The Australian Taxation Office (ATO) has re-signed infrastructure outsourcer EDS for another two years at the price of $300 million until 2008, at the same time negotiating another two-year contract extension until 2010 without going to public tender.
The new deal plus option effectively doubles EDS' initial five-year contract signed with tax in 1999 for $500 million dollars, neatly pegging the ATO's infrastructure services costs at $100 million per year.
Computerworld is currently trying to clarify when, if at all, the current EDS contract will require market testing.
In the likely event EDS stays at Tax until 2010, the company will have extracted $1.1 billion out of the taxman while having only once having its position market tested.
Yet despite the size of the deals and lack of challengers, the ATO is stressing it is still getting best value for money from EDS after it substantially rewrote the vendor's contracts to its own fancy at every available opportunity.
This includes a series of punishing chargeback provisions which allows the ATO to charge EDS for the cost of any technology failures, service delivery deficiencies and delays not only for IT, but across the whole of the ATO.
Architect of the new contracts, ATO second commissioner for IT Greg Farr argued the new extensions provided both significant leverage for the ATO while decreasing cost.
"This means no net increase in costs against current forecasts and we expect unit costs will actually go down each year. We have also negotiated improved service level agreements which give us the flexibility to meet changing business needs," Farr said.
Despite the large sums, Farr was also quick to point out ATO contract extensions since 2004 allowed the Taxman to keep the whip hand over the vendor and walk away at short notice should it desire.
"A big factor in deciding to continue with EDS was the success of our negotiations to improve the existing contract and to provide flexibility into the future," Farr said.
"The additional two years is solely at our discretion and gives us the flexibility to manage unforeseen risks in the run up to the delivery of the final stage of the Change Program in 2008," he added.
The Change Program is a $350 million architecture and applications rebuild that will see the Tax Office replace its core tax administration system and migrate a range of legacy applications onto a single a platform.