the meagre savings already achieved were only
realised because vendors were putting up "loss leaders"; and that the cost
differential between in-house and outsourced systems is even less than we
already thought?

RC

-----Original Message-----
From: Jan Whitaker [mailto:jwhit@PrimeNet.Com]
Sent: Tuesday, 16 January 2001 8:19
To: link@www.anu.edu.au
Subject: [LINK] Companies told to stop prep


This seemed a bit extreme, saying that the companies have been told to stop 
their bid work, but I guess that is the practical result afterall, even 
though 'on hold' is the language used to date.

Note the mention of INCREASING the charges on the EXISTING contracts.  So 
much for savings......

 
http://australianit.news.com.au/common/storyPage/0,3811,1614188%255E3682,00.
html

    $350m deal is off, IT tenderers told
        Selina Mitchell
        16 January 2001


    MULTINATIONALS competing to win the latest federal government computer
    outsourcing contract were told yesterday to abandon their bids because
the
    project had been scrapped.

    The companies, including IBM, EDS and SMS-Sausage, had been working on 
their
    multi-million-dollar tenders for the $350 million five-agency bid since 
well before the
    tender details were released last September.

    The huge IT outsourcing program has been put on hold after the Humphry 
report,
    released on Friday, found significant problems with the Government's 
approach.

    The agencies involved in the bid include the departments of Treasury; 
Education,
    Training and Youth Affairs; and Employment, Workplace Relations and
Small
    Business. Finance Minister John Fahey announced on Friday that the body 
in charge
    of outsourcing would be disbanded and that agencies would regain control
of
    outsourcing their own computer needs.

    The $1 billion Centrelink bid is also in doubt, but the two potential 
winners of that
    now-unlikely contract, CSC and Siemens, will have to wait. Key agency
    decision-makers are still on holidays.

    Most outsourcing companies are keeping quiet about any frustrations 
with the new
    arrangements for fear of upsetting their new public service buyers. But 
one company
    bidding for government work said the cost of providing services in 
existing outsourcing
    contracts would probably go up.

    Several government departments have already outsourced their IT 
requirements,
    including the taxation office and the departments of Immigration, 
Transport and
    Regional Services, Communications and the Arts, and Health.

    "Most of the big vendors would have priced their existing outsourcing 
contracts based
    on an expected growth of similar business," he said.

    "Economies of scale would then allow for a reduced cost rate for many 
services, and
    without this expected growth, the cost of providing services in 
existing outsourcing
    contracts will probably go up."

    One of the main beneficiaries of the outsourcing program so far, CSC, 
believes
    outsourcing will continue apace but that it may not receive so much of 
the work.

    CSC vice-president of federal systems Sheryle Moon said the numbers 
surrounding
    the total government spend on IT were unlikely to change, but the 
distribution of that
    money might.

    Wizard Information Services managing director Tony Robey said the new 
approach
    "won't suit the bigger outsourcing companies as well as the previous 
cluster,
    centralised arrangement, but it will suit the specialist providers, 
many of whom are
    local Australian companies".

    Australian Information Industry Association executive director Rob 
Durie said breaking
    up the large contracts would make them more accessible to specialist 
Australian
    providers.

    Association members include IBM, EDS, CSC and many small Australian
    companies, all of which believe that putting the process back in the 
control of the
    agencies is consistent with commercial practice.

    Politicians, industry groups and agencies scrambled yesterday for 
copies of the
    Humphry report, which became available on the Department of Finance 
website about
    10am after being released at 6pm on Friday.

    ACT Information Industries Development Board chairman Brand Hoff said 
most public
    servants and local IT companies welcomed the changes.

    "The blanket decision to outsource was the problem. Many agencies had a 
proud
    history of computer expertise and they didn't want to outsource," Mr 
Hoff said.