The full article from the Sunday Age:Taxpayers might pay if IT...

The full article from the Sunday Age:

Taxpayers might pay if IT contractor sinks

* Josh Gordon
* July 6, 2008

TAXPAYERS could be left with a multimillion-dollar bill as one of the Federal Government's biggest technology contractors founders under the burden of high debts and diminished earnings.

Commander Communications — responsible for the computer networks in a host of Government departments and agencies, including the federal Department of Agriculture, the Department of Environment, the Civil Aviation Authority, the Public Service Commission and the Communications and Media Authority — is in a parlous financial state.

The company has lost 90% from its share price over the past 12 months. Shares are now worth just 12 cents each and the company, burdened by debts, expects annual earnings, before factoring in interest, tax and depreciation, of between $4.5 million and $7 million, well down on its January 30 prediction of between $20 million and $30 million.

In the six months to December 2007, the company spent $118 million more than it received in revenue, although it expects to make a net $5.5 million for the five months to May 2008.

"It is a concern," a well-placed source said. "The situation looks OK for now, but if this goes belly up, the impact on the Government could be quite large, and yes, it's possible there could be costs for taxpayers."

The company has managed the desktop computers, servers and networks for a number of federal departments and agencies since 2006. The contract can be traced back to the bungled $5 billion compulsory information technology outsourcing program introduced during the 1990s by the Howard government.

The company recently lost the IT contract for the Department of Transport, Regional Development and Local Government, while the Department of Agriculture, Forestry and Fisheries has announced plans to put its IT outsourcing contract out to tender. In a letter to shareholders last month, Commander's managing director Amanda Lacaze said a plan to turn the company around had been showing some positive signs, although parts of the business were still operating "below original expectations".

"The shortfalls in some areas of the business … have been exacerbated by the current macro-economic climate," the letter says.

Finance Minister Lindsay Tanner has ordered a sweeping review of the Government's computing and communications spending. The review will consider whether a more centralised purchasing model could slash millions from the Government's annual IT budget after the outsourcing scheme of the Howard years.

A spokeswoman for the Department of Finance, which is responsible for Government IT contracts, said it would be inappropriate to comment on the financial state of a private company. Mr Tanner is overseas and was unable to comment.