BBC will lose £38m on Digital Media Initiative

24 May 2012

BBC will lose £38m on Digital Media Initiative – PAC

7 April 2011

The BBC's failure to open its content management project to competition undermined the potential benefits, the Public Accounts Committee has found

The Public Accounts Committee has criticised BBC's decision to hand its content management systems upgrade project, the Digital Media Initiative (DMI), to lead IT contractor Siemens without opening it up to competitive bids.

"The BBC chose not to test through competition the capacity and capability of potential suppliers to take on [the project]", the committee of MPs wrote in a report published yesterday. "The contract with Siemens transferred too much financial risk to the contractor, such that the BBC felt unable to intervene proactively in the development of the Programme until it was too late."

The BBC gave the £79 million contract to Siemens in 2008, but by July 2009 it was already behind schedule and the BBC decided to take the project back in house.

While the BBC has made good progress since then, the delays mean that instead of costing £81.7 million and delivering benefits of £99.6 million – a £17.9 million return on investment – the DMI is now predicted to cost £133.6 million and deliver benefits of just £95.4 million – a £38.3 million loss.

The PAC's report echoed the findings of a National Audit Office investigation published earlier this year.

The BBC outsourced its entire IT department to Siemens in 2004, in a ten-year deal worth nearly £10 billion. In 2007, the PAC criticised the BBC for having failed to achieve the £38 million savings it originally claimed the deal would deliver.

Siemens' IT services division is soon to be acquired by French company Atos Origin. The European Union granted the Atos Origin's €850 million bid regulatory approval last month, saying there is still plenty of competition in the IT services market.

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