Upgrading emergency service communications Contents

2Commercial arrangements

14.Once the decision to proceed with the Emergency Services Network (ESN) was taken in 2015, the Home Office (the Department) went to the market to invite suppliers to bid for the work.28 Instead of having a single contract as for Airwave, the commercial model for ESN followed current central government guidelines and was disaggregated into several contracts that were competed individually.29 The two main contracts were to provide user services (the public service applications and new technology to run ESN) and to provide the mobile network.30

15.For the user services contract, eventually won by Motorola, 17 initial expressions of interest were made. Not all suppliers followed up their expressions of interest but the Department told us that it downselected five bids and invited best and final offers from two suppliers. The Department told us that the large number of suppliers ruled out at that stage had been down to the fact that the user services contract had highly demanding technical requirements. Meanwhile, five initial bids were received for the mobile network contract, eventually won by EE. The lower number of bids for this contract was not surprising given the limited number of mobile network operators in the UK. Two of those bidders were downselected on price grounds and the Department invited best and final offers from two suppliers.31

16.At this stage, however, for each of the two main contracts a supplier withdrew, leaving the Department with only a single option to provide each of the main contracts32 raising the risk of uncompetitive pricing. The Department told us that for the user services contract the supplier that withdrew did so very late in the process, so that Motorola’s winning bid was effectively prepared under competitive pressure. For the network contract, the Department developed a should-cost model and, following discussions with the supplier was able to agree a contract it felt represented good value for money.33 The Department told us that both Motorola and EE would face financial penalties if they did not deliver a working ESN, but believed both suppliers had great incentives to deliver successfully.34 The Government’s National Technology Adviser told us that both he and the Cabinet Office had been “surprised that it got down to only one bid for both of those things. We were, though, comforted by the fact that that happened relatively late in the day”.35

17.When designing commercial arrangements for the new system, the programme moved away from the prime contractor arrangement it had with Airwave and instead disaggregated ESN into multiple contracts. This will include at least seven frameworks, contracts or grant agreements put in place by the programme and a number of arrangements sourced locally.36 All the ESN contracts are much shorter than the 20-year deal signed for Airwave.37 The Department told us that the combination of using the same technology as the public and the disaggregated commercial model adopted, which splits out the network from the applications and user services to allow more competition, should provide scope for frequent re-tendering to take advantage of technological improvements.38

18.Under the contract EE are building 250 masts that are being funded by the Department. In order to comply with European Commission state-aid rules other mobile network operators have the right to put their equipment onto any masts in remote areas funded through ESN.39 EE told us that it had committed to give other operators access to the Home Office funded sites, that there was a standard way of sharing infrastructure with other operators, and that it would “give them access as long as it doesn’t slow down our coverage roll-out of ESN”.40 The Department noted that other operators may choose not to participate because of the small number of potential customers in remote areas.41 We have, however, received submissions from other mobile network operators stating that they had not had information on the location and specification of proposed ESN sites42 and noted that early engagement between all operators was critical since it was much cheaper to build a mast to carry multiple networks rather than to adapt mast design at a later date.43 The Department told us that it wanted other operators to get an early opportunity to commit to using these masts, but its absolute priority had to be building ESN for the emergency services.44

19.Motorola meanwhile has responsibility for setting the specifications and approving devices for use on ESN45 which need to be high performing to provide the instant response times emergency services require.46 Motorola is also a supplier of devices, raising the risk that it could use its position to exclude other suppliers and favour its own products. The Department told us that it had “been very careful to make sure the specifications do not exclude other providers and are not bespoke. It is a standards-based process”.47

20.The main two ESN contracts currently expire in 2023, at the latest.48 The Department accepted that concern that the incumbent suppliers may be in a prime position to win future contracts was fair. However, the Department told us that it was optimistic that it would get better deals in future as the market for these new products develops and becomes more standardised over time.49

28 C&AG’s Report, Key Dates

36 C&AG’s Report, para 2.10

37 C&AG’s Report, para 1.2, Figure 9

42 Vodafone (ESC0008), paras 11–12; Three (ESC0004), paras 5–6; Telefonica UK (O2) (ESC0007), para 7

43 Vodafone (ESC0008), para 6–8; Three (ESC0004), paras 6; Telefonica UK (O2) (ESC0007), para 8–9

45 Q 189; C&AG’s Report, Para 3.16

48 C&AG’s Report, Figure 9.

19 January 2017