1 In March 1995 the Ministry of Defence ("the Department") invited tenders for the provision of a new Defence Fixed Telecommunications System for the whole of the Department including the three Armed Services. The Department's main aims were to rationalise and improve the efficiency of their existing fixed telecommunications services, to ensure continued telecommunications services and to deliver financial savings of around £30 million a year (some 20 per cent of their annual fixed telecommunications costs).
2 The Department's fixed telecommunications capability at that time consisted of 46 distinct services (Figure 1), provided by four separate organisations. The new system will consist of six services (Figure 2) managed, largely through a contract for the Defence Fixed Telecommunications System, by one organisation, the Defence Communications Services Agency (Figure 3).
3 In July 1997, after a competition, the Department let a ten year contract for this project to BT. The Department estimate that the project will cost them £782 million (present value), consisting of £612 million in payments to BT, and £170 million in other costs remaining with the Department. The Department estimate that their contract with BT, together with cost reductions they had made before letting the contract, will achieve the 20 per cent savings target they had established in 1995.