Managing IT Services Contracts

“The Ministry of Health and the NSW Police Force could not demonstrate continued  value for money in the long term IT services contracts I reviewed.”, Mr Achterstraat said.

In this audit the Auditor-General examined the ongoing management and renewal of three IT services contracts—two at the Ministry of Health and one at the NSW Police Force.

“Police and Health renewed contracts without properly reviewing the services that had been provided and what was required in the future”, explained Mr Achterstraat.

“One of the contracts I reviewed at Health was renewed for a further three years at the same fixed rate despite a 36 per cent decline in service demand”, Mr Achterstraat said.

“Police extended a contract without explanation or review despite annual costs increasing from the initial estimate of $450,000 to $1.3 million. A further five extensions were made without reassessing business needs and value for money”, he added.

“IT services contracts must be managed by skilled people with the necessary experience and expertise”, said Mr Achterstraat. “Yet, neither Health or Police assessed the risk and complexity of their contracts in order to ensure they assigned staff with the right skills to manage the contracts effectively”, he added.

The guidance provided to agencies by the State Contracts Control Board and the Department of Finance and Services is not detailed enough to help agencies effectively manage complex IT services contracts.

“I am pleased that a recently revised Agency Accreditation Scheme for Goods and Services should give the Board and the Department much better assurance that accredited agencies have the capability to manage complex contracts”, said Mr Achterstraat. “Despite this, the Board and the Department will need to improve the advice and support they provide to agencies, particularly when buying through the IT services State contract”, he added.

The State Contracts Control Board and agencies have treated IT services contracts as ‘one-off’ purchases, rather than long term service arrangements.

“Agencies must demonstrate that they achieve value for money from IT services contracts, not just when signing a contract, but over the life of the arrangement’, Mr Achterstraat said. “Unfortunately, agencies are putting all their effort into signing the contract, but not managing it for the long term.” he added.

“I note that the Minister for Finance and Services last week announced proposed reforms to the NSW Government’s procurement system. I trust that my report will contribute to improvements in contract management guidance and practices”, advised Mr Achterstraat.

NSW government agencies spend around $1 billion annually buying ICT goods and services through contracts with the private sector.

Further information

Barry Underwood, Executive Officer, on 9275 7220 or 0403 073 664; email: