£20m turnover threshold could exclude SMEs and communities from £2bn broadband deals

Smaller network operators and local communities could be excluded from taking part in the government's rural broadband roll-out, according to leaked documents.

Smaller network operators and local communities could be excluded from taking part in the government's rural broadband roll-out, after the Department for Culture, Media and Sport (DCMS) announced a requirement of an annual £20m turnover over two years for bidding companies.

Through the Broadband Delivery UK (BDUK) programme, DCMS is seeking to establish a framework agreement with up to 12 suppliers to deliver local broadband projects that could be worth up to £2bn. The framework agreement is expected to be the procurement vehicle for the majority of local broadband projects for parts of the country without high-speed broadband.

The government has not officially published a figure for turnover threshold on companies seeking to bid, but Computer Weekly has seen a leaked copy of the department's draft pre-qualification questionnaire (PQQ), which clearly states a minimum revenue requirement.

"The provider must confirm that their annual turnover or revenue exceeds the threshold of £20m average annual turnover or revenue over the two most recent financial years," said the PQQ.

"This is a threshold question, inability to confirm this level of revenue will result in the PQQ being disqualified."

Under the terms of the proposed agreement, providers are allowed to form consortia to create a combined turnover to meet the threshold, but Philip Virgo, secretary general of information society alliance Eurim, says the clauses in the PPQ remain prohibitive to SMEs and local interest groups.

Local communities will not be able to set up consortia and lead delivery under the terms, says Virgo. "The key is not just the turnover question, but also the period of trading it asks for," he said.

"[BDUK] has picked up standard clauses that have been around for the last 10 years, which lead to domination of the market by the big players. But this is not in line with the government's policy of local inclusion."

A DCMS spokesman said the threshold had not yet been fixed, and that the £20m figure had initially been put in place to ensure companies could meet the appropriate capacity.

"The framework encourages prime contractors and consortia to use SMEs as part of their supply chain, but requires prime contractors that are capable financially, technically and operationally of delivering at least one complete project," he said.

But Virgo disagrees that larger companies will subcontract to SMEs. "That argument has been around for over a decade, and for various reasons never works," he said.

The initial term of the framework agreement will be two years with the possibility to extend by up to two one-year extensions, making a maximum possible term of four years.

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