Concerns over subsidy levels in £165million broadband scheme

A report into Northern Ireland's largest ever publicly funded investment in broadband infrastructure has raised questions over whether the amount of subsidy given to the project was justified.

Project Stratum is a £165 million initiative from Stormont's Department for the Economy aimed at improving broadband speed to some of the least digitally connected rural areas.

But Auditor General Kieran Donnelly said concerns remain over the number of properties which will be covered by the scheme.

A spokesman for the Department for the Economy said it will review the findings of the Audit Office report.

Mr Donnelly examined the procurement process adopted by the department, which awarded the contract to Fibrus Networks Limited, as well as the arrangements established to manage the contract.

He commended a number of aspects of the procurement process, including the steps the department took to ensure that the procurement was done in line with best practice.

However, he also identified two main concerns which he said will have an impact on the ability to prove value for money was maximised - the coverage of the winning Fibrus bid and the commercial viability of the project.

His report said that, at the outset of the procurement process, the department had identified a target intervention area of around 79,000 premises which had low broadband speeds (less than 30Mbps) and which were not planned to be addressed by the investment plans of commercial operators.

As a part of the tender process, bidders were asked to provide details of the number of those premises within this intervention area to which they would be able to deliver full-fibre broadband, based on the £165 million government funding available.

When tenders were received from two bidders (BT and Fibrus) they were then reviewed by a panel and scored out of 100, with the project being awarded to the bidder with the highest score.

A range of criteria was used for the scoring, one of which was for the number of premises within the target intervention area that would be reached. This was allocated 30 marks in the process.

The Audit Office report said that, when the bids were received, the solution proposed by BT covered 100% of the target intervention area specified, while the proposal from Fibrus covered almost 97%.

The report said this meant that the Fibrus solution omitted around 2,500 premises, which the department has since estimated will cost around a further £24 million to address.

The scoring mechanism awarded 30 marks to BT while Fibrus was awarded 29.

The report concluded that the scoring mechanism was "not sophisticated enough" to provide sufficient consequences for solutions which did not provide 100% coverage.

Mr Donnelly said: "This ambitious project aims to widen access to high-speed broadband in Northern Ireland, and specifically to help redress the disparity between access in urban and rural areas.

"I am surprised, therefore, that the procurement scoring methodology allowed the solution proposed by Fibrus to score so highly in relation to coverage given that it did not propose to cover the full intervention area and the cost of making up the shortfall, estimated at £24 million, will be so substantial.

"While I accept that the scoring method was undertaken in line with the tender documentation issued to bidders, in my opinion it did not make sufficient reduction in the scoring to account for the impact of delivering less than 100% coverage."

The report also noted that, in September 2020, shortly after the contract had been awarded to Fibrus, the unsuccessful bidder (BT) submitted details of a planned further investment to extend fibre coverage providing speeds above 30Mbps to premises across Northern Ireland.

This submission included 16,000 premises which had been identified within the Project Stratum target intervention area and which were initially part of BT's bid.

The report said that, subsequently, in April 2021, BT further announced that it intended to invest £100 million in the next 12 months to expand the availability of 1Gbps broadband to another 100,000 premises.

BT confirmed that the investment would cover rural villages across Northern Ireland, including villages that already featured in the Project Stratum intervention area.

Mr Donnelly said: "Project Stratum was intended to provide high-speed full-fibre broadband to the target intervention area on the basis that these areas were commercially unviable.

"The fact that BT have now released plans to invest in the Project Stratum target intervention area raises questions about whether some of the premises included within the project were already commercially viable, and if the overall level of public subsidy afforded to this project was required."

A spokesman for the Department for the Economy said: "The evaluation of tenders for Project Stratum was subject to robust assessment of information and evidence submitted by bidders against a broad range of criteria.

"Fibrus have undertaken a detailed high-level design for the intervention area in order to reach the most homes and business in the target intervention area for the available funding, combined with the supplier's own investment in network design costs of more than £46 million.

"Fibrus Networks' engineering design seeks to optimise broadband coverage and provide fibre infrastructure deep into rural areas to enable gigabit broadband access to communities that have struggled without access to good broadband for too long."