The Australian National Audit Office Report which highlighted the multiple failings of the Coalition’s IT Outsourcing program, exposes Telstra’s role in the Group 5 contract won by Advantra, Shadow Minister assisting on Information Technology, Senator Kate Lundy said today.
The Auditor General revealed that: “In December 1998, OASITO advised the Group 5 Steering Committee that it had advised all tenderers that, at that stage, there was no business case to outsource.” (page 140)
The report also reveals that the revised pricing by Advantra, provided on March 8 1999, was still $7 million above Group 5’s cost baseline. Further negotiations between the parties led to a miraculous reduction in the bid by Advantra by $7 million. Advantra had not been selected at that stage, with the preferred tender not endorsed until the 25 March 1999.
The Auditor’s Report finding on the Group 5 tender outcome states:
In the Group 5 tender process, it was not until seven months after the tenders closed in August 1998 that potential savings for the group were identified. The successful tender was offered savings over the five year term of $0.96 million or about 1% of the total Group cost baseline…. A written briefing confirming the outcome of final contractual negotiations with the preferred tenderer was not provided to the Minister for Finance and Administration prior to the execution of the Services Agreement.
(page 143)
Advantra, at the time of winning the Group 5 contract, were a consortium of Telstra (50%), IBM (30%) and Lend Lease (20%). Speculation at the time of the tender suggested that this combination allowed the partners in IBMGSA, also a Telstra, IBM and Lend Lease consortia, to access the IT outsourcing contracts as an ‘Australian’ company. This would assist a Coalition under pressure for excluding Australian companies from tendering.
The
Audit report also implicates Telstra, the‘majority member of the joint venture forming the company agreeing to become a party to the contract’ as failing to provide a ‘Deed of Performance’ on or before the required date of 31 May 1999. This deed was the main form of protection for agencies in Group 5 in the event of a substantial failing on behalf of Advantra. Execution of the ‘deed of performance did not occur until over a month later, including 6 days after the commencement of the Services Agreement.
Since the Group 5 contract has been awarded, IBM and Lend Lease have departed and Advantra is now a fully owned subsidiary of Telstra.
This experience demonstrates that the Coalition, through the Department of Finance, facilitated the manipulation of process, scope and financial calculations to ensure that the political outcome desired by the Minister for Finance was achieved.
However even these efforts were not enough. The Audit Report calculated a net cost of the IT Outsourcing to Group 5 agencies of $5.71 million. Group 5 Agencies include Transport & Regional Services, ACCC, PM&C, DoCITA and DISR.
Contact Simon Tatz 0418 488 295
