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BDUK Blacklist No More – Government Lose £900m IT Case vs Fujitsu UK

Saturday, July 26th, 2014 (8:00 am) - Score 2,595

Reports indicate that the Japanese technology and telecoms giant Fujitsu UK has won its case against the 2008 dismissal of their £900m contract for providing the NHS with new IT services. Crucially this is also part of the reason why Fujitsu ended up being classified as “high risk” by the Government for other IT projects, such as the Broadband Delivery UK programme.

A little over two years ago it was revealed that Fujitsu UK, which alongside BT was at the time one of only two telecoms operators bidding for major national superfast broadband deployment contracts via the BDUK programme, was now classified as “high risk” for Government IT contracts (here) and thus subject to additional scrutiny (in the eyes of most people this was effectively a blacklist).

At the time the Department for Culture, Media and Sport (DCMS) confirmed that BDUK would also be affected by the classification and that “any supplier identified as high risk will be scrutinised particularly carefully before the award of further work“. Shortly after that, during early 2013, Fujitsu UK confirmed a truth that many had suspected for some time by withdrawing from all remaining bids for BDUK contracts (here).

Backed by Virgin Media, TalkTalk and Cisco, the Japanese firm had originally (2011) proposed building an ultrafast 1000Mbps capable Fibre-to-the-Home (FTTH) style broadband network, using BT’s own cable ducts (Physical Infrastructure Access), which could have reached millions of UK premises by 2016 (here and here).

Fujitsu’s idea was good but the execution poor and public funding requirements unattractive. As a result the company spent much of the next two years announcing its withdrawal from various related BDUK tenders, often while highlighting reasons of economic unviability. As a result of all this their decision to quit BDUK did not come as a huge shock, although being marked as “high risk” for IT contracts at the end of 2012 was perhaps the final nail in their coffin.

But a new report in The Telegraph, which was similarly picked up on by the BBC, suggests that the Government might have been wrong to black list Fujitsu after the original 2008 dismissal of their NHS IT contract, which first began all the way back in 2003 and by 2008 had spent £150m of the planned total. Fujitsu and the Government traded blame over the contract’s dismissal until it eventually went to arbitration.

At the time of writing both the Government’s Cabinet Office and Fujitsu UK are refusing to comment on reports that the case has ruled in favour of Fujitsu, which means the two sides are left to squabble over the level of damages (plus legal fees of around £40m) and this could potentially run into a huge amount of money given the total value of their original contract (up to £700m but probably less). Fujitsu might also rightly expect their “high risk” status to be revoked, although regardless of the outcome it’s presently unclear whether or not that will happen.

None of this has any impact on today’s Broadband Delivery UK programme, which is now and perhaps always has been dominated by BT. Fujitsu’s alternative simply couldn’t compete with an established infrastructure and the comparative cheapness of a slower hybrid-fibre solution that could cover considerably more people and in a much shorter space of time (favourable given the original 2015 target for 90% UK coverage and a low definition of “superfast” broadband [24Mbps+]).

The story might well have been different had Fujitsu been willing to invest more of its own money and build out some of their proposed network to a wider scale first before becoming reliant on government subsidies. In reality all they ended up doing was helping BDUK to offer the illusion of a “competitive” tender process, at least for a little while.

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16 Responses
  1. Avatar Raindrops says:

    Take your 40+ Million (obviously gonna be A LOT more) Fujitsu throw some of it on the table and join sky, talk talk and cityfibre’s scheme. The Enemy of my Enemy as they say… Suddenly a consortium with a near 50% coverage already offering products faster than anything FTTC can get near, a future DOCSIS upgrade and a nice FTTP earner also.

    A shame really but something like this is one way to kill off the BT monopoly once and for all. It would be interesting what BT would do (apart from cry its not fair to anyone that will listen).

    1. Avatar Bob says:

      The local loop is the problem that is stopping any real completion. You have the monopoly incumbent operator BT with a 100% of the market share in Broadband outside of the cabled areas in that any competitor has to use some or all of the BT network and any competitor has to use at least some of BT’s network and as we have seen BT can suddenly be quite keen to move into areas they have deemed non viable one a competitor moves in

      Taking the local loop off of BT and having a company running it that is not allowed to run retail or wholesale services would focus this company on maximising the usage of the local loop whereas at present BT does its best to restrict competition

    2. Avatar FibreFred says:

      Maybe not bob look at talk talk and sky on York if that works you can stop blaming the incumbent

      You can’t just “take” something from a private company 🙂

    3. Avatar Raindrops says:

      The real problem and real reason for next gen there is no competition is money. Or should i say how money has been allocated as this story points out. The only way to beat shady dealing is to be better at it. I frankly do not know why Others like Sky, Talk Talk etc have not joined forces before. If the government want to fund their spoilt brat BT then you just have to make sure you are bigger and richer.

  2. Avatar X66yh says:

    Well under your scenario BT might just decide to withdraw totally from the really rural broadband market on the basis that the repair costs or the present and future upgrade costs are just too high to be economically justifiable.

    The commercial altnet’s are never going to be interested in these places either (you know the remote group of 4 houses on their own sort of thing) – they prefer to cherry pick the compact self contained villages near to backhaul.

    So it is just possible that BB might end up like the mains gas infrastructure. Remote villages don’t currently have it and no one is interested in providing it now or ever in the future.

    1. Avatar Raindrops says:

      Do not see how that would happen, any ISP that has infrastructure that has failed in the past, BE/O2 being the most recent and UKOnline before them as 2 big examples in years gone by, has had its network and equipment bought buy others.

      Coincidentally those were purchased by Sky. I do not see why if BT quit that they would be any different leaving the people you talk about with the same service they have now or better anyway. Only difference is there would be no silly tax payer funding any more and the country saved millions of pounds. Unless there are loads of areas with only 4 houses which BT have been rushing to upgrade to faster services with their own money we have not been told about but you know about.

    2. Avatar Walter G M Willcox says:

      They are already secretly condemning cables where they previously offered VDSL, presumably due to cable renovation costs. http://www.ewhurst-broadband.org.uk/?p=2283&cpage=1#comment-956 With the closer lines providing a sync speed of up to 17 Mbps, the availability checker only shows the minimum 1 Mbps and no FTTC for those lines on ADSL. Cabinet 2 on the Shere exchange has just been enabled but 42 properties are excluded when some of their neighbours have VDSL as they are connected to Cabinet 6 in Peaslake off the Abinger Sutton exchange. It’s the wrong technology and the incumbent can’t afford to rewire rural UK.

  3. Avatar Bob says:

    The Fujitsu BDUK plan was sound it need to win a significant amount of the contracts though for it to be viable and the fragmented was the contracts were awarded made this impossible

    1. Avatar TheFacts says:

      What was their actual plan, any links?

    2. Avatar FibreFred says:

      It needed to win the whole pot before they would go ahead , the open consortium was a joke from the start its just a shame bob didn’t see it sooner

    3. Avatar Raindrops says:

      Er wasn’t BTs plans of 66% based on their own spend and 90+% based on if they got all the funding. So in that regard no different.

    4. Avatar FibreFred says:

      No you misunderstand Fujitsu wouldn’t commit unless they won all of the BDUK contracts. BT bid for each one on its own.

    5. Avatar Raindrops says:

      That is not what it sounds like from this story…
      Sounds to me like they slowly withdrew from tenders rather than all at once.
      Also looks now like they were in the right and other commenters on that story were as usual wrong.

    6. Avatar Gadget says:

      The did withdraw on a tender by tender basis, but it is also reported here http://www.ft.com/cms/s/0/e95dade8-ca97-11e1-89f8-00144feabdc0.html#axzz38iM10sbJ that they needed a certain scale to make it worth their while, and so there probably came a time when they acknowledged they would not achieve that scale even if all remaining bids were won by them and hence withdrew from the remainder.

    7. Avatar Raindrops says:

      ft.com links do not work unless you are a member

      The only scale they were aiming for was an initial 1 million connections and an aim of 5 Million by 2016…
      Which considering there are around 30 Million premises here in the UK and BT have had funding for way more than 1 Million premises that does not seem unreasonable.

      That story also confirms just like BT they applied on a tender by tender basis and not an all or nothing.

      Quite clear now the government just wanted to make the BDUK a BT funding exercise.

  4. Avatar Bill says:

    There are alternative technologies such as Fixed Wireless. Even Fujitsu were looking at using these as a last resort so as to bypass the crippling shared BT duct/pole costs.

    The Eu told them “NO” so that was the end of that.

    There are plenty of “Alt nets” , although i detest that term, who provide a super fast service to the “4 houses on their own” and upwards without any reliance on BT infrastructure , ducts or poles.

    These technologies and providers seem to disgust DCMS/BDUK as they don’t appease the “BT must do it” model . County councils when they were applying for the BDUK funding did their best to hide the existence of these providers, even going to the lengths of publishing “No Broadband” in areas they cover.

    I can understand why they did it, What i don’t understand is why it was allowed with the resulting state aid stamp of approval for a single provider who will fail to fulfill the target as it did for ADSL.

    So much for state aid not being allowed to distort the market place.

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