Letter from Anthony Fry to Margaret Hodge on future of the BBC’s DMI project

Date: 24.05.2013     Last updated: 23.09.2014 at 09.48

BBC Trustee Anthony Fry has today written to Public Accounts Committee Chair Margaret Hodge regarding the BBC's Digital Media Initiative (DMI) – a project intended to improve production efficiency by enabling BBC staff to develop, create, share and manage video and audio content and programming on their desktop.

In the letter, Mr Fry explains that DMI has failed to deliver what was expected and will be closed before it is completed. As a result, the BBC will need to write down its DMI assets to reflect this position in this year's financial statements.

The Trust has commissioned an immediate review by PwC to seek to establish what went wrong within the BBC in terms of project management, control and governance. This will be published in due course.

The full text of Mr Fry's letter to Margaret Hodge can be read below.

Letter from Anthony Fry to Margaret Hodge

Dear Mrs Hodge,

Last November I wrote to you to let you know that the BBC Trust had serious concerns about the BBC's Digital Media Initiative (DMI) project and the BBC Executive had halted the work until such time as a fundamental review had been conducted. Following recent meetings with the Executive, I am writing to provide a further update and in particular to inform you that an overwhelmingly negative picture has emerged.

As you know, in February 2011, I gave evidence to a Public Accounts Committee hearing on the BBC's management of its DMI project. The hearing followed a report by the National Audit Office (NAO) on the early stages of the project before the BBC reached an agreement with the external contractor to bring the project back in-house. I made clear that the Trust would be monitoring progress through regular reports from the Executive, which would also be received by the BBC Executive Board Audit Committee.

In my letter of November 2012, I explained that the project had fallen significantly behind schedule.  At that point, the Trust had requested a completely new business case based upon a fundamental review and agreed that in the meantime spending in most areas should be temporarily halted. On the basis of this review, the findings of which were presented to the Trust earlier this month, we have agreed to the BBC Executive’s proposal that a permanent halt should now be called to the DMI project.

Between April 2010, when the project was brought back under direct BBC control, and the point at which the project is halted, DMI will have cost the BBC £98.4m, having generated little or no assets.  This is because much of the software and hardware which has been developed could only be used by the BBC if the project were completed, a course of action which, due to technological difficulties and changes to business needs, would be, I fear, equivalent to throwing good money after bad. The BBC will of course need to write-down its DMI assets to reflect this position in this year’s financial statements.

Over the coming months the BBC will be submitting proposals to the Trust for future investment in its digital capability but we do not expect these to be of the scale, ambition or all-encompassing nature of DMI.

It is of utmost concern to us that a project which had already failed to deliver value for money in its early stages has now spent so much more of licence fee payers' money.  The Trust is extremely concerned by the way the project has been managed and reported to us and we intend to act quickly to ensure that that there can be no repeat of a failure on this scale.

It is the Trust’s intention to commission an external review immediately.  The review will be carried out by PwC and will seek to establish what went wrong within the BBC in terms of project management, control and governance. We will, in particular, wish to understand how the reporting to the Executive Board, its Audit Committee, and the Finance Committee of the Trust appears to have failed to give any true picture of the extent of the problems with this project until late 2012. 

We have also asked the Director-General to report back to us with assurance that adequate scrutiny, reporting and controls are in place within the BBC for all current major projects. 

As an immediate step, as part of interim management changes being made by the BBC Executive, an individual has been suspended.

While the NAO decided not to select DMI for their audit programme this year, the way is clear for them to carry out a value for money study, should they wish, once the Trust review has been completed.

The conclusions of the Trust’s review will be published and the PAC will have an opportunity to exert appropriate parliamentary scrutiny by holding a hearing on these conclusions if it should choose to do so.

The Committee may also choose to raise this topic at the 10 June PAC hearing on the BBC’s move to Salford, given that the impact of the DMI project on BBC North is referred to in the NAO’s report on this subject.

In the interest of transparency and accountability, I have decided to make DMI’s latest financial position public and I have concluded that the simplest way to do this is to publish this letter.

Yours sincerely

Anthony Fry,

Trustee, BBC Trust

cc Amyas C E Morse, Comptroller and Auditor General