NAO criticises BBC award of contract to Siemens without new competition

The BBC Trust has today published a report it commissioned from the National Audit Office on the BBC’s management of its Digital Media Initiative (DMI). The DMI is a technology project designed to allow BBC staff to develop, create,...

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The BBC Trust has today published a report it commissioned from the National Audit Office on the BBC’s management of its Digital Media Initiative (DMI).
 
The DMI is a technology 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 £133.6m.
 
The NAO concluded that the early stages of the Programme were not value for money, mainly as a result of a 21-month delay leading to £26m 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. 

The NAO said that 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:
 
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. 
 
2.       Once problems came to light, the BBC took the Programme technology development in-house but did not test whether that was the best option. 

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


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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.”

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