The Digital Transformation Agency is striking government-wide technology deals without input from the large agencies that use them, leading to underwhelming discounts and terms.
The revelation is one of a number in a 233-page report [pdf] published late on Tuesday on the efficacy of so-called single seller arrangements or SSAs.
SSAs are the whole-of-government agreements that DTA has with AWS, IBM, Microsoft, Oracle, Rimini Street and SAP.
While the DTA was keen to highlight that the deals had led to an estimated $1.6 billion in cost avoidance for government in the five years to mid-2024, the figure is somewhat overshadowed by issues – actual and perceived – with the vendor agreements and the way they were struck.
Of particular concern is that the biggest federal buyers of technology, and key users of the whole-of-government agreements – the likes of Defence, Services Australia, ATO, DEWR and Home Affairs – are not involved in the negotiation of the agreements at all.
The report reveals that the buyers did once have a seat at the negotiating table, only to be excluded by the DTA.
“Although previously these buyers had been at the negotiation table, this was subsequently replaced by an SES [senior executive service] sponsoring group which effectively removed these stakeholders from the negotiation table,” the report, prepared for the DTA by Solstice IT, states.
For some of the largest departments and agencies, the lack of input means they are presented with pricing and terms that are worse than what they could negotiate themselves.
“Some larger agencies stated they could negotiate the same or even better discounts or terms and conditions for themselves, relative to those in the SSAs,” the report states.
While absent from the overarching recommendations, the DTA was urged to reinstate the big buyers’ place at the negotiating table.
“The DTA should trial the inclusion of a select group of buyers (e.g. Defence, ATO) at the negotiating table,” the report states.
This would “actively support the DTA in achieving the best possible outcome” from vendor negotiations, while also ensuring that what is agreed is useful for the biggest departments and agencies.
It could also mean even better discounts and terms for smaller agencies – those without the bargaining power, which the SSAs are meant to aid the most.
In addition, it is seen as a mitigation for three out of seven risks associated with SSAs.
Complex, opaque
Government departments and agencies that make use of the whole-of-government agreements identified a number of issues with them.
A common desire was for the arrangements to be described more simply, to aid ease-of-use, although the report’s authors said there “is a pragmatic limit to how simple and easy to comprehend the arrangements can be made.”
Still, there is considered to be broad room for improvement, to help agencies work out whether using the whole-of-government arrangement even makes sense.
“The pricing structures of some of the SSAs create opaqueness,” the report states.
“This opaqueness undermines simplicity, which makes it a challenge for buyers to assess whether the agreed deal is better than other deals being offered by other sellers for similar technologies.”
Both buyers and SSA vendors said that some of the arrangements do not appropriately deal with the lifecycle of technology beyond its initial purchase.
“It was suggested that contract negotiations address not just the immediate acquisition of technology, but its full lifecycle, including ongoing support, upgrades, and end-of-life considerations, as part of a total cost of ownership assessment,” the report states.
The DTA was also criticised for “sometimes adopting the seller’s terms [and conditions]” as the basis of agreements, rather than using more standard government-defined terms.
Running the numbers
About 24 percent of total technology spending across government is sat with the whole-of-government agreements.
While the agreements are said to have benefitted government through “at least $1.6 billion” in cost avoidance over five years, the report found that actual savings are harder to accurately pin down.
“There is poor visibility of whole-of-Australian government spends for some of the SSAs, and of the spends by other [state and territory government] buyers [utilising the agreements], with no single source of truth,” the report found.
“Discounts realised are difficult to quantify, limiting the DTAs ability to track a key benefit of the SSAs.
“There is [also] limited visibility of the use of products or services, limiting DTAs visibility of where value can be further optimised.”
Other improvements sought
The report makes the case for a range of other enhancements to the agreements, including:
- Scoping new SSAs with the likes of Google, Salesforce, Adobe and Cisco for Splunk, as many of these vendors have agreements at the state and territory level, but not federally
- An ability to amend the scope of existing whole-of-government agreements to add “emergent technologies” that did not exist or weren’t productionised when the agreement was signed.
- Establishing “a minimum or standardised set of cyber and security clauses for inclusion in SSAs that cannot be overridden”
- Determining which IT services covered by an agreement need to be hosted on sovereign infrastructure, in advance of the agreement being signed.