ATO prepares to market test its biggest IT outsourcing deals

The Australian Taxation Office is preparing to approach the market to recontest its three major IT managed service deal in the biggest shakeup of IT outsourcing in more than a decade.

Chief information officer Ramez Katf on Tuesday revealed plans to release one or more requests for information (RFIs) next month to inform what will be a “multi-year” procurement approach.

The contracts will cover centralised computing, end user technology and enterprise services management centre (ESMC), and are collectively worth around $200 million each year at present.

Centralised computing – the largest of the three deals – is currently held by DXC under a 13-year, $2.1 billion contract, while the end user computing and ESMC contracts are held by Leidos.

All three contracts have been in place since the national revenue agency split up its monolithic IT outsourcing agreement with the IT services company formerly known as EDS (now DXC) in 2009.

Katf first flagged the ATO’s intention to replace the contracts – or bundles – in December 2018, a massive task that, at that time, was expected to begin in 2019 and take up to three years to complete.

The overhaul, called the ‘IT strategic sourcing program’, aims to modernise the agency’s IT outsourcing portfolio by introducing shorter, more flexible bundles that are better aligned with today’s market.

The ATO has already adopted this approach for its former managed network services agreement with Optus, which was the first of the IT outsourcing deals to be separated into six bundles last year.

Optus subsequently bagged five of the bundles, including fixed voice services, network management services and contact centre, while Vocus scored data carriage and internet connection services.

Katf said the IT strategic sourcing program will “reshape how we get these services into the organisation”, while providing “greater opportunities for competition” and “better value for money”.

Using responses to the RFI, the ATO plans to conduct market sounding and analysis for the IT sourcing program during 2021, before approaching the market in 2022 and finalising contracts in 2023.

The RFI, currently planned for June, will seek “strategic dialogue with the market to inform bundle structure, scope, commercials, pricing approaches and procurement strategy; with a focus on what the IT ecosystem will look like from 2023”.

“The technology ecosystem continues to evolve, and our outsourcing model needs to adapt and become future ready,” Katf added.