Feds move on risk as AIIA loses patience on policy

The federal government has moved to fulfil a pre-election commitment to train its purchasing officers to better assess risk when making ICT procurement decisions.However, in a closely-related development, an influential industry group has expressed frustration over the time taken by the government to work through and announce the detail of pre-election policy promises to reduce the liability burden on government ICT suppliers.

The federal government has moved to fulfil a pre-election commitment to train its purchasing officers to better assess risk when making ICT procurement decisions.

However, in a closely-related development, an influential industry group has expressed frustration over the time taken by the government to work through and announce the detail of pre-election policy promises to reduce the liability burden on government ICT suppliers.

The government has issued a request for tender for consulting firms to help it publish a 'best practice' guide which will help procurement officers assess and manage risks in procuring ICT goods and services. The guide will also be available to suppliers.

The guide is designed, according to the Department of Communications, Information Technology and the Arts, to "help give effect" to the government's "proposed policy that ICT contracts suppliers' liability should be capped appropriately". The move was formally unveiled to the ICT industry by the Minister for Communications, Information Technology and the Arts, Senator Helen Coonan, in the leadup to the federal election last year.

Under the policy, unlimited liability should be required as part of ICT procurement contracts only when it is justified by the size, complexity or inherent risk of a project, with liability capped "at appropriate levels" in all other cases. It is slated to replace stipulations in the current procurement framework that provides for Australian government agencies to cap suppliers' liability "when there is a compelling reason to do so".

However, the Australian Information Industry Association -- whose December newsletter touts Senator Coonan's September 19 commitment as one of its two great lobbying successes for 2004 -- today expressed its concern that the fine details of the government's policy were not likely to be known until the middle of this year.

David Kemp, the AIIA's policy manager, government business, said today "to my knowledge there's no concrete developments by way of implemented policy that have actually flowed [from the Minister's pre-election statement .

"We're concerned at the length of time taken to [enact] what [was] a logical, informed decision about procurement and procurement relationships," he said, adding that the issue of limiting liabilities "has been with us for a number of years".

Of particular concern to the AIIA was whether capped liability would be the default in all government ICT contracts bar the largest, most complex and most risky or whether it would merely be available as one of many options that officials could employ when issuing tender requests. "We are hopeful the end result will be a default position of capped," Kemp said.

The industry is anxious to see the default position changed as agencies have historically gone out with an uncapped liability clause in tender requests, requiring tenderers to either try and negotiate capped liability and risk losing the business or sign hugely expensive or deficient insurance deals. It believes a shift would require bureaucrats to publicly justify moving from their default position, ease the insurance burden and give all suppliers a chance of matching insurance costs to actual risk and hence winning more business.

According to the DCITA RFT, the government policy is expected to "address matters such as the circumstances when liability should not be capped and what risks generally are to be excluded from capping (for example, personal injury, breach of intellectual property rights).

DCITA also said a review of the general Government Information Technology and Communications (GITC) contracting framework -- the government's standard ICT contract -- was presently underway and "will provide one mechanism to give effect to the policy changes required.

"This review will also provide an opportunity for GITC users to be consulted in relation to liability capping".

The DCITA request for tender is part of the process initiated by Senator Coonan when she said said in the leadup to last year's federal election: "We will ... ensure that purchasing officers in government agencies are trained and better equipped to make appropriate risk assessments".

Senator Coonan said in her September speech "government agencies should only require unlimited liability for the riskiest of contracts and liability should be capped at an acceptable level for all other contracts.

"Evidence suggests that liability is capped in 90 percent of contracts -- but we will ensure that this is made explicit in the next version of GITC to avoid confusion and protracted negotiations," she said.

DCITA said the principal aim of capping suppliers' liability in ICT procurement was to:

  • help the Australian government obtain value for money in its procurement of ICT goods and services, including through improving the identification and management of risk where this is cost-effective;

  • provide greater certainty for ICT suppliers to government, which should enable them to better manage risks and/or purchase appropriate insurance to cover risks and;

  • enhance tendering and contracting processes.

DCITA warned, however, that the plan was "not intended to result in the shifting of risks to government purchasing agencies where the risks are better managed by the supplier".

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