BBC governors were originally told that the contract, worth an estimated 1.5bn pounds ($2.7bn) over 10 years, would deliver guaranteed average annual savings of 35.2m pounds ($64.1m). According to the NAO report, in practice the savings could not be guaranteed.
The NAO said that in October 2004, just one month after the level of savings had been guaranteed to governors, estimates had been lowered to 25.7m pounds ($46.8m) following the removal of 7.7m pounds ($14m) from the baseline spend against which savings were measured.
By April 2006, the report continued, estimated savings for 2005-06 (the first year of the contract) were 21.8m pounds ($39.7m) because spend under the contract was higher than forecast. Over its 10-year term, the deal is forecast to deliver total savings of 275m pounds ($500.5m).
Under the terms of the deal, SBS provides the BBC with IT services including desktop and helpdesk management, as well as working to upgrade the broadcaster’s networks and telephony, security and servers. Prior to the deal, many of these services were provided by BBC Technology Ltd, a wholly owned subsidiary of the BBC, which SBS acquired for 150m pounds ($273m).
Munich, Germany-based SBS has struggled to consistently deliver a profit in recent years, and has made several attempts at restructuring its business around high-margin industry areas. The deal with the BBC remains SBS’s biggest win to date, and IT services providers will be keen to avoid any complications on the project.
In its recommendations, the NAO said the BBC should provide an up-to-date estimate of savings over the life of the contract, inform the governors how the estimate has changed since the contract was approved, and update the governors if the estimate changes significantly in the future.
Responding to the study, the BBC admitted that the savings made so far under the contract were lower then the figures it had reported to governors, and the the use of the term ‘guaranteed savings’, in the original submission to the board, was inexact. However, the broadcaster said the error does not undermine the rationale for the deal nor the relative preference for Siemens over the other bidders.
The NAO said that SBS is currently delivering the required level of service, with key targets achieved 95% of the time. Yet, of the eight projects delivered so far by SBS, the NAO said five had been late with the other three coming in over budget. Some 28 projects are still being worked on, with nine already delayed and 10 running over budget.
