Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 200 - 219)



  200. Is that a yes or a no about open books?
  (Mr Parris) This contract was not procured under open-book accounting.

  201. I understand that. I am asking whether, in order to maintain good will, and as anxieties have been expressed, you are willing to demonstrate on an ongoing basis—we are talking about 15 years here—by operating some sort of open book system to show the Home Office that you are not profiteering.
  (Mr Parris) There is a mechanism within the contract which is similar to an open-book accounting mechanism which requires us to prove value for money on an ongoing basis. The broad answer to your question is yes. The additional thing I would say is that we have talked in this meeting about the additional possible service to fire and ambulance and such like. Those are discussions and negotiations yet to be had and I would fully expect to be able to demonstrate the provision of a value for money service to anybody else who joined up.

  202. Somewhere in this report it mentions that they were trying to estimate costs and so on. You were refusing to provide cost information. That does not sound like the actions of a partner and it does look rather as though you are concealing something, does it not?
  (Mr Parris) When this procurement went down to a single bidder we recognised that there was a need to adopt and change our approach. Indeed there were some advantages from being in a single-bidder situation. We proposed and PITO accepted the concept of the "should-cost" model, which is the basis of what you are referring to. We also suggested that in effect the bill of quantities would describe the bits which go to make up this system and we would make our own estimate of what those costs would be and PITO could check whether they felt they were appropriate estimates and such like. We did do that and we did do it for six major cost items. If I am reading your question correctly, there was some issue during the negotiation when frankly our design had not materialised, had not matured, to a level where we could provide all the detail which was required at that stage.

  203. Perhaps I have picked this up wrongly or it has been phrased wrongly in the writing. You would have no difficulty about providing any cost information which was sought either by the NAO or by PITO or by anybody else in order to demonstrate that you were not over-charging.
  (Mr Parris) We have done that.

  204. Mr Gieve, is that your impression?
  (Mr Gieve) May I ask Philip to answer as he was negotiating that contract?
  (Mr Webb) Yes, it was. During that period we worked very closely with Airwave.

  205. Thank you very much. I just wanted to clarify that. One of the other issues which causes us concern is this refusal to share profits from bringing in new users. It seems to me that is counter-productive from your perspective as well. If the Home Office and the police forces were your partners and had to have a profit-sharing arrangement they would have an incentive to help you bring more people in, yet at the moment you do not have that. Why is that?
  (Mr Parris) The discussion which took place at that time was very much around the way you have just described, that is we were prepared to engage in discussions about sharing benefits, sharing the rewards, as long as the Home Office could bring those users to the table, which unfortunately they could not, as events show, and if they were prepared to share in some of the risks, which for the same reason they were unprepared to do. I was quite prepared to engage in a risk/reward type of arrangement, as is fairly common in partnerships.

  206. Mr Gieve, could you comment on that? Is that your understanding of the position?
  (Mr Gieve) I will ask Philip, because he was negotiating the contract.

  207. But you must have an impression.
  (Mr Gieve) The impression is that we would have liked to get a better deal than we did, but in a commercial negotiation you have to settle for what you can get in the end.

  208. You have to settle for what you can get in the end. That is presumably because at the stage when you were discussing that really the O2 people had you over a barrel and you are on "Take it or leave it". You had to have this radio, so they could play hard to get and there was nothing else you could do but accept it.
  (Mr Gieve) No, it was not. The Home Office have been held over various barrels in the past in that way but it was not true in this case.

  209. Usually for your own good.
  (Mr Gieve) In this case O2 definitely had already invested heavily in this project and phase 2 stood to lose a lot if the project did not go ahead. It was more even than you say. Having a single body is not ideal and that is why we did the "should-cost" model and so on, to try to ensure that we were getting a value for money deal.

  210. May I clarify one point on page 12 which mentions extra charges? In the nice picture at the bottom on the right hand side it says "Where the police force requires its officers to operate inside buildings on a regular basis" basically you have to pay more. As far as I know, there are no police forces with no buildings, therefore presumably all police forces will at some stage have to operate inside buildings and presumably all of them are going to have to pay an extra charge. Am I picking this up wrongly?
  (Mr Webb) They would not necessarily have to pay an additional charge. The system does work reasonably well in most buildings, but in areas where they want a much higher level of coverage, like large shopping malls and airports, they would want a better service. What most police forces have done is look at the standard coverage and buy additional coverage for those areas which did not meet the full requirement.

  211. You are wiring inside the airport or wherever it is to provide that service.
  (Mr Webb) Yes.

  212. When this wonderful scheme is being rolled out, why is Scotland last?
  (Mr Webb) As part of the original arrangement Scotland chose to go last.

  213. Do they get it cheaper?
  (Mr Webb) Let us put it this way, we shall have rolled out to an awful lot of other forces and ironed out a lot of problems before we get to Scotland.

Mr Bacon

  214. May I start by asking a question about the money? You said the £1.47 billion was the net present cost of the stream of forecast payments. Could you say what is the actual annual payment?
  (Mr Gieve) It is £180 million.

  215. Each year?
  (Mr Gieve) The payment builds up as the service builds up. The full payment is £180 million.
  (Mr Webb) Yes, of that sort of order.

  216. What do you anticipate to be the total cash you would pay out over the 19 years?
  (Mr Webb) Total cash over 19 years is of the order of £2.9 billion.

  217. Which is why your website says £2.9 billion.
  (Mr Webb) That is right.

  218. Is that including an inflation assumption?
  (Mr Webb) Yes.

  219. Of what?
  (Mr Webb) Six% return on capital.
  (Mr Gieve) Six% is the discount rate.

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