Strategic review of the whole of Australian Government single seller arrangements

Getting the most out of the negotiation

Commercial realities of negotiation

5.71 For context, there are a range of commercial realities the Digital Transformation Agency (DTA), buyers and sellers face when negotiating these arrangements. The below outlines a few of these from each of their perspectives, however, this is not an exhaustive list:

• The technology is critical to deliver to Australians: Although all technologies are not created equal, some of the technology provided by the single seller arrangement (SSA) sellers is crucial for enabling services, infrastructure, and innovation that directly impact Australian individuals and businesses now and into the future.
• Both need each other: Large technology sellers and their buyers rely on each other to achieve mutual goals, whether delivering innovative solutions or maintaining a sustainable partnership.
• Both sides want the best for themselves: Although both buyers and sellers want win-win outcomes, they also engage in negotiations seeking to optimise their own benefits, whether financial, operational, or strategic.
• Australian Government is a valuable customer to the sellers: The Australian Government is highly regarded by technology sellers as a significant buyer, given its strategic importance and purchasing power.
• Negotiations are hard fought: Contract discussions with major technology sellers are often intense, as both parties aim to secure favourable outcomes for their respective interests.
• The SSA sellers are well experienced in negotiating with buyers globally: These multinational technology companies bring extensive experience gained from managing contracts with a diverse range of customers worldwide, necessitating the Australian Government to ensure it has commensurate expertise within its negotiation teams.
• Contracts and associated terms and conditions are complex: Agreements with large technology sellers involve intricate terms and conditions that must address varying legal, regulatory, operational and management requirements across different jurisdictions.
• High switching costs: Opting to change / switch technology typically involves substantial costs (e.g. discovery and design, build / configuration of solutions, reintegration to existing systems, testing, deployment and managing the impact of the change) representing a fiscal barrier to changing technologies.
• Sales cycles in technology sellers tend to drive particular behaviours: Sellers typically focus their resources on securing sales, with service delivery and long-term support often managed separately post-contract.

5.72 In approaching the negotiations, it is acknowledged that the Australian Government SSA negotiators are cognisant of these realities. Within this context, what the DTA prioritises in the negotiations becomes critically important.

What should be prioritised

5.73 A range of key themes emerged, throughout the review, regarding the priorities in negotiating an SSA. These themes were:

5.74 Each of these prioritisation themes are discussed below. 

Fostering strategic partnerships

5.75 A strategic partnership between the Australian Government and the SSA seller is critical given the importance of the technology to ongoing service delivery to Australians and the dollar value of the SSAs.

5.76 Building a strategic partnership requires the DTA, the SSA sellers and buyers to focus on long-term collaboration, rather than transactional interactions. This fosters innovation, adaptability, and mutual trust, ensuring the Australian Government’s evolving technology needs are reliably met by its partners.

5.77 Partnerships, like relationships, cannot easily be codified or captured in a contract. It relies on the human beings on all sides involved, and can pivot from one single change in personnel. Therefore, the right mindset needs to be brought by all sides. Setting the expectations around this mindset is an important first step.

5.78 Critically, a point made by stakeholders was that a strategic partnership must be evident before the establishment of an SSA, rather than the establishment of the SSA leading to the creation of a strategic partnership. This necessitates any seller which does not have an SSA in place to demonstrate its commitment to strategic partnership as a key indicator of it being ready to be considered as an SSA.

5.79 With this in mind, the review acknowledges SSAs are coveted arrangements that demand a higher standard from both buyers and sellers. Across the spectrum of those engaged, a range of views about the behaviours to be modelled under the SSAs were highlighted. These have been formulated into the below strategic partnership model: 

5.80 In respect of each of the elements above, the review provides the below explanation:

• Modelling the right behaviours all of the time: consistently demonstrating ethical, professional, and collaborative behaviours to foster a culture of integrity and reliability within the partnership.
• Co-investment – All parties contribute resources: whether financial, intellectual, or operational - towards shared goals, ensuring mutual benefit and commitment to long-term success.
• Shared ownership of risk: acknowledging and equitably distributing risks strengthens resilience, fostering a partnership where both parties are accountable for challenges and solutions.
• Mutual trust: trust is built through transparency, reliability, and shared values, enabling effective collaboration and aligned decision-making.
• Avoiding exploitative negotiation tactics: engaging in negotiations in a manner which ensures agreements are mutually beneficial and respect the long-term intent to partner over maximising short-term gains.
• Delivering on what you said you would: honouring commitments builds credibility and reinforces reliability, ensuring that expectations are met and trust is upheld.
• Sustainable value creation: beyond immediate gains, focus on creating long-term value that benefits all stakeholders, driving ongoing innovation, efficiency, and success.
• Going above and beyond: exceeding expectations in service, collaboration, or problem-solving enhances satisfaction.
• Proactively optimising solutions: continuously seeking improvements across the product and service suite, including with other agencies to help maximise the uptake of technology better practices.

5.81 Feedback and examples of how the SSA sellers are living up to these expectations can play an important part to support the establishment or renewal of an SSA. Gathering such feedback can go as far as seeking input from the SSAs on their alignment with these elements as a means to strengthen the Australian Government’s relationship with the sellers.

Considering the holistic value proposition

5.82 There is opportunity for contract negotiations to capture a broader spectrum of value, beyond simply pricing discounts. Precisely how this manifests is a matter for the negotiating table, however, there was broad agreement from across stakeholders encouraging the DTA to use a broader lens on what could constitute value. 

5.83 It is noted, however, the introduction of this broader value offering typically comes with additional administrative burden (e.g. reporting), so must be approached with a focus on keeping the arrangements as simple as possible to avoid overcomplicating arrangements. 

5.84 In considering value for buyers, there was also near unanimous agreement that the central focus remain on: 

• Discounts.
• A good set of terms and conditions which align to the government policy intent and the operational needs of buyers.
• Ensuring maximum efficiency in contracting. 

5.85 Notwithstanding this, balancing this focus with the other priority themes (e.g. ensuring flexibility, being realistic about the future needs of buyers) is required to optimise the overall outcome for the Australian Government as a whole. The ‘right’ balance needs to be struck as part of the negotiation activities.

5.86 Indicatively, the following graphic demonstrates what buyers identified as beneficial for them. It is expected these will shift over time, reflecting changing priorities and implementation readiness across both buyers and sellers. 

5.87 In the above:

• Priority reflects the suggested emphasis of the DTA in negotiating in these elements.
• Value for money reflects the benefit buyers see in the respective element.

5.88 Each of the above items is further expanded upon in the table below:

5.89 In addition, some buyers and SSA sellers shared a view that they do not believe the SSAs take a whole of life view particularly well. It was suggested that contract negotiations address not just the immediate acquisition of technology, but its full lifecycle, including ongoing support, upgrades, and end-of-life considerations, as part of a total cost of ownership assessment. This holistic approach is consistent with the principles outlined in the Investment Oversight Framework and the CPRs.

5.90 Further, sellers noted the SSAs allow for access to a pool of global experts (e.g. identity management, cyber security) and best practices which help shape technology roadmaps and drive improvement across buyers. Sellers also indicated the deals ensure they can invest in research and development of technology, like machine learning, artificial intelligence and quantum. The established relationships with the SSA sellers provide an opportunity for the Australian Government to have prompt access to these innovations, which further support the full value proposition on offer. This provides a key mechanism for the Australian Government to adapt to emerging technological advancements without compromising essential services for Australians.

Being realistic about future needs of buyers

5.91 Basing assessments of future technology needs on the intentions of buyers, as opposed to historical use in isolation, will improve the utilisation of the Australian Government’s buying power in negotiations. This input needs to be well balanced with the impacts from fast changing technology strategies. 

5.92 There are several mechanisms available to the DTA to manage this:

• Engaging with buyers to determine the amount of product and services likely required, and working with buyers to align this to the technology roadmap and investment strategy within the buyer. This could be done through existing SES sponsor groups or working groups.
• Led by the DTA, collaboration sessions with the SSA seller and buyers to co-create value-add opportunities, identification of what is working well, and resolving pain points or things that are not working well.
• Utilisation of the newly implemented Digital Investment Plans (DIPs), introduced under the Data and Digital Government Strategy, to obtain from buyers their long-term digital investment plans. This replaces the historically used Capital Management Plan (CMP) which has reduced in relevancy with the shift from capital expenditure-based technology (e.g. on-premises solutions) to operating expenditure-based technology solutions (e.g. cloud and software-as-a-solution).
• Obtaining insights from the Investment Oversight Framework, in particular submitted Procurement Plans as part of the two-pass business case process.
• For critical technology capabilities aligned with the Australian Government Architecture, the development of technology roadmaps, including the identification of the buyers which would utilise those technologies (e.g. myID and digital identity, myGov, payment platforms). 

5.93 The use of these mechanisms can be determined as part of negotiation planning.

Keeping the arrangements simple

5.94 The SSAs are complex and not always well understood.

5.95 Some buyers noted the SSAs have to fit into a complex technology architecture which include a range of technology sellers, all of which have to be managed by that buyer. As a result, buyers can quickly run out of the skills, capacity and experience within their teams to properly avail themselves of the SSA. It is therefore critical the burden placed onto buyers by the SSAs is minimised to the extent possible.

5.96 Further, the review noted the complexity of the terms (including additional terms and supplemental / hyperlinked terms), the number of modules and interactions with End User Licence Agreements all contribute to the SSAs not improving efficiency. Further, in some instances, the order of precedence of contractual clauses is unclear, presenting challenges to buyers in comprehending the SSAs. It is important this complexity is actively reduced by the DTA to maximise the potential efficiency benefits which can be obtained by buyers through the SSA. 

5.97 Maintaining simplicity in the SSAs will ensure ease of administration, compliance and leveraging of benefits. Clear, straightforward terms reduce the risk of misunderstandings and streamline operational processes, minimising administrative burden for both parties. This is particularly important when managing complex technology solutions within government.

5.98 Separately, it is the prerogative of sellers to set their own prices and commercial terms. Nonetheless, the pricing structures of some of the SSAs create opaqueness. This opaqueness undermines simplicity, which makes it a challenge for buyers to assess whether the agreed deal is better than other deals being offered by other sellers for similar technologies. If the SSA seller believes they are offering a better deal than anyone else, it is in their best interest to keep it simple so the deal can be understood.

5.99 When considering the SSAs' relative complexity, in respect of understanding the discounts made available under the SSA specifically, the SSA sellers can be grouped into three broad categories:

• Bespoke pricing schedules – SSA sellers provide a detailed pricing schedule which reflects the discounts made available.
• Category discounts – SSA sellers provide a grouping of products or services provided (e.g. hardware, software, applications) and apply varying discounts for each category.
• Agreement level discounts – SSAs apply a single or tiered discount value across the entirety of the Australian Government spend.

5.100 The SSAs can then be plotted against a continuum as outlined below.

5.101 Stakeholders consistently requested simplification of the arrangements to maximise the ease of use. Simplification can focus on the value-add aspects, such as:

• Discounts offered (e.g. a percentage amount off global retail prices, rather than a price list).
• Additional value adds (e.g. investment credits, access to training).
• Warranty periods.

5.102 In particular, the DTA preferably avoid detailed pricing schedules, as experience from buyers indicates that changes subsequently made by sellers to these pricing schedules do not always attract the same discounts. 

5.103 Whilst a simple discount model is important, there are many other contractual clauses within the SSA arrangements which make up the overall complexity of the SSA. The review heard that many users of the SSAs find the SSAs difficult to comprehend and navigate.

5.104 The review also heard that buyers find it difficult to understand how to onboard and utilise the SSAs. This is made more complex with the application of any non-disclosure agreements, or similar. The DTA can respond to this by defining a clear and easy process for onboarding to an SSA and aligning this to the way in which the SSAs are intended to interact with BuyICT and the panels.

5.105 It is acknowledged there is a pragmatic limit to how simple and easy to comprehend the arrangements can be made. 

Ensuring flexibility

5.106 Given the length of the contracts, the SSAs must allow for flexibility for both buyers and sellers to adjust to changes the technology, legislative or policy environments. This adaptability is essential to accommodate the dynamic needs of government operations and ensure optimal utilisation of resources and solutions.

5.107 The review identified that flexibility is made up of several key dimensions:

• Treating the Australian Government as a whole: where SSAs reflect a true, whole of Australian Government contract and views the Commonwealth as a single contracting entity. This can enable flexibility in licence, hardware, and software allocations, and result in more efficient resource management across agencies.
• Enabling shifts in technology choice: not being bound to the technology and enabling changes in the technology choices made, even to other sellers, such that policy and legislative alignment can be maintained, or the government can take advantage of technology innovations.
• Reflective of actual use: whilst negotiation reflect the planned intent, the ability to reconcile the intended use of products or services with the actual use is critically important as usage changes over longer periods of time, and is especially relevant to any products or services provided as a service.

5.108 Whilst not an exhaustive list, the table below outlines the key mechanisms identified by the review to enable flexibility against the above dimensions.

Building in an exit plan

5.109 A well-defined exit plan protects buyers against technology dependency, service disruptions and ensures continuity in delivering critical services to Australians. The SSAs and associated contracts have some exit plans, however, these are mostly associated with transitioning between SSA contracts, rather than being able to transition out of the products or services entirely. 

5.110 Further, the SSAs are set-up in such a way that buyers are expected to negotiate in transition arrangements individually. Unfortunately, for some buyers, the need to do so may be overlooked, or simply rejected by the SSA seller when it comes to negotiating in the provisions.

5.111 In respect of an exit plan, the SSA contracts could at minimum include provisions for:

• End-of-life (EOL) support
• Decommissioning
• Transitioning to alternative solutions, including data migration support (such as egress)
• Handover of relevant materials. 

5.112 This approach also aligns with the importance of not treating SSAs as a "set-and-forget" arrangement. Whilst SSAs typically represent critical technologies, exit provisions may contemplate the replacement of technology that may come about, for example, from geopolitical shifts, ownership restructures, technology advancements, or changes in policy settings. 

5.113 There are, however, limits to the pragmatics of the exit plan. The reality of being able to move away from certain technology choices may prevent the realistic application any exit plan. These provisions will, however, become more relevant if the Commonwealth chooses to expand the number of SSAs. 

Opportunities to create leverage

Get the ‘right’ people at the negotiation table

5.114 Effective negotiations require engagement from knowledgeable representatives on both sides. The DTA engages specialist lawyers, expert contract negotiators, government contract managers with lived experience, and the decision-maker (i.e. financial delegate and budget owner) as part of their negotiation team. Further, the DTA convenes Senior Executive Service (SES) forums (e.g. a Sponsoring Group) and working groups to consult the buyers regarding what they want in the SSA. 

5.115 Nonetheless, the biggest buyers (e.g. Defence, Services Australia, ATO, DEWR and Home Affairs) that represent the majority of the actual spend with these sellers, also have established technology procurement capabilities. Although previously these buyers had been at the negotiation table, this was subsequently replaced by an SES Sponsoring Group which effectively removed these stakeholders from the negotiation table. 

5.116 Reconsideration of including a select group of buyers at the negotiation table is warranted. This is supported by survey respondents identifying that their ability to influence and contribute to SSA negotiations is limited and results in the inability to negotiate specific requirements. Given the dynamic nature of negotiations, inclusion of mature buyers at the negotiating table could support:

• Conveying the strategic intent of the buyer.
• Contemplating the potential delivery complexities and realities of using the SSA as it is being constructed.
• Providing deep technical knowledge of the specific technology stack.
• Outlining the requirements of the buyer.

5.117 The DTA's role in central coordination must continue to ensure there is a whole of Australian Government lens placed over the negotiations to safeguard the value to be derived for smaller agencies and the Commonwealth as a whole.

5.118 The DTA should trial the inclusion of a select group of buyers (e.g. Defence, ATO) at the negotiating table. 

5.119 In addition, empowerment of decision-making vested centrally in the DTA, supported by buyers expressing tangible purchase quantities, is a crucial mechanism in optimising the outcome of contract negotiations. This approach prevents sellers from leveraging individual buyer needs against each other, ensuring consistency government-wide. Centralising decision-making authority within the DTA further strengthens bargaining power, fosters alignment with broader policy objectives, and safeguards against fragmented contract terms that may lead to inefficiencies or unnecessary complexities. 

Leverage government buying power nationwide

5.120 The DTA very clearly takes a whole of Australian Government view in undertaking the negotiations. This sentiment was shared by buyer agencies almost unanimously. 

5.121 The AWS agreement has been a resounding success for use by other States and Territories. Off the back of this, the DTA could continue to explore how to expand access to the agreements to States and Territories. The review acknowledges the sellers will also have to agree to this.

5.122 As of June 2024, there were approximately 365,400 Australian Government staff (including Defence force personnel) who are users of many of the technologies covered by the SSAs, however, there are approximately 2.5 million public servants across Australia if all States and Territories and local governments are included. By continuing to widen the scope of SSAs to include the States and Territories and local governments, the Commonwealth can increase its buying power by approximately 7 times.

5.123 Where agreements are expanded beyond the Australian Government, an approach the DTA could utilise is:

• Design for the Australian Government first: given DTA's remit as an Australian Government agency, SSAs ought to be designed with the Australian Government in mind in the first instance, to ensure the contracting framework established works for Commonwealth buyers.
• Enable others to ‘piggy-back’ with amendments: SSAs include a mechanism for any clause to be amended, with the seller’s agreement, to reflect the differing policy or legislation of other entities (e.g. States and Territories).

5.124 Note, the expansion to other States and Territories requires close consideration of the potential legal ramifications (e.g. limitations on the use of Commonwealth funds under the Special Account for the purposes of supporting the States and Territories). Further, the introduction of other jurisdictions increases the complexity of the arrangements (e.g. through the inclusion of clauses tailored to the policy of those States and Territories). To the extent States and Territories can be incorporated into the SSAs without introducing too much complexity or risk (e.g. as a ‘piggy-back’ arrangement, with an ability to tailor relevant clauses), there is value in continuing to explore these opportunities.

Pre-commitment, condition precedent and extended timeframes

5.125 The DTA is utilising three key dimensions in its negotiation tactics:

• Pre-commitment: pre-committing in contract negotiations to a minimum buy profile which reflects a portion of the Australian Government’s aggregate spend provides clarity and predictability for both buyers and sellers (e.g. a percentage of the planned spend which is less than the total spend anticipated). These pre-commitments require section 23 approval under the PGPA Act.
• Condition precedent: establishing conditions which need to be met before value is realised (e.g. trigger points enabling increasing percentages of discounts to be realised based on a tiering of the collective purchase by buyers). These trigger points need to be kept simple, as any complexity increases the opaqueness of the arrangement.
• Extended timeframes: entering longer term contracts to enable improved pricing by sellers able to be offered by adjusting risk profiles (e.g. investment, pricing fluctuations).

5.126 There is value in the continuing to use all three of these mechanisms as appropriate. Particular consideration will need to be paid to the CPRs in respect of pre-commitments of funding to restrict these to technologies already in use within buyers. This can be done by considering the anticipated aggregate spend of the Australian Government, rather than allocating specific amounts to respective buyers.

5.127 Consistent with the 'Being realistic about future needs of buyers' section above, it is important any pre-commitment does not obligate buyers to use an SSA seller. The key mechanisms available to the DTA to ensure this does not occur are to:

• Include the relevant buyer at the negotiating table, where appropriate.
• Ask buyers to indicate what their likely spend profiles will be, and evaluate these against historical spend patterns.
• Assess the anticipated aggregate spend of the Australian Government, rather than allocating specific amounts to respective buyers.
• Setting a pre-commitment amount at a level which will be achieved (e.g. 50% of the anticipated aggregate spend profile of the Australian Government); to the extent this cannot be determined, condition precedence can be utilised to set specific trigger points.

5.128 The use of these mechanisms enables a clear commitment from the Australian Government to be put forward, reducing the risk premium priced in by the SSA sellers. Further, the use of condition precedent, in particular, enables negotiations to accommodate demand fluctuations over time while still providing certainty to sellers. 

5.129 Any precommitment, condition precedence or extended timeframes ought to only be agreed where a commensurate benefit (e.g. discounts or other value-adds) are offered by an SSA seller.

Maintain competition wherever possible

5.130 Consistent with the CPRs, maintaining competition is a highly effective way to achieve value for money. This is predicated on sellers being more likely to offer competitive pricing, improved service models, and better contractual terms when they know buyers are considering alternative sellers. 

5.131 Whilst seller specific products are not available from outside of the SSAs, or authorised resellers, similar technological capability is often able to be sourced from others. For example, there are dynamic markets established for products within Customer Relationship Management, Enterprise Resource Planning, IT Service Management, and Security Information and Event Management. Further examples can be found in Appendix G: Competitive landscape. An expansion of the number of SSA sellers appointed is consistent with encouraging competition. 

5.132 Further, services can commonly be sourced from a wide range of providers, as evidenced by the number of providers on the DTA’s established marketplaces or the SSA sellers’ partner networks. 

5.133 The technology landscape is constantly evolving, meaning new entrants are regularly emerging, innovation in technology is constant, and service delivery models and pricing structures are regularly being updated. This dynamic nature emphasises the importance of maintaining competition (e.g. through buyer lead procurement processes) wherever possible. 

Get timely, accurate data

5.134 The historic formation of SSAs has been reactive to visible and a generally known high level of expenditure over an extended period of time with a seller. To enable a strategic, proactive approach to establishing and re-negotiating SSAs, there is a need for clear, consolidated data and information regarding the type and volume of technology in use across all government entities. 

5.135 A consolidated view strengthens the Australian Government’s bargaining position when negotiating with a seller. The impact of the absence of this information has been experienced by the DTA in having to negotiate some of the SSAs in a partial information void, where the DTA found it difficult to understand what products and services agencies were using.

5.136 Stakeholders also identified that there is varied understanding of the specific products, sellers and volumes in use across government, with no centralised view outside of reported AusTender data. While AusTender does provide a lens on technology spend, it can be obfuscated as products are often bundled within broader solutions, sold by resellers or sold by the seller directly. 

5.137 To demonstrate this, Splunk (previously Cisco) was identified by several stakeholders as the predominant security incident and event management product used across the Australian Government. AusTender data over the past 10-year period shows:

• Six buyers have established contracts directly with Splunk.
• A further 20 buyers have contracts with 22  either resellers, or service providers (found through free text search).

5.138 Expenditure through resellers or service providers in this instance, however, cannot be fully identified where the title of the contract notice does not explicitly contain the word “Splunk”.

5.139 This highlights that while AusTender is an important mechanism for publishing contract notifications and associated information, it has clear limitations in its representation of spend on specific technology products.

5.140 Developing a more extensive view of the technology landscape across government will support re-negotiation of existing SSAs, including: 

• A list of the current use of the existing SSA seller products and licences across government.
• A general view of the seller and product ecosystem available relevant to the government.

5.141 This information would provide a deeper understanding of product and seller use.