Defence initiates new ICT procurement strategy

Part of the strategy to bring savings of $1.9 billion over 10 years is launched

The Department of Defence has kicked off its modified procurement strategy with the aim of achieving significant savings in its ICT spend

The Department of Defence has kicked off its modified procurement strategy with the aim of achieving significant savings in its ICT spend

The Department of Defence has initiated its new approach to procuring ICT services and equipment two months after announcing the changes to its sourcing strategy.

In a statement the Parliamentary Secretary for Defence Support, Dr Mike Kelly, called on the ICT industry to "assist in providing future Defence central ICT services and terrestrial communication services".

The statement says procurement for distributed communication services and network equipment maintenance services for terrestrial communications has begun through two separate request for tenders.

In November, Defence flagged its sourcing strategy as a major area of review in its Defence Information and Communications Technology Strategy 2009 report.

According to the report, while the vast majority of the Defence CIO’s ICT spend was external, a strategic management approach had to date not been taken with this spend.

“85 per cent of expenditure is spent on external providers yet sourcing is highly fragmented, and procurement is decentralised and uncoordinated,” the report reads. “Existing contracts focus on inputs rather than end-to-end accountabilities for business outcomes [and] sourcing acts as a bottleneck, hindering the delivery of business outcomes.”

To address the issue Defence said it planed to consolidate the number of vendors from which it sourced in an effort to have more strategic relationships.

Defence’s infrastructure sourcing strategy will revolve around five technology areas, or bundles: distributed computing, centralised processing, terrestrial communications, specialist communications and applications.

"Although Defence aims to consolidate certain ICT services, and therefore fewer suppliers will be selected, those chosen as key strategic partners will have increased responsibility and opportunity to contribute to Defence's business outcome," Kelly said in the statement.

Defence has set itself the goal of saving up to $1.9 billion over the next decade by spending $940 million to develop an improved Defence Information Environment (DIE) to support the armed forces and business reform objectives to 2030.

As part of its ICT strategy report Defence reconfirmed its commitment to building a new DIE by 2012 and claimed it would bring savings of $1.9 billion over 10 years with continuing savings of $250 million per annum.

Not long after announcing its intentions to modify its procurement approach, Defence released the details of an audit into its ICT spend.

In the report titled, 2008 Audit of the Defence Budget, the authors from McKinsey & Company, said deep reform is needed to provide "much greater transparency in the $22 million annual budget for Australia's Defence." Specifically on the use of ICT, the report says "Defence's ICT asset base is largely depreciated and in need of refresh. Hence, once a consolidated future state architecture has been defined, a significant portion of these savings will need to be reinvested in infrastructure replacement."

The auditors contended Defence must undergo a "comprehensive transformation of the ICT function".

"Where the scope of an ICT transformation is holistic, the opportunity for improvement is typically even greater – with the potential to improve technology efficiency as high as 40 per cent with a concurrent increase in quality (for example, a 25 per cent reduction in outages). Therefore, we suggest setting high aspirations for ICT efficiency savings, which can be used to offset the significant anticipated refresh costs."

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Tags Dr Mike Kellydepartment of defenceICT procurementMcKinsey & CompanyParliamentary Secretary for Defence Support

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