The BBC's management of its Digital Media Initiative - Public Accounts Committee Contents

Conclusions and recommendations

1.  The BBC's contract with Siemens failed and was terminated by mutual agreement and the BBC is now delivering the Programme in house. The contractor did not deliver against the key contract milestones and the contract was terminated as part of a no-fault settlement. There are still risks to be managed, but the BBC has made good progress in delivering the technology necessary to support the Programme.

2.  By letting the contract without competition the BBC did not test the capability and relative strengths of prospective suppliers. The Trust acknowledged that it would now be more sceptical about such an approach. Whilst we accept that we are judging this with the benefit of hindsight, testing the capacity and capability of suppliers was particularly important in this case as there was a high degree of innovation involved. The BBC therefore would have done better to test Siemens against alternative suppliers. We welcome the Trust's assurance that it would now take a more challenging approach when considering procurements. In doing so, the Trust should take into account the level of innovation sought, the delivery risks, and the need to understand the contractor's capacity and capability.

3.  The BBC transferred too much financial risk to the contractor, Siemens, given the level of technological innovation involved. This approach meant that that BBC did not have a good enough understanding of the contractor's design and development work, and was unable to intervene effectively even when it knew delivery was at risk. This resulted in a two year delay in securing the technology for the Programme. We welcome the BBC's commitment to consider more carefully the appropriate degree of risk transfer for future contracts. It should have a close understanding of the design and development approach being taken by a contractor and should retain the ability to intervene without waiting for non-delivery or contract termination.

4.  While the BBC expects financial benefits from the Programme, it also expects non-financial benefits. These benefits include transforming the way the BBC makes programmes and supporting the forthcoming move to Salford. The BBC gave more attention to the non-financial case later in the life of the Programme, and should do so from the outset in considering future investment cases.

5.  The fact that the BBC easily identified new savings to compensate for the financial consequences of the contract failing suggests that the BBC should be more vigilant in securing real value and efficiency. The BBC was able to find £26 million in efficiencies to make up for the losses it bore through the late delivery of the Programme. It identified a further £24.5 million in new efficiencies in its wider Technology Framework Contract to cover the additional costs of completing the Programme in-house. The BBC Trust should obtain an explanation of why these efficiencies only came to light when the BBC came under financial pressure, and should identify what lessons can be learned for its other contracts and Divisions.

6.  So far the BBC has made good progress in delivering the Programme in-house. Since taking the Programme in-house, the BBC has successfully delivered four technology releases and is currently on course to deliver the complete technology for the Programme by Summer 2011, although this is five months later than planned. The BBC attributes its success to date to a strong supplier management team and to the creation of an in-house software development team. The Office of Government Commerce should work with the BBC to identify practical lessons to be shared across the wider public sector.

7.  The BBC's confidential settlement with the contractor delayed the C&AG's access to relevant information, and led to the National Audit Office's review being held up for eight months. We are pleased that the Trust agrees that there should be speedy access to all the information that is required when the C&AG decides to do a study. The C&AG should have full and unfettered access to the information he considers necessary and discretion over what is published.

8.  We welcome the Trust's constructive approach to giving evidence and its willingness to acknowledge the mistakes of the past. The Trust acknowledged our concerns about the need to provide more robust challenge before engaging in non-competitive procurements. We share the Trust's interest in pursuing value for money for the licence fee payer and look forward to the Trust having a similarly open approach with us in the future.

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Prepared 7 April 2011