Strategic review of the whole of Australian Government single seller arrangements

5.20 The IOF typically requires the submission of two key artefacts as part of the two-pass business case process:

• Solution designs which provide the architectural plans relevant to the business case, and commonly identify the capabilities and technologies required.
• Procurement Plans which can provide specific insight into the intentions of agencies and often reflect the outcomes of an initial approach to market (e.g. Request for Information). 

5.21 Where sellers or technology choices are specifically identified within the business case, these can be consolidated into the technology architectural landscape for the Australian Government, noting the review acknowledges there are Government security provisions which apply to New Policy Proposals.

5.22 In respect of the SSAs, it is noted that the IOF is primarily focused on New Policy Proposals. While this framework provides robust oversight for investments in technology over $10m, including the sustainment of the solutions typically over the forward estimates (a five-year window), it commonly excludes consideration of expenditure that is essential for maintaining and upgrading existing digital capabilities, or any agency internally funded technology projects. 

Digital Investment Plans (DIPs)

5.23 The establishment of this planning represents a key data and information gathering opportunity, to identify emerging large-scale product and service requirements, which in turn may support SSA opportunity identification. The Digital Investment Plans can capture: 

• Both Capital (CAPEX) and Operational (OPEX) spending plans.
• Inputs from the Investment Oversight Framework, especially in relation to Procurement Plans outlining proposed technology choices.
• Operational enhancements or upgrades, where they meet relevant thresholds.
• The planned technology architecture landscape within agencies, aligned to the Australian Government Architecture wherever relevant. 

5.24 As relevant, this can be supplemented by engagement activities to understand technology roadmaps or strategies as relevant to the SSAs.

Seller technology plans

5.25 Sellers commonly make available their technology plans, including upgrade plans and end of life intentions. These are critical inputs to the long-term planned use of technologies, in particular cloud services. 

5.26 The DTA could overlay the actual usage, IOF and DIPs with these seller plans as part of determining key areas of focus for negotiations and determining emerging whole of Australian Government technology risks which could be addressed through the SSA.

Contracting model

5.27 In considering whether the SSAs be retained, the review came from a first principles perspective, weighing the relative strengths and weaknesses available as contracting models.

5.28 A range of models are available to the Australian Government when contracting with technology sellers, which include: 

• Strengthened SSA contracting framework (proposed model): the updated SSA model with proposed recommendations from this report implemented.
• Limited tender SSA model (current model): the existing Limited Tender model with no changes made (i.e. recommendations from this report are not implemented).
• Panel model: the DTA run an Open Tender to establish a panel (similar to those already on BuyICT), or subsume the SSA sellers into existing panels.
• Individual agency contracts: encompassing any contractual mechanism whereby the relevant agency contracts directly with the seller.
• Model contracts: example contract clauses are designed (similar to the Commonwealth Contracting Suite) and agencies leverage these as part of contracting activities.

5.29 The strengths and weaknesses impacting each of these models is outlined in the table below.

5.30 Further to the above, and as already noted within this report, the SSAs are complex. Given that both the SSA seller and the Australian Government have to be satisfied with the contract negotiation outcome, there will always be an element of difference between each of the SSAs respectively and any panels in place, reflective of the outcome of the negotiations.

5.31 While the precise structure and format of the head agreement and contracts are to be developed and implemented by the respective legal teams of the DTA and SSA sellers, the following observations were made.

5.32 In respect of these elements, the following is provided:

• Condition precedent: these can be utilised as a key means through which specific targets, and outcomes for achieving those targets, can be incorporated within the SSAs. Importantly, an escalation of targets, rather than a single trigger point, can help reflect potential growth or shrinkage in the usage requirements of the Australian Government throughout the life of the SSA.
• Protection of negotiated terms: it is critical to preserve negotiated terms and conditions through ‘Order of Precedence’ so that these are not overridden by the SSA sellers’ global terms and conditions which are regularly updated, and which can give rise to unintentional risks to buyers (e.g. through seller terms overriding SSA provisions or adding new risks). Any update SSA sellers want to make to key terms and conditions (e.g. those associated with sovereignty) could be undertaken through the periodic reviews of the contracts.
• Inconsistency of the SSAs: usage of the SSA sellers’ terms and conditions as the basis of the SSAs (or the basis for some of the components of the SSAs) is a key contributor to the difference in contractual layouts. This makes it harder for buyers to comprehend and utilise the SSA, as each SSA is different and some are markedly different from both the layout and standard set of terms and conditions the Australian Government utilises, for example, the contract structures provisioned under the established DTA Marketplaces. Use of the Australian Government's terms and conditions as the basis is a key mechanism to drive consistency.
• State and Territory tailoring clauses: as noted earlier in this report, a mechanism required to enable States and Territories to utilise the SSAs is for specific clauses or addendums to be included to enable alignment with State and Territory laws and policy. Failure to do so means States and Territories cannot sign onto the SSA, noting this also has to be agreed to by both the DTA and the seller.
• One size fits all: there is little stratification of the relevance of clauses to differing sized entities within the Australian Government. Whilst there is a bare minimum set of clauses required for policy, some clauses (e.g. governance, liquidated damages) could be adjustable based on an agency’s buy profile. Further, buyers reported having limited ability for agencies to turn off and on clauses that are not applicable to them under the head agreement, which would aid in providing greater flexibility.
• Ease of comprehension: the contractual language and layout was reported by several buyers as being difficult to understand. Whilst the review acknowledges the documents are designed with specific legal language in mind, wherever terminology and layout can be simplified will assist in buyers and sellers being able to interpret the head agreement in subsequent discussions with SSA sellers (e.g. negotiating contracts or in delivery).
• Buyer autonomy: buyer autonomy is provided for through the contracts under the SSA head agreements. This approach enables buyers to define their own specific requirements, whilst leveraging the terms and conditions contained in the SSA. Further, the experience from GovERP was that autonomy in technology architecture is critical to ensuring fit-for-purpose, efficient technology solutions in government. This was echoed by buyer representatives.
• Mandatory use: mandatory use of the SSAs needs to be retained, given the substantial effort both parties have undertaken to negotiate them and the alignment with government policy which is achieved through the SSAs. This is particularly important given the mandatory nature of the SSAs is a key bargaining chip. In absence of the mandatory requirements, the review heard larger agencies in particular may walk away from the bargaining table undermining negotiation leverage.
• Mandatory minimum clauses: the establishment of a mandatory clause minimum within the head agreements sets a key governance mechanism to safeguard any override of certain critical clauses (e.g. security and data sovereignty provisions), which cannot occur without the express approval from the DTA. This strengthens the bargaining position of buyers when interacting with sellers and agreeing relevant contractual amendments under the SSA. Exceptions will always need to exist to these mandatory clauses, especially as the technology environment changes, such that the DTA needs a means to assess exceptions.

5.33 The review also heard from a range of buyers that:

• The terms and conditions within the SSAs were sometimes out of alignment with the scope and intent of the project being run by the buyer.
• Anecdotally, there is evidence that SSA sellers are undermining the use of the mandatory agreements in some instances.
• Agencies continue to report that where an SSA isn’t in place they are seeing variability in pricing / rates across the Australian Government.

Clarity through a framework

5.34 In the context of the SSA model being identified as the preferred model, there is opportunity to strengthen the DTA’s ability to identify, manage and close SSAs by formally implementing a framework. This will also enable transparency for other sellers seeking such an arrangement with the Commonwealth.

5.35 The review found a lack of clarity amongst stakeholders regarding the conditions that govern the Australian Government’s decision to establish an SSA, and the basis on which to assess sellers. While the DTA draws on internal documentation that outlines how SSAs are appointed and managed, this information is not publicly available. 

5.36 Stakeholders broadly agreed that contracts of this magnitude and impact to the Australian Government and economy, need to be assessed on the basis of agreed upon and widely known rules, or criteria.

5.37 A framework will drive transparency and understanding of the SSA life cycle by:

• Determining the strategic planning processes, data and information sources for identifying emerging SSA opportunities.
• Providing the basis on which to invite a seller to enter into an SSA.
• Testing and evaluating current SSAs.
• Informing and educating all stakeholders.

5.38 Proposed elements of the framework are outlined below. Other elements requiring inclusion are: the purpose and objective of the framework, governance, roles and responsibilities, risk management, and the continuous improvement model.

5.39 The DTA should publish a framework that supports clear and transparent assessment of the suitability of existing and potential SSA sellers, and reassess the incumbent SSAs against the new framework to determine ongoing eligibility.

Defining conditions that warrant an SSA

5.40 The DTA has internal guidance that can be utilised to assess whether a seller meets a range of criteria for consideration in being an SSA. This includes consideration of:

• The seller's annual spend across the government.
• A comparative market assessment of the products and services offered.
• Whether there is a competitive market for the relevant products or services.
• Strategic alignment supporting key objectives of government.
• The deal which was put on the table, including willingness to agree to terms and conditions favourable for the government.
• Whether the SSA is considered ethical and low risk.
• The desire for multiple buyers to have a long term, strategic arrangement.

5.41 In considering the internal guidance, stakeholder feedback and insights from this review, a set of principles were developed that could underpin the choice of an SSA as part of a published framework. 

5.42 Under these principles, an SSA could be established where, on balance, the principles are met. Meeting any one of these principles by itself may not indicate that an SSA be established. Conversely, failure to meet a principle in isolation may not cause a seller to be disqualified from the SSA.

5.43 Given the importance of SSAs to the Australian Government, the DTA must retain discretion in making a decision to enter an SSA, based on the evidence obtained and the extent to which a seller satisfies these five dimensions.

5.44 A brief discussion surrounding these principles is provided below. 

Limited viable alternatives

5.45 SSAs make sense to be considered when similar suitable products or services are not readily available in the market.

5.46 Evaluating alternatives requires a robust understanding of market dynamics so as not to undermine the principles of transparency, fairness, and accountability relevant to the CPRs. In the technology market, whilst the SSAs are an example of limited viable alternatives existing in some instances, this criterion will be rarely met by any other seller to be considered for an SSA. For example, Appendix G: Competitive landscape provides examples of products that compete with the existing SSAs.

5.47 Factors that may contribute to the availability of viable alternatives include:

• Compliance with data, cyber and security obligations.
• Copyright and intellectual property restrictions.
• Willingness to adhere to Australian Government terms and conditions.
• Geopolitical considerations.

5.48 Nonetheless, the consideration of the availability of alternatives is a critical factor in assessing whether an SSA may be required.

Usage and criticality

5.49 The extent to which a product or service is used, in combination with its criticality, is an important consideration, given the benefits tied to volume, and continuity and reliability of core technology. Where usage of a technology product or service is low, negotiating an SSA is unlikely to yield sufficient return on investment to justify the effort and resources required. 

5.50 In consideration of usage, there needs to be consideration of:

• The total amount of Australian Government spending with the SSA.
• The total number of agencies utilising the seller. (Where there are a lot of agencies (e.g. 20+), this supports the establishment of an SSA. Where there are few agencies, it would be more appropriate for bespoke contracts to be established by the respective agency).
• The ‘Offer on the table’ (discussed below).

5.51 The combination of these factors represents the return on investment to the Australian Government, when the expenditure required by the DTA to establish the SSA is also considered (refer to the Costs section of this report). 

5.52 Separately, there may be instances where the criticality of the SSA seller to the Australian Government’s technology landscape warrants an SSA being established despite the return on investment. To maintain competitive tension in the market, the circumstances that warrant an SSA solely for criticality reasons will be rare. 

5.53 Assessment could be undertaken through the utilisation of a quad chart as depicted in the graphic below:

Compliance, performance and behaviour

5.54 Compliance and seller behaviour form a foundation of trust. Products and services under consideration must align with established government policies and standards to ensure adherence to regulatory requirements and strategic objectives. Proven seller behaviour, including adherence to ethical practices and a commitment to delivering on promises, is vital in fostering long-term, strategic partnerships.

5.55 Leadership and engagement in fostering genuine strategic technology partnerships is necessary to elevate shared goals rather than short-term transactional engagements. Sellers demonstrating poor compliance, underperformance, unethical behaviour, or actions that conflict with the values of the APS will not align with government’s expectations. Such sellers risk eroding trust and the collaborative spirit essential for SSAs. Further, behavioural evaluations can be extended to assessing sellers’ contributions to enhancing public-sector capabilities. 

5.56 Performance of the SSA seller is another factor to be considered by the Australian Government, as outlined in the Improving reporting and transparency section of this report. Performance can be considered at both the establishment of a new SSA, as well as throughout the life of the SSA to inform any decision to renew the SSA. 

5.57 By prioritising sellers with a demonstrated commitment to the right compliance and behavioural practices, the Australian Government can establish SSAs that uphold public values while addressing critical needs. Where breaches are identified by agencies or the DTA, the DTA need to hold the SSA to account under the established contractual mechanisms, including the potential dissolution of the SSA where warranted.

Strategic and architectural alignment

5.58 The extent to which the SSA seller and its technology aligns with the various strategies across the Australian Government is an important factor to ensure these strategies are able to be achieved. Strategic alignment can be drawn from across the Australian Government, including:

• List of Critical Technologies in the National Interest
• Data and Digital Government Strategy
• 2023-2030 Australian Cyber Security Strategy
• Buy Australian Plan
• APS Net Zero Emissions by 2030
• APS Reform Agenda
• PSPF Directives
• Alignment to other Australian Government policy settings.

5.59 Architectural alignment to the Australian Government architecture is a further consideration in this area. Products or services must integrate or interoperate seamlessly with existing systems while adhering to common standards and fostering data-sharing capabilities. This is important to optimise resource allocation within agencies and improve digital service experience for Australians.

5.60 Stability must be balanced with flexibility - where significant architectural differences exist, the costs of integration and interoperability may outweigh the benefits, rendering an SSA impractical.

Offer on the table

5.61 The value of the offer is an important determinant of whether an SSA be pursued. 

5.62 Whilst discounts are key, greater value can be sought by considering the holistic value proposition by the seller. This is particularly relevant as it relates to improving the total cost of ownership over the life of the SSA, and sustainability beyond that point. This is further discussed in the Considering the holistic value proposition section of this report.

5.63 Further, given the risks outlined in this report, the value of the offer needs to substantially exceed the costs to the DTA outlined in the Costs section of this report. Whilst specific contract value thresholds could be implemented (e.g. a minimum of $100m must be spent on the seller prior to an SSA being implemented), sellers and the DTA are better to consider the return on investment, whereby the benefits are weighed against the costs and risks.

5.64 Where the offer is materially the same as the retail price available, there is little real cost avoidance available to the Australian Government beyond what can be obtained from panels. Such instances will not support the establishment of an SSA.

Testing the assessment process

5.65 In considering the sufficiency of the criteria outlined above, the review tested the assessment process against a sector that does not currently have an SSA in place: the cyber security sector.

5.66 The review considered specifically the relevant products and services to assess at a high level whether there is an emerging government cyber security requirement against the proposed SSA framework principles.