BBC overestimated savings offered by Siemens contract, says PAC

The BBC overestimated the annual savings from an IT service contract with Siemens by £13m, according to the Public Accounts Committee.

The BBC overestimated the annual savings from an IT service contract with Siemens by £13m, according to the Public Accounts Committee.

In September 2004, when the Governors approved £1.5bn 10-year contract with Siemens, they were told it would deliver, on average, guaranteed annual savings of £35.2m for 10 years. But by April 2006 the corporation estimated that annual savings from the contract would be £21.8m.

Edward Leigh MP, Chairman of the Committee of Public Accounts, today said, “The BBC’s approach to the contract has been distinctly second rate. This is not the first time BBC Governors have been given inexact figures when asked to approve spending on major projects. The BBC must make sure that all of its future business cases are subject to robust quality assurance.

 “None of this inspires confidence in the BBC’s ability to negotiate and manage large-scale commercial contracts. The BBC’s arguments for resisting full independent audit scrutiny by the National Audit Office are looking increasingly threadbare.”

A spokesman for the BBC said the National Audit Office had already highlighted the fact that total savings under the contract could not, in practice, be guaranteed. “That the savings made so far, while substantial, are not fully in line with the figures reported to the Governors in September 2004, and that the use of the term 'guaranteed savings' was inexact. This error was accepted and acknowledged by the BBC in July last year.”

The BBC’s Board of Governors had already begun to act on the NAO's recommendations for strengthening performance management and an internal review has commenced to ensure these issues are being addressed, the spokesman said.

In its first year, the contract did save £22m and the BBC now says the contract will make up the shortfall by saving around £40m a year.

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