4.4 The Department considered that they had a great deal of experience of commercial contracts, and sought to make as much use of in-house experience as possible whilst employing external legal advice in limited defined areas. When inviting tenders, they did not supply bidders with details of the draft contractual terms they required. Instead they asked the two final bidders to submit their own draft contracts. The signed contract was then finalised in negotiations with BT. The Department's Contracts Branch led the contract negotiations.
4.5 In addition to their in-house legal advice, the Department employed Burges Salmon of Bristol in October 1996. The Department, based on advice from their internal legal section, chose Burges Salmon from a panel of approved legal advisors. Although this was a large project, which was novel for the Department, they did not appoint Burges Salmon until after BT had been selected as preferred bidder. The Department appointed Burges Salmon to advise on this project because of their experience in outsourcing. When they were appointed in October 1996, Burges Salmon had not, however, been an advisor on a major private finance project. At this time private finance contracts had been let for prisons, schools, roads and information technology, and other large projects were under development so there would have been other firms with greater private finance experience who could also have been considered. The Department did not, however, consider the relative merits of other firms for this appointment, including firms with relevant experience which were not on the panel. The Department only sought Burges Salmon's advice on limited areas of the contract and negotiations. In other areas the Department negotiated the contract based on the terms initially proposed by BT in their own draft contract (paragraph 4.4) 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).