After 18 months of negotiations, a little rationality is beginning to appear in government purchases of information technology. A revised set of government IT conditions has been prepared by the industry and government. It is already being used by NSW and Victoria and will be used by the Commonwealth starting in the next round of purchases in March.
To date doing business with government has been an ache in the posterior, especially for small and medium businesses.
Previously, doing IT business with government was a pain, especially for small and medium Australian businesses with smaller contracts. There was too much costly farnarkling and risk for the profit involved.
The Australian Information Industry Association argued that wads of legalese, little flexibility, clauses that appeared to put all the risk on the vendor and little on the government and clauses that appeared to give the government all the advantages were counter-productive and did not serve the tax-payer.
It has now got much of that changed, though the new guidelines are still written in convoluted incomprehensible legalese, though the AIIA has done a translation into English for its members and an official plain-English version is on the way.
Some of the advantages:
Uniformity: In theory, eventually all nine Australian Governments will use the guideline. Previous a company doing business across Australia would have to negotiate with nine different sets of guidelines.
Flexibility: the guidelines allow for negotiation on things like copyright and use of consultants.
Some of problems the industry wants worked on:
The guidelines insist on high common-law liability. Risk averse public-sector lawyers imagine they are getting protection this way. In fact, all that happens is that small to medium businesses get excluded because they cannot afford or cannot get insurance. And in any event the government agency is not protected by high liability clauses because if there is a catastrophe most insurance has a financial limit and the supplying company is going to go broke leaving the government agency unprotected.
Suppliers are often required to get their directors to give personal guarantees. Once again small and medium businesses are disadvantaged. And in general such clauses stultify Australian inventiveness and entrepreneurial spirit if people cannot quarantine their basic personal assets (house and car) from business losses.
The fundamental problem is that government agencies dealing with public money have to ensure there are proper safeguards and procedures. Public servants are risk averse because they are accountable for the process, not the outcome. The result is costs go up _ tendering costs are sometimes as high as 20 per cent of the contract price.
The amounts at stake are quite high. The total IT turnover in Australia is $14 billion a year. Of that the government sector is 40 per cent. Commonwealth spending is $1.5 billion a year. However, a lot of this spending is not discretionary and not new spending. Much of it is committed in multi-year contracts and much spending is required on maintenance.
Another running issue on government-industry relations is the Industry Commission inquiry into the computer industry.
The commission’s main role in life is looking at competition, tariffs, bounties and the like.
At present, the telecommunications industry is protected by tariffs whereas the computer industry is encouraged by bounties.
With a bounty, Australian producers get subsidised for the difference between world price and their costs, but the consumer gets the goods at world prices. With a tariff, a charge is imposed on the imported goods so they do not undercut the Australian product. The result is that consumers pay higher prices.
The difficulty for the IT industry is that telecommunications and computer products are merging. This is resulting in erratic decisions by Customs as to whether an item is telecommunications equipment to be hit with an import duty, or computer gear.
Other industries have similar problems: is a Superman outfit a toy attracting a high duty or clothing attracting a low duty?
The commission hates high tariffs. You can bet it will recommend that telecommunications tariffs be cut or abolished as soon as possible. And you can bet the government will ignore the recommendation because the telecommunications union and others will squeal a lot.