Publication of the Committee's 19th Report, Session 2007-08
Edward Leigh MP, Chairman of the Committee of Public Accounts, today said:
"The BBC Trust has the power to decide which of the Corporation's spending activities should be scrutinized by the National Audit Office. Why the BBC among all the public bodies subject to value for money review by the NAO should alone have this privilege has never been satisfactorily explained. The effect, however, is that the BBC's spending of public money remains closed to proper independent scrutiny.
"Turning to the subject of today's report, I welcome the finding that the BBC is on course to hitting its own target of saving a total of £75 million over three years in respect of its spending on goods and services. A closer analysis reveals, however, that the percentage savings were lowest in the areas where the BBC spends the most.
"There is a lot more that the BBC can do to trim its procurement bill. It should make sure that its staff are fully aware that buying under central contracts can save a lot of money. It should look for further opportunities to use electronic auctions so that potential suppliers can compete online for business. And the Corporation should ensure that external providers of outsourced services themselves use the best procurement practices."
Mr Leigh was speaking as the Committee published its 19th Report of this Session which, on the basis of evidence from the BBC, examined the savings achieved and how it is meeting business needs, and on the BBC Trust's oversight of the BBC Executive.
The BBC spends over £500 million each year on goods and services ranging from broadcast specific products to more generic items. It has a centralised procurement function and manages spending along category lines, enabling it to control its spending more effectively than in the past.
The BBC was aiming to deliver £75 million savings from procurement in the three years to April 2008, but savings have varied widely between categories and it has achieved least from those where it has spent most, Production Resources and Technology and Broadcast Equipment. Spending on another category, People and Resources, doubled to £53 million in 2006-07 (the last complete financial year at the time of our examination) because of the costs of engaging temporary staff for a number of one-off projects, such as developing the iPlayer. The BBC expects this to drop significantly in the future when projects come to an end.
In recent years the BBC has used fewer suppliers and has established central contracts for a greater proportion of its goods and services, but in 2006-07 it still used over 17,000 suppliers. That year the BBC spent more than £200 million through local deals and made nearly 38,000 individual purchases from suppliers with which it had no central contract.
During 2006-07 the BBC introduced an upgraded electronic purchasing system, but 2,000 of the 4,500 licences it had paid for to give staff access to the system were not being used. The average cost of processing a purchase using the system is £6, although the cost is more than six times greater when buyers do not use a central contract.
The BBC uses technology across all of its procurement activities, including letting tenders through eAuctions. The BBC has made estimated annual savings of £3 million (14%) from the 19 eAuctions it ran between April 2005 and March 2007, but since then had let only five more contracts in this way.
In January 2007 the BBC Trust replaced the Board of Governors and is developing its oversight of the BBC Executive. The Trust discusses with the Comptroller and Auditor General a programme of value for money reports that it commissions each year, but the Trust retains the final decision on what subjects are examined.