The £15m radio migration and managed services deal awarded to a
division of debt-burdened NTL by five UK police forces highlights
the importance of due diligence in IT contracts, industry experts
have warned.
Due diligence aims to satisfy the buyer that the potential supplier
will not fail to meet its obligations. Martin Sexton of system
integration and implementation specialist London Market Systems,
explained, "When awarding contracts to suppliers it is paramount
that sufficient due diligence is carried out.
"It has been shown from recent experience, namely, ITV Digital,
that it is the customer who ends up paying the price."
Last week communications giant NTL filed for Chapter 11 bankruptcy
protection in the US. Nonetheless, NTL Business, a division of NTL,
was last month awarded the £15m contract to manage the Thames
Valley Police Consortium's migration from existing analogue
networks to the digital Airwave Terrestrial Trunked Radio (Tetra)
system. NTL Business will also provide managed services as part of
the deal, which will run for a minimum of three years.
Airwave is designed to enable emergency services in England, Wales
and Scotland to communicate seamlessly over a universal platform.
Executives at NTL Business have confirmed that the company
discussed the issue of Chapter 11 with the consortium, and allayed
any fears that its members may have had.
Richard Grant, strategic development manager at NTL Business, said,
"The whole issue was discussed with the consortium and we have
given them the assurances that they required." There are service
level agreements in place, he added.
Grant said NTL's financial situation will not affect the project,
and pointed to the company's track record in the UK public sector,
where it works with more than 70% of emergency services
organisations.
However, Sexton warned that users must take extra care when
obtaining guarantees from parent companies that they will not fail
to meet their obligations. "[This] should not be considered as
purely ticking a box in response to a tender," he said.
Mike Sanders, force communications project manager of the Thames
Valley Police Consortium, which consists of Thames Valley,
Cambridgeshire, Bedfordshire, Hertfordshre and Dorset police
forces, said, "The transition from an analogue to a digital system
is highly significant for the police service, which is why we have
entrusted the process to NTL Business."
Guest editor's comment
The fact that NTL is
incorporated in the US when the vast majority of its business is
conducted in the UK is obviously a commercial concern in any
contract placed with NTL, particularly in relation to the emergency
services.
Although the financial restructuring of NTL appears to have reached
a satisfactory conclusion, there remains the concern that as the
creditors have now become shareholders they may seek to influence
the direction of the NTL business towards cash generation. This
could result in the divestment of key business areas in order to
generate cash.
As the core business of NTL appears to be the provision of
bandwidth to the corporate and consumer markets over cable, the
possibility of NTL Business being sold as part of a cash generation
programme has to be considered. I wonder what contingency plans
have been put in place to cater for that particular eventuality?
David Rippon is chairman of IT directors' organisation Elite