"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."
Anthony Fry, BBC Trustee with lead responsibility for value for
money, 1 February 2011
"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."
Amyas Morse, head of the National Audit Office, 1 February
2011
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:
- 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.
- 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.
- 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.