It should now be much easier for technology vendors to contract with the NSW Government.

On Monday 21 February, the NSW Department of Services, Technology and Administration announced the launch of the new “Procure IT” framework for IT contracting – the standard terms and conditions used by the Government to purchase technology and telecommunications products and services. The existing Procure IT, version 2.1.3, has been completely overhauled, not only to improve its structure from a contracting perspective, but to address a number of key concerns which put IT suppliers bidding for Government work on a collision course with the Government time and time again in recent years.

Technology vendors had expressed concerns that the former version 2.1.3 did not adequately address their legitimate issues. Consequently, the path to successfully negotiating a NSW Government IT contract could often be arduous for both sides. The NSW Government listened to industry concerns and decided to make important concessions designed to eliminate the time and expense of protracted contract negotiations.

The result is the new version 3.0 of Procure IT, which is intended to be a fairer deal in many respects. However, the quid pro quo for this is that in the vast majority of cases, the main terms of the agreement will be non-negotiable. Only in the most exceptional cases will the Government entertain any requested changes to the Procure IT terms. In other words, from now on it really is a case of “take it or leave it” for IT suppliers looking to contract with the NSW Government.

Some of the key changes to Procure IT are as follows:

  •  Intellectual Property: the default position is that ownership of newly-created intellectual property now stays with the supplier, rather than being assigned to the Government. The Customer is granted a broad, royalty-free, irrevocable licence of that intellectual property.
  • Limitation of Liability: the “risk assessment” approach under version 2.1.3, under which the parties had to assess risk once the contract was underway to put in place a liability cap, has been scrapped. Instead, there is a default supplier liability cap under a Customer Contract of the greater of $100,000 or two times fees for products or non-recurring services, or 12 months’ fees for recurring services. This is a first for a standard Government contract.
  • There are now separate Parts containing the terms of the “Head Agreement” and “Customer Contract”. This allows Procure IT to be used:
    • under a panel arrangement, where a Government entity acts as the Contract Authority and establishes a master purchasing arrangement under which the supplier agrees to offer products and/or services to “Eligible Customers” at pre-agreed prices and on pre-agreed terms; or
    • under a one-off procurement authorised by the NSW State Contract Control Board not involving a Contract Authority.
  • Warranties: product- or service-specific warranties now appear in the relevant Modules, meaning that suppliers do not have to give warranties which are not relevant to what they are providing.
  • The “best price” clause, long a bone of contention for suppliers, has been replaced with an obligation on suppliers to use reasonable endeavours to ensure that prices represent “good value for money” over the life of the contract.
  • Insurance: required levels of insurance cover have now been reduced with the aim of ensuring that SMEs are able to bid for work without having to meet prohibitive insurance obligations.
  • The previous “time is of the essence” provision has been deleted and replaced with a more robust liquidated damages regime applicable to delays caused by the supplier.

In this way, the NSW Government has sought to usher in a new era of public sector IT contracting in NSW. Whether suppliers embrace the revamped Procure IT framework remains to be seen, but the Government has invested considerable effort and expense in undertaking the overhaul, and has publicly called for technology vendors to buy into this new way of contracting. The ultimate aim is for technology contracts to be let with as little difficulty and expense as construction contracts. Only time will tell if this dream becomes a reality.