Contract management still in dark ages despite multimillion dollar deals

Vendors need to be more accountable

The Australian Taxation Office (ATO) announced the biggest ICT deals in the public sector last week including a $A22.9 million contract with Telstra for voice services.

This is in addition to other ATO deals for business software solutions worth $6.6 million and $2.4 million.

A $1 million tender was also issued by the ATO last week for a software asset management system.

Another deal of significance was between Centrelink and business intelligence vendor Cognos for $9.97 million.

Despite all of the activity, a contract lifecycle management expert claims Australian organisations are still operating in the dark ages when it comes to managing contracts effectively.

Open Windows CEO, Adam McInnes, said fundamental flaws still exist in contract management which is why cost over-runs are still a part of IT project delivery.

McInnes said the inability of the customer to make vendors accountable for cost over-runs and scope creep has meant that the mistakes of the past are being repeated over and over.

Historically, he said vendors have had better contract management processes and systems in place because revenue contracts have always been perceived to have a greater direct impact on the bottom line than contracts on the buy side [supplier and procurement contracts].

Sales and revenue gains are still "incorrectly" seen as more important than cost control in procurement and in supplier contracting and outsourcing.

"A dollar saved in procurement is actually equivalent to two or more dollars earned in service delivery, but customers have been far too slow to put systems in place around what is being delivered under supplier contracts and enforce supplier obligations and compliance.," McInnes said.

"Government bodies in particular have lacked the negotiation expertise in putting deals together and failed in implementing the systems required to properly manage suppliers through each stage of a project.

"More time is spent on legal terms and conditions than commercial outcomes and service levels in contracts that would allow more effective post-execution management and on-time delivery."

However, McInnes admits both public and private sector organizations are moving toward the adoption of contract management software.

This trend was initially driven by compliance but the market is shifting as customers realize a broader range of benefits.

For example, last week in Tasmania, the department of infrastructure, energy and resources issued a tender for contract management software to improve reporting of contract performance for bus services across the state.

The Western Australian and Queensland governments are already using this software as well as private sector organisations such as ING and Bluescope Steel.

Next month RailCorp in NSW will award a contract for an integrated contract management system.

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