Chapter 3
Risks
3.51 The review considered the key risks of having the single seller arrangements (SSAs), the potential for unintended consequences, and how to manage or further mitigate these risks.
3.52 The below table lists these key risks and the assessed risk rating. Overall, the review found the key risks identified were low to medium, and either already effectively managed or with some opportunity for improvement which are reflected within Chapter 7 Recommendations and actions.
Risk title | Risk rating |
|---|---|
Seller lock-out | Medium |
Buyer locked into seller | Low |
Single seller vulnerability | Medium |
Insufficient flexibility | Medium |
Increased administrative burden | Medium |
Misalignment with technology, policy or legislation | Medium |
Unrealised value for money | Low |
3.53 The following sub-sections contain a description of each risk using a simplified risk statement (sub-section title), followed by a rating of that risk, then a fuller discussion of that risk. Risk ratings were assessed in alignment with Appendix I: Risk matrix.
3.54 Note, additional risks are identified by sellers and buyers at contractual levels relevant to key aspects of discovery, design, implementation or sustainment of the products and services offered under the SSAs. Rightfully, these risks are best considered ahead of agreeing the relevant contract. These include risks associated with data privacy, security, architecture and delivery.
Seller lock-out
Assessed risk rating
Likelihood | Impact | Risk rating |
Possible | Moderate | Medium |
Description
3.55 Seller lock-out relates to the prevention of other sellers from competing to provide the same products, services and solutions as the SSA sellers. The review found the risk of seller lock-out is medium.
3.56 The review summarised a high-level competitive analysis, which can be found in Appendix G: Competitive landscape. This showed that there is strong competitive tension amongst the SSAs themselves within common product or service groupings, a dynamic that helps offset some of the seller lock-out risk. Nonetheless, decisions by buyers that result in the potential exclusion of alternative providers may lead to over-reliance on a limited pool of large sellers, which possibly diminishes the Australian Government's bargaining power over time and a concentration of specific capabilities. Proper procurement by buyers is essential to help the Commonwealth to mitigate these risks while supporting buyers to access reliable technologies.
3.57 As a contracting framework, the SSAs are most appropriately aligned with instances where specified products, locked down by intellectual property rights, are not available through alternative providers. These circumstances allow the Australian Government to leverage its buying power while ensuring access to essential technologies that are critical for operational continuity. By focusing on such uniquely positioned products, SSAs can serve to protect government interests while capitalising on the proprietary expertise of the seller.
3.58 Conversely, the use of SSAs for services is less compelling, especially given the establishment of numerous services panels (e.g. Digital Marketplace Panel 2, Management Advisory Services Panel, People Panel). These panels demonstrate the availability of diverse service providers capable of meeting government requirements. Furthermore, many of the SSA sellers maintain extensive Australian partner networks comprising thousands of local companies, indicating that the domestic services market is both strong and diverse.
3.59 Many of the agencies interviewed confirmed they do not utilise the SSAs as a procurement pathway, rather only as a contracting framework. Nonetheless, a commonly cited means through which the use of the Coordinated Procurement provisions within the CPRs can create a competitive advantage for SSA sellers is by lowering contracting costs and simplifying engagement processes. How this can happen is depicted below.
- Contractual complexity making understanding what is available, and for what price, challenging.
- Insufficient training or a lack of awareness regarding how to access and deploy available features constrains agencies from realising the full value of the arrangement.
- SSAs which include bundling of products, of which some products were not required by buyers.
- SSAs can be restrictive and fail to adequately align with the specific operational requirements of agencies, particularly in relation to their unique environments. (A particular SSA requires agencies to commit to a minimum buy over three years. The review acknowledges this reflects commercial reality for the seller (i.e. the discount price was offered because of the commitment to buy).)
3.86 These limitations can further hinder agencies’ ability to fully leverage the agreements benefits, raising concerns about the SSAs’ effectiveness and flexibility in meeting diverse needs across government.
3.87 Feedback from several agencies indicates SSAs could deliver greater value if there was flexibility to amend contractual clauses, remove provisions unnecessary for the specific engagement and to clearly specify requirements (e.g. warranties). In particular, some larger agencies stated they have been able to negotiate more favourable outcomes directly with SSA sellers by committing to large, well-defined purchases. In some cases, buyers and SSA sellers negotiated separate contracts to better address the situation. This highlights the importance of tailored contract design in achieving cost efficiencies and meeting agency objectives, but also instances where the actions of SSA sellers could be regarded as less strategic and more opportunistic in nature.
3.88 Although the ability to amend the agreements to tailor them for the specific agency requirements is valuable, appropriate governance over such amendments is necessary, including DTA’s authority to approve changes given its role as the central owner of the SSAs.
3.89 States and Territories echoed the requirement to further tailor SSAs. For example, the South Australia Government could not use one of the SSAs it considered of interest because it does not comply with the State’s privacy requirements, appropriate Service Level Agreements cannot be incorporated and insufficient remedies for breach of warranty.
3.90 Another key factor cited by buyers regarding flexibility was the inability to adjusting (e.g. true up or true down) purchase quantities, especially where changes have occurred beyond their control (e.g. Machinery of Government changes). The review noted the shift to cloud and ‘as a service’ models have enabled more dynamic adjustments to be made to purchase quantities (e.g. daily or monthly subscription models).
Key mitigations
3.91 The below key mitigations were identified:
- Engage key buyers to determine strategic technology plans.
- Include a select group of buyers at the negotiating table to actively support the DTA in achieving the best possible outcome.
- Include mechanisms to enable flexible product reallocations across buyers, treating the Australian Government as a single buying entity.
- Ensure any contract entered which has the effect of modifying a head agreement is subject to DTA approval to ensure the impact on protections included in the head agreement are not circumvented inadvertently.
- Deliver training and education to support buyers in understanding the arrangements.
- ‘Bolt on’ addendums to alter the head agreement or contracts for specific agency or State and Territory needs, similar to the AWS agreement.
Increased administrative burden
Assessed risk rating
Likelihood | Impact | Risk rating |
|---|---|---|
Possible | Moderate | Medium |
Description
3.92 Another risk that relates to the SSAs is the risk or complexity in the head agreement. Many buyers, including States and Territories as well as Commonwealth agencies, reflected on the complex nature of some of the arrangements and the administrative burden required to negotiate individual agency contracts under the SSA, and manage and track use of the arrangements.
3.93 Efforts to maximise value frequently result in the inclusion of bespoke contract elements, tailored to address specific needs or circumstances. In the Australian Government context, examples of these include requirements associated with privacy, Indigenous or Australian industry procurement preferences, data sovereignty, and cyber and security. While beneficial, these customisations often introduce significant complexity into contract management processes. This added complexity can dilute potential efficiencies, undermining the advantages the arrangement is intended to deliver.
3.94 Buyers also noted that some inefficiencies they experience are due to how the clauses have been administratively designed. For example, the visibility of reporting credits available for use and processes for tracking usage of these could be streamlined. These inefficiencies are most heavily felt by large agencies. Defence, for example, manages hundreds of technology contracts, and requiring education across all of them is challenging at scale.
Key mitigations
3.95 The below key mitigations were identified:
- Clarify responsibilities across buyers, sellers and the DTA, for example through a Responsible, Accountable, Consult and Inform (RACI) model, for SSAs to identify where administrative activities exist.
- Where possible, drive contractual consistency to create commonality and support administrative efficiency.
- Include a select group of buyers at the negotiating table to actively support the DTA in achieving the best possible outcome.
- Deliver training and education to support buyers in understanding the arrangements.
Misalignment with technology, policy or legislation
Assessed risk rating
Likelihood | Impact | Risk rating |
|---|---|---|
Almost certain | Minor | Medium |
Description
3.96 The risk that SSAs do not remain aligned to evolving technology, policy or changes in legislation is rated medium. The review found evidence, as discussed earlier, of areas for improvement in how the SSAs apply policy in practice. However, the DTA have adopted review processes to ensure compliance on behalf of the Australian Government.
3.97 Over the past two decades there has been a significant shift within the Australian Government from an on-premises technology environment to cloud and ‘as a service’ models (e.g. Software as a Service, Platform as a Service, Infrastructure as a Service). In particular, this has seen a shift in the licence model from upfront purchase of software (e.g. buying and installing Windows Vista) to on-demand subscription models (e.g. month-to-month subscription for M365). Despite these changes, an overarching agreement (i.e. the SSA) is required so as to align to the specific policy the Australian Government has implemented.
3.98 Ongoing policy and legislative change inevitably affect long-term contractual arrangements. Despite this, long-term contracts are a key point of leverage in the Australia Government’s bargaining strategy. Therefore, whilst longer term SSAs will require updates to be periodically made as the policy and legislative environment changes, the DTA ought to continue to ensure appropriate mechanisms are in place to keep up with the changes. It is noted, all six of the SSA head agreements have clauses that allow for updates in response to legislative or policy shifts.
3.99 Responding to changes within the technology environment can be more challenging. Broadly, most of the SSAs provide for flexibility, however, there have been some successes and some challenges in responding to technological change. For example, the whole of Australian Government Microsoft Copilot trial and subsequent roll-out across Commonwealth agencies demonstrates how SSAs have been used to adapt to technological change.
3.100 Whilst the emergence of some technologies can be predicted with greater clarity (e.g. quantum), the exact timing of these changes cannot be easily foreseen. As such, mid-contract or periodic reviews are critical to address evolving requirements without conflating these reviews with exit provisions or option periods.
3.101 Given changes in these environments happen dynamically, there is not an optimal contractual length which could be agreed upon by stakeholders. Rather, implementing review points throughout the SSA's life will support addressing this challenge.
Key mitigations
3.102 The below key mitigations were identified:
- Retain clauses that enable alignment to policy and legislative changes.
- Establish periodic reviews, independent of provisions for contract termination.
- Enable the addition of emergent technologies to be negotiated into contracts following the completion of any procurement process (e.g. establishment of a new whole of Australian Government panel or an agency having identified a new technology it wants to procure).
Unrealised value for money
Assessed risk rating
Likelihood | Impact | Risk rating |
|---|---|---|
Possible | Minor | Low |
Description
3.103 The risk that the SSAs do not deliver value for money is low. Notwithstanding the importance of ensuring competition in procurement processes, buyers consistently stated the SSAs provide a useful mechanism to contribute to the achievement of value for money for the Commonwealth, including through non-financial benefits. In saying that, some raised the variability of these benefits at the individual agency level as an area for improvement.
3.104 As described in more detail in the Funding model section of this report, the current funding model is complex. While the Central Administration Fee (CAF) recovers the costs of administering the SSAs centrally, the Consolidated Revenue Fund (CRF) savings fee, collected and returned to the CRF, does not contribute to the administration of the SSAs. In a value for money assessment and comparison between an SSA seller and a non-SSA seller, an agency may find that financially it is more expensive (to the agency as opposed to the Commonwealth) to select the SSA seller, given the additional CAF or CRF savings fee it needs to pay.
3.105 Some larger agencies stated they could negotiate the same or even better discounts or terms and conditions for themselves, relative to those in the SSAs. This is indicative of the value of leveraging the large agencies at the negotiating table to maximise the value able to be derived for the benefit of all agencies across the Australian Government.
3.106 Some smaller agencies stated that specific thresholds for triggering certain discounts were not always aligned to their buy profile, and bundling can result in the provision of certain unnecessary products and services.
3.107 Another example is discounts being tied to a certain volumes of licenses, with limited ability to subsequently true down to reflect the actual usage over time at either a buyer or whole of Australian Government level (e.g. such as during times of machinery of government changes or reducing the APS workforce, and the resulting lesser need for licenses). This results in agencies sometimes paying for more than they require. Insufficient flexibility in this regard undermines whole of Australian Government value for money outcomes.
Key mitigations
3.108 The below key mitigations were identified:
- Engage buyers to understand strategic technology plans, buy profiles and respective requirements.
- Include a select group of buyers at the negotiating table to actively support the DTA in achieving the best possible outcome.
- Enable contractual and usage flexibility as discussed in the Ensuring flexibility section of this report.
- Reconsider the funding model with particular focus on minimising unintended consequences from the CRF savings fee.
Chapter 1: Introduction
An outline of the purpose of this report and background on the SSAs.
Purpose
1.1 The Digital Transformation Agency (DTA) engaged SolsticeIT to conduct an independent strategic review of the Australian Government’s Single Seller Arrangements (SSAs) to assess whether they are likely to remain fit-for-purpose, deliver ongoing value and continue to support the Australian Government's digital transformation agenda.
1.2 The findings highlight opportunities for the DTA, as the steward of the SSAs and the government’s digital marketplaces and panels, to:
- Strengthen how SSAs are negotiated and managed to ensure continued alignment with government priorities.
- Deliver maximum value for agencies.
- Enhance security provisions aligned to data and digital sovereignty requirements.
- Enable digital transformation of the Australian Government.
- Support the ongoing delivery of essential services.
- Deliver greater economic value to Australia.
1.3 Further details about the scope of this report can be found in Appendix L: Scope.
How to read this report
1.4 This report has been written with seven chapters.
- Chapter One: Introduction - an outline of the purpose of this report and background on the SSAs.
- Chapter Two: Alignment to policy, strategy and legislation - an assessment of whether the SSAs are aligned and supportive of government strategy.
- Chapter Three: Benefits, costs and risks of the SSAs - analysis of whether the benefits realised by the SSAs outweigh any of the associated costs and risks.
- Chapter Four: Jurisdictional comparison - exploration of how other comparable arrangements are being managed.
- Chapter Five: Optimising the SSAs for the future - how to get the most from these arrangements moving forward.
- Chapter Six: Other opportunities - other areas for improvement identified by the review.
- Chapter Seven: Recommendations and actions - what should the DTA do to improve the SSAs.
1.5 At the start of each chapter there is an overview page that summarises the key insights and findings.
Chapter 1
Track adoption of new technology
Track adoption: Prior to implementing a new technology, determine whether it aligns with the clear intent of the service and whether it risks leaving certain types of users behind. If implemented, monitor how users respond to the new technology and respond to any accessibility or useability concerns.
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