National Audit Office Press Releases
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BBC Trust publishes NAO report on the BBC’s management of its Digital Media Initiative

The BBC Trust today (1 February 2011) published an independent report commissioned from the National Audit Office on the BBC’s management of its Digital Media Initiative (DMI).
 
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 of delivery and implementation to the end of 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 £26 million of benefits not being achieved in the period 2009-10 to 2010-11.
 
The BBC appointed its existing IT contractor (Siemens) to develop the Programme. The contract with Siemens was terminated by mutual agreement in July 2009. The BBC then took responsibility for delivery of the project in-house and was able to offset its increased costs by a £27.5 million financial arrangement agreed with Siemens. In-house delivery of the system has started well, and, while there is a considerable way to go before the Programme is complete, users have been positive about the elements delivered thus far.
 
Key points from the report and the Trust’s response to them include:
 
1.       The way in which the BBC appointed the contractor without a new competition and was then unable to intervene effectively in system development without undermining its transfer of financial risk to the contractor was not an effective way of approaching the 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 that 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 according 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 delayed programme.
 
2.       Although once problems came to light it took the Programme technology development in-house, the BBC did not test whether that was the best option. It also did not test the value for money of this approach 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 (which includes the BBC Director-General, the BBC Chief Financial Officer and the BBC Chief Operating Officer) made an appropriate decision as to how to continue the DMI - given that the financial cost to the BBC was not increasing and the aims of the project remained as previously stated. However, the proposal to increase the scope of the project was rightly fully assessed and brought before the Trust in May and June 2010.
 
3.       The financial benefits of the Programme were initially 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 noted that the financial benefits case was revised in the 2010 case, and fully 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. However, the non-financial benefits of DMI are also significant, and the financial benefits of DMI, while important, are only part of the picture.
 
Anthony Fry, BBC Trustee with lead responsibility for value for money, said:
 
“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.”
 
Notes for Editors
1.     It is the responsibility of the BBC Trust, under the Royal Charter, to ensure that value for money is achieved by the BBC through its spending of the licence fee. In order to fulfil this responsibility, the Trust commissions and publishes a series of independent value for money reviews each year in consultation with the Comptroller and Auditor General – the head of the NAO. The reviews are undertaken by the NAO or other external agencies.
 
2.     Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk or the BBC Trust’s website www.bbc.co.uk/bbctrust. Hard copies can be obtained from The Stationery Office on 0845 702 3474.
 
3.     The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 900 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

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