Establishing the partnership overran the planned timetable and budget

Paragraphs 2.1, 2.4-2.8, 2.19-2.36 

9  The Agency originally envisaged that securing a partner would take 13 months, rather than the 32 months it eventually took. A number of factors contributed to the delay. Senior management in the Agency had other priority tasks including progressing the Wireless Telegraphy Act 1998, which allows fees for spectrum licences to be set based on the economic value of the spectrum, thus enabling auctioning for the first time. In addition, the emergency relocation of the Agency following the destruction caused by the London Docklands bombing in February 1996 made maintaining a service for customers and managing the spectrum priorities.

10  Through most of the procurement exercise the Agency took the view that the IT services operated mainly by contractors, rather than in-house staff, should be transferred first, thereby realising financial savings at an early stage. On this basis the Agency wanted to transfer the development work related to their bespoke IT systems first and to leave to last the transfer of the maintenance and management of hardware and non-business specific software. The Agency also did not want to guarantee the partner a minimum workload so that they could maintain pressure on the partner to keep charges competitive. The Agency considered that these measures would emphasise to potential bidders that what was on offer was not a conventional IT outsourcing contract but one which would require the supplier to add value in the development of systems. The Central Computer and Telecommunications Agency (CCTA) - then an Executive Agency of the Cabinet Office, now an Executive Agency in the Office of Government Commerce in the Treasury - advised that the Agency's proposed transfer order, the retention of an in-house capability and the absence of a minimum guaranteed workload would create uncertainty in the minds of potential bidders. They would be likely to assume that the Agency lacked commitment to the principles of partnership. An extended dialogue between CCTA and the Agency on the issue delayed the procurement. During final negotiations with CMG, when the Agency were satisfied that CMG understood the nature of the partnership on offer, the Agency agreed to a transfer similar to that initially proposed by CCTA.

11  With no similar previous public sector project to serve as a model the Agency underestimated the cost of securing a partner. Their original estimate was £550,000 including the cost of Agency staff working on the project. The decision to form a partnership through a joint venture company, which broke new ground in the relationship between the public and private sectors, increased costs significantly. By the time the contracts were signed with CMG in June 1998 the Agency had spent approximately £3.4 million. Of this sum about £2 million was paid to professional advisers and £0.5 million to CMG for work they carried out before the award of the contract. This work by CMG included analysing the work needed to establish Radio Spectrum International and auditing the Agency's IT systems to facilitate a rapid transfer of IT services.