ATO IT dept caged in AU$1bn outsourcing deals

The Australian Tax Office's past outsourcing contracts were too rigid to cope with technological change, according to its CIO, Bill Gibson -- so this time, business gets shotgun and IT will take a back seat.

The tender process the ATO is putting vendors through for its managed network services work -- worth between AU$275 to $385 million over five to seven years -- is the template for the two subsequent tenders for "end user computing" and "centralised computing" which will commence mid 2008.

Initial vendor briefings, such as occurred yesterday in Canberra, will be followed by expressions of interest (EOI) from vendors that are willing to foot a bill that ATO's Gibson expects could be AU$1 million just to compete for the work.

After this, a select few will be invited to workshop proffered solutions. And only then will the ATO issue a request for tender (RFT).

"That process is different to what others and we have done in past. It's very important that industry understands the principals we are trying to do," Gibson told ZDNet Australia.

Unlike previous tenders, the IT department will be taking a backseat to business managers, with the former only present to translate business requirements to workshop participants from both the ATO and would-be suppliers. Vendors that make the cut at the workshop stage will work closely with the ATO's business stakeholders for up to 12 months before an official request for tender is issued.

"In those workshops IT representatives are meant to facilitate rather than define our requirements and we want vendors to hear firsthand what our needs are from a business perspective," said Gibson.

And while CIOs of other departments such as Customs have warned not to listen to vendor recommendations -- because they always end up costing rather than saving money -- Gibson says the ATO is keen to hear ideas from vendors.

"We want [vendors] to design solutions. We will take on an assuror role rather than designer role. Common sense and the cost of the reality have to remain, so if we don't think a solution is viable we will need to explain why we feel that way. But we wouldn't put the tax system at risk by embracing a solution which is not appropriate," said Gibson.

The stakes are high in the race to win the ATO's outsourcing deals. The ATO spends AU$630 million per year on IT services and infrastructure, said Gibson, which, over the five to seven year span of the outsourcing contracts, amounts to more than AU$3 billion. Outsourced contracts will make up about a third of AU$3 billion.

Ex-second commissioner of the ATO, Greg Farr, said earlier this year that the ATO would be providing special testing rooms, which other vendors -- including the incumbent supplier, EDS -- will be isolated from, to prevent sabotage and intellectual property theft.

Secrecy around the ATO's exact requirements will remain up to the point the ATO issues a request for tender (RFT), according to Gibson.

"At the end of these workshops we will then issue a request for tender. This will describe what we are trying to achieve. Again, it will be something which is not solution specific because to do so would disclose intellectual property that these vendors have been good enough to bring to the workshops," he said.

Performance management and innovation

The ATO will not be relying solely on SLAs to manage vendor performance for this contract, said Gibson.

While the effectiveness of SLAs has been questioned by other government CIOs, the ATO's Gibson said they are necessary despite their limitations.

"SLAs have a place, I think. We'll be employing a balanced scorecard though and underneath that will be SLA and operational agreements. We have to have that so that we can gauge performance and get some confidence around service delivery," Gibson said.

"We will measure performance against achieving business outcomes versus things like 99 percent availability. [Availability] is still a requirement though because we're a 24/7 shop, but it will be more along the lines of being able to achieve business outcomes that are underpinned by robust IT services," he said.

However Gibson said that while he is open to vendor suggestions, he will remain cautious.

"It's quite reasonable to be cautious, not necessarily sceptical. But you need to be fully informed when you make a decision on something. I'm very keen to hear a new way of delivering us these solutions that we're looking for -- there's a business risk that we must make sure we don't impact on," he said.