WISPers of change – ICT services panel discussion paper

Author: 
John Sheridan - CIO & CISO
Category: 
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AGIMO is pleased to continue its program of consulting industry to seek advice on procurement issues. Today we are releasing a discussion paper on proposals for new ICT services panel arrangements -- available here on the blog in DOC (127k), PDF (101k) and HTML formats. We want to emphasise that this is a discussion paper. It is not policy, or even draft policy. The paper outlines the current ICT services panel situation, proposes a new model and encourages your input on the proposals. Some represent just incremental change from current practices. Others, if supported, could be more profound.

In his report, Sir Peter Gershon identified a need to improve the efficiency and effectiveness of the ICT marketplace. Among other measures, he recommended and the Government accepted, a measure to optimise the number of ICT panel arrangements across government. There are some 87 ICT services panels across government today. The average ICT services contract is worth $185,000. However, the median value is only $40,000. 72% are valued at less than the $80,000 that normally delimits the requirement for open tendering. Below $80,000, the typical requirement is for three written quotes.

To be competitive for this business, suppliers probably need to be a member of more than one panel and be well known to those that commonly seek quotes. This can be quite a hurdle. As you will see, the paper proposes measures to address such matters. We are keen to see if you think they could work.

We look forward to your comments. The post will be open for comments for about two weeks.

Regards
John Sheridan

 

Comments on this blog are now closed. Please let us know if you would like to discuss this post or have any general comments

Comments (17)

Hi,

This is definitely a good paper for the discussion of the PROCESS of procuring ICT services, and suggests a number of positive steps to streamline the PROCESS.

Panels, while useful, often do not feature online ICT services which are not championed by an Australian vendor - Salesforce.com, IdeaScale, and so on. Some of these are quite cheap and can sit below procurement thresholds, however some are not.

Australia is not a big enough market for many of these services to bother attempting to get onto a government panel here.

I also think thought needs to go into redefining what is meant by an ICT service given the growing range of cloud services available from vendors around the world.

And if I've misunderstood what you meant by 'ICT services', then a definition would definitely help!

Cheers,

Craig

Adding to Craig's comments the ICT environment is becoming complex as more portable devices eg iPads and Smart phones are becoming our normal desktops.

There is a strong need for agency integration as the 'client' expects multiple services from one corporation - Government.

I believe this is achieveable now more so than any other time previously. Keeping pushing on.

From my brief reading of the document I see a few issues. The overall tenet appears to be increasing competition and reducing the cost to government using auctioning etc.. This is fine for commodity services, but does not address the pubic sector's general lack of innovation and adaptability to change. Suppliers that can add most value in this space don't fit into the "auction" model. Agencies will not be able to articulate their needs to the extent that the job can be put to open tender.

In my view the reason why many agencies like to keep projects small and under the 'tender' radar is so that they can in fact work with a supplier, jointly develop an area of innovation, develop a trusted relationship that is required when something new or innovative is being attempted. The 'cost' to an agency in trying to develop a tender for non commodity services can be enough to kill it off before it even starts.

The model as I read it does very little to encourage longer term relationships between agencies and suppliers, at least in the areas that it matters.

The self funding & fee concept looks fine.
A brief comment in relation to the reliance on the Vic Government's eServices Panel:
The definitions there-in exclude "information security".
This oversight has previously been raised with the Vic Government, who have said it was being addressed.
AGIMO should take a lead to ensure it is an essential component of ICT services.
there should be a structured, annual opening of a window for refreshing, allowing new technologies and new entrants to make their case for inclusion on the panel.

My thanks to everyone who has commented to date. We have a received a number of responses on this blog, as well as via email.

I realise that the discussion paper proposes a large number of changes and I would like to give you more time to consider them, so this blog will now remain open for comments until 21 January 2011.

Regards
John

This panel makes sense for low value contracts with a few caveats.

Need to ensure that the cost of responding is commensurately low. Too often the effort required to respond to low value RFQs is onerous in proportion to their value and in general, underneath current arrangements, the cost of bidding is higher for small deals than large deals, as a percentage of the contract value. This makes it uneconomic for all businesses when responding to small RFQs. So to increase competition, the cost of participating must be lower. This can be achieved through templated responses, automated systems and well written questions, as discussed in the document.

As mentioned previously, you need to ensure that the panel has a broad range of categories and that new categories can be added easily. This will allow the panel to adjust to new industry innovations like cloud services that come to market relatively quickly.

I can understand the reasons for ensuring that there is a reasonable quality of companies on the panel however the bar shouldn't be set so high that SMEs find it difficult to enter. Part of this is also not having restrictions, like submission deadlines, around when a company can join as this will also restrict the entry of new companies to the panel.

The concept of a reverse auction is questionable. A reverse auction is a race to the bottom price such that other factors that impact quality are factored out unless they can be quantified. This works for commodity products but not as well for services. Laurie put it well in respect to innovation and IP. How to measure the value of innovation and IP? They could be new and have no quantifiable measure. Small to Medium Enterprises (SMEs) are also Subject Matter Experts (SMEs) with specific IP or innovation that has more value than just the cost of labour. In this case the auctioning system could act as a barrier rather than enabler of competition.

I don't think that an auctioning system to determine price should be the final step. If it must be used (and I'm not advocating that it be), apply it coarsely as an intitial broad filter to ensure that there are a reasonable number of respondents that can then be qualitatively assessed. I think you need 3-4 responses to have a reasonable evaluation. In addition, I think agencies should indicate their rough budget so that potential respondents can choose to qualify out before going through the process. This will also help reduce the work load for the bid writers and evaluators.

Given the broad reach of the panel, the Deed of Standing Offer, AGIMO should actively engage with industry to seek feedback and refinement of the Deed so that it is a quality document. Eg. there are a number of lesser quality Deeds out there with clauses that don't follow Federal Government guidelines on limiting liability which increases the cost for business to respond to them and consequently the cost for the agency.

Having an open and competitive market is more than just more competitors but rather active engagement by the agencies with the market to share information and seek feedback. Encumbents may be entrench because they have a relationship and knowledge that isn't available to other market participants so engagement with the market by agencies will help break down barriers to competition.

The general approach around using electronic tools to assist with assessment is a sound approach to deal with the increased workload that could come about because of a more open market. The tools however should allow for innovative solutions to be proposed so shouldn't be too restrictive.

I think it is reasonable to assess suppliers performance and participation in the panel however need to be careful not to discriminate against companies that have a low participation. This could be because of a range of factors including prudent decisions to qualify out because resources aren't available to respond or deliver work, or compelling value proposition (eg. opportunity driven by price, not innovation. To help improve the quality of RFQs coming out of the panel, I think suppliers should be given the opportunity to rate the RFQs regardless of whether they were successful or not. This can be used by agencies to refine how they go to market and improve their chances of getting what they really want - improved value for money.

The membership fee is interesting. $2000 annual fee could be a barrier for an SME so perhaps it should only apply where company turnover passes a threshold. Perhaps the fee should only apply when a company wins business and then only applied as a proportion of the contract value up to a maximum of $2000 per annum. In the end, I think industry will be happy to pay a fee if it represents value for money. For industry that could mean proven access to a wider range of quality opportunities, simple bidding process, opportunities to present the best value (more than just price), open engagement with potential clients, a commercially sensible Deed of Standing Offer, and a responsive panel administrator.

Apologies for the long response. Good luck with all of this.

I think generally the document is a fair way forward for building a simplified panel procurement process.

Like Jeremy I have misgivings about the inclusion fee, while I understand the want to only include serious bidders.

As a very small SME (less than 5 staff) I would see spending $2000 for each panel (well really any panel) up front with no way to measure return, as risk. I might be interested in the idea of a fee being payable after the first contract award as more palatable but in effect this will just be included in the price of that contract. So I have no real solution for you.

Perhaps a certification system where competency comes into play, perhaps three references from clients Government or Commercial and then a closed reporting system for continued certification.

I would NEVER rate my experience with a client in public and would be highly unlikely to say anything negative where they could see it. Remembering the adage the customer is always right and of course I would like the opportunity to work with clients more than having an easy life. If I had difficulty working with a client surely I would just opt to not respond to those opportunities.

I'm not sure I am Robinson Crusoe with being nervous about public feedback systems.

I am keen to grow our direct services business so easier engagement is very welcome.

Would you be interested in attending a briefing session on the proposal ICT Services Panel in early 2011? If so, please fill out the form at http://agimo.govspace.gov.au/2010/12/17/ict-services-panel-industry-briefing/.

John, pleaased the blog is to remain open until 21 Jan, enabling deeper thought on the proposed changes.
Happy to participate in a briefing session next year.

John, please that the blog is to remain open until 21 Jan, enabling deeper considerations of the proposed changes.
Happy to participate in a briefing session Q1 2011.
Cheers

If a supplier negatively rates an agency, the expectation of the supplier is that they will not get any more business from that agency and maybe from other agencies as a result.

An anonymous ‘Out of 10’ rating that requires a minimum of say 5 or 10 assessments prior to release would provide more candid feedback from suppliers and would smooth out the inevitable ‘one off’ stuff ups.

There is an expectation that this process will achieve cost savings for agencies due to the combination of increased competition and the online price negotiation process. The scale of those savings will be relative to the value of the project. Therefore, the ‘fee for use’ model with a percentage fee based on the value of each project would appear to be the most equitable approach. A smaller agency with very few projects would feel an annual fee is unjust and would be justified in objecting to the fee.

"The WISP proposal would utilise ‘best price’ tools similar to eBay™ to rank bids in order of final price, after a reverse auction." I would stay away from this process. Projects to deliver a 150K solution are different to buying a iPhone cover or used mountain bike.

Smart agencies will know that "transactional" procurements based on price may not deliver the strategic value higher priced vendors can offer.

A joing fee could be good although I would question the 2K fee as being too high. The Vic eServices panel structure still results in many companies not being approached so the value of panels is always questioned by sales teams.

I think the panel should use social media to connect vendors and agencies in a secure environment. This could allow conversations that lead to user and agency centric innovation and R&D which is what the big picture should be focussed on. The ability to join interest groups and meet face to face would further support this. Looking at how the Australian ICT sector can grow internationally is also another big picture goal for the Australian economy - could this panel support this?

I think the panel proposed is a great idea - with some major modifications. If the panel can support the growth in Agency quality of service, ICT innovation and skills attraction into the ICT sector then it has even more value to Australia.

It was a good paper.I think it is a good idea for the Government to continue to do due their due deligency to ensure the ICT suppliers can stay in business through out the life of the tender, any adverse events for the company and directors. Also, the government should montior some of its key suppliers.

The main points that should be considered are the following:

- Establish standardized processes for mitigating contractor risk;
- Validate potential contractors with rigorous due-diligence during the pre-award phase;
- Monitor contractor risk during the post-award phase;
- Adopt a portfolio view that assesses and manages the collective risk of contractors across the entire organization;
- Use automated reporting tools to strengthen management, transparency and oversight.

http://www.dnbgov.com/pdf/Contractor_Risk_Manage_WP.pdf

Thank you all for your comments. I’ve written a new post addressing the feedback we’ve received so far. I am also extending the time period to make comments on this post until the morning of January 27 2011.

Well, well. This is certainly a big topic and thanks again for the chance to provide some feedback.

I have had a long love/hate relationship with panels. Of course, when I am on them I can love them and when I am not on them I can hate them. Having said that, even when I have been on them I have had real concerns about them.

In the first, the problem that I have is that they can tend to be a "lazy" means to procure services. Of course there is much merit in the development of good long-term relationships between agencies and suppliers. However, these can become a bit cosy for my liking.

The other thing that really concerns me is the length of panels. Especially in my world, the digital space, a panel can lock out a whole lot of new suppliers from agency consideration.

As most who frequent this blog will know, a week is like an eternity in the digital world. So, smarter, funkier, and cleverer firms can find themselves locked out of the agency procurement world by the over-use of panels.

I think that my current situation is a great example. I have just set up my new and very funky digital agency, PUSH. Now I have been around for a while now - coming up to 20 years - and have delivered hundreds of digital projects for gov. But with panels pretty much dominating the procurement of the services I want to sell, I am locked out.

So, having said all of this, the thought of a whole of government panel is going to be a real potential problem. I am not sure what the solutions are but I imagine that the "refresh" concept would be vital.

I think that you also need to be careful of the barriers to entry that you might place in the process. Again using my PUSH as an example, I can see some suggestions in the paper that would mean I could not get onto the panel. Being brand new, I have no government 'reference' (well, I do have one now) but I could mount an arguement that I have loads of gov experience.

So, there would need to be some real fidelity in how firms are selected. Again, not sure what the answers are.

As for having to pay a fee ,,,, ummm that is a pretty interesting notion indeed. I am not sure if it is something that exists in another space. Have to say that it makes me uncomfortable. Of course, 2K is nothing to me but it might be something to a real new player. I would be very careful with that.

I think that the terms "IT services" is the big problem. I am in the "digital" space and so I do not identify with "IT" in any specific way. I also identify with "communications", "marketing" and indeedy the new "engagement" terms. So, I would like it to be the IT and Digital Services Panel if anything.

There is a mountain of difference between the work that I do and something like a major IT system. Lumping them together into one panel is something that may need to be considered.

I would be much more interested in seperate panel that might be called "Digital and Gov 2.0 Services". You could still have the IT panel for all the full-on IT folks.

There is my two-cents worth and thanks again for the chance to input.

The WISPer blog is now closed for comment. I thank you all for the time and effort you have taken in participating in this discussion.
If you have any further comments, you can direct them to the email address ictprocurement@finance.gov.au

Regards

John

Last updated: 28 July 2016