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Clash of the 500lb gorillas

By Maurice Downing - 8 December 2008 10

Request for Tenders for the $5billion national broadband network closed on Wednesday 25 November.  Given the nature and scale of this project there were only five bidders.  Surprisingly, Telstra’s bid as the largest supplier was only 13 pages in total while other bids ran into 100s of pages.  So what is going on here?  A high stakes game of brinkmanship between the Government and Telstra as two opposing 500lb gorillas? 

If Telstra prevails and wins the contract the implications for small and medium businesses could be far reaching, especially in Canberra where our home grown private sector does not have the same push and shove as the Telstra’s of this world.  Rather, they rely on the system; the system where non compliant bids are set aside and not considered further – end of game.  

This predictability and transparency is extremely important for Canberra firms who see federal government contracts as a means of growing their businesses, particularly those in the knowledge economy where a good contract can give you national exposure, good distribution and secure cash flows to fund growth.  Under the current system little guys can and do win.  But if Telstra is eventually successful the little guys faith in “the system” will be severely undermined.  I can just see business people across the ACT region throwing their hands in the air saying, “What’s the use! How do we have faith in a system that allows big companies to run roughshod over the rules?” 

At Corfocus this makes us very cranky.  Why? Because we consult to companies that want help to win government tenders and one of the central tenets of our services is that the system is fair and transparent and if you put in a compliant tender that makes a strong case and has competitive pricing then you stand a good chance of winning.  In short, the rules apply to all equally and the best tender wins.

How can you trust a system that buckles under pressure from 500 lb gorillas?  I hope this does not eventuate but if it does then maybe the ACT business community should lodge a No Confidence vote in the government’s procurement system.  What do you think?

What’s Your opinion?


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10 Responses to
Clash of the 500lb gorillas
dexi 9:42 am 10 Dec 08

“My personal beliefs, based on my dealing with them as a customer and as an employee are that Telstra will have no moral objection to do things that even the Devil would feel uncomfortable doing.”

If you want a good example of how bad Telstra handling of tendering and contracting is, you should examine the 2G and 3G contracts. From top to bottom the contracts where flawed. There was talk of multimillion dollar tenders being put out and accepted in days. Hand shake deals made for do and charge. Promises of future work on fiber to door contracts for low bids. This led to a construction company with little communications infrastructure winning the contract. They then used multilevel contracting. poor work practices and out comes. Little OHS compliance. Fraudulent billing. Impossible to meet project management time lines. Threats of using foreign workers. Lower level contractors, who where actually doing the work, had small margins for lots of hassles in return for promises of future contracts.

Stress levels for communications workers are huge, leading to mass exodus of highly skilled workers.

“The privatisation of Telstra has done nothing but harm to telecommunications services in this country. We now have the opportunity to redeem ourselves to some extent. I just hope this government has the cojones to do what is necessary.”

The horse has bolted. The government missed its opportunity when it privatised Telstra. The back bone network should have been kept in government hands and then leased to providers. This would have to be the single biggest rip off of tax payer investment in this country.

johnny_the_knife 7:58 am 10 Dec 08

The unfortunate reality is that had Telstra not been sold off without functional separation, chances are we wouldn’t be in a position now where telephone services, let alone broadband internet access in regional areas, and in many cases metropolitan areas, are grossly inadequate and/or overpriced.

Telstra’s argument that it can’t comply with the regulations set down by the Australian Government, primarily that the retail and wholesale arms of the NBN segment of the business would have to be functionally separate is probably good for its shareholders, but would be extremely bad for the community. Should Telstra get its way on this one and win the tender, at worst it will be a disaster on many levels:

• Loss of faith in government procurement processes
• Delay of implementation of the NBB due to legal wrangling instigated by both Telstra and the other bidders
• More expensive access to NBN services for consumers and business customers

Beyond the legal problems Telstra will undoubtedly cause should it not win this tender, there will be huge problems for the winning bidder. They will almost certainly need to utilise existing copper infrastructure for some segments of the NBN. Who controls the very vast majority of copper telecommunications infrastructure in this country? Telstra. They will make every attempt possible to block access to their cabling; once again making the whole exercise more difficult and more expensive than it needs to be.

Telstra’s behaviour on this is absolutely unsurprising, and absolutely unacceptable. The privatisation of Telstra has done nothing but harm to telecommunications services in this country. We now have the opportunity to redeem ourselves to some extent. I just hope this government has the cojones to do what is necessary.

harvyk1 8:10 pm 09 Dec 08

Sorry, I should have said former employee (My chose to leave, I hold no grudges)

harvyk1 6:02 pm 09 Dec 08

I’m with Maurice on this one. I for one have jumped through the hoops to try and put in a successful tender. It was not easy at all, and in the end we where not successful. So the fact that Telstra felt a 13 page document which looked more like a proposal I would put in for a $30,000 job than a $5,000,000,000 tender was sufficient makes me think that Telstra have nothing but contempt for both the government and the tender process. (Infact I think my $30,000 proposals would have more detail)

I personally hope that the tender response is placed into the bin, which is where is belongs, and Telstra is told in no uncertain terms never to pull a stunt like that again. What I am worried will happen is that Telstra will instead make it a battle of the lawyers. They will use their legal might to paint the Gov’t in a bad light for not accepting their (pathetic) tender response and the Gov’t will fold rather than risk years of litigation holding up the process (meanwhile making the average joe voter get annoyed at the delays and the money wasted).

If this is their strategy it is completed brilliant (considering that most of the other companies spent nearly $500 million to complete their tenders, that purchases a lot of legal time), completely un-ethical, but certainly not below Telstra.

My personal beliefs, based on my dealing with them as a customer and as an employee are that Telstra will have no moral objection to do things that even the Devil would feel uncomfortable doing.

Maurice Downing 6:53 am 09 Dec 08

As hark40 said – this information is in the public domain. Just google “Telstra 13 page bid” and lots of media comes up. I’m surprised the make up of the evaluation panel is revealed, I understood this was usually kept confidential?

We had and have no invovlement in this project but am interested bystander like many others largely becasue as the old saying goes. “It’s the principal of the thing”.

I’m also sure the actions taken by all parties are very carefully considered to leave some wriggle room but the fact remains that the Governemtn put out an RFT which would generally be expected to deliver compliant bids without the cute manoeuvring. Is it all skirting the procurement guidelines but still within the rules? Probably, there are some clever fellows at play here but it still creates a certain perception and as many of us know preceptions take on a life of their own and always last longer than the facts.

Primal 11:51 pm 08 Dec 08

hark40 said :

If Telstra’s response was a response the RFT it could be thrown out as being non-compliant. If it was a letter to Senator Conroy though, then it is independent of the RFT process. The Government (panel) could declare there were no winners in the RFT and that then allows the Government to follow the letter up with Telstra. If that happened, you would guarantee a lot of parties are going to head to the courts very quickly. No subversion of the process has taken place, but not a “nice way” of handling things and Telstra “wins”.

Telstra’s letter could be deemed a response to the RFT, thrown out for non-compliance and still be followed up in this manner.

However, in either case, if the RFT is nixed completely, the Government would still be obliged to demonstrate that Telstra was the only party capable of delivering the alternative system they are proposing in order for sole sourcing to be permissible. Otherwise a revised competitive tender process would be required.

I’m fairly sure legal hell will ensue here.

poptop 10:24 pm 08 Dec 08

LMAO! Thanks hark.

Telstra certainly is showing some cojones if they think this is going to work, though.

hark40 10:08 pm 08 Dec 08

Info on the tender responses is publicly available. See http://www.australianit.news.com.au/story/0,24897,24709781-15306,00.html so I don’t think there is any commercial-in-confidence leaks (yet!)

With a couple of state based bids (TransACT and the Tasmanian Government) as well as a couple of national responses (ONI, Acacia and Axia) there is some choice beyond Telstra for the NBN.

If Telstra’s response was a response the RFT it could be thrown out as being non-compliant. If it was a letter to Senator Conroy though, then it is independent of the RFT process. The Government (panel) could declare there were no winners in the RFT and that then allows the Government to follow the letter up with Telstra. If that happened, you would guarantee a lot of parties are going to head to the courts very quickly. No subversion of the process has taken place, but not a “nice way” of handling things and Telstra “wins”.

poptop 9:32 pm 08 Dec 08

Is this is some sort of pre-emptive grizzling, predicated on the assumption that your clients are going to be treated inequitably?

The Assessment panel comprises
-Ms Patricia Scott,Secretary of the Department of Broadband, Communications and the Digital Economy,
-Dr Ken Henry AC, Treasury Secretary.
-John Wylie, Lazard Carnegie Wylie CEO.
-Laureate Professor Rod Tucker, University of Melbourne.
-Professor Emeritus of Communications, Reg Coutts, University of Adelaide.
-Tony Shaw, former Australian Communications Authority Chairman.
-Tony Mitchell, Allphones Chairman.

Two questions for you, Maurice:-
Which panel members are going to subvert the process? and
Who has been providing you with information about the commerical-in-confidence documentsfor this process?

bd84 9:05 pm 08 Dec 08

Anyone but telstra will do, or a condition of the contract should be the break-up of the company and the service should be available to all telecommunications companies.

Though krudd is an idiot in the first place for using our money to try and build it with public money, the process has been a shamble from the start too.

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