BT got £106m from £46m contract then won £20m extension on service that overcharged public by £39m
Nice work if you can get it
BT has been awarded a £20m contract extension, without competition, on a project that has already ballooned in value by 138 per cent.
The telecoms and IT services group has been providing the Northern Ireland Land and Property Services' infrastructure since 1999, and last week it won a further four-year extension to July 2026.
The £20m deal was awarded for the LandWeb service without asking for bids from other suppliers because the private-sector supplier owns the intellectual rights to the system.
"There are technical reasons relating to the bespoke and complex nature of the solution which would lead to substantial duplication of costs and unacceptable technical risks which would not allow for the service to be transferred to another supplier," Northern Ireland's Department of Finance said in a tender notice.
LandWeb is a fee-based service for registering and searching land rights in Northern Ireland. BT won the contract to finance the design, build, and operation of the service in 1999 for a fee originally agreed at £46m. The vendor was set to recover costs entirely by receiving a set transaction fee, forming part of the charges made by Land and Property Services directly to customers.
However, a report from the Northern Ireland Audit Office [PDF] found that as of April 2019, a total of £97.89m had been paid to BT by way of unitary charges, which were inclusive of transaction fees. Total payments to July 2021 were set to reach £106.89m, it found.
What's more, the services had overcharged the public by around £39m since the 2006-07 financial year. "Although the excess is absorbed into public finances... LPS customers nonetheless continue to pay too much for the services provided," the NIAO said after acting on a tip-off from a member of the public.
But signs of problems with the project go back more than a decade. The NIAO report points to limited benchmarking of the service.
At the Northern Ireland Assembly Public Accounts Committee in March 2010, an accounting officer said: "I can say, with the benefit of hindsight, that if we were doing it now, we would do it differently."
"In our opinion it is regrettable that such mechanisms were not pursued further at the time of the break option, especially given the need for another extension to the Agreement from July 2019 to July 2021," the NIAO said. "Such mechanisms, if they were in place, would have helped inform the Department of Finance's negotiations with BT on the Agreement extension."
In June 2008, the NIAO found the project and services delivered by BT had been extended resulting in an additional £19.2m being paid to the supplier up to July 2007.
The auditors also pointed out that one of the key drivers for the project was to deliver significant reductions in the fees charged for the Land Registry's (LRNI) services.
"However, this has not been achieved with LRNI's surplus income increasing to £8.6 million at 31 March 2007. Despite reductions in fee levels, a further surplus is expected in 2007-08. This, according to the Audit Office, showed that LRNI customers were paying too much for the service provided."
The NIAO also noted that the agreement "precludes LRNI obtaining information on the make-up of BT's charges, costs, overheads and profits".
The Northern Ireland Department of Finance has not replied to The Register's request to describe how it is securing value for money in the latest contract extension. It has also not said whether it will seek a new supplier to support the system, or build a new one, after 2026.
Updated at 19.33GMT on 19 January to add:
BT has sent us a statement to claim the NIAO has recongised "progress made in digitising" the Land and Property Services, as well as the "delivery of the LandWeb system."
"In negotiating an additional two year extension agreement, 2019-2021, BT provided further enhancements including a 30% discount on total monthly transactional charges. The five year contract extension also includes a 35% reduction in cost from the original baseline contract and BT has agreed to benchmarking and open book accounting as part of this contract.
“BT will continue to work in partnership with government to deliver the extension of the Landweb contract until July 2026 to best serve the interests and needs of the Northern Ireland public.”.
The NI Department of Finance told us:
"In negotiating the most recent contract extension, the Department has secured a reduction in the cost of transaction fees and open book accounting as part of the terms.
"Users have been charged the correct fees as specified in the 2014 Fees Order. The Department was unable to revise the fees due to the absence of the Assembly between January 2017 and the start of 2020. The Department has engaged Ulster University to provide an analysis of the economy and the likely impact on the property market especially in the light of the current pandemic. It intends to use this to inform the new fee proposals.
"A procurement process is currently underway to replace the LandWeb system with the intention of going to tender in the middle of this year." ®