UPDATE National Audit Office to Criticise the Broadband Delivery UK Scheme

The National Audit Office (NAO), which works on behalf of Parliament to scrutinise public spending, is expected to criticise the value for money aspects of the government’s £530m Broadband Delivery UK (BDUK) project when it publishes an allegedly scathing report into the scheme next month (July 2013).

The framework ultimately exists to help 90% of people in the United Kingdom gain access to a superfast broadband (25Mbps+) connection by the end of 2015 (i.e. public funding would be used in the last 33% of areas that the private sector has neglected) but it has also been beset by various administrative and funding delays, not to mention competition concerns.

As with most such projects the NAO has, for the past few months at least (here), been tasked with examining the case for the scheme, the design of the procurement framework, the appointment of framework partners and the role played by DCSM in local authority procurements.

But few expect the NAO to give BDUK a completely clean bill of health, not least because BT has been left as the only viable bidder in the scheme after Fujitsu UK confirmed in March 2013 that it had given up on the process due to economic and competitive concerns (here). On top of that the release of a leaked internal discussion paper last year suggested that BT may have been overcharging for its work, which the operator strongly denied (here).

Since then the government’s Major Projects Authority (MPA), which was established to help improve the “delivery success rate” of major publicly funded projects through collaboration between various government departments, has put the effort to roll-out superfast broadband on Amber/Red Alert and warned that the “successful delivery of the project is in doubt” (here).

According to yesterday’s FT (Paywall), a source close to the NAO process said that the forthcoming report would describe BDUK as a “train crash waiting to happen” and one that is apparently “accelerating“. It’s also claimed that the report will criticise BDUK’s structure because it “lacks transparency and it lacks competition, so they can’t judge whether there is value for money or not” and that’s before we’ve even touched on the troubled but largely separate £150m Urban Broadband Fund (UBF) situation (here).

A DCMS Spokesperson said:

“The government is absolutely confident that our programme will deliver projects that are real value for money and result in a transformation of broadband in the UK by 2015. From the very start, we have built multiple controls into our contracts to ensure value for money, including independent assessment and clawback clauses.”

Margaret Hodge, Labour’s chair of the Public Accounts Committee (PAC), is widely expected to use the report as fuel to scrutinise the government’s broadband strategy. Needless to say that the situation could put BT, which is also set to be quizzed by MP’s over its broadband programme in mid-July, and the Secretary of State for the Department of Culture, Media and Sport (DCMS), Maria Miller, in a difficult position (though she could always blame some of it on Jeremy Hunt).

Suffice to say that BDUK has faced a rocky road but it’s also important to remember that funding for the scheme has been approved by Europe’s competition authority and it recently began to see some real progress with a number of local projects finally starting their physical deployment work. It’s possible that the 90% target could slip into 2016 but it will almost certainly still be met.

Meanwhile there’s unlikely to be a change of strategy until after 2015 when the focus will be on the most rural areas again (i.e. the last 10%).

UPDATE 12:09pm

BT has given sent us their statement.

A BT Spokesperson told ISPreview.co.uk:

“BT cannot comment on the report ahead of it being finalised and published. What we can say is BT is delivering value for money via the BDUK process and there are various auditing measures to ensure that is the case. We are contractually committed to ensuring the costs we incur in broadband partnerships are consistent with our own commercial costs and we are also reinvesting savings to go further when we can.”

It’s understood that a draft version of the NAO report is currently doing the rounds in order to be checked for accuracy and BT are believed to have warned that several things in it are factually incorrect, although we don’t yet know which aspects this is referring to.

BT has so far set aside roughly £1bn to match-fund with related BDUK projects, which amounts to a total of around £3.5bn for superfast broadband deployments when you factor in their commercial £2.5bn deployment of FTTC/P to 66% of the UK.