Local authorities believe that they can achieve greater economies of scale by using one supplier for Public Services Network (PSN), instead of running multiple procurements.

The Cabinet Office has expressed surprise that councils were choosing to go down this route.

The government recently announced 29 suppliers that were successful at bidding for work under the PSN Services Framework. It follows the award of the PSN Connectivity Framework earlier this year, with both frameworks intended to significantly cut the public sector's networking and related services costs.

The PSN services framework is divided up into 10 lots - the first nine offering separate commodities available from a number of suppliers, such as IP telephony, video conferencing and mobile services. However, the tenth lot allows local authorities to pick one supplier to provide a combination of all of the above commodities.

A description on the Cabinet Office's website states that "this lot has been included for use by customers who are replacing large and highly-integrated network/telecoms contracts rather than as a default route for procurement".

Cambridgeshire and Hampshire are at the forefront of the public sector's use of PSN. They chose to run individual tenders for PSN services, rather than signing up for the national framework, and selected Virgin Media Business as a sole supplier.

But both agree that if they had signed up for the national framework, lot 10 would have been the route to take.

"The Cambridge solution was an OJEU tender, only because the national framework wasn't quite there yet and the council was ready to go to market.

"However, I think if the national framework had been available it would have gone for lot 10 - they would have chosen a single supplier," said Mike Carey, CPSN contract and service manager, Cambridgeshire County Council, at a roundtable hosted by Virgin Media Business in London today.

Carey revealed that last week the Cabinet Office had expressed 'surprise' that local partnerships were taking the lot 10 route, with the department saying that this was not the intention of the framework.

He added: "If you manage to bring together 15 local public service partners, with that volume of business you want to leverage the economies of scale with a single supplier.

"Lot 10 is a worry for the Cabinet Office because they had hoped that councils would drill into the best value for every individual service, but for local providers that means you have to manage eight or nine different sets of services."

Cambridgeshire launched its PSN in May of this year and will connect over 400 sites including school, libraries, offices and emergency services. It claims that the deal with Virgin Media Business will save more than £1 million a year and see IT costs reduced by 50 percent.

Hampshire signed a similar deal with Virgin and has embarked on a £90 million development project, dubbed HSPN2, which allows 20,000 public sector workers in the region to connect to the network and share services from any site or mobile device.

Jane Stedman, IT support, quality and security manager at Hampshire County Council, agreed with Cambridgeshire, and said that even though its contract is with one supplier, this does not restrict it from running separate procurements if better value could be derived.

She said: "If we felt our contract didn't offer the best value for mobiles, for example, we would just go and buy the mobiles from somewhere else."

"You don't have to buy everything in that one contract, it gives you the best of both worlds."

Meanwhile, Virgin Media Business' head of business development, Robert Parker, claimed that the Cabinet Office's opinion of lot 10 is 'frustrating'.

"I'm bemused by the fact that there was a statement from government that it was a surprise that local government would use lot 10. It's kind of frustrating actually," said Parker.

"You have to assess, is it more efficient to run one procurement, or is it more efficient to run several? The reason that lot 10 exists is to allow people to benefit from economies of scale."

The PSN - a network of networks - is core to the government's ICT Strategy and the Cabinet Office hopes that in three years' time 80 percent of its PC-based staff (four million users) will be on the network.

PSN providers will connect to Direct Network Service Providers (DNSPs) via the Government Conveyance Network (GCN). The GCN is, in effect, the backbone to the PSN, acting as the gateway between the networks of different service providers.