CST 620 Final Exam: Contracts and Procurement Management Exam Question (Answered

Read the Case-Study and answer the questions which follow:
British Broadcasting Corporation – UK
Project type: Digital archive
Project name: The Digital Media Initiative
Project Date: May 2013 Cost: £100M

Synopsis:
Having started operations in 1922, the British Broadcasting Corporation (BBC) is one of the world’s oldest and most respected media production and broadcasting organizations. Covering both entertainment and news, the BBC’s radio and television productions captured the 20th century as it unfolded. The BBC’s archive of broadcast materials is unparalleled and as production continues to this day, the corporation has one of the largest archives of media materials in the world. Delivering content through television, radio, the Internet and via the BBC iPlayer app, the BBC is a brand name that is known around the world.
To improve efficiency when creating new materials, and to allow for better management and integration of archive materials, the BBC initiated the “Digital Media Initiative” (DMI) in 2008. DMI was intended to provide a single tool that would enable video and radio production from raw materials through to final edit. Accessible from staff desktops the system was to standardize the tool used for new production while allowing for improved integration of the vast archive of media materials built up over the organization’s 90 plus years.
Without going through a formal tender process, the contract to develop DMI was awarded to the BBC’s existing technology provider (Siemens) in 2008. The fixed price contract established a plan that would see the project completed in 18 months at a cost £82M. In theory a fixed priced contract protects the buyer from cost overruns, in practice this is not always the case as lack of clarity in requirements, changing needs and other real world complications often leave the door open to continual changes that can impact delivery dates and costs. Such was the case for DMI and ongoing challenges creating the system resulted in a Jul 2009 “no-fault” termination of the contract. Bringing the project back in house the BBC revised the timeline and set about completing the project using their own internal technical team. An independent audit report by the National Audit Office at the time made note of the failure to conduct a competitive tender process and made a number of recommendations to help ensure the system could be delivered by the internal team.
As work proceeded still further problems were encountered. Internally there was growing concern at the lower levels of project that senior levels were not being given a true picture of what was happening in the project. Bypassing the hierarchy, one senior technologist eventually wrote a letter to the BBC Trust (the committee with governance and oversight responsibility for the BBC) telling them that they were not being given an accurate picture of the project’s true status. According to reports the letter stated that the BBC Trust, the government and other senior parties involved “may have been misled about the true performance of the DMI since it was taken in house”.
Sadly the warnings turned out to have merit as the failure to deliver a working system resulted in the project being abandoned in May 2013. 

Q.1 (a) Briefly discuss BBC's procurement strategy for the DMI project. What kind of contract has been used for this project? (15 marks; 800 words)
(b) Using the knowledge gained through "Procurement and Contracts Management Unit" explain in detail why was this contract unsuited for the project? Why has this procurement strategy been a failure? If you were to lead this project, what procurement strategy would you suggest? Justify your reasons explaining the type of contract, its benefits, and why it would have suited the Digital Media Initiative Project better? (10 marks; 700 words)

• Understand procurement strategy, the different types of procurement contracts, and their pros and cons.
• Understand why the procurement contract used for the Digital Media Initiative Project was unsuited, suggestions for the most appropriate procurement strategy and contract, its benefits, and why it would have suited the BBC DMI Project better
• Critically apply procurement and contract theory to a real case study organization