IT companies in Newfoundland and Labrador were shocked and outraged Tuesday by the provincial government’s renewal of a lucrative service level agreement with Xwave.
The five-year agreement, worth $82 million, maintains Xwave’s status as the government‘s principal IT supplier. This includes consulting, application development, systems integration, information processing and facilities management for mission-critical systems in mainframe and client-server environments.
The original seven-year contract was set to expire in March 2002, but a few months ago the Newfoundland and Labrador Association of Technology Industries (NATI) began issuing public statements of concern when it looked as though the government would not open the work to other companies through a tendering process. In response, the government has shortened the length of the contract and said it would tender approximately $2 million worth of sub-contracting work to other IT firms.
Paul Mitten, president of Compusult Ltd., said the suddenness of the government’s decision took many in the industry off-guard.
“I’d say 99.9 per cent of the industry in this province is adamantly opposed to this arrangement,” he said. “We’ve made a lot of noise about the fact that this shouldn’t be happening. They’ve decided to go ahead and do it more quickly than even anticipated for their own reasons.”
Spokespeople at the Newfoundland Ministry of Trade and Rural Development could not be reached at press time.
Keith Collins, Xwave vice-president for the Newfoundland region who took part in the contract signing Tuesday, said the agreement offered a compromise that should be more to the liking of industry associations.
“The deal that was announced today was different than the deal that perhaps they were concerned about,” he said. “They have been working with the government for the past two or three months to make certain that their voice has been heard.”
NATI president Jeff Tulk acknowledged that the new SLA was a step in the right direction, but he said the government didn’t go far enough.
“The fact that there is a deal (at all) is not necessarily a good thing,” he said. “I think once they made a decision they wanted to get it out of the way before summer (ended).”
The new SLA means the government will be handing out the sub-contracting directly, a function that had once been Xwave’s responsibility. Collins said in signing the original agreement one of the government’s requirements of Xwave was to accept the role of fostering the local IT sector. This included making training available, contracting and sub-contracting local work to help other firms develop skills. “As a consequence of that, I think the IT sector today is much stronger than it was six years ago,” he said. “In some respects, it’s a positive statement that industry is as strong as it is and has the voice that it has.”
Mitten scoffed at that idea.
“The premise is that the way you further develop the IT sector is to create an anchor tenant,” he said. “In other words, what they’re really saying is that the only way they see this could be done is by creating a monopoly.”
Tulk would not go that far. He said a lot depends on the type of work that comes out of the agreement for other companies. “In the overall budget of government work, a lot of is going to be maintenance stuff,” he said. “All work is good, but not vital to the growth of our industry.”
Tulk said the government has agreed to allow NATI to be involved in the subcontracting discussions so that its members can plan for the work.
