mmO2 police profits come under the microscope

The profit mmO2 stands to make from its £1.5bn Airwave deal with the Police Information Technology Organisation (PITO) has become the subject of a government investigation.

In a meeting this week, the Public Accounts Committee (PAC) questioned members of the PITO on why mmO2 was able to demand a 17 per cent profit margin on the 19-year Airwave contract, which will provide the police with a nationwide digital radio system, when no other competitors had bid for the contract.

mmO2 was left as the sole runner last year when all other applicants dropped out of the bidding after the fire and ambulance services said they would not be using the system.

The committee questioned some charges within the £1.5bn price tag including a £170m charge for "alleged risk" and a £70m fee to cover "contingency charges".

Also under scrutiny was the fact that Airwave is expected to have a 13 per cent failure rate, meaning many police officers will not have network coverage in emergency situations.

However, the PITO insisted the profit level and charges are "fair" considering the risks involved in implementing the project.

The PAC concerns follow a report published by the National Audit Office (NAO) earlier this month which claimed the police were paying over the odds for the system.

The report said the chance of saving on economies of scale had been lost after the ambulance and fire services dropped out.

Going on current estimates the Airwave system will cost £180m a year to run.

The NAO also criticised a contract clause which will not allow the cost per user to be re-negotiated in the event of the other emergency services signing up.

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