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