Renewing the EastEnders set inquiry

Despite considering it crucial to the future success of EastEnders, the BBC has managed its E20 project badly. EastEnders is a flagship programme for the BBC but is being outperformed by its soap rivals, such as Coronation Street, and its overall audience has reduced as fewer people watch traditional linear TV. Therefore, it is important for EastEnders that the BBC completes E20 so that the programme is best placed to not only succeed but to also secure its long-term future. However, since we last heard about a 26-month delay to the project in 2016, it has gone off-track again. The project is now set to cost £87 million — £27 million more than initially budgeted - and complete in May 2023, nearly five years later than originally planned in 2013. The costs have increased partly because of inflation in the construction industry, the effect of which has been exacerbated by delays — with the construction of the Front Lot only starting in October 2018 rather than August 2017 as planned in 2015. The BBC has also underestimated the scale and complexity of the project, including how it would age the new sets so that they either exactly replicate what viewers are used to, or look realistic where there are new locations. In addition, the BBC initially failed to allocate enough money to manage risks and contingencies. It has encountered problems including asbestos and obstructions in the ground, which have, to date, cost the BBC around £1.8 million and delayed works by around four months. Under its latest plans, the BBC has substantially increased its risk and contingency budget. Recommendation: Commencing in October 2019 — one year into the construction of the Front Lot — the BBC should annually update the Committee on the progress, expected costs and completion date of E20. These updates should demonstrate how the BBC has learned lessons from previous project failings, and whether its revised risk and contingency budget has been adequate.

The BBC failed to get the right construction project management skills in place from the outset of the project. It is disappointing that the BBC failed to consider what skills it needed in critical roles in the E20 project team. The BBC accepts that as a result, it did not have enough construction project management expertise to plan and deliver E20 effectively. One of the impacts of this was that the project team did not introduce design development and change processes early enough. After the 2015 project business case had been approved, it took over a year for a design change process to be agreed between the E20 programme and EastEnders production teams. This led to a build-up of change requests after the design was supposed to be stable. This issue was exacerbated by the project and production teams failing to work together effectively in the early stages of E20. Recommendation: By July 2019, the BBC should develop, and update us on, processes to make sure the right skills are in place from the outset for all of its critical projects.

The BBC’s procurement approach for the Front Lot contract was ineffective and increased the cost of the project by £2.3 million. In 2016, the BBC carried out a single-stage open procurement for the Front Lot but this was unsuccessful owing to limited market interest. This led the BBC to move to a two-stage procurement through its Building Contractor Service Framework, which cost it £2.3 million and 6 Renewing the EastEnders set delayed the project by six months. The second procurement, in which only two bidders met the BBC’s requirements, led to Wates being awarded the contract at a cost of £24.2 million, £9.5 million more than budgeted. The BBC’s cost consultants were unable to validate £3.1 million of the costs that were included in the final contract and concluded that limited market interest was likely to have inflated prices. In addition, the BBC’s contract negotiations with Wates took six months longer than planned, partly because of discussions about what bricks to use for the set. The commercial problems the BBC has encountered on this project demonstrate its ineffective sourcing and negotiating approach, which may have implications for other contracts. Recommendation: By October 2019, the BBC should provide us with evidence of how it ensures best practice in procurement and contract management across its diverse range of contracts — for E20 and other contracts. Renewing the EastEnders set 7 The progress of the BBC’s E20 project

The BBC told us that the forecast cost of E20 had increased partly because of inflation in the construction industry, the effect of which had been exacerbated by project delays. For example, the construction of the Front Lot started in October 2018 rather than August 2017 as planned in 2015. The BBC asserted that £9.2 million of the project cost increases were the result of higher than forecast inflation and demand for construction services. However, it was unable to provide evidence to support this figure, beyond simply stating the difference between the original budget for the Front Lot contract and the final outturn in 2018.5 1 C&AG’s Report, E20: renewing the EastEnders set, Session 2017–19, HC 1782, 13 December 2018 2 Qq 1–2, 7–8; C&AG’s Report, paras 1.2–1.8, 1.12; Committee of Public Accounts, BBC critical projects, Eighth Report of Session 2016–17, HC 75, 8 July 2016 3 Qq 2–4; C&AG’s Report, para 1.3 4 Chair’s opening statement; Q5; C&AG’s Report, paras 1.12 and 2.1 5 Q 1, 34–36; C&AG’s Report, figure 6 and paras 3.20–3.21 8 Renewing the EastEnders set

The BBC accepted that it had underestimated the scale and complexity of the project, including how it would age the new sets so that they either replicated what viewers are used to (on the Front Lot), or look realistic where there are new locations (on the Back Lot). The BBC told us that it had originally planned to age the new sets while they were being constructed as part of the main Front Lot and Back Lot contracts, but that it now planned for this work to be done separately after construction has completed, as its original intentions added risk and complexity to the project. The BBC has now scheduled more time to age the set — 13 months for the Front Lot and seven months for the Back Lot.6 The BBC told us that £3.5 million of the overall cost increases for the project related to ageing the new sets and additional resources to manage the Front Lot contract.7

The BBC failed to allocate enough money to manage the risks and contingencies of the project in 2015. It has since encountered significant problems such as asbestos and obstructions in the ground. These issues have so far cost the BBC around £1.8 million and delayed works by around four months. The BBC told us that contingency represented 18% of the project costs in the 2015 business case, and that as part of its latest plans, it had substantially increased its risk and contingency budget.8 Skills to plan and complete E20 successfully

For any project to be successful and deliver the intended outcomes, it is vitally important that from the outset the project team has enough staff with the right skills and experience. The BBC acknowledged that it failed to get the right construction project management expertise in place early enough in the project and that the blend of skills in the project team was too focused on the creative, rather than construction-focused, elements of E20. It similarly accepted that this absence of construction project management expertise was a particular problem for the key roles of Programme Director and Manager. This meant there was insufficient construction knowledge to manage design, procurement and construction activities, which led to, for example, Front Lot design coordination problems that meant that the BBC had to commission various internal and external reviews to rectify design problems and inconsistencies. It also meant the project decisions and documents were ineffectively reviewed and challenged. The BBC had, however, made improvements in this area — recruiting a new Programme Director in September 2017 and a Front Lot Project Manager in July 2017, with both having construction experience.9

The lack of sufficient construction project management skills also meant that the project team failed to introduce design development and change processes early enough. The BBC accepted that having a change control process for the design of the Front Lot was particularly important and that it should have managed it better.10 It told us that it had taken over a year after the 2015 project business case was approved for a design change process to be agreed between the E20 programme and EastEnders production teams. As a result, there was a build-up of change requests — with associated costs of around £440,000 — after the design was meant to be stable. It also told us that this was exacerbated by the project and production teams failing to work together effectively in the early stages of E20 — with important members of the production team having poor quality working 6 Q 19; C&AG’s Report, paras 1.7, 2.8 and 3.8 7 Q 35 8 Qq 1, 10–12, 16; C&AG’s Report, paras 2.4 and 3.18–3.19 9 Qq 21–22; C&AG’s Report, paras 3.4–3.6 10 Q 40 Renewing the EastEnders set 9 relationships with members of the E20 team. The BBC recognised that the project and production teams were too distant and told us that it had made improvements in this area.11 Commercial approach

One of the most important elements of E20 is the Front Lot, which will replicate the existing external set using brick structures rather than the current facades. The contract for this work is the largest in a wide range of 42 contracts that have supported E20. In 2016, the BBC carried out a single-stage open procurement for the Front Lot but this was unsuccessful owing to limited market interest. Only one of the three bidders met the BBC’s cost and quality requirements. The BBC attributed the lack of market interest to the bespoke nature of the project and the economic environment at the time making contractors more selective.12 The initial procurement failure led the BBC to change its approach and move to a two-stage procurement through its Building Contractor Service Framework, which cost it £2.3 million and delayed the project by six months. The BBC asserted that it was important to the success of the project that it had spent this money to ensure that its subsequent procurement process resulted in a better contract. It similarly claimed that, in all likelihood, had it not undertaken the initial procurement, it would have ended up with a contract with a higher cost and a lack of clarity about roles and responsibilities.13

Owing to the limited market interest on the first procurement, the BBC adopted a new two-stage procurement approach for the Front Lot construction contract, using its Building Contractor Services Framework of six contractors, that began in March 2017. The BBC’s second procurement, where there were only three bidders with two bidders meeting the BBC’s requirements, led to Wates being awarded the contract. After an opening offer of £21.7 million from Wates, following clarifications and the confirmation of provisional sums and change requests, the cost of the final contract was £24.2 million, £9.5 million more than the BBC had budgeted. We were concerned that the BBC’s cost consultants (AECOM) were unable to validate £3.1 million of the costs that were included in the final contract and concluded that limited market interest was likely to have inflated prices. The BBC told us that AECOM had struggled to identify relevant data that it could use to benchmark the increased costs of the project but had nevertheless concluded that inflation was driving the difference.14

The BBC’s contract negotiations with Wates took 11 months — six months longer than planned — from October 2017 to September 2018. These lengthy negotiations were the result of the BBC receiving a more expensive contract offer from Wates than it expected, and partly because of discussions about what bricks to use for the set. The BBC told us that the process for choosing bricks had taken weeks and that it was important, consulting with production colleagues, to make the right choice. As part of agreeing the type and supply of bricks for the Front Lot, the BBC reviewed some £50,000 of sample brick panels that were produced by Wates. It explained that ‘Albert Square’ and surrounding scenery 11 Qq 23–26; C&AG’s Report, paras 3.13 and 3.16–17 12 Q 27; C&AG’s Report, paras 1.3, 3.22–3.24 13 Qq 27–29; C&AG’s Report, paras 3.23–3.25 14 Qq 28–29, 35; C&AG’s Report, paras 3.9 and 3.25–3.26 10 Renewing the EastEnders set was in the style of the Victorian era and including multiple shades of both bricks and mortar, and replicating the “look and feel” of the set meant that it was not possible to buy bricks from standard commercial sources.15 15 Qq 29–33; C&AG’s Report, paras 3.25–3.26. Renewing the EastEnders set 11