Making the Most of Government Purchasing Power - Telecommunications

The Auditor-General has found that agencies have consistently failed to negotiate the best price for their telecommunication contracts and are not getting value for money because of inadequate contract and expense management processes.

The audit examined six agencies to assess whether the government was getting value for money from its telecommunications contracts. It again raised problems with the way NSW government agencies manage contracts.

Volume One of the Auditor-General’s reports to Parliament for 2014 highlighted that agencies needed to better manage contracts to achieve intended benefits. Concerns about service level agreements with shared services organisations were also raised. A 2012 IT services contracts report highlighted that agencies were not getting value for money when contracting for IT services.

Only one agency in our review demonstrated it was getting value for money

Only one agency could demonstrate that it was getting value for money from its telecommunications contract negotiations; contract management and expense management.

“Few agencies market tested prices or negotiated with suppliers for better prices. Most just took the ceiling price in the Government Telecommunications Agreement,” said the NSW Auditor-General, Mr Grant Hehir.

Once contracts were signed, again only one agency actively managed its telecommunications contracts.

Three agencies demonstrated that they had proper processes to manage their usage and spend on telecommunications.

“Only one agency clearly took responsibility for achieving value for money. Central agency support was available if agencies were uncertain on how best to proceed and use of this could have generated significant further savings,” said the Auditor-General.

Agencies are slow to take advantage of savings opportunities

A number of the agencies reviewed did not make use of a working group established to assist agencies drive better deals when negotiating with suppliers.
This is despite the fact that, in the last 12 months the working group realised total savings of $3.66 million across 13 telecommunications proposals worth $11.46 million. This is a significant achievement.

“Agencies should use the government working group and access the necessary expertise on telecommunications to maximise value,” said the NSW Auditor-General.

“This is particularly important for all new telecommunications contracts, as the Government Telecommunications Agreement was replaced in April 2014 with new arrangements that require agencies to engage in more direct negotiations with suppliers,” he added.

Contract management capability needs to improve

Most of the agencies reviewed do not have the people with the necessary expertise and experience to get the best value out of contracts for telecommunications services.

“We have previously highlighted weaknesses with workforce capability in relation to contract management,” said the NSW Auditor-General. “A 2012 Auditor- General’s report found weaknesses in contract management and emphasised the importance of skilled staff in achieving continued value for money over the life of long-term IT services contracts,” he added.

Further information

Barry Underwood, Executive Officer, on 9275 7220 or 0403 073 664; barry.underwood@audit.nsw.gov.au