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How Was It For You? A Market Perspective on the PSN Frameworks

The Crown Commercial Service (CCS) recently released what is likely to be the last set of tender information about the PSN Services and Connectivity Frameworks. In future, CCS is pushing all of its customers to use the Network Services Framework.

Given this, I thought it would be useful to do a short review of the success of these frameworks from the perspective of the supply market. Have these frameworks provided an attractive and viable route to sell to the public sector?

Firstly, as a quick reminder, there were two frameworks for PSN services awarded by CCS a little over 3 years ago, both of which expire in 2016 (April for Connectivity, June for Services):

  • PSN Services, a multi-lot framework with 9 lots for individual categories of telecoms (e.g. Traditional Telephony, Managed LAN), and an integrated solutions lot 10. This framework had an expected spend range of £500m to £2Bn over two years.
  • PSN Connectivity, a single lot framework for the provision of PSN Compliant and non-PSN Compliant fixed data connectivity. This framework had an expected spend range of £500m to £3Bn over four years.

So, how have they actually done against those initial expectations?

(if you would like to see the source data, please contact me on the link above)

The table below provides the total value of contracts awarded by lot for the PSN Services Framework.

PSN Services Framework Total Contract Value (£) Annualised Value (£) Total Revenue/Supplier (£)
1. Telephony  82,319,289  26,689,913  6,332,253
2. CCTV  612,411  263,989  55,674
3. Videoconferencing  2,729,122  1,343,711  194,937
4. Equipment Rooms  2,016,908  713,267  224,101
5. Contact Centres  48,628,933  10,594,323  4,420,812
6. Mobile Voice & Data  8,819,311  4,408,039  1,469,885
7. Paging  195,159  97,579  65,053
8. Local Area Networks  15,444,805  9,887,157  1,029,654
9. Gateways  505,905  168,635  45,991
10. Integrated Solutions  478,628,777  111,998,785  39,885,731
Grand Total  639,900,619   166,165,398   53,724,091

And to complete the picture, below is the same data for the PSN Connectivity Framework

PSN Connectivity Framework Total Contract Value (£) Annualised Value (£) Total Revenue/Supplier (£)
Connectivity  970,651,111  206,233,326  80,887,593
Grand Total  970,651,111   206,233,326   80,887,593 

There are two caveats to note about this data:

  1. It assumes that all revenue is reported accurately to CCS (in other words, garbage in/garbage out). The contract values are those reported by customers at the point of contract award, not necessarily the amount of revenue actually generated.
  2. It excludes Direct Award under Lots 6 and 7 (Mobile and Paging). Both of these lots allowed suppliers to publish a catalogue of service offers, against which customers could place orders without a formal tender process. As a result, the figures for both lots are likely to be higher than those set out in this table.

With that said, there are some clear messages for the supply market to take away.

  • Customers want integrated communications. This should be no surprise generally, but the scale of the difference is striking. 75% of contract awards by value fell into Lot 10 – Integrated Solutions.
  • A number of lots were not worth bidding on. The cost to bid onto a framework works out at something in excess of 100k per supplier based on the direct costs of bidding alone. This doesn’t include the ongoing costs of compliance with framework reporting and other requirements which would substantially increase this.  On this basis, suppliers would have been wasting their time on 3 of the 10 lots, and would have struggled to make any meaningful return on a further 2.
  • The frameworks captured just 15-20% of the total market for network services. The annualised value of the awards across both frameworks is approximately £372m. However, we know from other sources that the total expenditure on network services across the public sector is in the region of £2.8Bn pa. There is likely to be some under-reporting on the CCS figures, but even allowing for this, only 15-20% of the total market is being addressed through these frameworks. The balance is spent through other channels – either other frameworks, direct OJEU competition or via outsourced arrangements that include network services.

A number of the changes implemented in the Network Services Framework (RM1045) will help increase the potential market. For example, the availability of direct awards under all lots will make it much easier for customers and suppliers alike. However, its clear that there is huge untapped potential for both CCS and the market to make better use of frameworks to deliver network services.

This post was originally published by Innopsis, the trade association for network and digital infrastructure suppliers to the public sector.