Tuesday, September 11, 2007

Customs deal blows out by $40m


AN Australian Customs Service outsourcing contract with IBM has blown out by more than $40 million since it was signed three months ago, as the agency added GST and a contingency for rising processing costs to the estimated bill.

IBM was awarded the mainframe and mid-range computing services contract on June 5 when the deal was announced as a five-year, $160 million agreement that replaced Electronic Data Systems' long-standing mainframe deal with Customs.

But contract values published by the agency under a Senate standing order showed that Customs now estimates the cost of the agreement at $203.15million over the same five-year period.

The jump in costs is similar to a $14 million rise in the value of a $140million Department of Immigration and Citizenship contract that was recorded earlier this year, when Immigration added GST to its outsourcing bill.

A Customs spokeswoman denied the additional $43million on its IBM contract represented an increase in the value of the agreement.

"The value of the contract has not changed," the spokeswoman said. "The $160million figure is the tendered price over the five-year period of the contract in today's dollars, excluding GST for the volume of services sought by Customs.

It was awarded as Customs broke up its nine-year-old outsourcing contract with Texas-based EDS.

EDS first picked up the Customs deal in December 1997 when all of the agency's IT functions were outsourced under the federal Government's failed $5 billion mandatory outsourcing contract.

The EDS deal was worth $200million over five years and gave Customs the option for two two-year extensions.

Customs exercised both of those extensions and the documents published under the Senate order showed that EDS will pocket $693.98million from the deal by the time the final components of the agreement expire in the middle of next year.