APPENDIX 4
Supplementary memorandum submitted by
the Millennium Commission (PAC/2000-01/13)
The Committee's questions to me focussed, understandably,
on visitor number projections.
In my evidence I attempted to draw a distinction
between the fact that 12 million visitors will not visit the Experience
and the assertion that it was unreasonable for the Commission
to judge in July 1997 that 12 million visits was achievable. The
Commission's support for NMEC's business plan was based on expert
advice and I would argue that supporting the ambitious visitor
number targets in NMEC's business plan on this basis was not imprudent.
That is why my predecessor as Accounting Officer did not seek
a direction when his advice that the Commission should ask NMEC
to plan on the worst case, as identified by Deloitte and Touche,
was not accepted. If one accepts that 12 million was achievable
in principle, then questions arise, many of which were asked by
the PAC, of why it was not achieved in practice.
However the decision to plan on the basis of
12 million was critical and in an effort to help the Commitee
I will set out the history of this estimate in some detail. The
history is complex. There were three estimates based on research.
| Date | Produced for
| Produced by | Estimate
|
| February-May 1996 | Imagination
| ERA | 10.9-16 million |
| November 1996 | MCL | ERA/MORI
| 10.9-16 million |
| July 1997 | Commission |
Deloitte & Touche | 8-12 million
|
| | |
|
Against these estimates a number of decisions setting visitor
number targets for the project were taken by the Commission, NMEC
and MCL (NMEC's predecessor).
| Date | Made by
| Target |
| May 1996 | Commission | 10 million
|
| December 1996 | MCL | 13.5 million
|
| January 1997 | MCL | 10 million
|
| May 1997 | NMEC | 12 million
|
| | |
In May 1996 an Economic Research Associates (ERA) study was
carried out for Imagination (a design company contracted to the
Millennium Commission). The ERA research was intended to identify
the likely range of visitor numbers for certain scenarios. The
content of the Experience was unknown at that time and a number
of caveats were attached to the findings. In summary the report
found that at a ticket price of £20, demand would range between
10.9 and 16 million visits, whereas at £30 a ticket, the
range would be between 9 and 13 million visits.
In May 1996, the Commission adopted a plan for the experience
involving temporary buildings with no arena or national programme
and a visitor number assumption of around 10 million. This target
is not given in the NAO report because the target is not explicitly
adopted in Commission minutes and the NAO would not therefore
accept that we had planned on this basis. Our view is that the
adoption of the 10 million visitor target was implicit in the
Commission's decision to plan a more limited exhibition. At that
time the Commission time was still hoping that a private sector
operator could be found.
The ERA research was current throughout 1996 and was revisited
in November 1996 when Millennium Central Limited's (MCL) business
plan was prepared. ERA commissioned MORI to carry out dome research
in greater detail regarding demand sensitivities. MCL's business
plan was based on 13.5 million visitors, The Commission rejected
this business plan, primarily because it required a high level
of cashflow funding.
In January the Commission considered a plan with an assumption
of 10 million visits, Whilst recognising that it required considerable
further work, a grant of up to £200 million was offered to
the company, This offer enabled the Commission to make interim
payments to MCL whilst they staffed up and developed a full Business
Plan and budget, which was produced in May 1997, It was the plan
produced by NMEC which assumed 12 million visitors.
In May 1997 the Millennium Commission engaged Deloitte and
Touche to assess the viability of the 12 million visitor assumption
on which the May 1997 NMEC business plan was based. As requested
by Mr Davies (q 328) I enclose 22 copies of the 27 May report
by Deloitte's.
Deloitte's carried out work on the ticketing and demand management
aspects of the December 1996 business plan. This exercise required
them to determine whether and how a median target of 13-5 million
visits could be accommodated at the Dome. This work informed much
of thinking in producing the May 1997 report and I enclose a single
copy of it for your information.
Mr Campbell asked (q 147) whether the MORI research investigated
preferred methods of transport, 1 can confirm that it did. Asked
for their initial views on transport to the site, half of the
respondents replied that they would prefer to travel by car—although
the research also reported that there were concerns over possible
congestion and crowding.
Mr Murphy asked (q 297) why the visitor number projections
had varied so much over time and made reference to a chronology
produced in a memorandum of evidence for the Commons Culture,
Media and Sport Select Committee in July 2000. I hope that this
letter explains the variations. Mr Murphy drew attention to February-May
1996 and the range of 10.9 to 16 million visitors identified by
an Economic Research Associates (ERA). I stated that I believed
that this figure might have been produced in November 1996, when
indeed the figure was re-validated. My staff have checked the
information in the chronology and, as is shown above, Mr Murphy
was correct as to the date this figure was produced. 1 must apologise
for inadvertently misleading the Committee—I am afraid I
was momentarily confused by the reference to a submission made
to another Committee of the House. My briefing was based on the
more simplified, but wholly accurate, summary of visitor numbers
contained in the NAO Report.
I am copying this letter and enclosures to Sir John Bourn.
Mike O'Connor
Director
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