The approach adopted was sound

2.18 PITO saw benefits from using a should-cost model. It realised that compiling information about the costs of Airwave would permit direct comparisons with, and challenges to, O2's estimated costs. PITO consulted its advisers about using such a model as a pivotal element in its value for money assessment. The advisers

Options reviewed by PITO after competitive tension had been lost

Option	Reasons given by PITO to reject options
1 Continue with O2	None.
2 Re-run single procurement of a national system	There would be no new parties interested in bidding. There would be a negative reaction from O2.
3 Implement fallback	User requirements would not be met.
	There would be few opportunities for sharers to join thus losing the opportunity for the unit cost to the police being reduced.
	Police forces would be burdened with the responsibility for replacing their radio systems.
	Expected benefits from Airwave would be lost.
4 Do-nothing	Postponing the procurement for three or more years so allowing the TETRA supply market to mature would see consolidation of the market and there would be no new major players beyond those already in the competition.
	Some police forces would obtain replacement systems in the interim and would resist, on value for money grounds, any move towards establishing, in the future, a national radio communications network.
5 Adapt procurement strategy to engender competition (e.g. a series of regional procurements)	There would be a need to restart the competition, which would delay the procurement of the service by at least two years. Delaying the procurement would erode support from the police forces.
Source: PITO

supported the concept, but with the proviso that O2 should supply detailed information quantifying the assets and labour needed to deliver Airwave. PITO, with support from Home Office experts and Mason Communications, considered that it possessed the ability to analyse the reasonableness of quantity related information.

2.19 Mason Communications also informed PITO that there was sufficient cost information in the public domain to allow independent pricing of components. The project team considered that this cost information, together with information quantifying components and a construction programme, could be used to test the reasonableness of O2's bid. PITO also considered that the model would be an ideal tool to use in benchmarking exercises during the term of the contract.