3.16 In conducting negotiations on the basis of a should cost model, the Department recognised the need to keep its cards close to its chest and avoid any possibility of collusion. The Department told us that it:
■ completed its own models before the receipt of bids;
■ did not show the contents of its models to the bidder;
■ did not indicate to the bidder, in negotiation, how much its price fell short of the should cost model price; and
■ only equalised costs between the bid and its own models after it had assured itself that the bidder's price was soundly based.
3.17 To underpin the integrity of the process PKF, on behalf of the Department, managed a formal process whereby Land Securities Trillium's financial submission models were not released for evaluation until IBM Consulting, the Department's business advisers, had delivered versions of the PSC and should cost models to the Department. In addition, PKF managed a quality assurance process to ensure that subsequent changes to IBM Consulting's models had been fully documented, authorised by the Department's project manager and checked to the actual models. PKF reported to the Department at various stages its review of all model changes to ensure that the integrity of the process was maintained throughout the bid and evaluation process.
3.18 Land Securities Trillium confirmed to us that it was aware that the Department had prepared a should cost model to maintain competitive tension but that it was not aware of the figures contained within that model and that in negotiation it was not made aware of by how much its bid fell short of the should cost model price or of the individual components of the price.
3.19 During the course of negotiations, Land Securities Trillium and the Department found it necessary to spend several days in detailed discussions to come to a mutually agreed understanding of what was required from the output specification and of the assumptions each had made in their respective models. Both Land Securities Trillium and the Department found this dialogue to be constructive. For example, during the course of negotiations, Land Securities Trillium was able to demonstrate that it could not make the level of savings through economies of scale and synergies that the Department expected because of the large number of small buildings within the estate. Land Securities Trillium was also able to demonstrate that it had sought competitive prices from its suppliers against the output specification. These discussions did not involve the Department discussing the actual figures it had included in its should cost model.