Senate committee uncovers blunder in Federal Government outsourcing deal

The Office of Asset Sales and Information Technology Outsourcing (OASITO) has admitted IBM Global Services Australia was supplied critical information relating to final pricing from competing tenderers, CSC and EDS, during the Health Department's IT outsourcing bidding process.

As revealed by Computerworld (1 October, 1999 Page 12), the federal government last year selected IBM Global Services Australia (IBM GSA) as preferred tenderer for the $350 million, five year outsourcing contract covering IT operations of federal health agencies.

But according to Senator Kate Lundy, the federal shadow minister assisting on information technology, OASITO has since been forced to admit "a major foul-up" occurred in the outsourcing bidding process.

Speaking after hearing evidence from both the Department of Health and OASITO, during Senate Estimateshearings this week, Lundy said OASITO had acknowledged IBM GSA was supplied with critical information relating to final pricing from the other two competing tenderers, CSC and EDS, two months before IBM GSA was announced as the successful bidder.

Lundy claimed OASITO had described the incident as an 'inadvertent error'.

She added: "OASITO managed not only to keep the blunder secret from the steering committee evaluating tenders for the Health Group, which includes the Health Insurance Commission, The Department of Health and Community Services and Medibank Private, but they secured agreement from the two compromised vendors not to pull out of the process.

"Despite active attempts by OASITO to keep the foul-up under wraps, an explanation eventually had to be supplied as rumours of impropriety and corruption were circulating widely."

Lundy said the "massive breach" of tender probity would normally result in cancellation of the process, and given the highly competitive tender process that involved spending hundreds of thousands of dollars on complex preparations, would be the fairest solution in this case.

She also called on the Minister for Finance, John Fahey, to supply a copy of the probity auditors report into the circumstances of the tender.

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More about CSC AustraliaDepartment of HealthEDS AustraliaGSA GroupHealth Insurance CommissionIBM AustraliaIBM GSAOASITO

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