Part 3 Negotiations after selection of the preferred bidder

This Part of the Report examines the outcome of negotiations with IAS after its selection as preferred bidder in September 1998. It shows that, at that time, GCHQ knew that IAS's bid did not comply wholly with its requirements and that substantial uncertainty remained over the services to be provided by IAS, the location of the building and GCHQ's accommodation requirements. It describes how the extra costs of resolving the outstanding issues were contained within the budget approved by Ministers and the Treasury but that due to IAS's status as preferred bidder not all the negotiations could be conducted in a competitive environment. The negotiations resulted in the net present value of unitary payments increasing from £404 million at preferred bidder stage to £489 million at contract signature.