IBM’s whole of government agreement is approaching $1 billion less than a year after it was announced, with the Tax Office tacking on another $29 million for licences and support for its ageing mainframe.
The Australia Taxation Office (ATO) this month disclosed it had awarded IBM another $28.8 million contract through a limited tender.
The contract was established under the Digital Transformation Agency’s (DTA) IBM Whole of Government Arrangement 2.0.
Announced in January and initially estimated to cost $725 million over five years, contracts signed under the agreement are now more than $900 million, according to AusTender data plus the latest ATO contract.
The whole-of-government agreement reduces procurement hurdles by allowing agencies to buy the company’s hardware, software, cloud services and professional services under standardised terms and conditions. The standardised terms were struck after several months of the Commonwealth negotiating as one entity through the DTA last year in an effort to improve its bargaining power.
Speaking at IBM’s Think summit in July, DTA chief Chris Fechner remarked that the government had “negotiated very hard with IBM” for the new arrangement and that the company colloquially known as Big Blue “came to the party a lot”.
Contracts disclosed under the IBM agreement’s standing offer notices now total $898 million, according to AusTender, with the latest Tax Office pushing this to $927 million, well beyond the initial figure.
But the January projection of $725 million over five years is still correct because it reflects the “initial value” of the agreement, according to DTA acting general manager, digital investment and sourcing division, Michelle Tuck.
She told InnovationAus.com the reason it has climbed higher now is because it also includes “where agencies have signed new contracts with IBM to address a new requirement, or where IBM may have won new work with government”.
“The protections provided in the whole-of-government arrangement ensures that when agencies enter into new work with IBM, the contracts still represent value-for-money for the Australian government,” Ms Tuck said.
More than $350 million in contracts were signed under the current agreement just days after deal was inked last year, as reported by InnovationAus.com, followed by another $402.5 million contract later disclosed by Services Australia.
The contracts with Services Australia, Defence, the Tax Office and Home Affairs alone were valued at $775.8 million in January. With a recent ATO mainframe contract and the latest licences deal, the four agencies have since added another $135 million to the total bill.
The new whole-of government agreement replaced IBM’s former arrangement with the federal government that was initially signed for $1 billion but ultimately ballooned to more than $2 billion over the course of its life.
The ATO’s latest use of the agreement comes as it transitions its IBM mainframe to the company’s latest offering, a z16 it says is capable of scaling to process up to 300 billion inference requests per day with just one millisecond of latency, making it ideal for the surges in demand that face the ATO.
But the latest contract will mostly go to prolonging the current critical ATO IT systems by providing licences and support services.
“The majority of this contract relates to the continuation of IBM mainframe software to align with the mainframe hardware contract term,” an ATO spokesperson told InnovationAus.com.
“A minor portion of the contract is associated with the Z-16 mainframe upgrade to support the increased capacity.”
Limited tender was used because it was the “most appropriate procurement method” to continue the existing IBM software and support being used by the Tax Office.
“A carefully planned mainframe transition is underway and will be completed in 2024,” the spokesperson said.
The ATO began a tender last year for a for a new mainframe as part of its IT Strategic Sourcing Program, which is replacing three of the agency’s biggest technology contracts with nine smaller, more modular bundles.
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