Questions 216-221: What do you anticipate to be the total cash you would pay out over the 19 years?

The Airwave contract payments are spread over 15 years for each force starting at the Ready for Service date. There was a planned progressive roll out starting in 2001 and the total life of the programme, including the roll-out and decommissioning phases, will be 19 years. When the system is fully rolled out the total annual charge at 1999-2000 prices will be around £180 million per year for core and menu service charges. This comprises £146 million for the core service and an estimated £34 million for menu exclusive services. As forces have local discretion for the amount of optional menu exclusive service they procure, their contract value can only be an informed estimate. On this basis, the total value of contract payments over 15 years at 1999-2000 prices is £2.7 billion. O2 may have a more optimistic estimate of the revenue they will receive from menu services provided to forces and have published a total contract value figure of £2.9 billion.

The start up including the provision of radios from third party suppliers is at an additional estimated cost of £280 million.

The net present cost (NPC) of the contract is derived from the contract payments and applying the Treasury recommended discount factor of 6 per cent. The NPC of the contract (excluding radios) is £1.47 billion.

The contract includes a complex indexation formula which takes account of RPI and the Electrical & Optical Equipment Earning Index and protects the public sector against any unregulated change in prices.