08 Dec 2016

The Digital Transformation Agency will transform Australian Government IT procurement

By Alexandra Wedutenko and Natasha Smith

Commonwealth entities are on a "watch and wait" for the direction that IT procurement will take in the future, as the DTA is established and the IT Procurement Taskforce finalises its consultation process.

The role of the Digital Transformation Office is expanding, and with it the possibilities in Commonwealth IT procurement.

Rebranded and reinvigorated with new responsibilities, the Digital Transformation Agency (DTA) was formally established in late October 2016 to guide, oversee and drive the Australian Government's digital and ICT agendas.

One driver behind the centralisation of Australian Government IT duties to the DTA is the streamlining of the procurement processes for ICT services, and a focus on finding efficiencies and maintaining a flexible approach.

This means that the market will be more easily accessible by a larger range of providers of IT goods and services, including  small- to medium-sized enterprises and start-up enterprises, which it is hoped, will drive competition and innovation.

Another is an increasing appetite for opening up data and processes and letting the private sector in, and a greater push for transparency on how entities are spending money on IT procurement and the procurement processes themselves.

All of this will inevitably involve a change in the way that Commonwealth entities approach IT procurement, and appetite for risk.

The key functions of the Digital Transformation Agency

The DTA will be responsible for the IT policy and ICT procurement functions, currently managed by the Department of Finance:

  • provide strategic and policy leadership on whole-of-government and shared information and communications technology and digital service delivery, including ICT procurement policy;
  • design, develop, co-ordinate, deliver and monitor policies, standards, services and delivery platforms for whole-of-government shared ICT and digital service delivery;
  • co-ordinate the funding of whole-of-government and shared ICT and digital service delivery platforms;
  • manage a whole-of-government ICT program management office which will oversee all significant ICT and digital investments; and
  • provide advice to the Minister on whole-of-government and shared ICT digital service delivery proposals. 

The DTA will examine how entities can conduct the business of ICT investment and IT procurement more quickly and in less risk-adverse manners than traditionally undertaken; we think this means that the DTA will look to a central and co-ordinated programme management capability and be heavily involved in the formulation of all major ICT, digital and data projects with entities.

To inform the DTA on how best to deliver this streamlined approach to Australian Government IT procurement, PM&C has established the ICT Procurement Taskforce to consider how best to achieve this.

It's released a public consultation paper, seeking submissions on three key areas of ICT procurements (the rules, capability and culture) to collect feedback on how to improve innovation in government through ICT procurement.

The consultation paper states that the ICT Procurement Taskforce has two objectives:

  • to make it easier and cheaper for ICT businesses to contract with the Australian Government; and
  • to deliver better government services at a lower cost.

So what does all of this mean for the future of Commonwealth entities undertaking IT procurements?

While it is still early days for the DTA, from what we have seen so far, there will be a fundamental shift in the way in which Commonwealth entities  will be required to undertake IT procurement.

Procurement Rules and policies

Tendering processes for large-scale IT procurements have traditionally been time-consuming and resource-intensive tasks, which have proved to be too cumbersome for smaller, less well-established vendors to particulate successfully in.  The concept of a faster, more flexible and less risk-adverse approach opens the way for SMEs and other start-up companies to participate effectively. 

However, for this concept to be realised, the Commonwealth Procurement Rules may need some relaxation and Commonwealth entities, presumably under the guidance of the DTA, will need to ensure that their internal processes for planning procurements, drafting request documentation, approaching the market and running tender processes allow them to react quickly in line with market expectations. Entities will need to familiarise themselves with and utilise initiatives such as the Digital Marketplace and the Business Research and Innovation Initiative, as relevant.

Commonwealth entities will also need to ensure that they fully understand and apply relevant policies, such as the Cloud Computing Policy and the Cyber Security Strategy, and support the Government's commitment to open data. It will be interesting to see if the results of the consultation paper indicate whether these policies (or any other procurement related policies) limit or frustrate engagement with the private sector, and what barriers they present to the ICT sector in realising the DTA's agenda of a faster, more flexible process. 

Developing an appetite for risk

Engaging with risk is also being promoted as part of the DTA's strategy. Commonwealth entities do not typically have a big appetite when it comes to engaging with risk.  However, the reality of any commercial deal is that the parties involved are going to have to engage with a level of risk in order to achieve the outcomes they require, and which provides the best value for money for the Government. As such, Commonwealth entities are going to need to review the way in which they engage with industry and consider the risks which they can realistically shoulder, to achieve commercially sensible and value for money outcomes for IT procurements.

The consultation paper suggests that:

"into the future, the Australian Government's ICT procurement decision must consider whether the best quality service can be provided by:

  • owning the solution;
  • partnering for the solution; or
  • providing the solution via high-quality interfaces." 

Cyber security

Considerations of security (and in particular cyber security) and privacy will likely, and necessarily, be at the forefront of an entity's IT procurement consideration.

Where, for example, entities' legacy systems are being overhauled or replaced, or where new systems are being built to facilitate the digitisation of services where manual models were utilised previously (whether these systems are internal IT systems to the entity or public facing systems) it will be important to ensure that in the pursuit of fast-paced, less risk-adverse procurement processes, entities ensure that appropriate security strategies are designed, implemented and maintained.

Relevantly, this relates not only to that the physical security of the system is protected, but also to the system's capability to detect and appropriately respond to and defend itself from cyber security incidents.  From the Cyber Security Strategy it is clear that promoting and enabling the growth of business, both in the private and public sectors, through a robust cyber security strategy is a top priority for this Government.

It is also clear from recent cyber security incidents involving Australian Government systems that the integrity of digital systems, and the public's confidence in them, can be undermined very quickly if cyber security breaches occur.

Cyber attacks which result in security breaches have the potential to result in a number of other losses and breaches, including loss of intellectual property, confidential information, breach of privacy, breach of duties to govern an organisation properly and reputational loss.

And so, while implementing the Australian Government's desire to open up IT procurement, to bring it in line with commercial market practices, it will be important that entities also ensure that they undertake thorough due diligence processes on any relevant IT solution. A balance will need to be struck between the two, seemingly competing, interests.  This will be an area of tension that the DTA, and all entities, will need to address to realise the objectives of the DTA.

Getting ready

For the moment, entities are on a "watch and wait" for the direction that IT procurement will take in the future, as the DTA is established and the IT Procurement Taskforce finalises its consultation process. In the meantime, it may be prudent for entities to start considering the processes that they currently employ in their IT procurements, what an overhaul of this procurement space might look like, and what effect that have on individual entities.  


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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.