Start-ups on alert as government ICT spending soars by 13%

SMEs need to have a strategy “well in advance” if they are to secure government spending on information and communication technology, according to government advisory firm Intermedium.

According to new Intermedium analysis, government spending on ICT rose 13% to $5.3 billion last year as a result of multiple contracts in the same calendar year.

Intermedium director Judy Hurditch says companies vying for federal contracts need to be aware of structural changes designed to centralise agency spending and deliver greater efficiency.

Whereas the past decade has been characterised by a number of large systems, integration projects and outsourcing contracts for individual agencies, more whole-of-government agreements are likely in the future as governments seek to cut costs.

“The government will continue to move towards panel contracts as a mode of procurement, which means if you don’t get on to the panel [about securing a contract] when it’s opened, you’re precluded from doing business with the panel until it is open again,” Hurditch says.

“[With regard to securing federal contracts,] SMEs need to have a strategy well in advance… They have to be aware there might be a barrier to entry for at least a little while.”

According to Hurditch, securing a contract could take up to 18 months or two years, so businesses shouldn’t rely on the funding as a “safe harbor” during tough economic times.

“A lot of procurements are not just about the lowest price. Small companies need to do what they can to make it sure they don’t present as a risk because of their size and their lack of experience with government,” Hurditch says.

“It’s an industry in which people can find their niche. Having said that, most government agencies have only a limited amount of bandwidth or preparedness to look at innovation – what they want is a proven track record.”

For this reason, Hurditch says larger organisations are often seen as more attractive. For example, the Australian Taxation Office outsourced a contract to Hewlett-Packard Enterprise Services last year valued at $853 million, in addition to two computer services deals with Lockheed Martin worth a combined $283 million.

Meanwhile, local supplier SMS Management & Technology secured federal contracts valued at $38.4 million, down 11% on the previous year.