The BBC s management of its Digital Media Initiative

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1 The BBC s management of its Digita Media Initiative Report by the Comptroer and Auditor Genera presented to the BBC Trust s Finance and Compiance Committee, 13 January 2011

2 Department for Cuture, Media and Sport The BBC s management of its Digita Media Initiative Report by the Comptroer and Auditor Genera presented to the BBC Trust s Finance and Compiance Committee Presented to Pariament by the Secretary of State for Cuture, Oympics, Media and Sport by Command of Her Majesty February 2011

3 BBC 2011 The text of this document may be reproduced free of charge in any format or medium providing that it is reproduced accuratey and not in a miseading context. The materia must be acknowedged as BBC copyright and the document tite specified. Where third party materia has been identified, permission from the respective copyright hoder must be sought.

4 The BBC s management of its Digita Media Initiative BBC Trust Response to the Nationa Audit Office Vaue for Money study The BBC s management of its Digita Media Initiative Background to this study As the BBC s governing body, the BBC Trust acts to get the best out of the BBC for icence fee payers. In part this means ensuring that the BBC continues to provide exceent vaue for money. We commission Vaue for Money investigations into specific areas of BBC activity to hep ensure that icence fee payers are getting the best possibe return on every pound of their icence fee. Each year the Trust commissions a series of Vaue for Money reviews after discussing its programme with the Comptroer and Auditor Genera the head of the Nationa Audit Office (NAO). The reviews are undertaken by the NAO or other externa agencies, reporting to the Trust. The Trust carefuy examines the findings from each study and requires a fu response and action pan from the BBC Executive expaining how it wi take forward the specific recommendations made. This study, commissioned by the Trust s Finance & Compiance Committee on behaf of the Trust and undertaken by the NAO, ooked at the BBC s management of its Digita Media Initiative (DMI). The DMI is a major technoogy project that is intended to deiver efficiencies whie aso improving creativity and productivity. As with a significant projects, the Trust is under an obigation to ensure that the project represents, and deivers, vaue for money. In view of the importance of this project to the BBC, and the probems that the Trust was aware of concerning its progress, the Trust was keen for this Vaue for Money study to take pace to identify any essons that coud be earned. The Trust thanks the NAO for undertaking this review and for the report s concusions and recommendations. Our views on the NAO s findings We have considered carefuy the NAO s report and we accept its key findings. The Trust considers that the DMI is a cutting edge project that wi improve the way the BBC operates, eading to greater efficiencies of time, efficiencies of cost and by providing scope to increase creativity. By its nature, this was aways a high risk project as there was no off the shef technoogy avaiabe. However, we remain convinced that with the Saford Quays and Broadcasting House deveopments coming on ine in 2012 it was right that we deveoped the DMI rather than insta soon-to-be-obsoete technoogy. The nonfinancia benefits of the DMI are significant, and the financia benefits of the DMI, whie important, are ony part of the picture.

5 The Trust agrees with the NAO that the first phase of the project did not proceed according to pan. The BBC awarded the DMI contract to Siemens, the BBC s technoogy framework suppier. Framework agreements are intended to provide efficiencies, in part by reducing procurement costs and times. However, with hindsight, the decision to award the contract to Siemens did not ead to the panned outcome and resuted in a deay of 21 months to the project and hence a deay in the improved working practices. It is difficut to concude whether a more detaied assessment at the time and/or a competitive procurement process woud have reduced the risk of this occurrence, as the inherent nature of IT projects means that they are compex and at high risk of cost overruns throughout both the pubic and private sectors. However, we accept that a detaied assessment of procurement decisions is a key area in project approva and we wi require the BBC management to take note of the NAO comments in this respect when considering future business cases. The Trust notes, however, that the contractua agreement with Siemens did protect the BBC from direct financia oss (athough not from oss due to deay). Since bringing the project in-house, the Trust has been satisfied with the progress of the project. We note the NAO s recognition that the BBC has now started to deiver the DMI system and that users have been positive about the eements deivered. In the context of the DMI being a compex and cutting edge IT project, the Trust considers this is something of which the BBC shoud be proud. However, there is sti some way to go to compete the project and we wi be continuing to monitor progress. Simiary, it is encouraging that the NAO has reported significant improvements in the way in which the BBC management has presented the more recent business case, particuary in respect of the anticipated benefits. We acknowedge the NAO s assistance in recommending improvements to the process of approva in its past studies for the BBC. The Trust wi now require the BBC Executive to provide a comprehensive action pan outining how it intends to impement the NAO s recommendations. Where impementation is aready in progress, we wi require fu detais on the actions being undertaken. We wi aso require the Executive to consider how these points may have reevance for other BBC projects. Specific Trust recommendation The NAO makes a specific recommendation to the Trust concerning the referra threshods. We consider that the referra threshods as currenty drafted are cear and have worked we to date, ensuring an appropriate baance such that the Trust is invoved in strategic rather than the more routine operationa decisions. However, we note the NAO s comments that these are narrow financia threshods. We agree that we shoud review these referra criteria in ight of the NAO s comments and consider expanding these to incude significant changes to the cost-benefit of a project. The Trust wi consider how best to impement this recommendation.

6 With specific regard to the decision to continue the project in-house in Juy 2009, the Trust is mindfu of the important division between the Executive s operationa responsibiities and the Trust s oversight responsibiities. The Executive Board and the Trust were kept informed of the status of the project through ora briefings, and both were satisfied that the BBC Finance Committee (which incudes the BBC Director-Genera, the BBC CFO and the BBC COO) was an appropriate forum in which to take the decision as to how to continue the DMI given that the overa financia cost to the BBC was not increasing and the aims of the project remained as previousy stated. However, the proposa to increase the scope of the project was righty brought before the Trust in mid Action pan The Trust has discussed the recommendations with the Executive and considered its response, which is pubished in this document. The Trust is satisfied that the Executive s proposed actions are an appropriate initia response to the NAO s findings, but wi require the Executive to provide a more detaied action pan for Trust review. Progress against this pan wi be reported to the Trust. BBC Trust January 2011

7 The BBC s management of its Digita Media Initiative BBC Executive Response to the Nationa Audit Office Vaue for Money study The BBC s management of its Digita Media Initiative The BBC Executive wecomes this study, in which the Nationa Audit Office (NAO) reviewed our management of the Digita Media Initiative (DMI). DMI is a strategic investment in infrastructure, peope and production processes that aims to support the reaisation of the BBC s creative vision in the most cost effective manner possibe. DMI wi seek to transform the way the BBC makes content for its audiences. It wi create a digita content production system that enabes easy manipuation of content, effective sharing across ocations, desk-top editing and access to the archive. The project covers hardware, software and running costs for eight years and repaces disparate egacy systems. It wi provide a foundation not ony for content fows across the BBC, but across the UK-wide sector as a whoe. The media industry is moving towards this way of working and the BBC needs to keep pace with current digita technoogy, so investment in technoogy of this type is a necessary step in the evoution of programme making. By investing in DMI, the BBC is making a significant commitment to strategic and operationa requirements, incuding: The BBC s strategy, Putting Quaity First (incuding re-investing savings in quaity content, deveoping partnerships and strengthening digita pubic space). A networked BBC buit around sustainabe centres of production across the UK. A pan-bbc digita archive. An end-to-end digita workfow and a soution for managing digita assets that woud aso hep estabish common standards in metadata in partnership with the industry. In February 2008, the BBC entered into an agreement with Siemens, its strategic technoogy partner, for the provision of deivery of the DMI programme. This agreement was a ca-off against the Technoogy Framework Contract (TFC) which was signed by the BBC and Siemens in September This is a 10-year outsourcing contract designed to deiver the BBC s technoogy requirements in an efficient and cost effective manner. The deveopment of digita production technoogy was envisaged to be a key part of this reationship when the BBC seected Siemens as the most suitabe strategic technoogy partner.

8 In summer 2009, after a number of deays to deivery of the programme, the BBC and Siemens reached a mutua agreement that aowed the BBC to take back ownership for the deivery of the DMI programme. Foowing evauation of the avaiabe options and further financia approva, the BBC is now deivering DMI in-house, using interna staff, contractors and a range of third party suppiers. The BBC Executive notes the recognition by the NAO that, despite the initia difficuties, the deivery of the programme is now we underway. A number of reeases have been successfuy deivered and initia feedback from users has been very positive. Response to the NAO s recommendations The BBC Executive has reviewed the NAO s recommendations, and notes that many are aready in progress or have aready been impemented in the atest phases of this project. Recommendation a The BBC did not have an up-to-date assessment of its contractor s capacity and capabiity to deiver the programme. The BBC assessed Siemens during a competitive procurement process in 2004 when it entered into a ten-and-a-haf year Technoogy Framework Agreement with Siemens as the BBC s strategic partner responsibe for its information systems. The BBC did not have to have a competitive procurement for the Digita Media Initiative as it coud appoint Siemens to deiver the programme in a straightforward and quick procurement under that Framework. However, to provide assurance the BBC is not making procurement decisions on sub-optima grounds, it shoud demonstrate in investment cases why its procurement route is ikey to offer the best vaue for money. The BBC fuy agrees with the need to ensure that its contractors are very thoroughy seected and assessed through a process which invoves open competitions when this is required or appropriate. The BBC Finance guideines set out that a procurements shoud foow best practice procedures to ensure vaue for money is achieved by seeking eary advice from our Procurement Department. Before its submission to the BBC Finance Committee, any investment case invoving procurement aspects needs to be approved by the Director of Procurement, who is responsibe for confirming, inter aia, that: The procurement (sourcing) strategy is appropriate for the particuar tender and fits to the overa outsourcing strategy (this incudes ensuring the appropriate evauation incuding seection and award methodoogy). The procurement governance mode and indicative timescaes are appropriate and reaistic for the services/goods being procured. The commercia dea ensures best vaue on a whoe ife basis.

9 When the BBC decided to use its ongterm strategic technoogy partner Siemens to deiver DMI it did so having taken fu account of the BBC financia guideines and procurement procedures. The principa reasons for seecting Siemens in February 2008 were: Siemens had been seected as the BBC s strategic partner to provide better vaue for money, and to better meet its future technoogy needs. In signing the DMI ca-off with them, the BBC compied with a recommendation made by the Committee of Pubic Accounts (PAC) that technoogy services and commodities avaiabe through the technoogy framework contract are procured through the contract where they are avaiabe and offer better vaue for money than procurement outside the contract. 1 The BBC ooked at other deivery partners and options but coud not identify any better deivery mode than using Siemens. The BBC estimated that procuring the programme as a ca-off contract within the TFC and thereby avoiding open procurement coud save the BBC six to nine months and costs of up to 3 miion. Externa consutants were asked to advise on whether the Siemens price was competitive. They concuded that open competition coud have generated a better price, but that any savings woud ikey be offset by the cost of having to integrate the new system with the Siemensrun BBC network, and deays in securing benefits. The BBC had fuy tested Siemens capabiity and capacity to deiver through assessments made as part of the TFC procurement. Siemens had a good understanding of BBC systems and experience of deivering projects with the BBC. The BBC had worked with Siemens (under the TFC) in defining the programme during 2007 and beieved Siemens had a good understanding of the BBC s requirements. In 2007 Siemens had deivered a project requiring a broady comparabe skiset to Pacific Quay, the BBC s new buiding in Scotand, incuding tapeess workfow, HD production and use of a digita ibrary. The BBC therefore considers that, based on information avaiabe at the time, its appointment of Siemens to deiver the DMI programme was a sound decision, and fuy compiant with procurement procedures in pace. However, when the BBC saw that the contract was not deivering, it took steps to rectify the situation as soon as it coud and minimise the oss of vaue. 1 cmseect/cmpubacc/1067/1067.pdf

10 Recommendation b Athough it took the Programme technoogy deveopment in-house, the BBC did not test whether that was the best option. To manage risks and maximise the cost-benefit of investments: the BBC shoud prompty re-submit for approva those approved programmes where there are significant changes in the deivery mode, risk profie or costbenefit projection; and the BBC Trust shoud adopt referra threshods based on the forecast costbenefit of investments rather than a narrow financia threshod. When the BBC reaised the deivery of DMI was not proceeding as panned it made a number of distinct decisions over time. The first one was to take contro of the programme and therefore responsibiity for future decisions regarding the deivery of the programme. In doing this it was then abe to assess in detai progress on the technica soution and estabish the compete financia situation. This in-depth understanding was necessary to keep a options open and, subsequenty, to compete a revised business case. The BBC then considered a avaiabe options incuding (1) continuing the programme in-house (2) procuring from another suppier or (3) stopping the programme atogether. Due to the time critica nature of deivery versus time that woud have been required to compete a fu EU procurement; the desire not to deay benefits further and deteriorate the business case; and the fact that through working with a range of suppiers, it beieved it had buit up the necessary expertise to compete the project; the BBC decided to take responsibiity for deivering the project in-house. Finay, the BBC decided the extent to which DMI shoud be roed-out across the BBC. It ooked at options from expanding the programme across a production areas to reducing it to support the new faciities in Saford ony or even stopping the programme atogether. The case was then thoroughy scrutinised and chaenged at the BBC Executive s Finance Committee and Executive Board before Trust submission. The case was strengthened in response to requests, in particuar around the non-financia and strategic benefits, as the Executive wanted to satisfy itsef on this point before submission to the Trust. The BBC recognises that this took time, in particuar to ensure the case was appropriate, which is recognised by the NAO. The Trust Protoco on oversight of the BBC aready sets out that the Executive Board must submit revised financia proposas to the BBC Trust for approva where: a b circumstances change significanty subsequent to the approva of a budget for a particuar period of activity; or the Executive Board wishes to vary approved budgets outside the imits set within the referra framework. In addition, the BBC s investment poicy states that business cases must return to the Finance Committee for additiona approva if the costs or benefits over the whoe ife of the project change by the ower of 1 miion or 10%.

11 It is for the BBC Trust to respond to the NAO s specific recommendation to amend the referras threshods, but the Executive woud have no issues with impementing it. Recommendation c Without a proper understanding of the approach being foowed by a contractor and the abiity to intervene, the BBC wi be unabe to act as an inteigent cient. The BBC shoud: commission independent technica assurance reports on system design when contracting-out software deveopment; estabish the minimum technica and management requirements for effective oversight of contracts on a contract-by-contract basis; and estabish how and when it wi be abe to intervene to secure deivery of outsourced contracts rather than waiting for either contract non-deivery or termination. The BBC agrees with this recommendation, and is aready impementing it for new contracts. In particuar, a investment cases submitted to the Finance Committee must demonstrate how the contract governance structure aows for effective contract management. Recommendation d The financia benefits of the Programme were initiay overstated. The BBC shoud continue to test the benefits projections with the rigour it showed in reviewing the revised investment cases for the Programme by: reducing budgets to refect projected benefits; and estabishing baseines against which it can demonstrate savings. The BBC agrees with this recommendation, notes recognition by the NAO of the rigour it appied to the revised June 2010 investment case, and wi continue to strive to deiver appropriate business cases. Recommendation e There wi be essons to be earnt from the initia contract for the Programme. Athough the BBC and Siemens had separate interna essons earning reviews they did not share their understanding of the programme in a no-bame environment, even after they had setted the contractua dispute, to generate an agreed and comprehensive record of essons earned. The BBC shoud invite Siemens to draw up a joint understanding of essons to be earnt, not east because they have common business interests in the form of the Technoogy Framework Contract which runs unti March The BBC agrees with this recommendation, which it has in part impemented. It wi continue to work with Siemens to ensure a essons earned from the DMI experience are fuy considered as part of the continuous review of services and methods of service deivery within the TFC. securing sign-up for benefits from those responsibe for deivering them;

12 Recommendation f The technoogy system supporting the Programme has so far been shown to be vaid but the BBC has not yet as at October 2010 put in pace to the eve required the fu range of processes and contros that shoud aow it to compete the deveopment of the technoogy to the panned time, budget and functionaity. Specificay, it shoud: for its technica soution, compete the independent technica assurance of the design to provide a framework against which it can assess interdependencies and the impact of change contro requests; for its technoogy panning, draw up more detaied team-based pans specifying resource requirements and responsibiities for each team; for its testing, document a testing strategy to embed the discipine of testing and increase the use of automated testing toos to improve efficiency and acceptabiity of new technoogy components; and for suppier management, ensure that the suppier management ead appointed in October 2010 sets out how he wi secure eary understanding of the deivery risks and potentia mitigation posed by third party suppiers. The BBC notes the NAO s finding that the technoogy system supporting the programme has been shown to be vaid. The BBC is we aware that there are sti many compex issues in the remaining deiverabes, but is encouraged by the fact that the atest functionaities have a been successfuy reeased to users. The BBC agrees with the specific recommendations made by the NAO, which wi yet strengthen its abiity to deiver the programme, and has aready taken steps to impement them, as foows: Technica soution: The programme has now put in pace a compete set of architecture documentation, which aows the programme to determine interdependencies between components and to assess the impact of any proposed changes. Technoogy panning: The programme is now using Reease Managers who are accountabe for the deivery of each reease, and deveopment of detaied endto-end pans with cear resource responsibiities. Progress towards these reeases is reviewed on a reguar basis in ine with NAO recommendations. Testing: The programme produced a fu testing strategy in December Suppier management: As recognised by the NAO, the BBC has aready impemented this recommendation. Whist the programme has aways had a commercia ead in pace, a suppier management ead has now been appointed. This function wi grow, with the recruitment of three members of the suppier management team as further third party suppiers contracts are signed. BBC Executive January 2011

13 British Broadcasting Corporation The BBC s management of its Digita Media Initiative Report by the Comptroer and Auditor Genera This report has been prepared at the request of the BBC Trust under cause 79(3) of the Broadcasting Agreement between the Secretary of State for Cuture, Media and Sport and the BBC dated Juy Amyas Morse Comptroer and Auditor Genera Nationa Audit Office 13 January 2011

14 The BBC s Digita Media Initiative is a transformation project which is designed to aow BBC staff and partners to deveop, create, share and manage video and audio content and programming on their desktop. Nationa Audit Office 2011 The text of this document may be reproduced free of charge in any format or medium providing that it is reproduced accuratey and not in a miseading context. The materia must be acknowedged as Nationa Audit Office copyright and the document tite specified. Where third party materia has been identified, permission from the respective copyright hoder must be sought.

15 Contents Summary 4 Part One What is the Digita Media Initiative? 11 Part Two The BBC s initia approach to deivering the Programme 15 Part Three The BBC s revised approach to deivering the Programme 21 Part Four The preparation and evauation of the BBC s investment cases for the Programme 29 Appendix One Methodoogy 33 The Nationa Audit Office study team consisted of: Chris Jamieson, Ashey McDouga and David Sewe, assisted by Rache Neathey, under the direction of Keith Hawkswe This report can be found on the Nationa Audit Office website at Photographs courtesy of xxxxxxxxxxxxxxxxxxxxxxxx For further information about the Nationa Audit Office pease contact: Nationa Audit Office Press Office Buckingham Paace Road Victoria London SW1W 9SP Te: Emai: Website:

16 4 Summary The BBC s management of its Digita Media Initiative Summary 1 The BBC s Digita Media Initiative (the Programme) is a transformation project which is designed to aow BBC staff and partners to deveop, create, share and manage video and audio content and programming on their desktop. It aims to reduce the time and cost of accessing and editing digita content and to foster creativity. The estimated gross cost of deivery and impementation to the end of March 2017 is miion. 2 The Programme is supported by a technoogy system (the system) which has to bind together production (where users manage the recreation of media content and need the atest creative digita media toos) and archiving (where users manage data storage, indexing and retrieva and require more traditiona Information Technoogy and toos). Successfu deivery of the programme is critica to the BBC s vision of staff across the BBC being abe to create, share and access digita content to make better programmes more efficienty. 3 Our review was prepared under an agreement between the Secretary of State for Cuture, Media and Sport and the BBC. 1 When the BBC Trust approved the Programme in January 2008, the system supporting it was due for deivery by the contractor by the end of May In Juy 2009, the contract for the system was terminated by mutua agreement and responsibiity for deivering the Programme brought in-house. Given the Programme is one of the BBC s seven key cross-cutting programmes supporting the future direction of the BBC, we ooked to see how effectivey the BBC has been managing the Programme. 4 Our methods are at Appendix One. 5 It is important to understand how the deivery timetabe, costs and benefits have changed over time. The panned and atest positions for the Programme are at Figure 1. The 2008 and 2010 costs and benefits are not directy comparabe as the atest deivery pans invove much wider ro-out of the Programme across the BBC than the 2008 pans. A cost and benefit figures in this report are expressed in cash terms. 1 The Broadcasting Agreement (Juy 2006) between the Secretary of State for Cuture, Media and Sport and the BBC, cause 79(3).

17 The BBC s management of its Digita Media Initiative Summary 5 Figure 1 Deivery Pans for the Programme Panned timeine for when deivery of the Programme by Siemens was to be to 6 business units January 2008 (approved by the BBC Trust) Investment cost 81.7 miion Panned benefit 99.6 miion Juy 2009 Contract termination Revised panned timeine for deivery of the Programme by BBC to 13 business units June 2010 (approved by the BBC Trust) Investment cost miion Panned benefit 97.9 miion Investment cost miion September 2010 (atest position) Panned benefit 95.4 miion System deveopment Use of system by the BBC NOTE 1 A cost and benefi t fi gures are in cash terms. Source: Nationa Audit Office anaysis

18 6 Summary The BBC s management of its Digita Media Initiative Key findings The contracted-out stage of the Programme 6 The BBC did not run an open procurement competition before awarding to Siemens the contract to deiver the Programme. In February 2008, the BBC contracted with Siemens for the deveopment, deivery and operation of the system supporting the Programme at a cost of 79 miion to March As the BBC aready had a ten-year Technoogy Framework Contract with Siemens, competitivey procured in 2004, it did not need to go through a competitive process to appoint Siemens, athough it was free to do so. It reied instead on Siemens s knowedge of the Programme, the assessment of Siemens made during the 2004 competition and its view that after ooking at other deivery partners and options it had not identified a better contractor. As a resut the BBC did not have as strong assurance on price, quaity and capacity to deiver as a new and specific competition may have provided. 7 The BBC negotiated a fixed price contract with fixed deivery miestones with Siemens. This transferred the risk of cost escaation to Siemens. The contract provided financia protection for the BBC in the event of non-deivery against expicit deivery miestones, uness the BBC undermined this risk transfer by contributing to any deay. 8 When it became ikey that the Programme woud be deayed, the BBC worked with Siemens to get deivery back on track. However, the two parties did not reach agreement on the causes for the deay and the Programme never reached the User Acceptance Testing phase. Because of the contractua transfer of deivery and financia risk to Siemens, the BBC did not want to intervene in a way that woud undermine that transfer of risk. The BBC s approach, even when it was concerned about the deiverabiity of the Programme, couped with its incompete knowedge of the system design, meant it was not in a position to deveop a detaied recovery pan unti the contract was terminated. 9 The contract with Siemens was terminated by mutua agreement with effect from the end of Juy As part of a no-faut settement, the BBC reached financia arrangements with Siemens which aowed the BBC to aocate 27.5 miion to meet the increased cost of competing the deayed Programme. This was funded through what the BBC and Siemens agree shoud be efficiency savings of 15 miion and reduced service charges of 9.5 miion, both within the overa Technoogy Framework Contract, a transfer of Programme assets ( 2.2 miion) and a payment to the BBC of 0.8 miion. 10 At the time the contract was terminated, the BBC estimated the competion of the system woud be 21 months ater than originay panned. As a resut, it did not achieve 26 miion in benefits it expected from the Programme in the period to In response, the BBC, to meet its corporate savings targets, made compensating savings in and pans to do the same for

19 The BBC s management of its Digita Media Initiative Summary 7 The BBC s in-house deivery stage of the Programme 11 The BBC took responsibiity for deivery of the Programme in Juy 2009, accepting the risks of deivering the Programme, athough without testing the vaue for money of this approach. When the contract with Siemens was brought to an end, the Programme was in difficuty and behind schedue; the deivery method was changing fundamentay, the chaenge in terms of the BBC s in-house capabiity increased and the financia risks transferred to the BBC. 12 Despite the known difficuties, the BBC did not revisit the investment case at this point or test deivery options, such as finding a new contractor. It tod us this was argey because of the time a fu EU pubic procurement woud take and the potentia impact of further deay on other time-critica BBC projects. It considered that taking the programme in-house was the ony soution and was achievabe, athough recognised that it did not, at that time have a the in-house capacity and capabiity necessary to deiver the Programme. 13 The BBC s in-house deivery of the system has started we but the compex stages to foow wi be a severe test of its approach. The in-house team deivered the first two system components, on schedue, in February and June 2010, and eary users have been positive about the impact. In September 2010, because of deays in defining procurement requirements, the deivery pan was revised, with the resut that competion of the in-house deivery of the system woud be deayed by a further five months. Since then the BBC has deivered a further two major system components on time against this revised schedue. The deays mean there is no time contingency eft in the revised deivery schedue, athough there is sti 10 miion of financia contingency avaiabe to mitigate risks to deivery. 14 The technoogy soution for the Programme has so far proven to be vaid. However, at the time of our review in November 2010, the panning processes the BBC had put in pace around the deveopment and testing of the system were not then sufficienty rigorous to support the more compex integration of system eements as the Programme proceeds. The BBC has since made appointments and commissioned externa assurance that shoud strengthen its processes. The financia case for the Programme The financia case for the Programme has weakened over time. 15 The origina cost-benefit estimate in January 2008 was a projected net benefit of 17.9 miion by March These figures were based on impementing the system across six BBC business units. The atest forecast is of a net cost to the BBC of 38.2 miion by March 2017 for a wider ro-out to 13 business units. This net cost fas to 10.7 miion after taking account of the financia package agreed with Siemens.

20 8 Summary The BBC s management of its Digita Media Initiative 16 When approving the revised business case in June 2010 the BBC Trust gave weight to the strategic benefits of moving the BBC more fuy into digita technoogy and the non-financia benefits expected from the Programme, such as improved creativity and increased partnership working with other organisations and potentia pubic access to the BBC archives. The BBC has no direct contro over the deivery of those non-financia benefits which wi not be deivered soey by the BBC, but has aready signed memoranda of understanding with partners incuding the British Library to reaise these benefits. 17 There was a marked improvement in the June 2010 investment case approved by the BBC Trust compared with earier cases. Previous reports by the Nationa Audit Office and the Committee of Pubic Accounts have highighted weaknesses in the BBC s investment appraisas process. The fina case had, unike previous cases, fu cost and benefit comparisons for scope options, as we as for a stop option. The expanation in the fina investment case of how benefits woud be secured was an area of marked improvement, as a resut of a more rigorous chaenge by the BBC Finance Committee and the BBC Trust. However, in the context of a programme with deivery difficuties, and where the BBC was accepting the risks, the case woud have been strengthened by independent assurance on costs and system design. Concusion on vaue for money 18 This concusion on vaue for money ooks at the Programme in two phases: the period when the Programme was contracted-out unti the BBC brought it in-house; and how the BBC is managing the in-house deivery of the Programme. 19 The way in which the BBC appointed the contractor without a new competition and was then unabe to intervene effectivey in system deveopment without undermining its transfer of financia risk to the contractor was not an effective way of approaching the deivery of a compex programme. Whie the BBC s financia arrangements with the contractor shoud aow the BBC to compete the Programme, the deay of 21 months and the 26 miion in Programme benefits the BBC did not achieve in that period, and had to find esewhere in the BBC, meant that the eary stage of the Programme was not good vaue for money. 20 The Digita Media Initiative is a chaenging Programme, but the BBC has now started to deiver the system and users have been positive about the eements deivered. There is sti a considerabe way to go in the deveopment of a technicay compex system which requires the integration of a number of interdependent eements without any time contingency. In addition, the success of the Programme wi depend on take-up by users across the BBC and esewhere. It is therefore too eary to concude on the ikey vaue for money of the Programme.

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