Department of Health Centralized Computing Services contract.
Description of the Pre-award issues.
The health department’s procurement and management entered into a centralized computing services contract so as to be able to provide high-quality center facilities for primary and secondary data, to outsource data center facilities so as to eliminate the need of building their own and also to free up the money needed for the department’s health system. The contractor who was from the private sector enabled the establishment of the private sector in the provision of health services in the public sector. Usually, when the government enters into contractual agreements with the private sector, these contracts have to work extremely well as such contracts must deliver value for money. The government lacks the skils and the ability to deliver all of its services and thus it requires outsourcing some of these services from the private industries that are ready and willing to provide such services. The benefits realized from these arrangements are indisputable, but if the contracts are not managed well, these benefits may not be realized. As the contracts have benefits, they have equal risks and require high level of management to take over especially when they are of very high value and takes lots of time before termination.
The health department entered into a contractual agreement with an international company to be provided with centralized computing services that it lacked. The contract was formed in November 2010 and it had a total sum of $44.9 million. The contract was mainly to come up with a data center facility which could provide high quality primary and secondary data services. The data center facilities were to provide housing to computer systems and components such as telecommunication and systems for data storage, (Massachusetts 2006). The secondary data center facility was to act as a backup in case the systems had a problem. Other than data center facilities, the contract also entailed the provision of management of the computer network infrastructure and the management and support of the data facilities at different levels such as teaching, local, regional and various metro hospitals. The contact of services was meant to ensure that information technology systems and applications were readily available in the health sector. The degree of availability of these systems would ensure that vital information that is lost is easily recovered and that the systems and applications are flexible enough to handle the peak seasons when work in the health sector can be overwhelming.
The contract’s main objective was to relocate existing health equipment’s from then data centers to better facilities. This relocation was to take the shortest time possible as it had specified deadlines and also it was to ensure that it had minimal or no disruptions to the normal operations of the health sector. Initially the contract as to take four years with a two by two year extension that was to be valued at $48.9 million. As per the recent contract progress review, health has extended the contract with two more years and it is estimated that it will run up to November 2016. According to an auditor’s report, the contract since inception has undergone numerous variations and its value increased with over forty million. The contract was to be managed by the Health information technology department in collaboration with the health information network. In 2014, the health sector initiated a procurement contract review which identified a lot of issues which were hindering proper running of the contract, (Varajao 2014). When health entered into this contractual agreement, it also wanted to achieve consistency in the recovery of systems so as to meet the business requirements of Health, secure data and ensure flexibility in the data center facilities.
In my career, I have my employer enter into numerous contracts with international contractors so as to provide us with services that the organization lacks skills and capabilities for. This report is necessary in my career development in order to have a good understanding of contract formation and how it should be run. It advocates that the key objectives should be outlined and what the organization aims to achieve. The contract timeframes and transition should be outlined as well so as to be able to track progress.
Post award issues.
Since its inception, the health’s centralized computing services contract had undergone 79 contract variations, and the estimated value of 44.9 million dollars had gone up with at least 81.4 million dollars. Out of this addition, close to 44 million dollars were unauthorized, and the auditors said that it should have been procuring through the open tendering method as they are said to be inconsistent with the initial scope of the contract, (Towey 2012). The health sector, therefore, cannot justify that it received the value for its money. The contract variations of 44 million dollars were too much, and at least they could have been factored in during the formation of the contract at the beginning. This shows the lack of proper needs assessments such that extra needs are realized later and they are classified as exceeding requirements. Analysis of the contractual process of procurement done by the auditors shows that the health had followed the right procedures and processes. In fact, analysis done at the beginning shows that work carried out in the initial contract was in the budget constraints and was on track. However, wherever there are contractual benefits, contractual risks are equal as well, (United States 2012).
The numerous contractual variations depict that the department lacked effective management of its centralized computing services contract. The exceeding requirements which demanded another 81.4 million dollars for the procurement of additional and unnecessary IT services show that the contract had poor leadership and governance, (Western Australia 2016). The health sector was not able to get value of its money and possibly failed to meet its service expectations due to lack of proper planning and implementation of its needs. On the issue of contract variations, it shows that Health failed to follow effective procedures for identifying possible risks and possibly mitigate measures. In mid-2013, the health sector conducted a contractual review which identified several issues that led to exceeding needs but instead of addressing these issues, it preferred to undertake another review sometimes later and this could not solve anything, (United States 2005). In addition the department of health also had poor and ineffective financial management. According to the auditor’s report, the health finance sector did not adjust the contractual values in its financial system so as to reflect the variations. The finance did not code invoices to the contract as well as checking the accuracy of the invoices provided by the contractors, and there were numerous missing discrepancies which explain the poor financial management. According to the United States report (2010), lack of coded invoices hindered health from monitoring the contractual expenditure against the planned budget. The department of health went ahead borrow money to lease assets worth 27 million dollars to its contractor without seeking authorization from the national treasury.
The health’s centralized computing services contract management, leadership, and governance can be termed as inefficient, ineffective and by far insufficient, (Irwin 2008). After conducting mid-contract reviews, the leaders in charge did not address emerging issues, and they proposed waiting for the next review where issues were beyond repair, (Illinois 2005). The department of health failed terribly in its contract management process as, despite the high value of the contract, the contractor was not assessed till November 2014. Having formed the contract in 2010, it was expected that the health contract managers could have at least checked whether the contractor was meeting the terms and conditions of the contract and ask for monthly performance reports from the contractor to check compliance and monitor progress, (Kirk 2010). The contract management team should have as well identified any emerging issue arising from the monthly reports and address the issues as they come. After the mid-2013 review, that is the only time that the Acting Director General tried to improve governance in procurement and projects leading to the audit that followed shortly.
The health department had very high expectations from the contractor. For instance, it expected that the primary data facility center could be available for more than 99% of the time required in action. This was not achieved as in February 2015, the computer systems and the IT network had crushed for fourteen hours due to the inefficiency of the primary data facility. This depicts that the health sector did not monitor the contract deliverables so as to ensure that their expectations were being met. In my career development, my employer has made similar mistakes by entering into very highly valued contracts and failing to manage them effectively leading to total failure of the projects. Lack of proper planning, monitoring the contracts progress to check whether expectations are being met and lack of coding invoices so as to see whether the contractor’s records tally with the organization’s records, (Great Britain 2005). In any contract therefore, lack of proper contract administration and management could lead to failure of achievement of the desired results. Complex and expensive contracts should have a proper contract management plan.
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