Report 1

Health Department’s Procurement and Management of its Centralised Computing Services Contract

Introduction and Background

Introduction

In late 2014, the Acting Director General, Department of Health (Health) wrote to the Auditor General advising of his concerns regarding the structure and performance of Health’s Central Computing Services contract.

Following discussions with Health and a preliminary review of available information, we decided to audit the procurement and management of the contract as well as the financial and asset control arrangements for goods and services purchased under the contract.

Overview

In November 2010, Health entered into a $44.9 million contract with a large international company (the Contractor) to provide centralised computing services. This entailed the provision of high quality primary and secondary data centre facilities. A data centre is a facility used to house computer systems and associated components, such as telecommunications and storage systems. The secondary centre acts as a backup facility.

The contract also includes management and support of the computer and network infrastructure in the data centres and support to the data rooms at teaching, regional and other metro hospitals.

The contracted service was structured to ensure IT systems and applications had a high degree of availability. This would also guarantee critical information was recoverable and the systems flexible enough to handle the peaks and troughs of demand experienced by Health.

One of the key objectives of the contract was for the relocation of equipment from Health’s existing data centres into better facilities within specified timeframes and with minimal disruption to Health’s business operations.

The initial contract was for 4 years, with 2 x 2 year extension options valued at another $48.9 million. Health has exercised the first of these options and the contract will now run to at least November 2016.

Health’s IT branch, the Health Information Network (HIN) managed the contract. During 2014, Health initiated a procurement review which led it to identify and start addressing many of the issues raised in this report. Health is implementing fundamental reforms to ensure greater oversight over its contracts.

Appendix 1 shows a timeline of key events during the course of this contract.

Background

Organisational structure

When the contract commenced in 2010 and until the reorganisation in 2014, the basic organisational structure of Health was as represented below. The State Health Executive Forum (SHEF) was responsible for setting strategic direction. The SHEF ICT Committee was a subcommittee of the SHEF, and was mainly responsible for ensuring ICT projects were aligned with ICT strategy.

Figure 1 - Health's organisation structure during contact period

The above structure changed in April 2014 as part of a major reform project.

Health established an ICT Executive Board and gave it oversight and endorsement where appropriate of ICT investment decisions and projects. The ICT Executive Board is also responsible for approving annual implementation plans and monitoring the success of the ICT strategy. The Director General chairs the ICT Executive Board with support of an ICT Program Committee that oversees delivery of the ICT strategy and ensures ICT projects and programs are delivered on time, on budget and according to agreed scope.

In September 2015, Health also reorganised its support services, which includes HIN, to strengthen further the overall governance and management of ICT across Health.

Description of contract

Health entered into a contract with the Contractor for the provision of:

  • infrastructure (2 x data centres) to be available almost continuously or for 99.98% of the time. This would also include reliable and active support to ensure consistency of services
  • recovery of systems to be consistent with the need for applications, this would include disaster recovery services which meet Health’s business requirements
  • flexibility to handle peaks and growth in demand, through suitable data centre facilities and capacity planning aligned to business drivers
  • secure data centre occupancy to ensure further relocations were not required
  • the relocation of computing equipment located in the existing primary and secondary data centres to the replacement primary and secondary data centres within timeframes specified by Health and with minimal disruption to business operations.

The contract was awarded on 30 November 2010 with a transition period of April 2011 to move equipment from existing data centres to the new data centre at Malaga. The initial contract period was for 4 years with 2 contract extension options of 2 years each, giving a total potential contract period of 8 years. Prior to the end of year 4, Health exercised the first of its options and extended the contract to November 2016.

The contract requires the main data centre to be Tier 3 aligned. A Tier 3 data centre does not shut down for equipment replacement and maintenance. It also must have a secondary delivery path for power and cooling to ensure systems are available and operating so that each and every component needed to support the IT processing environment can be shut down and maintained without impact on the services provided.

Figure 2 - A schematic description of Health's data centre arrangement

Contract variations

There were 79 variations to the contract in its first 4 years. These consisted of a variety of items, as can be seen below. Although most did not significantly increase the contract value, 10 variations cost between $1 million and $6 million and the 3 highest value variations were for $8.2 million, $20.4 million and $21 million.

There were 2 main periods of activity. One was from 25 October 2011 to 8 October 2012 where the value of variations totalled $55.9 million. These included the Data Centre Implementation, Network Management Services Extension, Data Centre Expansion Project, Non-Production Virtual Environment and the Network Expansion Phase 2.

The second period was from the 4 June 2013 to 21 June 2013 where a total of $13.2 million of variations were processed.

Health reviews of the contract

Health undertook several reviews in the first 4 years of the contract. A number of issues raised in these reviews are referred to throughout this report. The last 2 reviews shown in the table below were undertaken at the direction of the Acting Director General due to concerns about ICT procurement and contract management.

The Contractor advised us that only the findings of the mid-term review were provided to it for comment and that it disagrees with some of the main findings of the other reviews.

Table 1 - Reviews that had findings relevant to the contract
Table 1: Reviews that had findings relevant to the contract

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Page last updated: February 24, 2016

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