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Telstra and Optus to face competition for state dollars

Telstra and Optus look set to lose their stranglehold on telecommunications in the Victorian public sector, following the establishment of an online marketplace to give government agencies more flexibility and access to new suppliers. 

Expected to be operational by mid 2015, VicConnect will replace the decade-old Telecommunications Purchasing and Management Strategy (TPAMS).

Agreements awarded in 2004 and due to expire in July this year include data services supplied by Telstra, fixed voice services by Optus and mobile services by both vendors. The government's internal telephone network is managed by NEC.

Victoria's Minister for Technology Gordon Rich-Phillips told IT Pro he wanted to introduce more competition and make it easier for agencies to switch providers.

Last year Victoria replaced its eServices panel, which had locked unapproved ICT suppliers out from doing business with the state for up to four years, with an online eServices Register which eligible vendors can join at any time. To date, about 800 have done so.

The telecoms market had changed significantly over the past decade - as had the size and nature of government requirements - and agencies needed to be able to take advantage of the most efficient and cheapest services, Mr Rich-Phillips said.


"We saw an opportunity within Victoria to be more flexible in the purchasing of telecommunications ... with contracts up for renewal, we can look at ways to do things better."

The state went to market in March for a supplier to establish and manage the VicConnect marketplace and develop a framework for a government cloud. It plans to issue a request for proposal later this year and has allocated $9.5 million to the initiative over four years.

Current supplier arrangements will be extended until new contracts are in place. Until the marketplace is operational, agencies will not be free to go to their supplier of choice.

Victoria spends about $1.5 billion a year on ICT products and services.

The procurement overhaul forms part of a broader reform strategy designed to attract ICT companies to the state and restore credibility to its management of IT projects, in the wake of high-profile debacles, including that of CenITex.

Established in 2008, the shared services bureau was expected to save $40 million a year by merging the systems of 14 agencies but degenerated into a "feeding frenzy" for IT contractors, who delivered poor service to customers.

Elsewhere in Australia, the model continues to move in and out of favour. While Canberra is considering pulling back office functions together into a super-department, Queensland has put its shared services bureau CITEC on the market.

Mr Rich-Phillips said the Victorian government wanted the benefits of aggregated purchasing but the model of a government owned entity was "not necessary in the current climate".

Victoria's ICT reforms were expected to lead to cultural change within the public service and increased focus on "collaborative dialogue as part of the procurement process", he said.

Historically agencies had been loath to engage with project suppliers during the early stages, due to probity concerns, and the result was often poorly aligned expectations and "sub-optimal outcomes", he added.

IBRS analyst Alan Hansell said Victoria scored highly for good intentions but its reform program remained short on detail about how procurement would be improved and management transformed.

"Both are complex tasks and difficult to measure," Hansell said.

"I do not know of a state government that has done both in a credible way. I would like to know how the new approach will accelerate project delivery, engage agencies to fast track using new technologies and develop staff skills - all of which are hallmarks of transformation.

"Ministers like to promote use of commercially astute procurement practices but inevitably they slow acquisition of services and delay projects."

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