Paragraphs 1.5 to 1.13. | 5 Before developing the project the Department had carried out a strategy study of all their communications requirements until 2010. This had identified the implementation of a single fixed telecommunications system as the keystone of the Department's future communications strategy and the savings which this would produce would be an important factor in enabling their other plans for improving communications to be achieved. There are, however, interrelationships between the Department's various communication systems and rapidly changing technology requires fast and frequent reassessment of the most effective form of service delivery. But, having decided to procure a new fixed telecommunications system, the Department did not assess the potential advantages and disadvantages of expanding the project to seek synergies from including other services, or reducing the scope to generate competition for a number of smaller projects. 6 The Department consider that the project involved considerable risk because it was large and novel, and that expanding the project would have added further to its complexity. They say this would have prolonged the competition and led to delays in the achievement of identified savings they expected to secure through rationalising the delivery of fixed telecommunications services. BT, the winning bidder, supports this view. We consider, however, that the Department should have carried out a strategic review of the project scope to assess the extent to which restricting the project to fixed telecommunications would have limited their future options for pursuing the best possible savings on other communication services and how this should be balanced against the risks of a project with a different scope.
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7 The project started out as a conventional public sector procurement of assets, but became a privately financed project when the Department rejected two publicly financed bids. They assessed one of these bids as not technically feasible. They were keen to pursue a privately financed solution, they rejected the other publicly financed bid due to technical non-compliance and decided that the final stages of the competition would be most effective if this was between the two privately financed bids they had received. | |
8 After considering other contract periods, the Department chose to let the contract for ten years. Although contracts for many privately financed projects are much longer than ten years, the length of Private Finance Initiative contracts for information technology and telecommunications services has generally been between five and ten years due to rapid technological changes in these sectors, with the current trend being towards ten year contracts. The Department decided that ten years would deliver the greatest savings, would reduce annual charges as bidders would have longer to recover the costs of their investment, and retain some flexibility that would be lost by being locked into a longer term contract. The length also reflected the fact that the project is complex, requiring a three year implementation period before the new system is fully operational. A ten year contract period, however, entails a number of risks for the Department arising from the rate of change and increasing competition in the telecommunications industry. How effectively the contract deals with changes will therefore be an important element in ensuring value for money. The Department and BT meet regularly to consider jointly whether service changes are desirable and the contract contains mechanisms aimed at ensuring that BT's services continue to offer value for money throughout the ten year period (paragraphs 3.10 to 3.17). |