I was delighted with the news that the National Audit Office will be investigating whether BDUK gives value for money. One can make a reasonable guess as to some of the questions they might address and those they will shy away from. One question that they are most unlikely to consider is whether it was all a plot to help turn BT into a Tier One Operator like Verizon Another is whether it was correct for the Department to be so focussed on the success of the Jubilee and the Olympics that it neglected its other responsibilities, including Broadband. That priority was inevitable once the Coalition Cabinet had agreed the decision to “go for broke” with the Olympics. The KCB for the Permanent Secretary was as well deserved as his likely fate had the games had not been a triumph. The DCMS “decision” to delay broadband roll out to rural areas, until the BT had fulfilled its critical role vis a vis the Olympics, followed. Was it, however, necessary? And should not others have been informed before wasting millions on futile bids as that “decison” was expensively sonked with wandering goal posts?
Should the need to avoid diverting scarce BT resources not have been used instead to help bring about a return to the pre-1997 policy of fostering a competitive market (including “competition in the local loop”)? The policy of Local Loop Unbundling was brought in by New Labour to save the bondholders of NTL and Telewest from taking a “haircut”. It nearly destroyed BT by denying it a return on the £billions it had already invested to bring fibre to within a kilometre of 60% of the population. Current BDUK policy appears to be to preserve the BT – Virgin local loop infrastructure duopoly from being trashed by newcomers who might build faster, cheaper, more resilient networks to international standards.
Is that policy sustainable given the impending price wars between Sky and BT and between BT and the mobile operators ? Is it even in the best interests of BT shareholders? I declare an interest. I have modest shareholdings in BT, Sky, Vodafone, B4RN and also some of the equipment suppliers. I want all of them, and their competitors, to make money by growing the market – not by fighting over a communications backwater, surfing the cybercrud that comes their way.
Such policy questions are not the concern of NAO but, given that DCMS was so totally focused on the Olympics, why did it create BDUK at all?
Why did it not simply give the money direct to local authorities to pool with their own budgets and what they could raise from local businesses, including those running, or planning, business parks and property developments? Local Government has considerably more experience than Central Government with regard to pooling funds for infrastructure investment? Most local authorities also have more experience than most of Whitehall when it comes to procuring communications networks? Why were they blocked from using, let alone sharing that expertise? Was it necessary to provide central guidance at all, let alone use consultants with experience of neither telecommunications nor local (as opposed to central) government procurement simply because they could be hired quickly (but not cheaply) under an existing framework contract?
The consequent idiosyncratic, imploding and increasingly controversial process was probably expensively doomed from the start. However, the second most important question concerns commercial confidentiality with regard to the use of public funds. This has reverberations across the whole of the public sector and I should explain why. My father was an accounting officer in the days before the National Audit Office was created and lectured at the Civil Service College on the duties of an accounting officer under the Exchequer and Audit Acts. At about the same time (late 1970s) I did a spell as Comptroller (finance and administration) for ICL Public Corporations Sector. In those days all terms and conditions for public sector tenders and contracts (except defence and security) were a matter of public record as were the details of the winning bid after the contract had been awarded . I recently discussed the widespread use of “commercial confidentiality” as an excuse for secrecy with a former Cabinet Official. We could not work out when this became commonplace and whether it was actually legal, let alone good practice. Suffice it to say that no one appears to have challenged it in the courts. There is also the question of whether BT’s refusal to allow local authorities publish what it has told them of its forward plans, while effectively demanding that others publish theirs, invalidates the conditional state aid waiver given by the commission for the BDUK framework, particularly now that there is only one supplier. What Ian Grant describes as BT’s attention to detail, even with regard to the small sums on offer from DEFRA, raises serious questions as to the reasons as well as legality of such confidentiality.
Third comes the question of how the process became tailored round what BT could offer to all parts of the UK, based on its existing infrastructure rather than on international standards that would enable local networks to be operated and maintened by others should the provider go broke, as well as enabling any-to-any connectivity and incremental upgrade paths. This goes to the heart of whether the BDUK framework will be viewed during the run-up to the next election as a cost-effective triumph or an expensive disaster . The charges to DCMS from well-known consultancies and law firms for staff with experience of neither telecoms nor local government procurement, compared to those to local authorities by consultants with experience of with experience of both, are small beer by comparison. Have they actually painted the recipients of BDUK funding into a technology dead end while claiming to do the opposite?
Fourth comes the relationship, or not, between BDUK and those organising the DECC and PSN frameworks, let alone those running other procurement frameworks, such as Janet and the Grids. Would not the local authorities been able to get better value for money by mixing and matching across all three, provided the result was built and operated to international standards and was also compliant with those for the PSN.
I regret the negative tone of this blog but NAO value for money reports are often negative. The tend to be tasked to looking at expensive mistakes and identify why they happened so that we can learn for the future. The most common lessons from such reports are:
1) When stuck in a hole stop digging
2) The cover-up commonly does more damage than the original cock-up
3) There was a much simpler, less risky way which might still be practical, provided the department can swallow its pride and does not throw the baby out with the bathwater, unless it is indeed so malformed that it cannot survive.
The NAO report should enable ministers to make that third judgement but do read the report carefully. Every attempt will be made to protect the guilty and punish the innocent while it is being circulated for comment before publication. Ministers will have to insist on the truth, if they are to turn the current predicament to advantage. That may well be best done by accepting the criticisms and seeking to draw in investment from new players, even at this late stage, to turn the UK back into a genuinely competitive, world class, on-line market place.