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• Full Report - The BBC's management of srategic contracts with the private sector

The BBC Trust today (18 March 2009) published an independent report it had commissioned from the National Audit Office on the BBC’s management of its strategic contracts with the private sector. 

Jeremy Peat, BBC Trustee, said:

"The Trust welcomes this report from the NAO into the BBC’s strategic contracts. We are pleased that the NAO found that the BBC has exceeded its own savings targets for these contracts. However, we recognise that there is more to be done to ensure consistency in the way the BBC manages large contracts. The BBC Executive has now set out its response to the NAO’s recommendations. The Trust has required the Executive to provide an action plan and timetable for this response to be implemented."

Tim Burr, Comptroller and Auditor General, said:

"The BBC has kept its spending on strategic contracts in line with its forecasts and exceeded its savings targets. It now needs to concentrate on securing the levels of service for which it has paid - as well as achieving greater innovation - to provide the BBC and licence fee payers with value for money." 

Management of strategic contracts  

The NAO review looked at whether the BBC is securing the service and financial objectives the Corporation outlined when it entered into high value, individual strategic contracts and whether adequate steps have been taken to maximise the value for money of its portfolio of strategic contracts.

The report found that the BBC spent £715 million on strategic contracts in 2007-08, in line with forecasts, and exceeded its savings target of £135 million by £22 million. The BBC has secured the contractually agreed minimum levels of service for 91 per cent of the indicators specified when it entered its strategic contracts where those indicators are linked to payment and 82 per cent of performance indicators not linked to payment. However, the BBC has not secured as much innovation by the contractors as it expected on some contracts. The BBC has not, therefore, achieved the full range or level of performance specified in its strategic contracts.

Overall, across five contracts examined, the BBC’s approach to relationship management was above average compared to other organisations in the public and private sectors.  Although the BBC has examples of good practice in contract management its contract and relationship management with its private sector suppliers is variable. The Corporation needs consistently to follow best practice. 

The report has identified a series of recommendations to improve the management of strategic contracts at the BBC.

• The NAO recommends that, to improve the service and innovation the BBC receives through its strategic contracts, it should identify the source of shortfalls in contract performance, prepare action plans with targets and apply lessons learned when procuring strategic contracts in future.
  
  The Trust welcomes the work that the NAO has done on identifying ways in which the BBC Executive can improve its contact management. The Trust notes that the report acknowledges the formation of the BBC’s Strategic Relationships Board, which will share issues, best practice and become a focal point for reporting. The Trust also expects the BBC Executive to undertake a more robust annual review of contracts and introduce greater senior management involvement in underperforming contracts. The Trust has asked the Executive to prepare an action plan and timetable and report back progress.
• The NAO recommends that to improve the consistency of its contract management the BBC should define core competencies for contract managers, identify the relationship management needs of contracts and clarify accountability for contract managers.
  
  The Trust supports the BBC Executive’s progress in developing the expertise of its contract managers and the development of a set of core competencies for contract management. The Trust also supports the BBC Executive’s plans to develop a structured approach to the professional development of contract managers.
• The NAO recommends that to make the most of open-book access rights to suppliers’ records the BBC should exercise those rights.
  
  The Trust notes that the BBC Executive has completed an audit with JCI and  currently has audits with Siemens and Capita TVL in progress. Additionally the BBC Executive routinely interrogates data from contracts suppliers and has arrangements to see annual cost data. The Trust supports open book audits whenever appropriate. 
• The NAO recommends that to identify the relative importance of services to its business the BBC should establish criteria to identify the most important performance indicators.
  
  The Trust welcomes the BBC Executive’s undertaking that the Strategic Relationships Board will undertake a review of all the performance measures across the BBC’s portfolio of contracts.
• The NAO recommends that the BBC should validate performance information provided by suppliers, particularly when the reported information has a bearing on payments to the supplier.
  
  The Trust notes that, although the BBC Executive has methods of ensuring performance across the portfolio of contracts, performance is not systematically validated against all performance indicators as a matter of routine. The Trust welcomes the Executive’s undertaking to introduce a process of sample validation across the key contracts.  
  

Notes for Editors

1. It is the responsibility of the BBC Trust, under the Royal Charter, to ensure that value for money is achieved by the BBC through its spending of the licence fee. In order to fulfil this responsibility, the Trust commissions and publishes a series of independent value for money reviews each year in consultation with the Comptroller and Auditor General – the head of the NAO. The reviews are undertaken by the NAO or other external agencies.
2. The BBC defines ‘strategic contracts’ as those which have an annual cost of at least £2 million and a term of at least five years. In 2007-08 the BBC had 17 strategic contracts. Services received under strategic contracts include: technology (Siemens), digital terrestrial television transmission (Arqiva), human resources (Capita) and facilities management (Johnson Controls Limited and HBML Limited). During 2007-08 the BBC signed two further strategic contracts, with Eaga and RMS but incurred no expenditure on those contracts in 2007-08. 
3. Press notices and reports are available from the date of publication on the NAO website, which is at www.nao.org.uk or the BBC Trust’s website: www.bbc.co.uk/bbctrust.  Hard copies can be obtained from The Stationery Office on 0845 702 3474.
4. The Comptroller and Auditor General, Tim Burr, is the head of the National Audit Office which employs some 850 staff.  He and the NAO are totally independent of Government.  He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.