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UK £1.2bn ESN contract in further trouble as HP pulls out

Competition for replacement of the UK’s Emergency Services Network hit yet again as HP withdrawal leaves only one bidder for Lot 2 User Services contract, while Lot 3 main network contract has already been reduced to one bidder (EE) following Telefonica’s pull out last month

UK £1.2bn ESN contract in further trouble as HP pulls out

The Government’s £1.2bn Emergency Services Network (ESN) programme is now in almost total disarray following HP’s decision to pull out of bidding for the Lot 2 User Services network management contract. This leaves just one bidder left – Motorola Solutions, meaning there is no longer any competition for this vital part of the contract. The Home Office, which is responsible for ESN, said HP’s decision was ‘disappointing’.

HP’s move makes a bad situation worse, as there is already no competition for the Lot 3 Mobile Services main area network after Telefonica O2 pulled out the bidding last month leaving EE as the sole bidder. Lot 4, which involved providing extension coverage services in remote areas, and which only ever attracted one bidder due to the risks involved, Arqiva, was folded into Lot 3 in February.

Wireless understands that HP considered it could have delivered Lot 2 but felt the time scales and the technical and commercial risk profiles were too high. Industry commentators have said from the beginning that the timescales are too tight and the amount of risk being dumped on the supply side would be too high to stomach for most bidders.

The commercial mobile network has to be beefed up to mission critical standards and its coverage considerably widened by 2017 when the first of the existing Airwave contracts run out. Commentators have said this is too short a time to enhance what is a ‘best effort’ consumer network to meet much more stringent mission critical network standards.

The tough timescales and heavy apportioning of technical and commercial risk on to the supply side has put bidders off from the beginning. Five bidders were shortlisted for each of the original four lots, but only Arqiva was prepared to bid for Lot 4 Extension Services (coverage in remote areas).

Three bidders decided not to submit bids for Lot 2 perceiving the difficulties and risks as too high: Airwave; Astrium; and CGI IT UK. That meant Lot 2 only ever had two bidders, thus reducing the competition severely. HP’s withdrawal at the best and final offer stage (BAFO) leaves Motorola Solutions as the only bidder.

Lot 3 Mobile Services (the main network) saw all bidders stay in the running, but the Home Office eliminated Vodafone, Airwave and UK Broadband Networks from the bidding in May. Telefonica O2 UK and EE were due to return BAFOs in June, but one month ago Telefonica decided not to do so, leaving the Government with no competition for Lot 3.

Telefonica cited the upheaval in the UK telecoms market with the proposed potential acquisition of Telefonica O2 in the UK by Hutchison Whampoa, the owners of Three UK. Again, commentators had suggested that the takeover activity in the UK telecoms market (BT is also in the process of acquiring EE) would prove a distraction to the mobile operators. This seems to be the case with Telefonica.

In a statement in June, the company said: ‘We are therefore unable, at this time, to provide the detail and commitments required to continue into the next stage of the bidding process put forward by government. We have taken the decision to notify the 'Authority' that we will immediately withdraw from the bidding process for ESN so that the government can consider next steps before the award stage.’

The only competitive part of the ESN tender left is Lot 1, which covers project management during the four to five years of transition between the existing narrowband Airwave terrestrial trunked radio (TETRA) service and the 4G service running on one of the UK’s commercial mobile operator’s networks. Four bidders are still left in Lot 1: Atkins; KBR; Lockheed Martin; and Mott MacDonald.

The Home Office has confirmed the withdrawal of HP. A Home Office spokesperson said: ‘The Emergency Services Mobile Communications Programme (ESMCP) is designed to attract the best tenders to establish a more effective, flexible and affordable network for the UK's police, fire and ambulance services.

‘The new Emergency Services Network, which will replace the current communications system used by the emergency services, will provide a system which is better and smarter. It is also expected to save the emergency services around £1bn over the next 15 years.

‘There are six strong bidders competing for the main contracts. We have received their best and final offers and hope to sign contracts later this year.’

In a Guidance Note, the Home Office stated:
• HP's decision to withdraw from the procurement process to provide the UK with a new emergency services communications network is disappointing.
• The Home Office decided to use the negotiated procurement process, which is iterative and designed to produce the tenders that best meet the needs of the emergency services and provide value for money for the taxpayer.
• Any best and final offer that does not meet the needs of the emergency services and represent value for money for the taxpayer will not be accepted.

See also:
Telefónica UK pulls out of UK’s Emergency Service Network bid

Final bids for UK’s £1.2bn ESN contract due back mid-June

Defining the new critical communications roadmap

Final bidders chosen for UK’s new Emergency Services Network

UK Home Office drops network extension part of £1.2bn Emergency Services Network

Bidders drop out of UK’s £1.2bn ESN contract as risks prove unacceptable


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