The Federal Government’s abandoned request for proposal (RFP) process for a fibre-to-the-node (FTTN) National Broadband Network (NBN) cost it and participants more than $30 million, an auditor general report has revealed.
The Australian National Audit Office (ANAO) has released The National Broadband Network Request for Proposal Process report, which details the management and handling of the RFP process, which began in 2008.
The report said that although the Department of Broadband, Communications and the Digital Economy (DBCDE) "conducted the process well", it did not address key risks until relatively late in the process, which included the potential compensation payment to Telstra should a non-Telstra proposal using FTTN technology be successful.
“As it was, the Government decided to seek binding offers from the market through a one stage RFP process and give proponents wide scope to request regulatory changes to facilitate their proposals,” the report read. “This approach was not conventional for a competitive assessment process of this size, nature and risk.”
The ANAO concluded that adopting a multi-stage process, "would have been the more conventional approach for conducting tender processes of this size, nature and risk, particularly when seeking innovative solutions. Proponents contacted by the ANAO considered that the two way dialogue an expression of interest stage in a two stage process generates, would have better informed the RFP process and the RFP document, increasing the likelihood of a successful outcome".
It was also revealed that as the RFP period progressed, it became “increasingly obvious” to Senator Stephen Conroy’s department that the chance of a successful outcome was reducing.
The report also found that:
The Government could have varied the RFP document and process when it became apparent that:
- Proponents were looking for clearer direction and were unlikely to submit proposals that met all the Commonwealth’s objectives and other evaluation criteria; and
- the global financial crisis was impacting on the proponents’ ability to finance their proposals.
Proponents would have had an opportunity to submit better developed and more competitive proposals had they received:
- greater clarity as to how the information requested was to be used when assessing proposals against the RFP’s multiple objectives and criteria;
- guidance as to the relative importance of the evaluation criteria and Commonwealth’s objectives; and/or a clearer understanding of the Government’s regulatory intent for the NBN.
The audit also noted that the Australian Competition and Consumer Commission (ACCC) advised the department that FTTN was "not a stepping stone towards FTTP" (fibre-to-the-premises).
"Most FTTN expenditure would be on equipment that becomes obsolete under a FTTP network platform," the report reads. "A FTTN network could also serve to delay FTTP if the successful proponent was not under significant competitive pressure and could therefore delay further investment until they had fully recovered their initial investment."
The audit did not make any recommendations to the DBCDE as the process has finished, but stressed that government departments should have a sound understand of the implications of risks involved during a major tender process. It added, the "conclusions and recommendations in the Panel’s Evaluation Report are supported by appropriate evidence".
In April last year, the Federal Government dropped the FTTN plan and said it would establish a new public company - NBN Co - to build the next-generation fibre-to-the-home (FTTH) network.