The desire for flashy premises in central London led GCHQ to manipulate its procurement process and overspend on the new National Cyber Security Centre (NCSC) by £3m, a report has found.
Auditors were called in to investigate the controversial choice of new-built accommodation for the new centre at Nova South near Victoria.
The Intelligence and Security Committee of Parliament (ISC)’s report said MPs’ concerns over the intelligence-gathering agency’s spending had caused it to launch an investigation and contract auditors.
The report said: “The procurement process was unacceptable – with an emphasis on image rather than cost.”
GCHQ’s procurement process for office accommodation for the NCSC sounded alarm bells when it became obvious the agency’s favoured option of Nova South was over twice the cost of an alternative option in Canary Wharf.
Nova South’s running costs were estimated to be £6.4m per year compared to Canary Wharf’s £3.1m.
The ISC said the cost of Nova South equated to more than “£21,000 per staff member per annum”, which was more than twice that of the typical government cost for London-based staff.
“The cost significantly exceeded the funding allocation, meaning that GCHQ is paying for the shortfall out of its main budget – money which could otherwise have been spent on operational capabilities,” the committee said.
The committee said the NAO’s participation in the inquiry had unearthed a number of “very significant shortcomings throughout the procurement process”.
An arbitrary timetable for works, faulty criteria, ignored warnings and ignoring its own principal accounting officer were among the criticisms levelled at the intelligence agency.
“From the outset, the selection criteria used were faulty: an unnecessarily tight timetable was imposed arbitrarily at the outset, resulting in excessive haste which potentially led to faulty decision-making – and to good options being summarily dismissed due to non-availability within that timescale,” said the committee.
“Locations outside London were never considered, and great emphasis was placed on finding high-end accommodation – without any case being made for that being necessary.”
Ministers were blamed for putting an artificially early deadline on the process, which limited the potential choice of sites.
At a late stage the agency decided it needed to be housed in a “tech hub” such as Shoreditch, although this had never been a formal procurement criterion and the case for such a requirement had not been made.
The agency then switched its preference at a late stage to favouring Nova South – a decision that meant that much of the work that had already been carried out as part of the procurement process went to waste.
The committee criticised GCHQ’s scoring system in its procurement which “significantly under-weighted costs and over-weighted location”.
Yet even despite weighting criteria that dramatically favoured Nova South, this option did not lead the initial shortlist.
This led to scores being manipulated to ensure it was chosen as the favourite option by the time of a draft full business case.
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