BBC criticised over handling of £2bn building projects

The BBC was criticised in a report today for its handling of three major building projects, including its redevelopment of Broadcasting House, which was hit by a four-year delay and a £100 million cost overrun.

The BBC Trust said that licence fee payers were "let down" by serious mistakes made during the early stages of the BBC's redevelopment of Broadcasting House.

The BBC's governing body today published the findings of an independent report prepared by the National Audit Office (NAO) on the BBC's management of three projects with a total budget of £2 billion.

They were the refurbishment and redevelopment of Broadcasting House in London, the construction of BBC Scotland's new "state-of-the-art" Pacific Quay headquarters in Glasgow and the corporation's forthcoming move to Salford Quays.

The report found the BBC has learned lessons from the first phase of Broadcasting House's redevelopment, which suffered from significant cost and time overruns.

Management of the three projects has got better but there is room for further improvement, it said.

The Broadcasting House project will be completed in April 2013, four years later than first planned.

The project will cost £1.046 billion, £55 million more than originally approved. The knock on effect of the delay has added a further £52 million of costs, the trust said.

The Pacific Quay development cost ran to £188 million - around £60 million more than the original prediction of £126 million.

The document said the scope of the Broadcasting House and Pacific Quay projects changed after the BBC Governors first approved them, adding to the costs.

None of the three projects was clear at the outset about intended benefits, which could give a meaningful measurement of success.

The NAO said this had the effect of "diluting accountability and making the evaluation of value for money very difficult".

A detailed benefits realisation plan for Pacific Quay was not laid out until a year after the project was finished, the report said.

The Salford scheme is on course to be fully up and running by December 2011, with the first building already handed over a month earlier than planned.

The construction costs are being borne by the developer, with the bulk of BBC spending relating to renting and staffing studio facilities over 20 years and costs to do with relocating five BBC divisions to the North.

The estimated total cost of the project over 20 years is around £877 million - £76 million less than originally forecast.

The NAO report found that "weak governance" contributed to the problems of the first phase of the Broadcasting House project, but the BBC strengthened this in 2004 and applied lessons to phase two as well as its Pacific Quay and Salford Quays projects.

BBC Trust chairman Sir Michael Lyons has today written to the BBC's director-general Mark Thompson asking for his plans in response to the NAO's recommendations, and asking for a "health check" of all major projects currently run by the BBC without delay.

Sir Michael wrote to Mr Thompson: "The trust's view that initial planning and control arrangements for the first phase of the Broadcasting House project were unacceptable.

"They showed significant weaknesses and shortcomings, and must never be allowed to happen again."

Sir Michael acknowledged that the problems "arose under previous regimes".

The trust expects Mr Thompson to report his findings to the body next month.

The BBC executive said the projects happened in a decade of "unprecedented transformation" for broadcasting.

Increased terrorism threats following the July 7 bombings was one of the considerations which changed the scope of the projects.

A BBC spokesman said the three "complex" projects have "been designed to not only accommodate programme makers and technical facilities like studios, but to be enduring landmark buildings that the public use.

"Pacific Quay is already enabling the BBC to deliver better value for money, and we are confident that will also be achieved for the projects in Salford and London.

"All three projects are now on track and once completed the total cost of property management at the BBC will fall by £50 million per year."

Jeremy Peat, BBC trustee, said: "Serious mistakes were made in the first phase of the Broadcasting House project. Licence fee payers were let down, and the trust regrets this.

"The governors took steps to get the issue under control and then the trust, when it was formed in 2007, continued their energetic oversight.

"We are reassured that this report shows lessons learned have been applied in the second phase of Broadcasting House, Salford and Pacific Quays.

"But there is still considerable room for improvement, and consequently we will follow up the NAO's recommendations vigorously and as a matter of urgency."

The NAO has made a number of recommendations to bring the BBC's processes in line with good practice.

NAO head Amyas Morse said the BBC let the Broadcasting House project run into "serious difficulties before the governors and then the trust took action, and the result is a four-year delay and a cost overrun of £100 million.

"For future major projects, the BBC needs to make sure that: investment decisions are based on a full assessment of the scope and cost of the project; there are clear baselines so that performance can be measured and project teams held to account; and proposals submitted by management are reliable and subject to effective challenge by the BBC Trust."

Edward Leigh, chairman of the Commons Public Accounts Committee, said: "Today's report provides another example of the BBC Trust's inability to hold the BBC to account for how it spends our money.

"As things stand, the National Audit Office is doing its best but it is being held at arm's length by the corporation.

"The BBC must be subject to full independent audit by the Comptroller and Auditor General.

"It is unacceptable that the BBC is not subject to the same scrutiny as every other public body in the land. Licence fee payers expect and deserve nothing less."