Memorandum submitted by the BBC
This memorandum updates the Public Accounts
Committee of events and progress since the NAO conducted its fieldwork
in March 2005.
1. REFINANCING
BENEFITS
On 23 March 2005 agreement was reached with Land
Securities Trillium to restructure the lease agreement covering
the White City site to secure the desired refinancing benefits
for the BBC. The restructuring of the lease has allowed the project
to access the bond markets at a considerably lower financing cost
than that provided by LST. The BBC purchased LST's interest in
the White City site for a net £321.5 million. It then granted
a long lease to a separate company for £323.5 million while
retaining the freehold. The separate company then funded its purchase
of the lease from the BBC by the issue of a 30 year bond. The
BBC agreed to rent the site from the separate company at a predetermined
rent.
The net cost reduction to the BBC is £63
million in today's money over the 30-year term, with a short-term
cash flow benefit of £50 million in respect of a two-year
rent-free period at the start. The bond securitisation deal has
been short listed for "securitisation deal of the year"
by the Association of Corporate Treasurers.
2. PARTNERSHIP
WITH LAND
SECURITIES TRILLIUM
In May 2005 the BBC's relationship with Land
Securities Trillium was significantly restructured to focus on
completing two other property developments currently in progress
at Pacific Quay in Glasgow and Broadcasting House in Central London.
All other services are terminated, by mutual consent, with effect
from 31 March 2006, with an option to extend by up to six months
at the BBC's discretion. It is estimated that the partnership
arrangement has saved the BBC £33 million in today's money,
across the 49 locations covered by the partnership, between its
inception in November 2001 and termination in March 2006. This
saving is as compared to the cost projected by the BBC's "own
delivery" comparator.
3. PROVISION
OF FACILITIES
MANAGEMENT AND
CONSTRUCTION MANAGEMENT
SERVICES
Following the consensual termination of the
contract with LST, the BBC commenced EU procurement exercises
for facilities management in London and Scotland, and for the
provision of construction management project services UK wide.
These are shorter-term supply contracts covering a period of four
to five years. On the FM procurement, the BBC recently announced
a shortlist of six companies. A very large number of companies
have qualified for construction management project services shortlisting
and a shortlist of potential suppliers is being evaluated now.
The recommendations made by the NAO concerning
performance-related payment systems and the contract variations
process have been incorporated into the intended new supply agreements.
4. OVERALL PROPERTY
STRATEGY
The BBC's announced plans for substantial job
reductions are being implemented now and the separate intention
to relocate 1,500 staff to Manchester in 2010 has been published.
The precise details of accommodation requirements
in the future will be at least partially dependent on the progress
of the BBC's own cost saving initiatives and the outcome of the
discussions with HM Government on the level of the licence fee
in the next Charter period from January 2007. As programme making
is essentially a people based process, there will be significant
new requirements for accommodation as the cost reductions from
the savings initiative are recycled into programming. Other accommodation
requirements could arise from additional programming linked to
the BBC's licence fee settlement proposals.
In the meantime the London premises are expected
to be rationalised further, beyond the position shown in the plan
on page 8 of the NAO Report. The revised plan, below, shows the
further concentration of activity into three sites of which the
White City site is key.
5. SPACE UTILISATION
Since the NAO's fieldwork, the overall space
utilisation for the White City 2 site (ie Media Centre, Broadcast
Centre and Energy Centre) has improved from the 15% vacancy rate
shown in table 12 of page 17 to 7% by October 2005.
In July, we reported in the management response
that free space was 4.3% in respect of the Media Centre and Broadcast
Centre. This has reduced to 3.5%. The vacancy rate in the new
Media Centre alone is 4% and that of the Broadcast Centre is 3%.
This compares to an industry average of 5%. The site is now occupied
by over 5,000 workers.
6. AWARDS
In addition the BREEAM "excellence"
rating and the CABE award, the new buildings won an RIBA award
for architecture and contribution to the local environment in
June 2005 and a British Council for Offices award for "Best
Corporate Workplace".
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