News

BBC questions Trillium contract

News

Julia Cahill

16 October 2004

30-year partnership under review as costs rise and broadcaster prepares for charter renewal

Concerns inside the BBC over the cost of its 30-year property partnership with Land Securities Trillium have led to a wide-ranging review of the deal.

The review comes in a climate of change at the BBC, as new chairman Michael Grade looks to ensure it is properly handling the £3bn it spends every year, and as the broadcaster approaches charter renewal in 2006.

Grade called in Ernst & Young to review its “financial controls” after he took over from Gavyn Davies in May, while Mark Thompson, who replaced Greg Dyke as director-general, announced an efficiency review in June that is expected to lead to significant cost-cutting measures.

A spokesperson for the BBC confirmed that talks with LandSec Trillium, over the deal they signed in 2001, had started, and said it had instructed management consultants at Deloitte to assist it. It has also terminated a contract with NM Rothschilds & Sons, which advised it on the partnership.

The BBC spokesperson said: “It is routine practice to look at a contract after a while.”

However, a source told EG that the cost of the deal had increased by around 30%, or more than £250m over the contract’s life by net present value. “Annually it is costing the BBC £25m-£30m more each year than some expected. There may be perfectly logical explanations. These deals do move of course, but it’s a hell of a lot for just two years,” he said.

The talks are also likely to address whether LandSec Trillium is delivering the profit sharing it promised.

The source added: “I am sure this is all about the post-Dyke world. The new regime wants to be whiter than white. It wants to go for charter renewal knowing fully what its expenses are.”

A spokesperson for LandSec Trillium confirmed that the contract was subject to review.

NAO investigates

The BBC’s contract talks with LandSec Trillium come as the National Audit Office starts its own probe into the deal. Its report – BBC Property: the White City project – will be the third of six NAO investigations into the way the broadcaster spends the £2.6bn raised each year from the licence fee.

An NAO spokesperson said it was now establishing the remit of the investigation and expected to report back in mid-2005.

The NAO’s remit had previously been restricted to arrangements for collecting the licence fee and the BBC World Service. However, a deal was struck last year between the government and the BBC allowing parliament’s spending watchdog to launch a series of inquiries.

30-year partnership under review as costs rise and broadcaster prepares for charter renewal Concerns inside the BBC over the cost of its 30-year property partnership with Land Securities Trillium have led to a wide-ranging review of the deal. The review comes in a climate of change at the BBC, as new chairman Michael Grade looks to ensure it is properly handling the £3bn it spends every year, and as the broadcaster approaches charter renewal in 2006. Grade called in Ernst & Young to review its “financial controls” after he took over from Gavyn Davies in May, while Mark Thompson, who replaced Greg Dyke as director-general, announced an efficiency review in June that is expected to lead to significant cost-cutting measures. A spokesperson for the BBC confirmed that talks with LandSec Trillium, over the deal they signed in 2001, had started, and said it had instructed management consultants at Deloitte to assist it. It has also terminated a contract with NM Rothschilds & Sons, which advised it on the partnership. The BBC spokesperson said: “It is routine practice to look at a contract after a while.” However, a source told EG that the cost of the deal had increased by around 30%, or more than £250m over the contract’s life by net present value. “Annually it is costing the BBC £25m-£30m more each year than some expected. There may be perfectly logical explanations. These deals do move of course, but it’s a hell of a lot for just two years,” he said. The talks are also likely to address whether LandSec Trillium is delivering the profit sharing it promised. The source added: “I am sure this is all about the post-Dyke world. The new regime wants to be whiter than white. It wants to go for charter renewal knowing fully what its expenses are.” A spokesperson for LandSec Trillium confirmed that the contract was subject to review. NAO investigates The BBC’s contract talks with LandSec Trillium come as the National Audit Office starts its own probe into the deal. Its report – BBC Property: the White City project – will be the third of six NAO investigations into the way the broadcaster spends the £2.6bn raised each year from the licence fee. An NAO spokesperson said it was now establishing the remit of the investigation and expected to report back in mid-2005. The NAO’s remit had previously been restricted to arrangements for collecting the licence fee and the BBC World Service. However, a deal was struck last year between the government and the BBC allowing parliament’s spending watchdog to launch a series of inquiries.