The Government has decided not to proceed with the original tender process for the Defence Integrated Distribution System (DIDS), and is instead assisting tenderers to resubmit bids in line with revised criteria.
The Government was concerned that the tender process did not provide sufficient opportunity to allow tenderers to offer innovative solutions in accordance with commercial best practice, nor did it sufficiently recognise the importance of maintaining jobs in regional and rural Australia.
The Government was not prepared to proceed with such an arrangement which would have delivered a less than optimal result, and I have directed the department of Defence to invite the current tenderers to resubmit their bids taking these factors into consideration.
The revised tender process is still expected to be completed by the end of the year.
The Government has agreed to meet reasonable costs of the tenderers for the revision of the tender responses.
This cost is expected to be up to $6 million, but the savings from the outsourcing of the Defence distribution network are expected to be tens of millions per year.
Outsourcing decisions under the Commercial Support Program (CSP) are proving extremely beneficial in delivering more resources to the 'sharp' end of defence.
One hundred and fourteen separate activities covering work which previously cost $1.2 billion per annum and involved 14,000 positions has been outsourced. Savings of more than 30% of the original cost - some $340 million - have been achieved so far.
DIDS will contribute to these efficiencies. It is estimated that savings of 20-30% will be possible through greater coordination and efficiencies.