Audit: channel scoured by large outsourcers

Audit: channel scoured by large outsourcers

A new report on the federal government’s IT outsourcing policies has recommended that it take a more proactive stance in ensuring that large multinational suppliers meet Australian industry development requirements.

The Australian National Audit Office (ANAO) report recommended the Government increase the amount of information required from its outsourcing partners, as current levels did not identify whether suppliers are meeting Australia’s industry development commitments and SME participation as established in their original contract plans.

These industry development rules were designed to ensure that large suppliers provide, via sub-contracting agreements, valuable opportunities for smaller, local Australian businesses such as resellers and integrators in gaining access to Government contracts.

In particular, the ANAO report criticised changes introduced by the revised Procurement Policy Framework in June 2002. These saw the introduction of voluntary guidelines setting out the government’s expectations for strategic industry development (ID) activities by its ICT suppliers. While these revised arrangements had simplified the ID requirements, “partners will only have to contractually agree to minimal mandatory SME participation levels.”

As a result of these changes, the role of the Department of Communications, Information Technology and the Arts (DCITA) has also diminished to that of an advisor, thereby allowing suppliers to escape repercussions if they fail to maintain sufficient industry development levels - such as adequate local SME participation.

This flies in the face of one of the government’s key goals when it launched the outsourcing initiative - to enhance the growth and competitiveness of the Australian IT &T industry by promoting the involvement of SMEs in its external contracts. To fulfil this objective, all contractors were required to submit an industry development plan, and expected to meet annual development targets set by the government.

Although the five current contract holders had continued to submit annual ID reports, shortfalls found each year had not been addressed by reinforced ID commitments or plans, the report stated.

Shadow Minister for Information Technology, Senator Kate Lundy, seized on the ANAO report after repeatedly requesting the department explain its position on ID requirements in recent months.

Lundy said that the failure of large contractors to sub-contract local channel companies had indirectly resulted in the failure of several resellers, such as IBM partner Approved Systems. She cited CSC as an example of where an original promise to sub-contract at least 24 per cent of their business to local SME’s had been watered down under a new arrangement to 11.8 per cent. CSC was also committed to ensuring that 80 cents in every dollar spent by its customer would be spent in Australia – that figure now stands at a measly 53 cents.

“This completely contradicts the minister’s previous lip service paid to facilitating small business access to Government IT outsourcing contracts,” she said.

For more on the ANAO report, see this week’s issue of ARN.

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