1.19 Under a privately financed project, specifying the services required and letting the private sector decide how it can best deliver them usually provides the best value for money, as this allows greatest scope for private sector innovation in service delivery. The Department decided here that certain assets would remain under their ownership due to the unique nature of their resilience and security requirements for telecommunications, although the contractor would be responsible for their operation and maintenance. These included the BOXER and UNITER systems, for which the Department were at the closing stages of a conventional procurement exercise, and new high grade encryption equipment to provide secret transmissions. The Department offered bidders the option to tender for support of BOXER and UNITER from the beginning of the competition, but they did not make it mandatory to include these systems in the bids until an advanced stage of the competition because they wished to explore whether bidders could provide them at an acceptable cost. This followed a policy decision in the first quarter of 1996 that the Royal Air Force need no longer itself undertake the work of supporting these systems. The Department considered the terms of bidders' initial proposals for these unacceptable, for example, because cost plus terms were offered.
1.20 After deciding to follow a privately financed solution, the Department did not re-consider whether to require bidders to take responsibility for these highly specified systems. Although these services have a pre-defined method of delivery, thus restricting the amount of innovation that bidders can bring, there is scope for savings, for example, by replacing uniformed military staff with lower cost civilians. Making the supply of these services mandatory requirements at a late stage in the competition meant that there was limited competition for them as only BT and Racal bid to provide them, and in our view the Department cannot demonstrate that the price agreed for these discrete requirements was value for money (paragraphs 2.42 to 2.44).