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Jeremy Peat, ³ÉÈË¿ìÊÖ Trustee, said:

"The Trust welcomes this report from the NAO into the ³ÉÈË¿ìÊÖ's strategic contracts. We are pleased that the NAO found that the ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ manages large contracts. The ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ and licence fee payers with value for money."

Management of strategic contracts

The NAO review looked at whether the ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ has not secured as much innovation by the contractors as it expected on some contracts. The ³ÉÈË¿ìÊÖ has not, therefore, achieved the full range or level of performance specified in its strategic contracts.

Overall, across five contracts examined, the ³ÉÈË¿ìÊÖ's approach to relationship management was above average compared to other organisations in the public and private sectors. Although the ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ.

• The NAO recommends that, to improve the service and innovation the ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ Executive can improve its contact management. The Trust notes that the report acknowledges the formation of the ³ÉÈË¿ìÊÖ's Strategic Relationships Board, which will share issues, best practice and become a focal point for reporting. The Trust also expects the ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ should define core competencies for contract managers, identify the relationship management needs of contracts and clarify accountability for contract managers.
• The Trust supports the ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ should exercise those rights.
• The Trust notes that the ³ÉÈË¿ìÊÖ Executive has completed an audit with JCI and currently has audits with Siemens and Capita TVL in progress. Additionally the ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ should establish criteria to identify the most important performance indicators.
• The Trust welcomes the ³ÉÈË¿ìÊÖ Executive's undertaking that the Strategic Relationships Board will undertake a review of all the performance measures across the ³ÉÈË¿ìÊÖ's portfolio of contracts.
• The NAO recommends that the ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ Trust, under the Royal Charter, to ensure that value for money is achieved by the ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ 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 ³ÉÈË¿ìÊÖ 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.