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					                                                 Competitive Tendering and Contracting

Pursuant to the Financial Management and Accountability Act 1997 and the FMA
Regulations, the Chief Executive Officer of the Department has given instructions to
staff on the use of public money. These are known as the Chief Executive Instructions
(CEI’s). Under the CEIs, when purchasing goods and services, the two key principles
are “value for money” and “open and effective competition”.

During 2000-2001, the Department of Health and Aged Care is undergoing two major
competitive tendering and contracting exercises involving information technology
services and corporate service functions.

Information Technology Outsourcing

A Request for Tender (RFT) for market testing the information technology (IT)
infrastructure services for the Health Group (Health and Aged Care, the Health
Insurance Commission, and Medibank Private Ltd) was released to industry on
30 November 1998 and closed on 15 February 1999.

On 23 September 1999 the Government announced that it had selected majority
Australian-owned IBM Global Services Australia as the preferred tenderer and on
6 December 1999 a contract was finalised and signed by the Minister for Finance and
Administration. IBMGSA is expected to formally take responsibility for service
delivery to the Department in mid-June 2000.

Expenditure for the market testing process for Health and Aged Care in 1998-1999 was
$1.8m and the redundancy payments for existing IT staff are expected to total $6.0m.

The overall value of the Health Group contract is $360m, and expected savings are in the
order of $54m for the group over the life of the contract. These savings are based on a 5
year projection of the Health Group costs and IT usage.

In addition, the Australia New Zealand Food Authority will be undertaking a tender
process to outsource their IT activities. Tenders will be called for by December 2000.

Competitive Tendering and Contracting of Corporate and Other Functions

The Department has developed a program to market test its corporate and related
activities over the next three years. This program will:

   identify those activities which are 'in scope' for market testing;
   cost, benchmark and process re-engineer these activities; and
   market test those activities where market capability is demonstrated to represent best

This program is scheduled to begin in mid 2000 and be finalised in the 2002-2003
financial year.

                                                  Competitive Tendering and Contracting

In addition to these two major examples of competitive tendering and contracting, the
Department, and Agencies, also engages consultants and contractors in relation to a
range of outputs where it lacks the specialist expertise, or where an independent
assessment is considered desirable. These consultancies will change from year to year,
depending on current priorities. The types of assignments include: qualitative and
quantitative research, policy related advice, information gathering and analysis, attitude
surveys, public relations advice including development and testing of promotional
campaigns, evaluation of departmental programs and the development of materials to
improve the accessibility of departmental programs to individual client groups.