2Remaining risks for ESN
Integration risks
17.The Department appointed KBR to act as its ‘delivery partner’ in 2015, to oversee testing and support the integration of the different elements of ESN into a coherent system. The Department admitted that the contract was not successful and that it had downgraded the role of KBR and did not expect to continue to employ KBR much longer. Following our evidence session, it wrote to us to confirm that its contract with KBR had been terminated.47 KBR was contracted to deliver planning and collaboration between suppliers but the Department told us that while the contact had been useful to procure specialist resource, in some instances it had felt it necessary to appoint its own staff as those supplied by KBR did not have the experience or expertise the Department required.48
18.The responsibility for integrating ESN has now passed wholly to the Department. The Department recognised that this was not naturally the role of a Government department and that it needed to build its capability to take on the role.49 It told us that it was strengthening the programme team to increase its ability to undertake the integration, and that it was in the process of procuring a new delivery partner to ensure it has the system integration skills it needs.50
19.The Department recognised that several of the early problems faced by the programme could have been avoided with better integration and coordination between the different suppliers, for example, managing the impact of different versions of telecommunications standards being assumed by EE and Motorola. While the Department understood there was a difference, it admitted that it did not fully comprehend that this was a fundamental problem for the programme until software entered testing.51 We asked why the Department had not ensured suppliers worked in the same location at the start of the programme so that they could have talked to each other. We have seen such co-location bring benefits to other programmes such as efficiencies, savings and technological improvements. The Department admitted that, on reflection, it should have ensured suppliers were co-located and that while it thought its arrangements to work with suppliers would have been good enough, this had not been the case.52
Commercial risks
20.As part of the reset, in June 2018 the Department realised that the existing ESN contracts were not deliverable.53 The Department told us that it had tried to hold its suppliers to account but it admitted that it had needed to clarify the contract to make responsibilities clear.54 As part of the reset, since mid-2018 the Department has been renegotiating its contracts with EE and Motorola and has extended the Airwave contract. It has agreed temporary working arrangements with both EE and Motorola to enable work to continue due the renegotiation. The Department had intended to complete this by December 2018 but it only signed the Motorola contract in May 2019, 5 months late, and it had not signed the revised contract with EE at the time of our evidence session.55 The Department told us that the revised contracts would be clearer with a sharper division of responsibility. But it has not changed the complicated commercial structure of ESN, which it admitted is highly disaggregated.56
21.The National Audit Office concluded the Department needed to manage Motorola’s contractual position carefully as it is both a main supplier to ESN and the owner of Airwave and may therefore benefit from delays to the programme. The Department will also need to manage any potential conflict of interest regarding Motorola’s role as one of the main suppliers to ESN as well as accreditor and potential vendor of control rooms and devices for the new system. Motorola will benefit from the successful development of ESN but also receives large revenues from the Airwave contract including £1.4 billion from extending Airwave to December 2022.57
22.As part of its renegotiation with Motorola, the Department agreed a 5% discount in extending Airwave to December 2022 and a fixed price of £620 million per year to continue to run Airwave. We asked whether this cost would increase substantially if the Department needed to extend Airwave further. The Department told us that it had not tried to agree a longer contract because it did not want to be locked into Airwave.58 It said it had secured a commitment for Motorola not to put the future price of Airwave up “unreasonably”, but acknowledged that extending Airwave again would require another negotiation. The Department recognised that there was a risk of the cost of Airwave increasing again if a further extension is needed.59 For example, the Department told us that the TETRA technology used by Airwave is not likely to last into the 2030s without further capital investment.60
The case for continuing with ESN
23.ESN is now expected to cost up to £9.3 billion, £3.1 billion more than was forecast in 2015. Of this, £1.4 billion is due to the cost of extending Airwave.61 The forecast costs of the programme are still uncertain as they are part of a business case which has not yet been approved. The Department expected to approve the new business case for ESN by December 2018, but it is not now expected until the end of 2019.62 We asked the Department whether the business case still stacked up and the programme would still provide value for money given the increases in cost. The Department told us that it still considered ESN to be cheaper than Airwave due to the savings expected after Airwave is turned off. It told us that, had it known at the beginning of the programme everything it knew now, the programme would still have represented value for money. It asserted that the only circumstances where it would make sense not to undertake ESN would be if it believed it was not technically possible to deliver it, which was not the case.63
24.The Department estimated that running ESN will be about half the cost of running Airwave.64 It told us that it also continued to expect that ESN will deliver 5 minutes of time saved per officer per shift. It described this as a “conservative” estimate despite police not having approved it.65
25.The Department now expects the point at which savings from ESN will outweigh the additional costs to happen by 2029, a delay of 7 years compared to the 2015 business case. But this assumes the cost of the programme is within the estimate in the draft business case, which only contained enough contingency to fund a delay to Airwave of less than two years.66 The Department was not able to tell us what level of cost increases would make it cheaper to pursue options other than ESN, such as pausing to allow the market to develop more of the needed technology rather than the Department being the first to develop it. It asserted that there were benefits to continuing with ESN despite the extra costs that will be incurred to be the first in the world. The Department also considered that there was no realistic alternative other than to continue with ESN because if it was stopped, a future Government would likely return to it later.67
26.We were concerned that the increased cost of ESN was also likely to create local cost pressures for emergency services. Emergency service organisations told us that they have delayed upgrading their Airwave equipment in the hope ESN would be delivered will need to buy new Airwave devices while they wait for ESN.68 The Department accepted that delays were causing problems for emergency services who need to plan their expenditure and had relied on ESN being ready when drawing up these plans. It acknowledged this was “unfortunate” but was not able to offer any solution other than it was working with the National Police Chiefs Council to identify whether there was scope for emergency services to pool devices.69
47 Q 93; Letter from Home Office to Meg Hillier, 4 June 2019 C&AG’s report, para 3, 14
48 Q 93; C&AG’s Report, para 6
49 Q 97
50 Q 98
51 Qq 46–50, 56
52 Qq 59–60
53 C&AG’s Report, para 3.3
54 Qq 36–37
55 C&AG’s Report, paras 3.4, 3.5, Q 37
56 Q 37; C&AG Report, para 8
57 C&AG’s Report, paras 10, 20
58 Qq 75–77
59 Qq 75–80
60 Qq 62, 79
61 Q 61; C&AG’s Report, para 10
62 Q 140, C&AG’s Report, para 10
63 Qq 62–63
64 Q 63; C&AG’s Report, para 8
65 Q 124
66 Q 60; C&AG’s Report, paras 10, 11
67 Qq 64, 65
68 Qq 117–118, Written Evidence ESR0003, Bedfordshire Police, 5 June 2019
69 Qq 18, 117–118
Published: 17 July 2019