Q71 Dr Pugh: You made a 4% saving on the basis of the bi-annual technology reviews. Do you have any idea what profits your private partner made over this period?
Mr Bradbrook: I do not know what their profits are but I am sure they will be published in their annual accounts. What we do know is that the cost of the call-off items is less than we were paying under conventional procurement, so we are assured good value for money.
Q72 Dr Pugh: Have you imposed any penalties over the course of the contract for the private contractor not delivering on time?
Mr Bradbrook: Yes, we have. There are about three penalty regimes. One is for loss of availability of the service. This is a very simple regime with a fixed amount deducted for each service that is unavailable, and in the seven months since the new network was completed there have been deductions of the order of £1.2 million for lost services. Some deductions were also made due to delay in delivery of some of the minor items on completion of the two-year build phase documents and things like that.
Q73 Dr Pugh: Mr Robertson, at the start you mentioned that a PPP contract was favoured because of the real advantages of the flexibilities that it offered. What are these flexibilities?
Mr Robertson: One flexibility is that because at the margin the PFI company can go and borrow more money to offset a risk when I am working within a fixed budget all the time. It can do things to set off risk that would not be easily available to me. I think there are some instances where they have invested ahead of when we would have done it ourselves.
Mr Bradbrook: One of the big advantages is the outsourcing or transfer of the technology risk. One matter that is acknowledged by NAO's consultant Mason is that the national network now installed is a leading edge solution. In taking a risk on putting something in that is future-proof and able to be very flexible, resilient and capable of easy change if the level of usage increases it has paid a price in that it has had some teething problems. In all those cases it has had to pick up the cost of resolving the problems having taken on that risk. But the solution from a technical point of view is significantly more flexible than the proposed public sector solution.
Q74 Dr Pugh: You believe that that could not be done under a standard public sector procurement contract with an amenable and adaptable private contractor?
Mr Bradbrook: I am absolutely convinced of that. We took a far more risk-averse approach in our illustrative solution which we then built into a public sector comparator.
Chairman: Mr Robertson, thank you very much for your presence and your evidence. I wish you well in your retirement or next role. Obviously, the Committee is concerned about value for money. Undoubtedly, some aspects of this project did go well in terms of transferring risk, but equally we are concerned about the amount of money you spent on advisers and the length of the procurement process. No doubt we will reflect on this in our report.
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