MPs have slammed the BBC’s management of a 10-year IT outsourcing deal with Siemens Business Services worth nearly £2bn after 60% of the key technology projects in the deal's first year suffered delays or went over budget.
The criticism comes in a report by the powerful Commons public accounts committee on the huge contract, signed in October 2004, which saw Siemens take over the broadcaster’s IT subsidiary, BBC Technology, with 1,400 staff.
The MPs found “significant gaps” in the BBC’s management of the contract, “most notably the absence of controls over performance data validation, the volume of services purchased by divisions through the contract, the checking of the accuracy of suppliers’ bills and the absence of contingency plans in the event of early contract termination”
The MPs said the BBC’s estimates of the annual savings to be delivered by the outsourcing deal had “fluctuated widely” from £21.8m to £40m – estimates that “do not inspire confidence in the BBC’s forecasting”, the MPs said.
The report notes: “When BBC managers sought approval for the deal with Siemens they told the BBC governors that savings were guaranteed at £35.2m a year, but they made mistakes when they estimated the cost reduction that the contract would deliver.”
In the first year of the contract, savings were just £22m - 38% lower that the original forecast. “Contrary to the advice provided by the BBC to the Board of Governors when seeking approval for the deal, the annual savings achievable under the contract were not guaranteed,” the report says.
Committee chair Edward Leigh MP said: “The BBC’s approach to the contract has been distinctly second rate. Its estimates of annual savings have fluctuated widely, many parts of the BBC are still using other suppliers, and there was no provision for the BBC to share profits above an agreed level.”
He added: “Indeed, the BBC has chosen not to check on how profitable the contract actually is for Siemens.”
Future contracts of this type “should include a provision for profit sharing” if profits rise above an agreed level, the MPs said.
The committee also found that despite the scale of the outsourcing deal, many areas of the BBC were still buying technology services and commodities from other suppliers.
Last April, Siemens began to roll out a project to provide a new IT interoperability infrastructure for the BBC, dubbed “Digital Fabric”. The project aims to introducing an enterprise architecture integration layer, bringing together around 200 key applications and to allowing legacy and future technologies to work together.