Procurement Processes

Previous Public Sector Broadband Projects

During the roll out of first-generation broadband, local authorities were asked to get involved in broadband procurement by central Government. Many public sector schemes were set up, often encouraged by central Government.

A number of specific projects were set up to meet different objectives, e.g. Project Atlas in Scotland, NYNet in North Yorkshire. More generally two of the principle mechanisms for public sector organisations to procure broadband services were the creation of Regional Broadband Consortia, operating on behalf of education services and more broadly-based Regional Aggregation Boards, known as Adits. The experience of the nine Regional Aggregation Boards was patchy at best. Set up in 2004 under a DTI initiative, just two remain: Adit North, based in Newcastle, and Adit South in London.

The Regional Broadband Consortia have proved more durable. Ten are in operation around the country (plus the devolved administrations) connected via the SuperJANET backbone. They offer a number of useful lessons for local authorities aiming to procure next-generation broadband services for their communities.

Framework Agreements

In 2010 JANET set up a telecommunications framework agreement involving 19 suppliers of services, from the very large – BT – to smaller, more specialist providers like Vtesse. The framework can be used by JANET(UK), JANET connected organisations, Regional Network Operators, members of the Purchasing Consortia, and the Regional Broadband Consortia.

The advantage of the framework is that it conforms to EU criteria and thus makes the procurement exercise simpler and easier to undertake. The disadvantage is that whilst frameworks are good for the procurement of standard commodity items, they may be too rigid when innovative products and services are needed. It can also be the case that with smaller projects economies of scale don’t come into play with the concomitant financial benefits.Frameworks are also fixed in terms of the supplier group for the lifetime of the framework agreement, though new entrants can be encouraged to engage as sub-contactors of existing framework members.

State Aid Compliance

State aid is a bugbear for many public sector projects. RBCs have experience in structuring projects so that they conform to state aid rules. This experience can be made available to local authorities developing next-generation broadband projects. More detailed guidance on state aid issues is given in the Policy & Regulation section of the Knowledge Base (see State Aid and Next Generation Broadband).

Encouraging Bidding Consortia

From a local authority perspective, putting together a procurement exercise that seeks one major supplier looks superficially attractive. It limits the number of bidders to a manageable group, simplifies the bidding process and simplifies the contractual arrangements. However the corollary is that smaller, innovative players may be excluded by the bidding criteria and thus opportunities to get better, more local solutions can be lost. It is also likely that the role of local communities will be more limited, perhaps just to demand stimulation and aggregation exercises. The appetite for local community investment is unlikely to be tested, except perhaps for an investment of labour to help reduce trenching and other costs. The real point is that one size does not fit all circumstances.

Two approaches that can be taken are to divide up the whole area into lots – smaller areas where particular local needs can be addressed, or to encourage consortia involving a number of suppliers to bid into the process. These two approaches are not mutually exclusive.

There is a legal and management overhead for local authorities running such processes which also needs funding as many LAs will struggle to find the resources internally. RBCs could be tasked to do this but again there is likely to be some funding requirement from government.

Special Purpose Vehicles

Projects like NYNet (see Creating a Broadband Backbone for North Yorkshire) are essentially special purpose vehicles (SPV), usually wholly or partly owned by the public sector, designed to exploit those assets for wider social and economic benefit. NYNet and similar projects are successfully making this provision available and in the process getting a bigger bang for the public expenditure buck. Other public sector networks are developing similar approaches. In Gateshead significant progress has been made in connecting up businesses to a high-speed network created by Gateshead Council and technology supplier Alcatel-Lucent organised through the SPV G-Ti (see Gateshead's Baltic Business Quarter Goes for Economic Growth).

Supporting Local Schemes

Some local authorities are thinking ahead and taking a more innovative approach than others. Both industry and government recognise that the combined investment on the table from the (currently stated intentions of) private sector players and government combined is not enough to fully future-proof the UK in terms of next-generation access. However, this need not be the case if local authorities are able to set the procurement criteria to encourage investment from other parts of the public sector, the private sector and local communities themselves.

One such approach might adopt a LEP-like process, with communities or parishes that naturally associate with each other joining forces as combined elements in a county-wide framework.

  • Some of these areas will have money to invest;
  • Some may be happy to sign pre-orders as collateral;
  • Some will dig the trenches;
  • While others will organise local demand registration schemes e.g. BT’s Race to Infinity.

Arguably such a framework will attract a wider range of bidders, greater scope for investment, and a more creative solution able to optimise every inch of every county.

Kent County Council has taken an imaginative approach to solving some of its local broadband problems. Rather than adopting a one-size-fits-all approach, it has supported projects designed to meet local needs and continues to offer grants to local projects. More on Kent's approach can be found on their Community Broadband page. 

Sewing Together the Patchwork

The growth of local schemes implies a “patchwork quilt” approach to next-generation broadband development. This is already the case with the many different projects and players around the country. An often expressed danger is that these will not enable competition at the service provider level – i.e. customers connected to a regional or local next-generation network won’t be able to choose the service provider they want. This is a problem of the commoditisation of broadband where scale matters. For major ISPs, the costs involved in interconnecting to dozens, or hundreds of local schemes, are prohibitive.

However, frameworks are either in existence or being developed to overcome this problem. One of INCA’s key projects is the development of a Quality Standard for local schemes to enable service providers to deliver services over them with confidence. This is linked to a framework involving over thirty ISPs. The first stage of the work is scheduled for completion by the end of July 2011. More information can be found at www.inca.coop or by contacting info@inca.coop.