2.35 PITO managed the negotiations through a number of working groups, allowing concurrent negotiations across a range of issues. During the negotiations, PITO was reluctant to concede to O2's proposed terms in
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11 |
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Comparison between the base cost of the public sector comparator and the cost of Airwave calculated by the should-cost model |
This figure shows that there was £350 million of allowances in the public sector comparator. When these are deducted the base cost of the comparator is still £270 million more than PITO's estimate of what Airwave will cost O2. | |||
| Net Present Cost | ||
1,610 | |||
Less: |
| ||
Indexation | 110 | ||
Risk allowances | 170 | ||
Cost contingencies | 70 | ||
The base cost of the public sector comparator | 1,260 | ||
Cost of Airwave calculated in the should-cost model | 990 | ||
Source: NAO |
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five key areas: the limit of liability; the liability cap for the pilot; liquidated damages; service credits; and sharing the benefits should other emergency services join Airwave. Differences between PITO and O2 persisted for seven months and led to PITO postponing its request for O2's best and final offer. By September 1999, with a sufficient number of the differences resolved, PITO invited O2 to submit its best and final offer. In October 1999, negotiations recommenced and there was considerable effort by the two parties to conclude the deal by the end of December 1999. In the event, this proved optimistic and it was not until the end of February 2000 that the deal was signed. PITO acknowledged that the contractual remedies that it had secured were not ideal, but were still within the range of what it considered acceptable.