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ESN:a challenging contract

The Invitation to Tender documents for the UK’s £1bn Emergency Services Network reveal a complicated contract with demanding schedules and a high degree of risk. James Atkinson reports

ESN:a challenging contract

Bidders for the UK’s £1bn Emergency Services Network (ESN) are gearing up to submit bids for the contract that will replace the current Airwave TETRA two-way radio network with a 4G LTE broadband voice and data service.

The Home Office sponsored project, being run by its Emergency Services Mobile Communications Programme (ESMCP) team, has split the contract into four lots (see list below). There are five bidders for each lot (if all decide to submit bids) – bids are due back by 17 October for Lot 1 and 31 October for the other three.

ESN will cover approximately 300,000 operational staff: of which 250,000 are Tier 1 users in the emergency services (ESs), including all 44 Police Forces, 50 Fire & Rescue and 13 Ambulance Trusts; and 50,000 Tier 2 users, including other Government departments, Coastguard, Border Agency, etc.

Invitation to Tender (ITT) documents seen by Wireless reveal that ESN is an extremely complicated contract to be delivered in an eye-wateringly tight timescale with very high levels of risk placed on suppliers.

Multiple procurements
By refusing to appoint a single supplier, the Government has made seamless operation and management of the network inherently more complex. ESN is further complicated by the fact that there are up to 14 different procurements associated with, but separate from, the main contracts.

These include: ground to air network and airborne radio fit out (no solution has been identified for this, yet bidders will have to guarantee to integrate it despite not knowing what it is); ESN-ready devices for end users; an ESN app store; and potentially the fit out of 45,000 ES vehicles.

There are also a host of local procurements by user organisations that need to be co-ordinated with and integrated into ESN. These include: upgrading 230 control rooms and integration into ESN; installing ESN-ready devices in 45,000 vehicles; transition and migration support for users and staff training; purchase of voice and data usage.

These latter contracts will be locally funded and industry experts have told Wireless that there is, as yet, little awareness among local police commissioners and local authorities of the costs involved here which they will need to find budgets for.

Service Level Agreements
One major concern has been that the Government might reduce the mission critical service levels to something nearer the ‘best effort’ service provided by commercial mobile network operators (MNO) to consumers.

The good news is that the key requirements have been kept high. Coverage must provide parity with the current Airwave network. This will, however, place a heavy cost burden on MNOs bidding for Lots 3 and 4, as in addition to infilling many poorly covered geographic areas, their networks must also cover the UK road system.

Just the cost of covering the road system alone, not to mention all the other ‘not spots’, will require MNOs to install hundreds, possibly thousands more base stations and to a much higher resilience spec than normal.

One third of Airwave base stations have 7-day power back up and the resilience is extended to backhaul and other parts of the network to provide end-to-end reliability. For an MNO to replicate this on a third of their 15,000-plus sites will be hugely expensive.

Availability of the network is probably even higher than under the Airwave contract, where there is an obligation to fix faults within four hours. ESN is asking for a fix within three hours based on outcomes affecting ‘operational performance of the service’.

Again, this will be a challenging operational requirement for MNOs compared with their normal operational procedures. Generally, sites that generate the highest revenues get most attention if a fix is required, those with little revenue attached can be out for hours if not days. But under ESN each site must be treated equally.

Pricing options
ESN is going to be enormously challenging to price sensibly for suppliers. They can build to the required spec and most likely blow the Government’s cost estimates out of the water and then try and charge the Government for the full cost – something they are unlikely to get.

They can take a hit on the build cost and hope to claw it back by winning the contract again when it is retendered – or, if the Lot 3 winner is an MNO, offset the cost through commercial revenues, as the winner will undoubtedly have a much better network than its rival mobile operators. But it may then fall foul of benefiting from State Aid at the expense of its competitors.

The Government ITT document states: ‘The Programme has engaged with the EU Commission in relation to the possible existence of State Aid, although it considers that it will be allowable aid as a Service of a General Economic Interest (SGEI) for the provision of critical communications services benefitting the UK as a whole.’ Others believe this position is eminently challengeable – so it is a risk a winning MNO would have to take.

The third option is to price the contract knowing that it may well be undeliverable under the terms of the contract and hope to negotiate more favourable terms later – probably a naïve view.

The ESN bids will be evaluated on price, commercial, service and technical aspects to determine the most economically advantageous tender (MEAT) with different aspects given individual weightings. The evaluation team has just four weeks to assess 20 bids (estimated to run to approximately 8,000 pages each), raising questions over the quality of the marking.

Network Delivery Programme
The winners will then get just seven months to build the network and a further 11 months to test it. The point here is that the winning bidders face 18 months of heavy financial investment in building the new network without any payment. Payment (a mix of capital repayment and standard operational payments) only begins when the end users are satisfied with the service and sign it off.

The longer the test period goes on, the longer the supplier has to wait before earning any revenue – and if delays are the fault of the supplier he may well be incurring fines on top of having no revenue. As the full number of end users will not be on the new network much before Lots 2 and 3 come up for re-tender the full revenue generating period is quite short.

This, in essence, turns the first contract stage of ESN into a build-only contract. Bidders will need deep pockets to take that hit and the associated risk involved – and there is no guarantee they will win the contract again when it is retendered.

Roll Out Programme
Most industry people believe two years is a sensible roll out time – if that turns out to be the reality suppliers could be seriously out of pocket. The actual roll out programme, described as ‘unbelievably ambitious’ by one potential bidder, is around six months per region (based on the 12 Ambulance Trust regions) with the Metropolitan Police being given a bit more than 12 months.

NPfIT Contract
Just to add to the fun, there is an ‘all for one and one for all’ Musketeer operational clause: if one supplier fails, everyone gets penalised. Worse still, the Government is persisting with its use of the National Programme for IT (NPfIT) contract, used to such disastrous effect in the NHS for the ill-fated national electronic health record project (finally abandoned in 2011 at a cost of £9.8bn).

The equally bad news is that rather than ease up on that contract’s much criticised adversarial ‘take it or leave it’ contracts, the ESN schedules are said to be even more restrictive and punitive. There seems to be no attempt here to promote harmonious long-term relationships. Failure will carry a heavy penalty.

Stark choices
The choices facing Government are not easy in these financially constrained times. Dr Dave Sloggett, an independent academic specialising in mission critical communications, observed in a post on earlier this year: ‘Any move to use commercial suppliers (MNOs) will inevitably see them having to decide where their priorities lie, with their shareholders or the public?

‘This is where a dedicated network has its major advantage. But some argue that comes at a price premium. They argue that only by testing the market can the right payment for the services required be purchased. Economically that is a fair argument. But the way the procurement is conducted should not provide an added bias in favour of a specific ideologically acceptable solution.

‘The choice for the Cabinet Office as it prepares for the procurement of the replacement of the existing Airwave contract is a stark one. In deciding which of a number of offers it accepts, the Cabinet Office must ensure that the playing field is absolutely level.’

A tough call
The gloomy conclusion is that all the bidders will struggle to make a sensible business case out of ESN given the parameters they are forced to work in.

The Government is asking for too much, for too little money in too short a timescale and with too much risk attached. Try making a sensible business case out of that equation.

It is going to be interesting to see which brave suppliers put a bid in – and then if they stay the course. And if no one signs up to this onerous contract, what then? What’s the Plan B? Apparently there isn’t one.

The ESN Contract

Lot 1 – Delivery Partner (DP): £60-95m
The DP will manage the transition from TETRA to 4G LTE. The contract will run for 5.5 years with possible extensions up to 1.5 years.
Shortlist: Atkins; Kellogg Brown & Root; KPMG; Lockheed Martin; Mott MacDonald

Lot 2 – User Services (US): £120-245m
The US will develop and operate the public safety communication services and functionality (including voice applications). The six-year contract can be extended up to two years.
Shortlist: Airwave Solutions; Astrium; CGI IT UK; HP Enterprise Services UK; Motorola Solutions

Lot 3 – Mobile Services (MS): £200-530m
The MS provides the main resilient mobile network infrastructure ‘with enhanced availability and coverage’. The 5.5-year contract can be extended to a maximum of 1.5 years.
Shortlist: Airwave Solutions; EE; Telefónica UK; UK Broadband Networks; Vodafone

Lot 4 – Extension Services (ES): £175-350m
The ES provides mobile network infrastructure for areas not covered by Lot 3 – essentially rural areas in the UK. The contract runs for up to 15 years with an optional break point at seven years.
Shortlist: Airwave Solutions; Arqiva; EE; Telefónica UK; Vodafone

What are the alternatives to ESN?
The UK could follow the US model where the P25 mission critical voice network will be retained and a dedicated private LTE data service, FirstNet, is being built on top. This is, of course, an expensive option.

The other alternative is to follow Belgium’s example. It is retaining and upgrading its ASTRID TETRA network for mission critical voice services and has set up an MVNO, Blue Light Mobile, whereby the emergency services buy airtime from the country’s three MNOs to access ‘best effort’ broadband data services. LTE devices are fitted with a SIM that enables users to roam across all three networks.

This provides a less aggressive glide path to all services, including voice, being delivered over LTE when the standards are in place and an ecosystem of mission critical LTE infrastructure and devices has had a chance to develop by the mid-2020s. This is a far cheaper, much less risky option than ESN’s jump into the unknown.

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