Costs
3.43 Separate from the single seller arrangement (SSA) spend profile, the review considered the cost of the Digital Transformation Agency (DTA) entering into and administering an SSA.
3.44 As it is core business, the DTA tracks the internal cost of implementing and managing each SSA. Whilst each contract negotiation has its unique attributes and timeframes, the table below outlines the average costs for the SSAs. (Cost analysis was provided by the DTA's internal finance team.)
Item | Average cost per SSA |
|---|---|
Establishment / renewal of an SSA (for each SSA) | $1.6m |
Ongoing management of an SSA (annually for each SSA) | $1.0m |
3.45 The DTA funds approximately 50% of these costs through annual appropriations and recovers the remaining 50% via the CAF. (Recovery of costs is used in the general sense of the phrase and conveys an intention not to generate a surplus. Note, SSA cost recovery is not subject to the Australian Government Cost Recovery Policy per paragraph 6 which omits charges between Commonwealth entities.)
3.46 The costs above include the legal fees for contractual legal advice and the APS staff costs to support negotiation (including financial analysis, technical advice, administration and governance).
3.47 It is acknowledged, however, since the DTA is negotiating on behalf of all buyers, SSA negotiations are more complex. This means the cost of the DTA negotiating an SSA are likely higher than the costs of each buyer respectively negotiating an individual contract, but substantially less than the collective total of all buyers incurring negotiation costs separately.
3.48 The ongoing costs of managing the contracts under the SSAs, which are entered into by buyers, are likely to be reasonably similar to not having the SSAs in place and managing bespoke contracts. This would, however, typically be subsumed into existing procurement functions within buyer agencies.
3.49 Whilst the SSAs are a contracting framework, the table below contextualises the costs in relation to the procurement lifecycle and identifies where buyers and sellers realise efficiencies:
| Stage | Costs to the seller | Costs to government entities as the buyer |
|---|---|---|
| Pre-procurement | Generally sellers undertake a range of pre-sales and marketing activities, including the establishment of pursuit teams and budgets. |
|
| Procurement |
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|
Contract negotiation SSA realises efficiencies here |
|
|
| Work order specification |
|
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| Delivery and management |
|
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3.50 As shown above, irrespective of the SSAs being in place, buyers and sellers still incur additional costs associated with pre-procurement, procurement, work order specification, and delivery and management.