2.18 Payments for most of the services were to be based on tariff charges for each call made. This means that bidders and the Department needed accurate estimates of the level of telecommunications usage and data on existing assets in order to calculate estimates of the total costs of the services over the period. Bidders have told us that there were many errors, omissions and inconsistencies in the Department's information, particularly on volume of usage and details of assets8.
2.19 Inability to provide accurate information meant that bidders were likely to have increased their contingencies for uncertainties, in turn increasing their bid prices. The Department made available more and better information as they obtained it as the competition progressed, and this enabled bid prices to be improved. Racal believe they could have reduced their bid prices further if more accurate information had been available.
2.20 Notwithstanding the improvement in the Department's information there still remained some concern about the accuracy of information on assets and telecommunications usage at the time of contract signature. This, together with the need to record any changes in the period between contract signature and subsequent transfer of assets, meant that BT undertook a verification exercise after the contract was let and before services were provided through the new system. This created a risk that if BT discovered that existing assets were different from what they had expected, they might make claims against the Department. Alternately, they may have made an allowance in their contract price for the possibility of additional expenditure if information given to them by the Department was incorrect. The Department told us that they have accepted a claim for £316,000 arising from deficiencies in security concerning the packet switched service at the time that assets were transferred.
___________________________________________________________________
8 This lack of information was identified in the 1994 National Audit Office report on Management of Telephones in the Ministry of Defence (HC 637, 1993-94), and was one of the areas the Department hoped the new contract would improve.