Decision on Govt VPN extension criticised

2 Jun 2005

The Department of Finance confirmed to that there is potentially another two years left in a €60m a year fixed-line and internet services contract that it awarded to Eircom in 2002. The decision to roll over the contract for another year raised criticism from various quarters in the telecoms industry because it was not put out to tender.

In recent months the Government awarded Eircom another year of the €60m a year contract to supply fixed-line and internet services to the public sector. Under the deal Eircom provides a virtual private network (VPN) for all government departments and 150 state agencies.

The Central Management and Organisation Development (CMOD), a division of the Department of Finance, explained to yesterday that the reason why the contract was not put out to tender was that because the original contract spanned the years 2002 to 2007 and it was part of a rollover facility available to the Government. As such, the Government was free to decide whether to pursue a lengthy tendering process or continue with an existing arrangement.

CMOD said yesterday: “The original contract covers the period 2002-2007 It is rolled over on an annual basis. The rollover facility in accordance with the contract allows us to make changes/adjustments to the original terms when and if required.”

CMOD was responding to claims by a Dublin-based corporate telecoms solutions provider called MinuteBuyer, which criticised the Government’s decision to renew a €60m a year contract to Eircom without putting the contract out to tender to other telecom suppliers.

Brendan Moran, chief executive of MinuteBuyer, argues that not only was it unfair not to put the contract out to public tender but claimed that according to his analysis, Eircom’s rates are 30-40pc higher than standard rates in the marketplace, and as such the tax-payer is being cheated out of cost savings of €20m a year.

The contract between Eircom and the Government was first signed in May 2002 and has been criticised for undermining competition in the telecoms market where other licensed operators (OLOs) such as Esat BT and MinuteBuyer argue it should be used to encourage greater competition in the sector. Moran says that this means the country’s biggest fixed line telecoms firm supplies almost all the public sector with voice and internet services.

Moran claims he has seen the VPN and fixed-line rates that Eircom is charging the government departments and state agencies and estimates that a cumulative saving of 37.5pc could be made on the costs he has seen. “In particular large savings could be made on the state agencies VPN off-net charges (calls made off the government VPN), where in some cases costs could be cut by more than 50pc. Examples include VPN off-net to 087 numbers and VPN off-net to UK numbers,” says Moran.

Eircom, when contacted by, declined to comment on the matter except to say: “Eircom is very pleased to be selected on the combination of price and quality of performance in providing what is a very complex solution.”

By John Kennedy