Govt pays PwC $2.5bn to manage its property

The Federal government has announced it will contract PricewaterhouseCoopers (PwC) in a $2.5 billion Commonwealth non-defence property management agreement, which the government claims will generate $88 million for the local economy.

In his keynote speech at the Australian Outsourcing Summit yesterday, the federal minister for finance, John Fahey, said that PricewaterhouseCoopers Solutions Limited would manage the upgrading and maintenance of the Commonwealth's global chanceries and properties through a five-year, web-based technology initiative.

The Government manages over 400 chancery properties in 50 countries.

PwC Solutions, a subsidiary of PwC, will relocate its IT team to Canberra to develop integration and IT installation services for Commonwealth property management. PwC will also launch a 40-staff call centre in the ACT to service government properties in the Asia-Pacific.

Knight Frank has been subcontracted by PwC to provide business development consulting for the government's property management policy.

A $20 million proportion of the contract will be subcontracted to local small-to-medium enterprises (SMEs), Fahey said. However, the catch is that they must prove they can "add value" to the local economy by showing established industry partnerships and prospects for regional development, he said.

The PwCdeal will also save the economy $74 million in overhead costs, Fahey claimed.

The contract is a new component in the government's broader five-year IT outsourcing plan, in which it has invested $900 million in IT products and services.

The plan will also see the government export $290 million worth of new IT products to overseas markets, namely the Asia-Pacific, and generate $400 million in revenue and potentially 400 jobs in tendering contracts for SMEs, according to Fahey.

He said the PwC contract was evidence of the government's "commitment" towards outsourcing policy reform, and showed a shift in mindset towards private sector integration. "We're committed to forming long-term strategic relationships through outsourcing and improving service delivery via the skills acquired by IT contracting," he said.

"(Government) agencies are aware there is no provision for in-house bidding," Fahey added.

Federal government expenditure on goods and services purchased through outsourcing was $40 to $50 billion over the last year. Total procurement operation expenditure was $28 billion per year, according to Fahey.

Additionally, 60 per cent of IT contracts are awarded to SMEs, surpassing the government's 10 per cent target. This figure translated to $5.8 billion in revenue for the IT industry, Fahey said.

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