BBC Fair Trading: BBC Studioworks Group Trading Manual

20 December 2017

Introduction

This document sets out the specific arrangements the BBC is implementing to set charges for the goods and services BBC Studioworks obtains from the BBC Public Service, and the services that BBC Studioworks sells to the BBC Public Service. Many of these arrangements, and supporting Service Level Agreements, are in place. The BBC expects that all of the arrangements described in this document will be fully implemented by the 2018-2019 financial year.

Table 1 summarises the goods and services BBC Studioworks may use from the BBC Public Service, and for which there are arrangements in place. BBC Studioworks will not necessarily use all of these services on a regular basis. Table 2 summarises the goods and services that BBC Studioworks may sell back to the BBC Public Service. Tables 1 and 2 also describe the BBC’s approach to charging for these goods and services. The remainder of this document further describes these goods and services.

The BBC has carried out an internal review to ensure that all services potentially traded between the BBC Public Service and BBC Studioworks have been covered by this Manual. This included:

 A review of activity from both BBC Studioworks and the BBC Public Service;

 A review of transfer prices from the prior BBC Trust Fair Trading regime; and

 An accounting review from the BBC’s finance team and a review of transactions from the BBC’s finance’s systems.

The activity, service and finance reviews provide assurance that all significant costs are covered by the transfer pricing arrangements.

Where any additional or new service activity is identified between the BBC Public Service and BBC Studioworks, then an appropriate transfer pricing process will be put in place.

Part of the annual budget process will include a review of the transfer pricing arrangements. This will identify the need for any changes to these arrangements. This Group Trading Manual will be updated each year and published via the BBC website. Each year details of any changes to these methodologies and the impact thereof will also be set out.

Table 1: Summary of BBC Studioworks transfer pricing from the BBC Public Service

Services Provided Price Basis Rationale Apportionment Methodology

External Communications

Press Cutting Service Market price from contract External supplier appointed using a Based on pass through cost of BBC agreed with external supplier competitive open market process. Price paid Studioworks subscribers as a percentage of to contractor for service is therefore a total users market price.

Media Monitoring Service Market price from contract External supplier appointed using a Based on pass through of third party costs agreed with external supplier competitive open market process. Price paid to contractor for service is therefore a market price.

Finance

Business Process Operations (IBM Market price from contract External supplier appointed using a Based on proportion of BBC Studioworks Outsourced Processes) agreed with external supplier competitive open market process. Price paid spend of total BBC spend to contractor for service is therefore a market price.

Tax and Treasury Verifiable, comparable Benchmarking data provides a market price Based on usage (staff time) information on market price range; the BBC Public Service then uses its internal cost base to set a transfer price in line with the market benchmark

HR Admin Verifiable, comparable Benchmarking data provides a market price Based on BBC Studioworks’ dedicated FTEs as information on market price range; the BBC Public Service then uses its a proportion of total BBC Group’s FTEs internal cost base to set a transfer price in

line with the market benchmark

HR Admin Outsourced Market price from contract External supplier appointed using a Based on pass through of costs based on BBC agreed with external supplier competitive open market process. Price paid Studioworks’ allocation by headcount of to contractor for service is therefore a relevant services market price.

Internal Communications & Verifiable, comparable Benchmarking data provides a market price Based on allocation by headcount, including Engagement (including Diversity & information on market price range; the BBC Public Service then uses its staff time Inclusion) internal cost base to set a transfer price in line with the market benchmark

Legal

Legal assistance and advice across Verifiable, comparable Benchmarking data provides a market price Based on usage (staff time) the BBC Group information on market price range; the BBC Public Service then uses its internal cost base to set a transfer price in line with the market benchmark

Marketing & Audiences

Studio Audience Services: Verifiable, comparable Benchmarking data provides a market price Based on number of stewarded shows used by Stewarding information on market price range; the BBC Public Service then uses its BBC Studioworks internal cost base to set a transfer price in line with the market benchmark

Pensions

BBC group pension schemes Verifiable, comparable Benchmarking data provides a market price Based on cost of pension scheme provided to information on market price range; the BBC Public Service then uses its BBC Studioworks staff (i.e. number of BBC internal cost base to set a transfer price in Studioworks staff with pension schemes) line with the market benchmark

Procurement

Corporate Insurance and Market price from contract External supplier appointed using a Based on BBC Studioworks proportion of Production Insurance agreed with external supplier competitive open market process. Price paid cover required from the total market price to contractor for service is therefore a BBC Group pays for insurances. market price.

Corporate Insurance and Verifiable, comparable Benchmarking data provides a market price Based on usage (staff time) Production Insurance support information on market price range; the BBC Public Service then uses its costs internal cost base to set a transfer price in line with the market benchmark

Property

Office and production space in Verifiable, comparable Benchmarking data provides a market price Based on floor space occupied by BBC Elstree information on market price range; the BBC Public Service then uses its Studioworks (m²) internal cost base to set a transfer price in line with the market benchmark

Quality, Risk & Assurance

Internal Audit Verifiable, comparable Benchmarking data provides a market price Based on usage (staff time) information on market price range; the BBC Public Service then uses its internal cost base to set a transfer price in line with the market benchmark

Safety, Security and Resilience Verifiable, comparable Benchmarking data provides a market price Based on use of relevant service by BBC information on market price range; the BBC Public Service then uses its Studioworks’ users internal cost base to set a transfer price in line with the market benchmark

Technology

Core Technology Service and End Market price from contract External supplier appointed using a Based on use of relevant service by BBC User Compute Service (“EUC”) agreed with external supplier competitive open market process. Price paid Studioworks’ users to contractor for service is therefore a market price.

Training – BBC Academy

Face to face and online training Verifiable, comparable Benchmarking data provides a market price Based on use courses information on market price range; the BBC Public Service then uses its internal cost base to set a transfer price in line with the market benchmark

Development of new courses; Verifiable, comparable Benchmarking data provides a market price Based on the price to develop/deliver new training courses and events information on market price range; the BBC Public Service then uses its courses for BBC Studioworks, including staff (Masterclasses) internal cost base to set a transfer price in time line with the market benchmark

Training Courses and Events: Verifiable, comparable Benchmarking data provides a market price N/A – no charge – these course/events are Informal Events information on market price range; the BBC Public Service then uses its provided free of charge as they are open to internal cost base to set a transfer price in external third parties as well as to BBC line with the market benchmark Studioworks

Other Verifiable, comparable Benchmarking data provides a market price Based on use, including staff time where information on market price range; the BBC Public Service then uses its relevant internal cost base to set a transfer price in line with the market benchmark

Table 2: Summary of BBC Studioworks transfer pricing to the BBC Public Service

Services Provided Price Basis Rationale Apportionment Methodology

Production facilities and related services

Production facilities, equipment Market price from contract as If BBC Studioworks contracts with the BBC Based on facility or service being used (e.g. and crewing; other studio and post agreed with external supplier Public Service on the same basis as all of its type and duration) production services clients. It has a charging framework for its services, then negotiates each contract on the basis of the specification its clients require.

Property

Office space Verifiable, comparable Benchmarking data provides a market price Based on floor space occupied by the BBC information on market price range; BBC Studioworks then uses its Public Service (m²) internal cost base to set a transfer price in line with the market benchmark

Further description of goods and services the BBC Public Service may provide to BBC Studioworks

EXTERNAL COMMUNICATIONS

Press Cutting Service and Media Monitoring

The Press Cutting service includes early bird round ups, BBC daily media news and BBC national press for BBC Studioworks staff identified by the business.

Media Monitoring provides a journalist database service to the BBC Group.

FINANCE

Business Process Operations

The BPO service comprises the following elements which are outsourced as a commodity service to IBM: Purchase to Pay, Expenses and Advances, Contributor Payments, Order to Cash, Payroll, and Application and Infrastructure Management.

Tax and Treasury

The Tax team provides stewardship and controllership to all matters relating to corporate and employment taxes and VAT. The Treasury team provides stewardship and controllership to all matters relating to Treasury, including cash and liquidity management.

HR Admin

HR Admin is an HR service centre, providing services such as general HR advice, support and guidance, on boarding, HR helpdesk, benefits and pension information, and freelance management. Other services are provided by specialist outsourced suppliers.

Internal Communications & Engagement (including Diversity & Inclusion)

Internal Communications & Engagement manages BBC-wide internal communications channels such as: Ariel, online news for employees, Gateway, the staff intranet, Team Talk, the monthly briefing for managers, internal campaigns, advice to senior management and Diversity & Inclusion.

The Diversity & Inclusion service includes the provision of BBC Group diversity and inclusion policies and strategies, to enable BBC Studioworks to draw on the widest possible range of experiences, talent and ideas.

LEGAL

The Legal department provides legal assistance and advice across the BBC Group. BBC Studioworks is able to engage and seek counsel from the following legal departments: General Counsel’s office, commercial legal, litigation, employment law, intellectual property; workplace, and competition legal.

MARKETING AND AUDIENCES

Studio Audience Services comprise the Stewarding service in relation to BBC programmes produced by BBC Studioworks. The Stewarding service includes stewards to meet, greet and seat audiences, responsibility for the health and safety of audiences including any controlled emergency evacuation, and on the spot management of any complaints and any other audience related issues.

PENSIONS

The BBC’s principal pension scheme offered to all staff is its defined contribution pension scheme, LifePlan. This scheme offers to match employee’s contributions; the average matched contribution is eight per cent. In addition to this scheme, the BBC also has a number of legacy defined benefit pension schemes which are closed to new members but remain open to new accrual by existing members. BBC Studioworks staff includes members of both schemes. The BBC Public Service staff who work with BBC Studioworks are also members of both schemes.

PROCUREMENT

Corporate Insurance and Production Insurance Support provides specialist insurance advice on insurance coverage, management and payment of claims falling within the corporate insurance arrangement; and ensures global compliance statutory and contractual insurance requirements in the UK and abroad.

PROPERTY

BBC Studioworks uses space at the BBC Elstree site under licence from the BBC Public Service; this includes both office and production space.

A charge is determined for this space, based on a market benchmark on the price of equivalent class of space in the same geographical location (e.g. a cost per m²). This is also cross checked against the total cost for the building, including relevant overheads like maintenance costs based on the most recent information. This price is then broken down based on the Net Internal Area (NIA) for that building to arrive at a cost per m². BBC Studioworks is then charged based on the proportion of the NIA it uses.

QUALITY, RISK & ASSURANCE (QRA)

Internal Audit and Risk

The Internal Audit department is an independent, objective assurance and advisory function. It involves the assessment of the effectiveness of BBC’s internal controls, management of financial risk and compliance with regulation and policy.

Safety, Security & Resilience (SSR) Group

The SSR Group is a corporate function that routinely provides professional, technical and operational support to BBC Studioworks, and is available 24/7, including duty officers.

TECHNOLOGY

Core Technology Service and End User Compute (EUC) Service

The Core Technology Service consists of technology governance, information security, telephony service, circuits and networks, supported applications, specialist change support, infrastructure storage, core support, technology support, and Nations’ technology.

The EUC Service relates to system access and software licensing for each user within BBC Studioworks.

TRAINING – BBC ACADEMY

BBC Academy is the BBC’s in house training department, which provides a number of training services pan- BBC, including training courses and events.

Further description of goods and services BBC Studioworks may provide to the BBC Public Service

PRODUCTION FACILITIES AND RELATED SERVICES

BBC Studioworks provides the BBC Public Service with production facilities, equipment and crewing, as well as other studio and post production services. These services are charged out to the BBC Public Service at market price as per any third party customer.

Each transaction or arrangement between the BBC Public Service and BBC Studioworks is contracted separately.

PROPERTY

The BBC Public Service uses office space in Television Centre under licence from BBC Studioworks.