Limits to the length and value of ICT contracts

This guide outlines the Australian Government’s ICT Contract Capped Term and Value Policy.

The ICT Contract Capped Term and Value Policy limits the length of government information and communications technology (ICT) contracts. It also limits the financial value of these contracts.

One of the policy’s aims is to encourage competition. By shortening contract lengths it makes sure businesses of all sizes can bid for smaller parts of larger projects.

Shorter contracts also allow agencies to bring in new and innovative technology and services earlier.

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Who is this policy for?

Non-corporate Commonwealth entities must apply this policy to all contracts signed after 23 August 2017.

We encourage corporate Commonwealth entities and other government agencies to apply the policy voluntarily.

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Policy details

The policy came into effect on 23 August 2017.

It covers:

  • how much a contract is worth — its value

  • how long a contract lasts — its term

Capped value

Under this policy an ICT contract’s value must not be more than $100 million, exclusive of GST.

This is the whole-of-life-cost. That means it includes the cost of the initial contract plus any extensions.

Capped term

Under this policy ICT contracts must meet the following conditions:

  • A contract’s initial term can’t be longer than 3 years.

  • Each extension to the contract can’t be longer than the initial term.

  • There’s no limit to the number of extensions, but the whole-of-life value must not be more than $100 million, exclusive of GST.

The policy allows any combination of initial term and extensions.

For example, if a contract’s initial term is 3 years, each extension can be any length of time up to 3 years.

You must review the contractor’s performance and deliverables before extending the contract.

These reviews are intended to make sure government agencies adapt to advances in technology, identify issues early and can see if a project is at risk of failure.

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How the policy affects existing contracts

Contracts in their initial terms

If you signed a contract before 23 August 2017 and it’s still in its initial term, the contract is not affected by this policy.

Contracts being extended

If you signed a contract before 23 August 2017 with automatic extension options, you can extend it under the same terms and conditions.

However, we strongly recommend you first carry out a review of the contractor’s performance and/or deliverables.

If you need to modify or re-sign the contract for the extension, then your new contract must comply with this policy.

The total value of the initial term and extensions can’t be more than $100 million, exclusive of GST.

Making changes to contracts

Get in touch with us if you want to change the scope of an existing contract. This is so we can make sure any proposed changes meet the policy requirements.

Changes may include adding a new service or changing the spending commitment.

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Automatic exemptions to this policy

This policy does not apply to all contracts. Sections 2.6 and 4.9 of the Commonwealth Procurement Rules outline the conditions in which contracts are automatically exempt from the policy.

For example, if you have entered a contract using one of our ICT panels and arrangements, that contract is deemed to comply with this policy.

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Exemptions to this policy

Very few exemptions to this policy are granted to non-corporate Commonwealth entities.

Exemptions can only be granted jointly by the entity’s portfolio minister and the Minister Assisting the Prime Minister for Digital Transformation.

Get in touch with us if you are seeking an exemption. We can help you to prepare your case for why you need an alternative arrangement and how you can still meet the intent of the policy.

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Get in touch

You can send your feedback, comments or questions to sourcing@dta.gov.au