Public markets were once the staunch ally of the incumbent, a close cousin to inertia to change. While this is a valuable process for government agencies to ensure probity and transparency, it has made it prone to human error, with a complex and sometimes manual process requiring each agency to go through all the requirements, writes Daniel Benad.
The expense, time and effort required to issue a request for tender (RFT) and subsequent processing of dozens of bids meant that for many IT departments it was often desirable to simply stay with the incumbent and enter into long-term contracts lest the agency have to go through another procurement process.
Many government agencies have therefore been locked into long-term agreements with vendors such as Oracle and SAP – and with them, locked into long-term and costly maintenance and support contracts for these platforms. Enterprise Resource Planning (ERP) vendors are estimated to make up to 90% profit margins on these maintenance and support contracts, and often these add no value to an organization’s operations. .
Yet, as the process was arduous for both IT and procurement to replace them, their incumbent was perhaps their greatest asset, helping them maintain their status quo position.
However, in Australia and New Zealand, there has been a noticeable transformation that has shortened the procurement process from weeks to days.
The Digital Transformation Agency (DTA) in Australia and the Department of Internal Affairs (DIA) in New Zealand have created easily accessible systems that shorten the procurement process and open up a more flexible approach to these long-term contracts.
In Australia, this is in the form of government-wide agreements: contracts with suppliers that can be quickly viewed and easily signed by any agency in Australia via the DTA. With these specific services offered under a government-wide agreement, it is often no longer necessary to go through the entire tendering process, including maintenance and support of software systems.
The collaborative marketplace
The same is true in New Zealand where the DIA has created the Collaborative Marketplace. These are similar agreements for a large and growing number of services that agencies can now quickly access and implement within the time it would normally take to undertake a full tender and procurement process and ensuing evaluation.
Every government aims to simplify the process and improve the speed of government while remaining transparent to the public.
These agreements aim to save the public purse from budget collapses, as the procurement process is considerably shorter. Additionally, vendors often offer a discounted rate for their services in order to gain agreement, as this can lower their barrier to government acceptance or commitment and reduce the resources needed to procure a solution.
Holder is not as valuable anymore
Suddenly, tenure wasn’t as valuable a trait as it used to be. Recently, we’ve seen agencies take advantage of whole-of-government deals in droves, attracted by the shorter process and lower rates on offer. In the case of ERP maintenance and support, agencies have begun to rapidly transfer contracts from the incumbent vendor to the nimble third-party support provider that can cut those costs by at least half a year and offer support and service superiors.
Ultimately, the goal of these government-wide agreements is to improve flexibility and simplify the process for agencies to purchase technologies and maximize the value of their investments. We are already seeing significant evidence of this, and there are more to come.
*Daniel Benad is Group Vice President and Regional General Director, ANZ and Oceania, at Rimini Street
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