RCBF Guidance for Change Control or New Procurement

1. DRAFT RCBF Guidance for change control or new procurement including approach to define eligible premises May 2013 Version 1.0 The European Agricultural Fund for Rural Development: Europe investing in rural areas

2. RCBF GuidanceDocument use and contents DRAFT This guidance pack is for Local Authorities and is designed to explain the approach and various elements that need to be considered for using the BDUK Rural Call-Off Contract to implement a Rural Community Broadband Fund (RCBF) Project. It also sets out the process for defining eligible premises in the Final 10% and provides Local Authorities with guidance for liaison with stand-alone Community led projects. This guidance is focused primarily on change control or a new procurement but also where relevant this guidance refers to procurements by community groups. May 2013 RCBF & Call-Off Contract Guidance 2 2

3. RCBF GuidanceDocument use and contents (cont) DRAFT Please Note: This document relates to the BDUK Broadband Delivery Framework (the "Framework") and is subject to change. This document is provided by BDUK for use only by Local Bodies who are utilising the Framework in order to ‘call off’ their local rural broadband Project. It is not to be used for any other purpose. Access to this document is restricted to the relevant authorised Huddle users and other associated permitted recipients. This document may contain certain high level and/or selected summary information only and care should be taken if relying on its content. To ensure they are fully informed, Local Bodies should refer to the relevant more detailed framework document(s) (where available) and otherwise consult with BDUK and/or their own professional advisers. Anybody using this document must seek their own legal advice in respect of the document's content. DCMS (including BDUK) accepts no liability for: (i) the accuracy of this document; or (ii) its use in respect of a Framework call off or otherwise. The principles in this guidance will be relevant to Local Bodies who have not used the BDUK Call-off procedure under the Framework, although the details of how they are applied will vary depending on the contract used. May 2013 RCBF & Call-Off contract Guidance 3 3

4. RBCF GuidanceContext DRAFT This document is intended for Local Authorities only and provides guidance on the process for establishing a Rural Community Broadband Fund (RCBF) Project which is either integrated into an existing Call Off Contract under change control or procured separately. The guidance is provided in two parts: Part 1 – For Local Authority led RCBF applications – which could also include where the Local Authority has agreed to lead as the procuring and contracting authority on behalf of other local organisations. Part 2 - For Community led RCBF applications – setting out the process for considering if a project is located in the 10% area. Note 1: This document does not provide guidance for community led procurements of RCBF projects. Local communities intending to undertake their own separate procurement should be referred to the guidance provided in the RCBF Full Application handbook and other material available on the Defra website. http://rdpenetwork.defra.gov.uk/funding-sources/rural-community-broadband-fund Note 2: The deadline for submissions of expressions of interest under the 3rd wave has been extended and now closes on Monday 17th June 2013. May 2013 RCBF & Call-Off Contract Guidance 4

5. RBCF GuidancePart 1 – Local Authority Initial Considerations DRAFT A Local Authority must consider the following aspects in determining its approach for an RCBF project: • Eligible Premises – RCBF projects are only eligible for funding if those premises are not covered by the NGA deployment of the county programme and therefore fall within what is broadly defined as the “Final 10%”. The Local Body will need to validate whether premises are eligible by analysing the “no build” tagged information set out in the Speed and Coverage Template (“SCT”). Please refer to Slide 7 for further details. • Materiality – RCBF projects can only be integrated into an existing Call Off Contract under change control if the change does not constitute a material change under procurement law (otherwise a new procurement will be required). Please refer to Slide 8 for further details. • State Aid Compatibility – the RCBF project will need to be State aid compatible. If the Local Authority intends to use the UK National Broadband Scheme as state aid cover for the RCBF project, then the project will need to meet all the relevant criteria set out detailed guidance note for state aid compatibility. Please refer to Slide 9 for further details. • Project Completion Date – the Local Authority will need to ensure that the Supplier is able to deliver the RCBF project under the current RDPE Programme (2007-2013), which means that funding needs to be contracted by Summer 2014 and all premises delivered with expenditure defrayed by March 2015. May 2013 RCBF & Call-Off Contract Guidance 5

6. RBCF GuidancePart 1 – Outline Process Flow DRAFT X weeks 4.A.2 Local Body considers submitting a RCBF application and commences market engagement based on procurement route identified 4.A.4 Local Body commences procurement: If Change Control Local Body prepares a Change Request Form and requests a full ‘quotation’ using change control process OR For a new procurement the Local Body prepares ITT documentation for issue 4.A.5 Supplier(s) provide response to Change Request or ITT response and Local Body evaluates 4.A.7 Confirmation of RCBF Project approval by BDUK 4.A.8 RCBF Project signed off Implement Change Control or sign new contract 4.A.6 Local Body submits outcome of procurement to DEFRA/BDUK in their Full application for formal approval (Technical. Commercial and State Aid) 4.A.1 Following finalisation of SCT at Local Body Contract Award –Local Body to carry out the following assessments: • Final 10% • Materiality Note: Note: the procurement route will be dependent on the outcome of both of these X weeks 1 month 4 B.4 State aid compatibility confirmed 4.B.1 Public Consultation: If required (see slide on state aid compatibility) 4.B. 2 Intervention area for Community Project confirmed as white (Formalise map) 4.B.3 State aid compatibility assessment commences 4.C.1 Expression of Interest (“EOI”) 4.C.3 Full application submitted Full Application appraisal undertaken 4.C.2 DEFRA confirms EOI and requests Full Application to commence development 4.C.5 RCBF Case Team assessment and evaluation 4.C.6 RCBF Case Team approve and issue Funding Terms 4.C.4 Compliance check for Public Consultation confirmed Key Dependency RBCF & Call-Off Contract Guidance May 2013 6

7. RCBF Guidance Part 1 – Eligible Premises DRAFT • Prior to commencing any analysis work to establish which premises within the Local Authority area are eligible for RCBF funding, the Local Authority must have finalised its Speed & Coverage Template and awarded its county project under the BDUK Call-Off Procedure. • Once this stage has been reached, the first key step that should be undertaken is to define which premises could be eligible for RCBF funding. The Local Authority will be able to carry out analysis of its SCT and determine if the postcodes for their project are eligible premises that can form part of the RCBF application to DEFRA. • This must be based on the “no build” tags within the SCT where NGA is not proposed to be built as part of the existing county project. . (i.e. they are white NGA areas only). • Premises that are in postcodes which are tagged in the SCT as forming part of phase of deployment under the county programme will not be eligible for RCBF funding and therefore should not be included in the application to DEFRA. • In order to meet the evaluation process for the RCBF application, it will be necessary for the Local Authority to confirm that the premises being included meet the eligibility requirements. May 2013 RCBF & Call-Off Contract Guidance 7

8. RCBF Guidance Part 1 – Materiality DRAFT • Please Note: this “Materiality” slide only applies if the Local Authority intends to add an RCBF project to its existing County call-off contract. It is the second key step in the process to determine whether an RCBF project can be delivered via change control or if a new procurement is required. • Local Bodies will need to form their own view as to whether the proposed change to the Call Off Contract would be considered to be material under procurement law. The current materiality test is set out below. BDUK will be issuing further guidance concerning the application of the materiality test in the near future. • Under current procurement law the test of materiality involves an assessment of the following non-cumulative factors (known as the Pressetext test): • Does the change demonstrate an intention to re-negotiate the essential terms of the contract (risk allocation, price etc)? • Has there been a change that could have affected the tender outcome or affected a bidder's approach to their tender submission? • Has there been a change that could have altered who decided to respond to the original call for competition? • Will there be a shift in the economic balance of the contract in favour of the contractor? • Will the change increase the scope of the contract "considerably"? • Was the change provided for or contemplated under the original contract? • Local Authorities should note that the Materiality test applies to all additional funding added to an original county project on a cumulative basis, therefore any other additional funding that has already been added to an original procurement should be taken into account when undertaking the Materiality test. May 2013 RCBF & Call-Off Contract Guidance 8

9. RCBF Guidance Part 1 – State aid Compatibility DRAFT • Any RCBF project will need to comply with the State Aid law. The Local Authority may in certain circumstances be able to rely on its original Public Consultation (used for the Call Off Contract). One month is normally allowed to lapse between the close of the Public Consultation and the start of the tender process. However, up to 6 months can lapse from the last Public Consultation closure date but the Local Body will need to take additional steps as appropriate to assure itself that the classification of the target areas to be delivered under their RCBF project remain accurate without any further action being taken. • In the event that that the Local Authority cannot use its original Public Consultation, then it will be necessary to run a new Public Consultation for the set of proposed post codes that are intended to form part of the RCBF project. • DEFRA/BDUK will validate the Public Consultation and confirm its compliance under the “National Broadband Scheme for the UK: Supporting the local and community roll-out of superfast broadband State Aid Guidance: Public Consultation”. Further guidance can also be found at https://www.gov.uk/broadband-delivery-uk#state-aid • The Community Project will be State aid compatible if the following can be satisfied: • An open tender process has taken place and • The contract change or new procurement complies with current legislation and guidelines (i.e. materiality) • In addition, State aid requires that the contract change or new procurement to include the following conditions: • Wholesale access • Benchmarking • Clawback – applicable if the project is valued at over £150,000. In the case of Change Control the value of the community project is added to the original contract value to determine the £150K threshold – therefore in all Change Control cases, Clawback will apply. Clawback will be required to commence from completion of the last milestone • Reporting including transparency • Step changes (to the RSS) meets the requirements of FTTC and FTTP • Reconfirmation of aid intensity (range from 53% to 89%) May 2013 RCBF & Call-Off Contract Guidance 9

10. RCBF Guidance Part 1 – Procurement: Change Control DRAFT • If the Local Authority determines following its assessment under the Materiality test that it can proceed to implement a RCBF project under Change Control then the Change Control Procedure as set out under its existing contract must be followed. As a minimum the following components should be included and/or considered in the Change Request: • Post codes – a list of post codes for the RCBF project area • Timing & Speed Requirements – details regarding timing or deadlines for the RCBF project to be completed. The Change Request should also specify the minimum speed requirements – i.e. at least 24Mbps as RCBF funding can only be used to deliver NGA. • Quotation – see “Quotation” slide. The quotation format should be issued and completed by the Supplier as part of its response to the Change Request. This will include all the necessary cost categories and allow Clawback to be monitored. • Milestones and Implementation Plan – an Implementation Plan detailing Milestones and timelines should be requested. The milestones should be based on the exiting Milestone categories (Milestones 0, 1 & 2 as a minimum). It is the for Local Authority to determine if it requires a Milestone 3, but is not a requirement for RCBF funding. A Completion Date must also be specified by the Supplier as part of its response. • Payment in Kind – if the RCBF project has any payment in kind, this should be set out in the Quotation by the Supplier. • Eligible Expenditure – for the purposes of RCBF projects, DEFRA has agreed to allow the use of the existing Call Off Contract “Permitted Expenditure” categories as detailed in Schedule 5.1 Milestone Payment and Claims Procedure (Appendix 2). • Additional Funding Terms – See separate slide on “RCBF Funding Terms”. Any specific requirements attached to the RCBF Funding should be set out by the Local Authority in Schedule 5.4 “Additional Funding”. May 2013 RCBF & Call-Off Contract Guidance 10

11. RCBF Guidance Part 1 - Quotation DRAFT • The attached ‘Quotation’ template that has been developed which details all the relevant cost categories as per the Project Model that can be used for Change Control purposes. In the event that a new procurement is undertaken then a new Project Model will need to be completed. • The Supplier should be requested to complete the Quotation template as part of the Change Request and submit back to the Local Authority as part of its response to the Change Request along with details of the proposed Milestones, Implementation Plan and Speed and Coverage template. A spread-sheet version of this Quotation template is attached to this Guidance. • Note: The quotation template has been developed to allow it to align with the existing Project Model categories and will be used to update the Project Model as part of the Change Control process. May 2013 RCBF & Call-Off Contract Guidance 11

12. RCBF Guidance Part 1 – Procurement: Change Control (cont) DRAFT • Following the return of the Supplier response to the Change Request details will need to be submitted to DEFRA in line with the guidance set out in the RCBF guidance pack. The RCBF project will then be subject to final governance approval by DEFRA, BDUK, and the National Competence Centre to confirm State Aid approval. If all governance procedures are successfully completed, then DEFRA will issue to the Local Authority a final Grant Offer Letter. The following parts of the Contract should then be updated as part of the Change Control in line with the Change Control Procedure as set out in the original Call-Off contract: • Project Model –This should be updated to reflect: • Any changes to milestone amounts (and/or new milestones) to include RCBF funding. • Changes to the amount of Permitted Capex per quarter, and in total. • Changes to the number of Premises Passed and Premises Connected. • As a result of these changes, the Project Investment Ratio may change (if the ratio for the RCBF area is different to that in the original Project Model). • The Project Unit Margin should remain unchanged.  • Speed and Coverage Template – this will be up-dated with the post codes relating to the RCBF project as well as the phases within which the postcodes will be delivered. The relevant speed thresholds for each postcode area should also be updated. • Implementation Plan – this will need to be up-dated to reflect the implementation plan for the RCBF project. It will also need to include the Completion Date. • Schedule 5.4 – this should be updated to take account of any specific additional funding provisions agreed between the Local Authority and the Supplier. May 2013 RCBF & Call-Off Contract Guidance 12

13. RCBF Guidance Part 1 – Procurement: New Procurement DRAFT • Following the assessment made under the Materiality test, if the proposed change to the Call Off Contract to incorporate RCBF funding is considered to be material under procurement law, it will be necessary for the Local Authority to undertake a new procurement process. • In determining the structure of a new procurement, the Local Authority should consider the range of procurement options that may be available and should also take into account conditions which may be specific to its local supply market - i.e. are there other suppliers who may wish to compete for the RCBF project. • The outcome of the new procurement will result in the Local Authority entering into a separate contract with the successful supplier. • For Community led RCBF projects which are not intending to align with an existing Local Authority led project, then it will be necessary for them to undertake their own procurement procedure which complies with procurement regulations. These Community projects should be referred to the RCBF Full Application handbook for further details on how it should conduct its procurement or be referred to the RCBF website. May 2013 RCBF & Call-Off Contract Guidance 13

14. RCBF Guidance Part 1 - RCBF Funding Terms DRAFT • The Grant Offer Letter provided to the Local Authority by DEFRA will contain a range of conditions that will need to be complied with in order to ensure the RCBF funding has been administered by the Local Authority in line with those conditions. It is for the Local Authority to determine the extent to which such conditions may need to flow down to the Supplier. Some examples of these include: • Asset register (Clause 9 RBCF Funding Agreement) – retention of assets on an asset register, use and disposal of assets. • Publicity requirements (Clause 12 RCBF Funding Agreement) – compliance to Section 3 of the RCBF Project Guide. • Audit/Inspection requirements (Clause 16 RBCF Funding Agreement). • It is imperative that the Local Authority considers the impact of these requirements and agrees with the Supplier how any specific terms should flow down into the Call Off Contract. Schedule 5.4 Additional Funding should be used to capture these further requirements. May 2013 RCBF & Call-Off Contract Guidance 14

15. RCBF Guidance Part 1 - Quotation Spreadsheet DRAFT • RCBF Quotation Template May 2013 RBCF & Call-Off Contract Guidance 15

16. RCBF Guidance Part 2 - Community Led Applications DRAFT • For community led applications submitted directly to DEFRA, it will be necessary to determine if the proposed RCBF project is targeting eligible premises (i.e. they are located in the Final 10% and therefore eligible for RCBF support). DEFRA and BDUK will need to validate the target area through its appraisal process. • DEFRA and BDUK will need to consult with the Local Authority on the outcome of the SCT in considering the geographic coverage of a proposed community led RCBF project or identify opportunities to revise the boundaries of a Community led RCBF project where it partially falls into the 90%. • The process for considering the location of the community projects is set out below: • Local Authority/ BDUK/ DEFRA to meet as soon as the analysis is undertaken on the contracted SCT to establish whether the proposed project will be covered by the County programme or not. • Where a Community led RCBF project entirely consists of eligible premises (i.e. they are all tagged in the SCT as “no build”) then DEFRA and BDUK will complete the appraisal of a project application. Subject to a successful outcome of the appraisal process, the project will be able to proceed. • Where all (or the vast majority) of premises fall into the existing county roll-out programme (i.e. in the 90%) then the Community should be advised by the Local Authority that they will receive a NGA service through the main county programme. DEFRA and BDUK would therefore reject the RCBF application. The template letter attached to this guidance can be used by the Local Authority as the basis of this communication to the Community project. May 2013 RCBF & Call-Off contract Guidance 16

17. RCBF Guidance Part 2 - Community Led Applications (cont) DRAFT • In the event that a number of premises fall into the existing county roll-out programme (i.e. they are partially covered in the “90%”) then discussions would be held between the Community applicant, the Local Authority, DEFRA and BDUK to establish if the project could be re-scoped to cover other areas defined as “no-build” in the SCT. • Where the Community project is partially covered by the County programme, then it will be for the Local Authority to determine at its’ sole discretion if it wishes to raise a Change Request request to its existing Supplier to establish the impact of whether such changes can be made to the County programme. • In the event that the Local Authority does not wish to raise a Change Request, then the Community Project will only be able to progress where it can be clearly established that premises are eligible premises for funding under the RCBF. Otherwise it will be rejected as part of the DEFRA and BDUK decision-making process. • If the Local Authority decides it does want to proceed with a Change Request, then the Local Authority will ask the Supplier to undertake an assessment of the impact. The outcome of any assessment will be subject to consultation between the Local Authority, DEFRA and BDUK prior to any decision being made by the Local Authority about whether it wishes to proceed with a Change Control to its existing County programme or not. Note: Local Bodies must note that under the terms of the Call Off Contracts the elements of the SCT provided by the Supplier (including the “no build” tags) cannot be disclosed to any Community Project. May 2013 RCBF & Call-Off contract Guidance 17

18. RCBF Guidance Part 2 – Sample Letter DRAFT • The sample letter set out below can be used as the basis of informing community projects that NGA broadband will be provided under the county scheme. May 2013 RCBF & Call-Off Contract Guidance 18