The BBC spends over £500 million each year on goods and services ranging from broadcast specific products to more generic items. It has a centralised procurement function and manages spending along category lines (Figure 1 on page 8), enabling it to control its spending more effectively than in the past.

The BBC was aiming to deliver £75 million savings from procurement in the three years to April 2008, but savings have varied widely between categories and it has achieved least from those where it has spent most, Production Resources and Technology and Broadcast Equipment. Spending on another category, People and Resources, doubled to £53 million in 2006-07 (the last complete financial year at the time of our examination) because of the costs of engaging temporary staff for a number of one-off projects, such as developing the iPlayer. The BBC expects this to drop significantly in the future when projects come to an end.

In recent years the BBC has used fewer suppliers and has established central contracts for a greater proportion of its goods and services, but in 2006-07 it still used over 17,000 suppliers. That year the BBC spent more than £200 million through local deals and made nearly 38,000 individual purchases from suppliers with which it had no central contract.

During 2006-07 the BBC introduced an upgraded electronic purchasing system, but 2,000 of the 4,500 licences it had paid for to give staff access to the system were not being used. The average cost of processing a purchase using the system is £6, although the cost is more than six times greater when buyers do not use a central contract.

The BBC uses technology across all of its procurement activities, including letting tenders through eAuctions. The BBC has made estimated annual savings of £3 million (14%) from the 19 eAuctions it ran between April 2005 and March 2007, but since then had let only five more contracts in this way.

In January 2007 the BBC Trust replaced the Board of Governors and is developing its oversight of the BBC Executive. The Trust discusses with the Comptroller and Auditor General a programme of value for money reports that it commissions each year, but the Trust retains the final decision on what subjects are examined.

On the basis of a report by the Comptroller and Auditor General,[1] we took evidence from the BBC on the savings achieved and how it is meeting business needs, and on the BBC Trust's oversight of the BBC Executive.