BBC Knuckles Rapped By National Audit Office (Again)

The BBC Trust has just published a report commissioned from the National Audit Office on the BBC’;s management of its Digital Media Initiative (DMI) – which concludes that the first phase of the project was “not value for money”.

The DMI is a technology transformation project designed to allow BBC staff to develop, create, share and manage video and audio content and programming on their desktop, and intended to improve production efficiency across the BBC. The estimated gross cost to March 2017 is £133.6 million.

The NAO has concluded that the early stages of the Programme were not value for money, mainly as a result of a 21-month delay leading to an expected £26 million of benefits not being realised in the period 2009-10 to 2010-11.

Key points from the report and the Trust’;s response include:

The way the BBC appointed contractor Siemens was not an effective way of handling delivery of a complex programme.
The Trust notes that the BBC awarded the DMI contract to Siemens under a technology framework agreement intended to provide efficiencies, in part by reducing procurement costs. The Trust agrees the decision to award the contract to Siemens did not lead to the planned outcome and the first phase of the project did not proceed to plan. The Trust notes, however, that the BBC reached a financial arrangement with Siemens which allowed the BBC to allocate £27.5 million to meet the increased cost of completing the Programme.

Once problems came to light the BBC took the Programme in-house. But it did not test whether that was the best option. It also did not test the value for money of this despite the Programme being in difficulty and behind schedule.
The Trust closely monitored the status of the project, and was satisfied that the BBC Finance Committee made an appropriate decision as to how to continue the DMI.

The financial benefits of the Programme were overstated. The original cost-benefit estimate in January 2008 was a projected net benefit of £17.9 million. The latest forecast is of a net cost to the BBC of £38.2 million by March 2017, partly offset by a £27.5 million financial package agreed with Siemens, leading to a final net cost of £10.7 million.

The Trust agrees with the NAO’;s recommendation that greater rigour should be applied than was evident in the 2008 business case. It is reassuring that the NAO noted significant improvements in the 2010 business case.

Anthony Fry, BBC Trustee with lead responsibility for value for money, concluded: “The DMI is a cutting edge project that will improve the way the BBC operates and transform the way it makes programmes and content. The Trust agrees with the NAO that the early phase of the project ran into significant difficulties, but the BBC reacted with speed and efficiency, and since bringing it in-house delivery is progressing as planned. Clearly there are lessons to be learnt and the Trust will continue to monitor progress against the action plan we’;ve asked the BBC Executive to produce.”

Amyas Morse, head of the National Audit Office, said: “The BBC’;s approach to the early stages of this Programme was disappointing and did not achieve value for money. However, since taking the Programme back in house, delivery of the system has progressed well, and users have responded positively. The real test of value for money of the Programme as a whole will be the take up by users across the BBC and elsewhere, and on this it is too early to conclude.”

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