[LINK] golden noose, not handshake

[Jan Whitaker]

>Golden noose tied to cards
><http://australianit.news.com.au/articles/0,7204,21291812%5E15306,00.html>http://australianit.news.com.au/articles/0,7204,21291812%5E15306,00.html
>

Golden noose tied to cards
Karen Dearne
FEBRUARY 27, 2007

         THE first two access-card contracts come with a golden noose 
attached, as successful bidders must lodge financial guarantees - 
understood to be more than $100 million - against project delays, 
breaches and failure to meet agreed services levels.

         Contractors will also bear "unlimited liability" for 
damages, including payments for every day a project is delayed.

If a problem is not fixed within five days, the Department of Human 
Services has the right to terminate the contract and call on the 
financial guarantee.

The Office of the Access Card declined to confirm the size of the 
financial guarantees, which were "commercial in-confidence".

It's understood potential bidders are finding the guarantees hard to 
swallow, as the systems integrator and card issuance projects are 
large, complex, and subject to a politically determined work schedule.

An industry insider, who asked not to be named, said no one wanted to 
be exposed to such a huge financial risk.

"All tenderers are gnashing their teeth over those clauses," he said. 
"Everyone is trying to work out how to say they will comply, while 
creating a window for renegotiation if they get chosen."

The systems integrator contract closes on Thursday, while the cards 
contract closes on March 15.

Independent technology analyst Bruce McCabe said financial guarantees 
were an instance of the "drive to outsource responsibility" for 
government projects.

"Public servants want to make the risk somebody else's problem, but 
they can't," he said. "Good government outcomes are the government's 
responsibility."

Mr McCabe said the idea of transferring all risk to the supplier was 
poor practice "because from the start you have created an adversarial 
relationship with your technology partner".

"Delays are often not the fault of suppliers, but the fault of the 
client," he said. "It's sheer stupidity to set project deadlines 
before you've even chosen your supplier. To construct a contract 
where you've placed the whole burden of meeting timetables on the 
vendor is appalling."

Large guarantees also shut out many players, Mr McCabe said. "Such 
sums immediately put the project in the domain of very large multinationals.

"Nobody else can put their company on the line."

Meanwhile, Australian Privacy Foundation spokesman David Vaile said 
there was a risk that any contracts negotiated prior to the passage 
of all three proposed access card bills would be negated if they were 
inconsistent with the final legislation.

"If I was a tenderer, I would be seeking advice on this risk," he 
said. "Key design decisions, apparently being made prior to executive 
or legal authorisation, also raise project management and governance concerns.

"Major IT project disasters are typically traceable to such failures, 
so this should set alarm bells ringing."

A spokesman for Human Services Minister Ian Campbell said tenders 
were not expected to be signed until after the first part of the 
legislation had been passed.

"There have not been any concerns raised to date," he said. "There 
will be mechanisms in place to manage changes to the contracts."


Jan Whitaker
JLWhitaker Associates, Melbourne Victoria
jwhit at janwhitaker.com
business: http://www.janwhitaker.com
personal: http://www.janwhitaker.com/personal/
commentary: http://janwhitaker.com/jansblog/

'Seed planting is often the most important step. Without the seed, 
there is no plant.' - JW, April 2005
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