3.20 The Department required Land Securities Trillium's initial bid on 28 February 2003, in response to the Invitation to Negotiate it issued on 20 December 2002. The bid had to be completed in a relatively short timescale for such a large deal and the Department had not been able to complete verification of some data issued at the time of the bid. This caused Land Securities Trillium to err on the side of caution and make prudent pricing assumptions. In addition, Land Securities Trillium told us that the specification set for the PRIME expansion estate was higher than that for PRIME. Land Securities Trillium reflected this in its initial bid which was 43 per cent higher than the Department's should cost model. The Department, therefore, did not regard Land Securities Trillium's bid as a suitable basis on which to commence negotiations. It informed Land Securities Trillium that it would invoke its alternative commercial solution if Land Securities Trillium did not improve on its initial proposals. The provision of fuller information enabled Land Securities Trillium to submit a bid which the Department considered was an appropriate basis for negotiation in May 2003.
3.21 After receiving a revised bid in May 2003, the Department requested further revisions in July and September 2003 during extensive clarifications and negotiations. Figure 10 shows how the price of both the PSC and should cost model came down in line with Land Securities Trillium's bid between May and July. Costs on the should cost model and PSC rose between July and September 2003, to exceed the Land Securities Trillium price, which continued to fall, by 3.7 per cent or £44 million in present value terms. Figure 11 provides details of the reasons for changes in costs over the period between May and September 2003, together with their impact on costs.
3.22 Subsequent to Land Securities Trillium's September bid, the Department agreed to a higher flexi-core allowance to be spread over a longer period, and that the contract start date should be moved back from 3 November 2003 to 15 December 2003. These adjustments increased Land Securities Trillium's price to £1,194 million and the should cost model price to £1,236 million, a difference of 3.5 per cent.