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Value for Money Concerns Raised Over N.Ireland Broadband Projects

Thursday, Jun 17th, 2021 (12:37 pm) - Score 1,120
northern ireland map uk simplified

The Northern Ireland Audit Office (NIAO) has today published a new report into two recent state aid supported broadband rollout projects in Northern Ireland, which questions whether they delivered value for money, highlights a lack of contract bidding competition for BT and warns about a reliance on the contractor to self-certify its costs.

At present, Northern Ireland is somewhat of an oddity so far as broadband connectivity across the United Kingdom goes. The latest data from Ofcom shows that only 90% of premises can access a “superfast broadband” (30Mbps+) network – well below the UK’s 96%, yet full fibre (FTTP) is available to 63% (21% in the UK) and gigabit-capable networks cover 69% (37% in the UK).

NOTE: Gigabit-capable include both FTTP and Virgin Media’s Hybrid Fibre Coax (HFC) using DOCSIS 3.1 network.

However, the NIAO’s report isn’t so concerned with full fibre and gigabit connectivity (i.e. the new £165m Project Stratum programme is out of scope), instead it’s focused upon the previous £17.7m Northern Ireland Broadband Investment Programme (NIBIP – build completed Dec 2017) and the £15.7m Superfast Rollout Programme (SRP2 – build completed Dec 2018) – both contracts were won by BT (Openreach) as the only bidder.

Both projects were designed to increased broadband connectivity to premises across Northern Ireland, particularly in areas of market failure (i.e. rural areas or those that had been deemed economically unviable to upgrade). A lot of this involved the deployment of Fibre-to-the-Cabinet (FTTC / VDSL2) and some old ADSL2+ technology.

The N.I’s Department for the Economy (DfE) awarded the NIBIP and SRP2 contracts using a national framework established by the UK’s Department for Digital, Culture, Media & Sport (DCMS), which provided a mechanism for local bodies to award contracts on a call-off basis and therefore avoid expensive, individual open tender exercises. But the NIAO’s report identified a number of concerns.

The NIAO’s Areas of Concern

— By the time the Northern Ireland contracts were awarded, only one bidder (BT) remained on the framework.

— Reliance on the contractor to self-certify that costs were “internally consistent and consistent with its commercial investment” was not an adequate control.

— Performance through the NIBIP fell well below DFE’s original expectations of delivering broadband to 117,600 premises and, in fact, only ended up improving broadband access to 37,500 premises.

— The report also notes that the take-up rate for improved broadband was significantly higher than originally estimated. BT had estimated that around 20% of customers would access and pay for improved broadband delivered, but the actual take-up has reached 66% for NIBIP and currently stands at 33% for SRP2. Both schemes include a mechanism for the Department to recover excess profits because of a higher than expected take-up and it is estimated that around £14m will eventually be recovered from BT. Nevertheless, the report suggests that the high take-up rates raise questions over whether either project could have been commercially viable with significantly less public subsidy.

On the first point about BT being the only bidder, it’s worth remembering that back when these contracts were awarded there were very few viable alternative networks present across the UK, particularly in N.I where only Openreach (BT) and Virgin Media dominated. The original Phase 1 BDUK programme had the same issue, while a proposed alternative between Virgin Media and Fujitus UK never amounted to anything tangible. Today’s market is of course very different (Summary of Full Fibre Builds) and Phase 2 involved more operators (e.g. Gigaclear, Airband etc.).

On the second issue of costs and related transparency, this is one that the UK’s Public Accounts Committee (PAC) has raised in the past and the Building Delivery UK programme has, since 2015, “strengthened its value for money team and had access to detailed cost information from BT.” But the NIAO agrees with the National Audit Office‘s (NAO) view that “BDUK’s analysis shows that actual costs are lower than BT’s bid prices but do not, in themselves, assure BDUK that BT priced the contracts economically.”

On the NIBIP shortfall from 117,600 premises, it’s worth noting that this figure reflected the N.I government’s original aspiration (part of an ambition to provide universal access to speeds of at least 2Mbps) and not a contracted figure, while in 2014 BT said they could only guarantee delivery to 45,259 premises for the given funding. Meanwhile, SRP2 separately improved access to a further 42,000 premises (30Mbps+ speeds).

As for take-up, that too was a historic issue spotted by the UK’s NAO – in many ways the NIAO’s report merely echoes the findings from earlier reports on the wider UK Superfast Broadband programme. The strong take-up has however led to hundreds of millions of pounds being earmarked by BT for return to the public purse and reinvested in future upgrades, but the NIAO makes a fair point about the impact vs commercial viability (again, this is a known issue from the early BDUK phase).

Mr Kieran Donnelly CB, NIAO Comptroller and Auditor, said:

“The COVID-19 pandemic has brought into sharp focus our increasing reliance on the internet to communicate, work, learn and shop. Many in Northern Ireland have faced COVID-19 lockdowns with inadequate access to broadband services, and while any improvement in broadband infrastructure is to be welcome, my report raises significant issues.

The outcomes of the NIBIP were considerably below DfE original expectations and were disappointing in terms of the number of premises benefitting from improved broadband access. The report concurs with the findings of previous Parliamentary Committees that use of the DCMS national framework seriously limited competition and provided insufficient transparency over actual costs incurred by the contractor.

It is vital that Project Stratum, involving £165 million of public subsidy, finally provides an appropriate broadband solution for those rural homes and businesses in Northern Ireland which are still dealing with poor digital connectivity.

I note the Department for the Economy’s assurance that Project Stratum was procured using an open tender process rather than the framework which had lapsed in 2016, and there are built in controls to ensure full transparency over costs.”

The NIAO says they separately intend to report on the award of the Project Stratum contract later this year, which should prove to be much more interestingly, particularly since that one is much more recent and went to an alternative network provider (Fibrus) – not BT. We’ll be looking to see whether the DfE has learnt any lessons from their earlier projects.

Finally, today’s report also includes a series of recommendations, which admittedly are a little too late to be of much use for existing projects, but they may inform the future gigabit programme.

The NIAO’s Recommendations

Recommendation 1

The BDUK framework was compatible with EU regulations and provided a mechanism for local bodies to award contracts on a ‘call-off’ basis and therefore avoid expensive, individual open tender exercises. However, following the withdrawal of seven of the nine companies which pre-qualified to bid, and Fujitsu’s March 2013 announcement that it would not be bidding for any further contracts through the BDUK framework, BT was left with no competition.

We recommend that for future procurements exercises, in the event that only one bidder remains on a framework, consideration is given to the impact on the market of awarding all contracts to that bidder and assessing how, in such cases, the achievement of value for money can be objectively measured.

Recommendation 2

In the absence of competition, local bodies were not in any position to evaluate BT bids. As an alternative, BDUK prepared bid comparison reports for local bodies. NAO and Westminster PAC have both been critical of BT bids which they concluded lacked detail, relied on self-certification that costs were consistent with commercial investment and were economically priced and contained non-disclosure agreement clauses. We note that by 2015, BDUK had strengthened its value for money team and had access to detailed cost information from BT. Although BDUK was then in a position to compare bids and confirm that BT’s actual costs were lower than bid costs, we agree with NAO’s view that while BDUK’s analysis did not, in itself, provide assurance that BT priced the contracts economically.

We recommend that, for future contracts, departments secure appropriate inspection rights to detailed data so that bids can be fully assessed. We also recommend that nondisclosure clauses are omitted from contracts.

Recommendation 3

We note that in several of the contracts let through the framework, take-up was estimated at 20 per cent. Actual take-up however has been considerably higher (66 per cent on the NIBIP and 33 per cent on the SRP2). While we acknowledge that DCMS (and ultimately DfE) shares in a percentage of any gain, in our view, predictions on take-up should be more accurate.

We recommend that for future programmes, contracting authorities ensure they have the necessary information to allow them to produce more accurate predictions on take-up.

Recommendation 4

The BT framework bid for, and actual delivery under, the NIBIP fell considerably short of DfE’s initial expectations. This indicates that either DfE’s initial planning was totally inaccurate or BT’s bid and performance represented poor value for money. While we note that BDUK and DfE’s technical consultants considered that the final BT bid offered value for money, it is difficult to understand how preliminary DfE expectations could have been so far out.

We recommend that, where the use of frameworks is not mandated, departments take time to consider whether it would be in their best interests to consider and negotiate through alternative procurement methods, for example through open competition.

We note assurances from DfE that the contract for Project Stratum, which was awarded after the BDUK framework lapsed, was procured using the Restricted Procurement Procedure pursuant to Regulation 28 of the Public Contracts Regulations 2015 and was fully managed by the Department of Finance’s Construction and Procurement Delivery (CPD) in line with the National Broadband Scheme 2016, with State aid Assurance provided by BDUK as the National Competency Centre.

We suspect that trying to “produce more accurate predictions on take-up” for any new broadband technology could be quite a tall order, particularly in today’s market with so many new rivals cropping up. At the end of the day, take-up is a matter of consumer choice, desire and awareness, which is inherently hard to quantify with much accuracy.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and .
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10 Responses
  1. Avatar photo NGA for all says:

    They confirm that most of the £14m clawback is still outstanding. Nationally that is a great deal of money tucked away.

    It appears BT gets to certify its own capital. If so, Ofcom may be called upon to show the capital payments are consistent with what is expected in a ‘fair bet’ analysis.

    1. Mark-Jackson Mark Jackson says:

      Contracts based around the BDUK framework tend to run for 7 years and, unless an earlier release is agreed with BT for reinvestment, then many local bodies may just wait until the 7 years is up for the payment to come (no strings attached), or take out a related loan to help with future contracts – paying that back using clawback.

    2. Avatar photo NGA for all says:

      Except the ambition and stated aim was to finish the job. The issue on BT’s capital contribution remains outstanding.

    3. Mark-Jackson Mark Jackson says:

      Most of the BDUK contracts do seem to be finishing the job, indeed the majority met or exceeded their original coverage targets, but how and when new contracts are agreed (many are still in-progress) is entirely up to the local bodies. As you read ISPreview, then you already know that a fair few contracts are using clawback, but others are awaiting the final release before reinvesting, or taking out loans to give them flexibility until they can reinvest.

    4. Avatar photo CarlT says:

      Ambition / stated aim isn’t legally binding. If that was the plan someone failed to get it nailed down in the contracts.

  2. Avatar photo CeredigionMan says:

    This sounds like a similar issue in Wales!

  3. Avatar photo The Real Facts says:

    Shortened version:
    BT should not be trusted, BT Openreach CEO Clive Selley should get a CBE for shafting the UK public purse in Northern Ireland.

    Recommendations clarified

    Recommendation 1
    Fujitsu pulled out leaving BT no competition, so they shafted us.
    We should be careful of BT shafting us.

    Recommendation 2
    BT kept the bids vague so they could overprice them and pad them out when needed.
    Then used Non-Disclosure Agreements to shaft everyone and get people to shut up.
    We should probably not allow NDA’s in future.

    Recommendation 3
    The take up was estimated at 20%, but we left out any way to accurately measure up take.
    We should probably include a way to measure and monitor our own defined checks and balances.

    Recommendation 4
    BT’s bid was accepted because they said they would improve broadband for 117,600 premises and in fact only delivered to the 37,500 cheapest and most easy to reach locations.
    This is only 31% of what they said they would do. The still took 100% of the money though, and continue to owe us millions.
    Therefore the DfE are grossly incompetent and BT pulled another fast one on them.
    We have therefore chosen a different company to shaft us with Project Stratum, and included the Finance procurement department so we dont have to fire the all the DfE telecoms idiots.

  4. Avatar photo RN says:

    Here is yet more evidence BT and Openreach are totally abusive using their own weight and use bullying and filthy, dirty tactics to destroy and annihilate the AltNet bids.

    BT Openreach engineer install time is only worth £200/day ABSOLUTE MAXIMUM for FTTP area installation labour yet we see inflated bills presented for tens of millions which doesn’t justify the cost proportionately. Someone is swindling the taxpayer on a monumental scale here. Yet AltNets can do all this for a tenth of the price and STILL make profit.

    Openreach engineer jobs are advertised at £30,000-£34,000. That’s my proof. Plus van and tools and pension. Costs £52,000 a year, divide 52 weeks, by 5 working days = £200/day “RAW COST OF ONE ENGINEER” excluding consumables such as reels of fibre.

    I’ve noticed 80% of readership on this site actually secretly works for BT or Openreach and therefore totally lack the objectiveness to think independently and see this scam from the consumer point of view, instead the secret employees continue to defend the company till death (or redundancy)

    1. Avatar photo The Facts says:

      Is the cost of an altnet contractor £20/day?

    2. Avatar photo HDB3 says:

      You argument makes no sense. BT can’t possibly be both vastly inflating their bids *and* destroying the competition. Only one could be true. Bid competitors tend not to win when they inflate their prices.

      The cost of employing someone is typically twice their pay.

      Openreach people don’t dig the road and lay trenches. That work is carried out by contractors, who charge between £22-40 per metre – https://www.building.co.uk/download?ac=1539683

      If a kilometre of fibre needs to be layed, that’s £40k for the dig before any Openreach people turn up.

      Try to think a little harder. You’ll be less wrong and as a result, less angry about things that aren’t true.

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