Paragraphs4.2 to 4.7

20  The Department spent some £4.4 million on external advice during the competition. The largest parts of this were £1.8 million for ongoing specialist support to the project, and £1.7 million for site surveys to inform the Department's asset database for the invitations to tender. They spent relatively little (only £220,000) on strategic, financial and legal advice as they considered their in-house experience of procurement and the delivery of telecommunication services gave them sufficient expertise to address most issues that would arise.

21  The Department did not supply bidders with the draft contract terms the Department required. Instead they asked BT and Racal to submit their own draft contracts with their final bids. The Department did not appoint their own legal advisor, Burges Salmon, until after BT had been selected as preferred bidder. The Department chose Burges Salmon, after taking advice from their internal legal section, from a panel of approved legal advisors. The Department did not seek competitive tenders from other firms and only sought input from Burges Salmon on limited areas of the contract and negotiations. In other areas the Department negotiated the contract based on the terms initially proposed by BT without Burges Salmon. We consider that this contributed to some aspects of the contract being more favourable to BT than we would have expected (paragraphs 17 and 18).

22  In our view the Department's interests could have been better protected if they had brought their legal team together at the outset, if they had considered which legal firms had relevant experience, had sought competitive tenders from those firms, and if they had sought bids based on a set of contract terms developed with input from their legal advisors. The Treasury's guidance on the standardisation of Private Finance Initiative contracts published in July 1999 will help departments and their legal advisors to develop acceptable terms for privately financed contracts.