C3i project business case

Report: 14
Date: 25 October 2001
By: Commissioner and the Clerk

Summary

In May 2001, the MPA agreed the new approach for the C3i Project to provide a new call and despatch system for the Metropolitan Police Service (MPS). It was assumed that MPS would need funding from the Home Office and HM Treasury and an original estimate of £60m was presented. A revised business case has been prepared in consultation with Partnerships UK, working on behalf of HM Treasury, based on the centralised three centre option. The outline business case shows that the total estimated cost of C3i has not changed a great deal but that the funding arrangements assumed in May have changed significantly. Accordingly the business case presents a worst-case bid to HM Treasury which is now being asked for funding of £180.5m. Although officials at the Home Office and the Treasury have been working on the outline business case, the Authority needs now to submit its bid formally to the Home Secretary if deadlines for the implementation in time to take full advantage of Airwave are to be achieved.

A. Recommendations

Members are asked to :

1. note the issue of the C3i outline business case of September 2001;
2. note this issue of the business case has been revised in content and consequent cost detail to address the new approach agreed by the MPA in May;
3. agree the new funding requirement; and
4. that the Chair make a formal bid to the Home Secretary for funding for the C3i project, on the basis of the agreed business case.

B. Supporting information

1. In May 2001 the MPA agreed that C3i should proceed on the basis of a three call centres approach. This was developed as a consequence of the non-affordability of the private finance initiative (PFI) option and the need to adopt a more conventional procurement and funding solution.

2. The C3i project team has therefore produced a new business case to:

• reflect the new approach to the project agreed by the MPA in May
• to meet Office of Government Commerce (OCG) requirements for having an suitably comprehensive business case and a detailed project approach
• support the MPA's bid for project funding from the Home Office (HO) and HM Treasury (HMT).

3. The business case is being brought to the MPA to agree. It addresses the MPA's May decisions and does not propose a new or different approach to the C3i project. Members will wish to note that an addendum to the business case has been prepared to address the revenue implications of the opportunity arising from C3i to increase front-line operational police numbers. While the MPA is being asked to support this additional revenue bid, it is distinct from the business case tabled today and forms no part of the recommendations of this paper.

4. The revised business case has been developed in consultation with Partnerships UK (PUK), working on behalf of HMT. PUK are content that the structure, content and detail of the business case meets Treasury requirements. PUK has offered the business case and the proposed funding requirement to Home Office officials to anticipate the lead times for funding bids and to assist C3i in the competition for funds that has grown more complex and urgent since 11 September 2001.

5. The new business case is based on the operational and configuration assumptions agreed by the MPA in May. There are however some significant differences in the size of the bid that is now to be made to the HO/HMT. These arise principally from a change in the assumption of how much money the MPS would be able to contribute to C3i.

6. The preparation of the business case has been overseen by a steering group chaired by the Deputy Commissioner. Nicholas Long, the Clerk and the Treasurer represent the MPA. Rachel Whittaker, as Chair of the Human Resources Committee has recently joined the steering group in recognition of the significant personnel issues that will arise as the project enters the implementation phase.

7. There is an urgency to the submission of the business case. For the implementation of the new call and despatch system to deliver maximum financial efficiency benefits it must tie in with the introduction of Airwave, the new digital radio system. This will require tenders for the procurement of C3i to be let early in 2002, which in turn calls for confirmation that funding will be available from central government sooner than that.

8. The business case has been considered and recommended by Finance, Planning and Best Vale Committee at its meeting on 4 October 2001 and by a workshop linked to the IS/IT sub-group meeting on 9 October 2001. Submission now does not imply that no subsequent changes may be made to the detail: it may, for example, be sensible to review the location of the three centres in the light of the events of 11 September. But no fundamental or significant financial departures from the current proposal are envisaged.

C Financial implications

1. The contingency proposal identified in the MPA report was based on an assumption that the MPS would need support from the Home Office/HMT to meet the anticipated capital costs. The estimated bid to the HO/HMT was £60m; but this was predicated on some assumptions that have now changed.

2. The funding for C3i needs to finance the ongoing service as well as pay for project costs:

• the current expenditure on the command and control service is a. £80m per annum – this therefore constitutes the budget for all revenue costs for C3i
• under C3i, the service costs are reduced, but project revenue costs must also be paid for
• there is a very large capital implementation cost to be borne up to 2006 when the project costs end and operational service costs take over.

3. Other than an increase in accommodation costs and a slower civilianisation profile, the costs in the business case are broadly the same as in May. The two main changes to the costs of C3i identified to the MPA in May and those in the revised business case are as follows:

• there have been accommodation cost increases of £5.5m
• the MPS has reflected the risk of slower civilianisation in the impact on its revenue budget.

4. The build up from the assumed £60m bid to the Home Office to the revised £180.5m bid which is now calculated within the revised business case is identified in the table below:

Table – Business Case Cost Increases

5. The key difference between the position in May and now is the degree to which the MPS is able to contribute revenue finance to C3i. The MPS' financial position has worsened in the interim - and this has prompted submission of a worst-case bid to the Treasury.

6. In May, the MPS assumed that it would be able to finance £34m of revenue contributions, find £20m of additional revenue in 2004/5, and £29m for contingency over the life of C3i. This bid assumes the MPS will not now be in a position to make additional revenue contributions beyond the assumed £80m per annum budget. This substantially increases the capital sum which the MPS is seeking finance for from the HO/HMT.

7. The C3i budget issues are complex and are further detailed in Appendix 1.

D. Background papers

MPA report to FPBV Committee 4 October 2001.

E. Contact details

The author of this report is Sean Coughlan.

For information contact:

MPA general: 020 7202 0202
Media enquiries: 020 7202 0217/18

Appendix 1: C3i Budget Issues Amplification

The MPS must finance the service costs and the project costs from its available revenue budget and needs to find capital finance for implementation costs.

Revenue

Table 1.1 is a rounded extract from the tables in the business case and identifies:

• that the MPS's available revenue budget is £80m per annum
• that continuing to deliver the service, assuming that civilianisation takes place, will cost approx £78m for the first three years of the project's life, reducing markedly as the impact of civilianisation and centralisation kicks-in between 2004 – 2006
• project revenue costs of £63m need to be financed between 2001 – 2006, which lead to a cash funding deficit of £19.9m over the first four years.

Table 1.1 – Basis of revenue funding requirement

In addition, the impact of slower civilianisation would add approx £13m to the revenue budget deficit, leading to an overall revenue gap of approx £33m in the absence of any revenue contributions.

Capital

The MPS needs to finance £162m of capital expenditure to implement C3i. The MPS can only afford to finance £14.6m of necessary capital funds (£4.6m in existing project costs and £10m of capital programme budget). This leaves a project capital finance gap of some £147.6m over the project. This is demonstrated in Table 1.2, a rounded extract from the business case, which identifies:

• a breakdown of the total capital cost of £162m over the project life
• the MPS declared available capital finance
• the capital gap that arises

Table 1.2 – Basis of capital funding requirement (inc risk)

Total gap

The total funding gap identified in the revised outline business case, and in the funding bid to HO/HMT, is the total of the revenue gap of £33m and the capital gap of £147.6m.

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