Strategic review of the whole of Australian Government single seller arrangements

Background

Brief history of single seller arrangements (SSAs)

1.8 The Australian Government has progressively developed coordinated ICT procurement since the early 1990s to streamline procurement processes, reduce duplication, and secure better value for money in technology engagements.

1.9 The introduction of the General Information Technology Conditions in the 1990s established standardised contractual terms for technology procurement across government agencies. These conditions reduced legal complexity and supported more consistent supplier relationships, but procurement processes remained largely decentralised. In addition, until its abolishment in 1997, the Department of Administrative Services established a series of arrangements similar to those currently in place on BuyICT.

1.10 During the early 2000s, agencies commonly negotiated individual contracts with major sellers, often resulting in inconsistent pricing and fragmented contract terms. The Australian Government recognised the inefficiencies of this approach and began pursuing a more coordinated procurement strategy.

1.11 In 2008, the Gershon Review called for the Australian Government to improve coordination of ICT procurement and manage suppliers more strategically. The review recommended the Australian Government adopt whole-of-government approaches to reduce duplication and improve cost-effectiveness. In 2009, the Australian Government implemented this by establishing the first whole-of-government technology contract with Microsoft. This was the first SSA, known as ‘Volume Sourcing Agreement 1’ or VSA1 for short.

1.12 At this time, commercialised cloud storage and computing services emerged, transitioning the traditional on-premises, perpetual license model to the ‘as-a-service’, subscription-based licensing model that is now common across the modern technology landscape.

1.13 The Australian Government updated its engagement model with Microsoft by signing its second SSA in 2013, VSA2, reflecting lessons learned from the first iteration and creating a unified contracting framework for all Commonwealth agencies. The Australian Government then expanded the SSAs to other major sellers (SAP, IBM, AWS, Oracle and Rimini Street), supported by growing institutional capability in digital procurement policy.

1.14 The November 2013 audit of technology procurement by the Australian National Audit Office further highlighted the importance of coordination. The audit identified shortcomings in fragmented contracting practices and supported stronger central oversight and consolidated procurement models.

1.15 The establishment of central agencies to lead digital transformation further shaped the SSA environment:

• In 2015, the Digital Transformation Office was established within the Department of Communications to drive whole of Australian Government digital service reform.
• In the 2015-16 Budget (see page 94 of Budget Paper No. 2), the Australian Government agreed the Department of Finance (Finance) would complete a scoping study on expanding whole of Australian Government Coordinated Procurement Arrangements for technology products and services. In April 2016, the Australian Government agreed to the scoping study recommendations and provided funding to establish the associated SSAs.
• Concurrently, in 2016, the Digital Transformation Office became the Digital Transformation Agency (DTA), with a broader mandate to lead digital policy, capability, and coordinated technology procurement. The DTA assumed responsibility for managing strategic seller relationships and overseeing whole of Australian Government technology agreements, which included the transfer of administration of SSAs to the DTA through a machinery-of-government change which took effect from May 2017.

1.16 The figure below summarises this history. 

1.17 The Australian digital sector continues to attract interest, including recent reports by the Australian Government on the ‘influence of international digital platforms’ and ‘supporting the development of sovereign capability in the Australian technology sector’. Further, Australian companies are keenly interested in the success of the technology sector within Australia. (For example, Technology1’s report on ‘Improving evaluation of economic impact in ICT procurement’.)

Overview of the current SSAs

1.18 The SSAs are pre-negotiated, whole of Australian Government technology agreements with specified sellers, established to leverage the government's collective buying power and ensure consistency with legal terms and conditions.

1.19 The Australian Government has SSAs with six sellers: AWS, IBM, Microsoft, Oracle, Rimini Street and SAP. At a high level, the graphic below summarises the structure of SSAs:

1.20 Each SSA includes the following core components:

• An overarching arrangement that establishes the pricing, product and services offered, terms and conditions (including alignment to government policy requirements).
• A contract execution mechanism that enables eligible buyers to utilise the SSA.

1.21 There are significant differences in how these components are incorporated into each SSA, reflecting the distinct evolution paths each SSA has undertaken. More recently, the DTA has been working with the SSA sellers to more consistently align the terms and conditions across the SSAs. This has required some of the arrangements to transition from terms and conditions which were initially based on the sellers’ terms and conditions, to a format that better meets Commonwealth needs. Consequently, each SSA exhibits key differences in:

• Agreement structures and mechanisms, and the execution of contracts under the SSA.
• The documentation of all terms and conditions applicable to a specific contract.
• The way in which pricing is presented.
• Obligations placed on the seller, buyer and the DTA.
• Eligibility, as some arrangements exclude certain government entities, and the process for an eligible agency or entity to join an SSA.
• Payment structures for contracts executed under the terms of an SSA.
• Fees charged by the DTA to buyers purchasing through SSA, which provides the core funding for the DTA to administer the SSAs.

1.22 A summary of the key establishment dates for the SSAs are outlined in brief below.

AWS

1.23 The AWS SSA was first established on 1 May 2019, and is now in its third iteration, which commenced on 1 April 2025 for a three-year term that expires 31 March 2028.

IBM

1.24 The IBM SSA was first established in June 2018, and is now in its second iteration, which commenced 15 December 2022 and will expire 15 December 2027. 

Microsoft

1.25 The first SSA with Microsoft was established in July 2009 (this agreement was signed in February 2009, however, began operating from July 2009). This SSA is now in its fifth iteration which was signed on 1 July 2022 has been extended through to 30 June 2026. The current iteration of the SSA provided for an initial term of 3 years, to which there was a subsequent contract renegotiation to extend the contract further for one year.

1.26 Products and services are procured from Microsoft’s incumbent Licensed Solution Provider, Data#3, through a reseller arrangement under the Software and ERP Marketplace Panel (SON3490955).

Oracle

1.27 The Oracle SSA was established on 25 November 2020 for an initial period of three years. Options have been exercised, and the SSA now expires 24 November 2025.

Rimini Street

1.28 The Rimini Street SSA was established on 28 January 2020 for an initial period of four years, with options having been exercised under the contract such that the SSA now expires 28 January 2026.

SAP

1.29 The SAP SSA was first established on 29 June 2017 and is now in its second iteration, which commenced on 29 June 2024 for a three-year term that expires 28 June 2027.

Products and services available under each SSA

1.30 The table below provides a high-level overview of the products and services offered under the existing arrangements.

1.31 Further information about the sellers can be found in Appendix A: Overview of SSA sellers and Appendix E: Commercially sensitive analysis.

1.32 The timeframes relevant to each of the existing SSAs is provided below. (Where option periods exist, these are not included on the below timeframes as this information is commercially sensitive. Microsoft’s VSA dates reflect the end dates.)
 

1.33 Appendix B: SSAs representation on the DTA panels provides further information on the representation of the SSAs on BuyICT with respect to the DTA's marketplaces and panels.

1.34 SSAs primarily support the requirements of non-corporate Commonwealth entities (NCEs), and their use as head agreements is mandatory for these agencies. (Whilst their use as head agreements is mandatory, this does not compel the selection of any particular products or services from the SSA seller.) However, they can also be utilised in other contexts (in some instances, the SSA seller or DTA must approve this), which are:

• Corporate Commonwealth entities (CCEs) and government-owned businesses including Commonwealth Companies and State-Owned Corporations.
• States and Territories.
• Local Councils.
• Public higher education institutions.
• Some other public sector entities and companies fully controlled by the Australian Government or international entities.

1.35 Appendix E: Commercially sensitive analysis outlines the availability for use of these arrangements across these entities.

SSA spend profile

1.36 The amount the Australian Government spends on the SSAs is reported on AusTender (the reporting portal for all Australian Government contracts over $10,000).

1.37 The figures below provide an overview of the total value of the reported spend on AusTender for each of the SSA sellers for the period 2019-2024. (Data sourced from AusTender. The total spend for Microsoft includes values reported through Data#3 for Microsoft products and services.) In respect of these figures, the full value of a contract is included where the start date fell between 1 July 2019 and 30 June 2024, and are split out in to:

• Standing Order Number (SON): all contracts reported against the SSA SON for the seller.

• Contract notices: all other contracts reported against the SSA seller.

1.38 This spend profile was also considered against other digital marketplaces and panels which the DTA have established.

• For figure 6, “other digital marketplaces” is a combination of: Digital Marketplace Panel 1.0 (SON3413842), Cloud Services Panel (SON2914302), Cloud Marketplace (SON3668352), Telecommunications Marketplace Panel (SON3713272), Telecommunications Services Panel (SON3386916), Hardware Marketplace Panel (SON3541738), Major Office Machines Panel (SON3390763), The Mobile Panel (SON2589631), Data Centre Panel 3 (SON3945937), Data Centre Facilities Supplies Panel (Panel 2) (SON2402841), Software and ERP Marketplace Panel (SON3490955).
• For figure 7, “other panels” is a combination of: Cloud Services Panel (SON2914302), Telecommunications Services Panel (SON3386916), Major Office Machines Panel (SON3390763), The Mobile Panel (SON2589631) and the Data Centre Panel 3 (SON3945937).

The below two figures compare the SSAs with these other arrangements:

1.39 The figures above show that buyers across the Australian Government do not solely rely upon SSA sellers, with approximately 76% of the spend profile going through the other digital marketplaces and panels.

1.40 In respect of these figures, the review noted the values published on AusTender do not align to the actual spend under the SSAs for the following key reasons:

• Per Procurement Publishing and Reporting Obligations (RMG 423), AusTender values are reported as the potential maximum value of the contract over its initial term, including all options which may be exercised. In practice, this does not provide an acquittal of the actual spend under the contract or reflect the timing of that expenditure.
• AusTender is a Commonwealth procurement reporting tool and does not include any contracts under the SSA established by State and Territory Governments or other non-government organisations.
• Under the Commonwealth Procurement Rules, AusTender reporting is only mandatory for 65% of agencies, comprising 102 Non-corporate Commonwealth Entities as per the PGPA Flipchart and 25 Prescribed corporate Commonwealth entities as per section 30 of the PGPA Rule.
• Respective buyers undertake reporting on AusTender, which can result in contracts not being reported against the SSA SON, including:
  • Agencies may include report against the SON for the marketplace (e.g. Hardware Marketplace) used in the procurement process, rather than the SON relevant to the SSA.
  • Some contracts for IBM with Defence, the ATO, Services Australia and Home Affairs are reported as separate contracts in AusTender, rather than under the SSA SON.
  • The structure of the Microsoft SSA involves providing products and services through Microsoft’s reseller arrangement with Data#3, which are reported on AusTender under Data#3 contract notices rather than against the Microsoft SON reference.

1.41 Further, some sellers expressly constrain the DTA from publishing information, including SSA spends, unless it is already in the public domain. Noting this, however, engagement with the SSA sellers through the review indicates willingness from the SSA sellers to support transparency common in government procurement globally.

1.42 To address the constraints above and to enhance the transparency of the Australian Government's spending on the SSA sellers, the DTA should, in collaboration with the SSA sellers, publish the full value of expenditure under the SSAs for each respective SSA seller.
 

How SSAs are established

1.43 The DTA has internal guidance for assessing whether an SSA be established.

1.44 When a potential new SSA has been identified, the DTA seeks approval from the relevant portfolio and Australian Government for policy authority to establish the new mandated arrangements and to resource negotiations, which are conducted directly with the seller on behalf of the Australian Government. The DTA then continues to manage the arrangements, including renegotiation of renewals. (Finance Minister approval is not obtained to renegotiate renewals of the SSAs.)

1.45 The below figure outlines the process the DTA follows: 

1.46 The following briefly outlines each of these steps:

• Plan: gather information, monitor market trends and competition, engage with buyers and the seller. The DTA works with agencies across the Commonwealth to understand the intricacies of the pre-existing contracts and value of these, using this as a basis to determine the Commonwealth’s bargaining position.
• Negotiate: work with the seller to achieve a mutually-beneficial arrangement, agreeing the contractual structure and specific clauses. By all accounts, this phase comes with significant complexity and effort by both parties.
• Establish: execute and implement the head agreements as standing offers and any contracts (including those contracts centrally managed by the DTA) with the seller and manage the transition of buyers and their contracts to the arrangement, as appropriate.
• Manage: manage the contract, supporting the seller and buyers in its use across the life of the individual buyer contract, and undertake reporting (e.g. from the sellers to the DTA on usage and invoices, or internal to the DTA to monitor the realisation of benefits).
• Close or renewal: preparing for the end of the arrangement by either renegotiating (and returning to the Plan stage above) or assisting buyers to transition off the SSA, finalise any financial obligations, and document lessons learnt.

1.47 Details on the operational costs of this work for DTA are outlined in Costs section.

How the SSAs are funded

1.48 The DTA is funded to establish and maintain the SSAs through two means:

• Core funding is appropriated for the administration of the SSAs.
• The DTA’s additional costs associated with establishing and maintaining certain SSAs are recovered through a Central Administration Fee (CAF), which is established separately for each relevant arrangement. The fees are reviewed twice annually to ensure the DTA achieves a cost-neutral position. (A cost-neutral position means that the net costs to the DTA of running the SSAs (total costs of running the SSAs, less Departmental funding provisioned by government) equals the total CAF collected by the DTA. In essence, the costs are equal to the CAF and Departmental funding.)

1.49 Separately, in certain circumstances, buyers must pay a savings fee which is calculated based on the total contract value. Monies collected in the form of savings fees are temporarily stored in a special account and returned to the Consolidated Revenue Fund (CRF) in the following financial year. (The CRF savings fee is extended to additional arrangements as agreed by the Finance Minister.) These monies cannot be used to fund activities of the DTA.

1.50 Of note, buyers pay either the CAF or the savings fee, not both.

1.51 The CAF and CRF savings fee are paid to the ICT Coordinated Procurement Special Account 2017 which is limited appropriation that allocates funds for specific purposes. The balance of the special account determines the amount available for expenditure, subject to strict rules around the use of the funds. (Appropriate expenditure includes: Administration of the SSAs, pass-through costs, compliance and reporting, development of procurement technology and tools, user research, technical advisory, and staffing costs.) The Australian National Audit Office audits this account annually.

1.52 The following graphic illustrates the interaction between the amount paid to a seller, the CAF or CRF savings fee paid by the buyer and the discount realised.

1.53 The table below summarises the CAF and CRF fees payable. 

1.54 Further details can be found in the Funding model complexity section of this report.