The BBC’s management of three major estate projects Report by the Comptroller and Auditor General presented to the BBC Trust’s Finance and Compliance Committee 13 January 2010 The BBC’s management of three major estate projects Report by the Comptroller and This report, prepared by the National Audit Offi ce Auditor General and the BBC Trust at the request of the BBC Trust, has been transmitted to the Secretary of State for Presented to Parliament Culture, Media & Sport By the Secretary of State for Culture, in accordance with clause 79(4) of the Agreement Media and Sport between the Secretary of By Command of Her Majesty State and the BBC dated July 2006. Clause 79(4) also February 2010 provides for the report (and any Trust response) to be laid before Parliament by the Secretary of State. © BBC 2010 The text of this document may be reproduced free of charge in any format or medium providing that it is reproduced accurately and not in a misleading context. The material must be acknowledged as BBC copyright and the document title specifi ed. Where third party material has been identifi ed, permission from the respective copyright holder must be sought. The BBC’s management of three major estate projects BBC Trust Response to the National Audit Office Value for Money Study ‘The BBC’s management of three major estate projects’ Background to this study agreed budget and timetable. The three projects are essential parts of the BBC’s As the BBC’s governing body, the BBC vision to provide world-class and efficient Trust acts to get the best out of the facilities to deliver the BBC’s public BBC for licence fee payers. In part this purposes. Nevertheless, it is critical that means ensuring that the BBC continues the BBC manages these major projects to provide excellent value for money. We effectively to ensure value for money to commission Value for Money investigations the licence fee payer. into specific areas of BBC activity to help ensure that licence fee payers are getting The Trust places significant value on the best possible return on every pound of the work of the NAO and has carefully their licence fee. considered the report’s conclusions and recommendations. Each year the Trust commissions a series of Value for Money studies after discussing its programme with the Our views on the Comptroller and Auditor General – the Head of the National Audit Office NAO’s findings (NAO). The studies are undertaken by This report confirms our own findings the NAO or other external agencies, that since the BBC Governors, and reporting to the Trust. The Trust carefully subsequently the Trust, first intervened examines the findings from each study directly to bring the Broadcasting House and requires a full response and action development back on track the BBC has plan from the BBC Executive explaining significantly improved its management how it will take forward the specific of major estates projects over the past recommendations made. four years. This study, commissioned by the Trust’s We agree that there were significant Finance & Compliance Committee on failings in phase 1 of Broadcasting House behalf of the Trust and undertaken by the (already reported extensively) which was NAO, looked at the BBC’s management of approved in 2003 and delivered in 2006. the Broadcasting House, Pacific Quay and Broadcasting House phase 1 was brought Salford Quays projects and whether they back on track via the direct intervention are being delivered in line with both the of the Governors, who worked with the expectations at the time the commitment Executive to negotiate a new contract of resources was approved and the latest with Land Securities. The Governors also commissioned Ernst & Young to review the investment case improved with each new contract (reporting in May 2006) and project, none contained all four elements. the governance (August 2006) to provide The Trust will require the Executive to reassurance that the failings had been ensure that appropriate guidance on what rectified. These reports were shared with content should be included in investment the NAO. cases is developed and implemented. The Trust has since received regular There are two areas in particular where updates on the progress of the ongoing we are pleased to see that earlier failings estates projects and was keen to ensure noted by the Governors and ourselves via informed external examination that have already been addressed: the BBC’s management of these projects had indeed improved. We therefore the importance of having the right commissioned this review by the NAO. The people with the right skills in place NAO’s report provides us with assurance from the outset of any major that important lessons have been learnt, project was one key lesson which and passed on to the three later projects; was identified by BBC internal with the result that Broadcasting House audit’s review of the governance phase 2, Salford Quays and Pacific Quay are arrangements for Broadcasting proceeding far better than Broadcasting House phase 1, and also picked up House phase 1. Notwithstanding the by the NAO. The Trust notes that many positive improvements that have the Executive has taken strong been highlighted by the NAO, the Trust action in this respect, with the agrees that there are still ways in which result that the NAO recognises that the BBC can, and should, further improve this has improved in more recent its processes. The NAO has made some projects, with the BBC appointing important recommendations in this respect an experienced project director for and we will require the Executive to Broadcasting House in 2005 and address all of these. recruiting staff from the construction industry and appointing staff with Specifically, the Trust agrees with the NAO experience of relocations for that the approvals process should be Salford Quays. improved, and that where benefits cases on approval are incomplete this makes the need for appropriate financial it more difficult to demonstrate project contingency allocation was another success (and value for money). This does lesson learned from Broadcasting not necessarily mean, however, that the House phase 1. Again, the Trust notes projects concerned do not, and will not, on that the Executive has taken strong completion provide clear benefits and value action to address this concern, with for money. the result that the NAO found that the contingency set aside for The Trust has considered the approvals Broadcasting House phase 2, Salford process and discussed it with the Executive. Quays and Pacific Quay was in line The NAO provides four key elements with government recommendations. that should be included in an investment proposal. We take very seriously the NAO’s conclusion that, although the Although there were undoubtedly serious The Trust’s response to the issues around the governance and project management of Broadcasting House recommendation directed at phase1, as previously highlighted by the the Trust Governors, the Trust is reassured by this report that significant improvements have The NAO makes a specific been made since then. We are also satisfied recommendation concerning the BBC Trust: that many of the NAO’s recommendations “The preparation of well developed business have already been implemented by the cases is the responsibility of the BBC Executive following the period studied. management. But the BBC Trust should The Trust has discussed the remaining make clear the evaluation criteria it will recommendations with the Executive and apply when considering business cases, considered its response, which is published satisfy itself that business cases are reviewed in this document. independently of project teams before they We note the Executive’s comments are submitted (the BBC has confirmed that concerning identification of benefits at its Finance team performs such reviews), the start of a major project and how and draw on expert advice as necessary.” these may evolve with time. While some The Trust agrees with the NAO that evolution will undoubtedly occur, for these points are an important part instance around technological fit-out of of discharging the Trust’s duties. With buildings, we agree with the NAO that regard to the first point, the Trust and its any approval to proceed with a project Committees (particularly the Strategic must be based on a sound evaluation of Approvals Committee and the Finance all the anticipated benefits. We will be & Compliance Committee) review seeking reassurance for future projects investment cases against four main criteria: that the BBC has undertaken and set affordability, value for money, extent to out clearly all the necessary analysis. We which they further the specific strategy consider it important, from the viewpoint (e.g. Corporate Property Strategy) and of accountability to licence fee payers, extent to which they further the BBC’s that the BBC has mechanisms in place for Public Purposes. These are set out in the delivering real value for money and for Trust’s protocols, which are currently being able to demonstrate this through under review; the Trust will, however, clearly documented processes. consider the recommendation to see if any We will now require the Executive to improvements in process can be made. provide a more detailed action plan for With regard to the second point, the Trust Trust review which we will share with the always confirms that the BBC Finance team NAO. As with other VFM studies, progress and Executive Board have reviewed cases against this action plan will be reported before they are submitted to the Trust. In regularly to the Trust and again shared with response to the third point the Trust, as laid the NAO. out in its protocols, regularly commissions expert external, independent, advice to assist it in reaching a view on complex decisions.