2.1 This Part of the report considers whether the competition the Department ran for the Defence Fixed Telecommunications System contract is likely to result in the Department achieving their objectives and their service requirements at a good price.
2.2 Although we had some concerns about the procurement process, we found that the Department selected BT as preferred bidder after holding an effective competition, despite BT's position as their dominant fixed telecommunications supplier. The winning BT bid was £121 million cheaper than Racal's final bid. The Department estimated that it was also £44 million cheaper than their ten year budget provision for fixed telecommunications services. This had been reduced to take account of savings of 20 per cent (around £30 million a year identified in the Department's 1994 review) (paragraph 1.5 and Figure 9). Benchmarking has confirmed that BT's prices are generally reasonable, but the Department did not establish that the contract with BT would be better than traditional procurement.