ATO drops Telstra, CSC from $385m deal

The Australian Taxation Office (ATO) has dropped Telstra and CSC from consideration for its managed network services contract, worth up to $385 million over seven years.

The decision leaves Optus and Dimension Data still in the running. For the next six months, both companies will be negotiating contracts with the ATO, according to a statement published yesterday.

The managed network services contract, worth around $55 million a year for between five and seven years, covers the ATO's data and voice carriage services, telephone, Wide Area Network (WAN), Local Area Network (LAN), call centre infrastructure and components of its security services.

Yesterday's decision brings the ATO a step closer to completing the lengthy process of overhauling its outsourcing contracts. A 2007 review by the Boston Consulting Group resulted in the ATO's decision to break up its $1.8 billion 10-year deal with EDS, which covered its entire IT infrastructure. The contracts were separated into three bundles.

The ATO is yet to narrow the two shortlists of contenders for its "end-user" and "centralised computing" contracts, which were under the same evaluation process. CSC, EDS, Telstra-owned KAZ Group, Lockheed Martin Australia and Unisys in July were selected to workshop proposals for the ATO's end-user computing deal. Meanwhile, Lockheed Martin, CSC, IBM and EDS in September were selected to undertake the same process for the ATO's "centralised computing" contract, worth $160 million per year.

The ATO said it expected to announce the winner of its managed network services deal by mid-2009, however, Telstra and CSC may be thrown a lifeline if its negotiations with the Optus and Dimension Data fail.