GOVERNANCE UNIT Preparing for the new BBC Trust: Service Licences and the Public Value Test 25 October 2005 PUBLIC CONSULTATION Closing date for responses: Friday 16 December 2005 Chairman’s foreword The Government published its Green Paper on the review of the BBC’s Charter in March this year. This set out a radical new vision for the governance of the BBC. It included a decision to replace the Board of Governors with a new BBC Trust.. The Government invited me to become Chairman of the new Trust and I accepted this position. The current Board of Governors supports the new governance agenda set by the Government. From the start of the debate we made clear that the status quo was not an option and we recognise the scale of the task awaiting the Trust. The Government’s White Paper is likely to provide a clear steer on how it expects the Trust to operate in due course. It is explicitly not for the Board of Governors to determine how the new Trust will operate, but since March the Governors have been keen to play their part in laying some of the groundwork. To that end they have considered in greater detail some of the key tools and processes which the Trust is likely to need. This document publishes some further thinking on two of the mechanisms for BBC governance which were first proposed in the BBC’s Charter Review submission, Building Public Value, and recognised in the Green Paper as potentially useful tools for the Trust. They are: • Service Licences: to ensure that the BBC’s services are focused on delivering their public service remits; and • the Public Value Test: a standard and evidence-based framework to inform decisions required of the Governors regarding significant service-related investment proposals from BBC Management. The Governors are seeking to gather together a body of evidence based on a wide range of views. This process should assist the Trust to be in a position to review its options, reach its decisions and implement its method of working early in the new Charter period. We welcome reaction from licence fee payers, commercial broadcasters and media groups, regulators, the Government, and any organisation that might choose to comment. Following this consultation, and subject to the Government’s decisions in the White Paper, the Governors intend to instruct the BBC Governance Unit to prepare papers that may help the Trust. In particular, the Governance Unit will prepare first drafts of the Service Licences for each of the BBC’s services, in order that these can be made available for public consultation in 2006 and then put to the Trust for its deliberations and decisions once established. The Board of Governors also intends to undertake initial application of the Public Value Test during the current Charter period, if BBC Management submits any major new service-related investment proposals which fall within its scope. Both mechanisms outlined in this document will contribute to increasing the BBC’s transparency. This is much needed and, if achieved, will be of benefit to the BBC, licence fee payers and the commercial organisations that operate within the same markets. At the same time, we must guard against introducing unnecessary bureaucracy that could stifle creativity. Achieving that balance will require judgement on behalf of the Trust, not the application of an algorithm. The Governors and I would like to hear a full range of views in response to the ideas described in this document. We hope you will take the time to respond to our thinking. With your help, this will allow the Board of Governors to hand a body of evidence to the new Trust that helps it to reach its key decisions on governance and establish itself as early as possible as a new and effective body. Michael Grade BBC Chairman October 2005 Contents Chairman’s Foreword 1. Introduction 2. Public Value Test 2.1 How the Public Value Test might work 2.2 Contents of a Public Value Assessment 3. Service Licences 3.1 How Service Licences might work 3.2 Service Licence template 4. The Performance measurement framework 5. How to respond to this consultation Appendix A Extracts from Spectrum report on Public Value Test 1. Introduction The purpose of this document is to set out the thinking of the BBC’s Board of Governors on two of the key ideas for the future governance of the BBC’s services, first proposed by the BBC in Building Public Value1 and recognised by the Government in its Green Paper2. These are Service Licences and the Public Value Test (PVT). The new Charter and Agreement will set out a framework for the future of the BBC. Within that framework, the new BBC Trust3 will be the final authority in approving the content and application of the Service Licences and the PVT. The work of the Governance Unit to date in developing these mechanisms is on the instruction of the current Board of Governors. How the BBC’s services might be governed in the future The BBC Governors believe that the PVT and Service Licences will help greatly in creating a more robust, transparent and accountable system of governance. Alongside them, there are also likely to be formal commitments, running across the BBC’s services, on how the BBC will deliver each of its six public purposes, as set out in the Green Paper: • sustaining citizenship • promoting education and learning • stimulating creativity and cultural excellence • reflecting the UK’s Nations, regions and communities • bringing the world to the UK and the UK to the world • building digital Britain. The Governors believe that Service Licences and the PVT will become key parts of the new performance measurement framework, which is already being developed by the BBC to standardise performance monitoring and appraisal by both the BBC Trust and Management. The framework includes the six public purposes outlined above and draws on four measures set out in Building Public Value - Reach, Quality, Impact and Value for money. The National Audit Office undertook an independent audit4 of the BBC’s developing performance measurement framework in 2005 and concluded that: “The BBC has made good progress in developing the performance measurement framework [with] important building blocks in place.” 1 Building Public Value is available from www.bbc.co.uk/thefuture 2 The Government’s Green Paper, Review of the BBC’s Royal Charter A strong BBC, independent of government, DCMS, 2005 is available from www.bbccharterreview.org.uk3 This is a working title for the new governing body used in the Green Paper. We use this term throughout this document 4 National Audit Office: Public Service Broadcasting: The BBC’s Performance Measurement Framework, June 2005. This is available from the NAO and from the BBC Governors’ website at www.bbcgovernors.co.uk/governingservices This consultation This consultation focuses on the Board of Governors’ suggestions for how Service Licences might work, and the work carried out on their behalf in developing the Public Value Test. Next steps The Board of Governors will publish the responses to this consultation on its website. The follow-up work outlined below will reflect these responses. Service Licences The Governors will ask the Governance Unit to lead the development of the first drafts of Service Licences for each BBC service. Governors will publish these in 2006, for public consultation. The Governance Unit will encourage extensive public engagement in that public consultation. This should ensure that the public interest can be properly reflected and presented to the incoming Trust in a full set of draft Licences for its deliberations and decisions. Public Value Test One aspect of the Public Value Test is still outstanding, beyond the outcome of this consultation, namely the Market Impact Assessment (MIA). The issue of MIAs on BBC services has been subject to considerable public debate. The Green Paper states that MIAs on new services should be conducted by Ofcom. In its Green Paper response, the BBC suggested that MIAs on new services should be jointly commissioned from an independent source by Ofcom and the Trust, while the Trust should commission MIAs on existing services alone. The Governors do not believe that the new Trust should be excluded from an integral part of the PVT. The Governors recognise that this is ultimately a matter for the Government to decide. When this matter is resolved and the outcome of this public consultation is taken into account, the current Board of Governors will approve a final version of the test which would be used by them, prior to the new Charter period, to handle any proposals for new services or significant changes to existing services during this time. The Secretary of State’s approval would still be required in some instances, under the terms of the current Charter. The Board of Governors will not approve, or submit to the Secretary of State for approval, any investment proposals for new services or major changes to existing services prior to the PVT becoming operational. 2. The Public Value Test Building Public Value proposed that the BBC Governors would use a Public Value Test (PVT) to assess any new service proposals and significant changes to existing services. The Green Paper supported the concept of a PVT and asked for it to be developed further. On behalf of the Board of Governors, the Governance Unit together with independent consultants, has developed the part of the PVT which measures the public value of a proposal. A summary of the consultants’ report is available from the Governors’ website as an Appendix to this document.5 The Governors await a decision from Government on who should be responsible for carrying out Market Impact Assessments before finalising that part of the PVT. The methodology for the MIA will be developed in agreement with Ofcom. The Governors intend to have an agreed, operational PVT in time to deal with any new investment proposals from BBC Management in 2006. The Trust may wish to continue with this version of the PVT, or they may decide to amend it. 2.1 How the PVT might work This section explains how the whole PVT (PVA and MIA) might work, when it is operational. The process for the MIA is pending a decision from the Government. 2.1.1 The purpose of the PVT The Public Value Test (PVT) was proposed by the BBC as an aid to decision-making for the Board of Governors and a means of ensuring that considerations of public value are foremost when decisions relating to resource allocation are being taken. The primary aim of the PVT is to enable the BBC’s governing body to judge whether or not the net public value from a BBC service justifies the investment in it. The Board of Governors intends to use the PVT in either of two situations: • the appraisal of any new service proposals, • the appraisal of any proposed significant changes to existing BBC services. 5 Appendix A - Spectrum Strategy Consultants, PVT Robustness Assessment – Extracts is available on www.bbcgovernors.co.uk 2.1.2 Contents of a Public Value Test The Public Value Test comprises two parts: • the Public Value Assessment (PVA) which measures the public value which would be created by a service; • the Market Impact Assessment (MIA) which measures the likely impact on the existing market or potential value in the wider market as a result of the change. The main indicators would be the wider economic value which would be created by the service and any potential crowding-out of other players in the market. The results of both the PVA and MIA would be used to generate a final view of the total net public value and hence inform the Governors’ final judgement. Within the PVT, there are three consecutive assessment “hurdles” which a service must cross. It must demonstrate that: • it would be aligned with the BBC’s public purposes, and that it meets the required standard of quality and distinctiveness for a BBC service; • it would create public value at an acceptable cost; • it would generate a significant increase in net public value, taking market impact into account. The PVT is illustrated in Figure 1 below. Figure 1: Elements of the Public Value Test Public Value Assessment (PVA) Market Impact Assessment (MIA) Public Value Test (PVT) Fit with Purposes Quality & Distinctiveness Impact Reach Cost and VFM Economic Value & Crowding out First hurdle Is it aligned with the BBC’s purposes? Does it meet the required standard of quality and distinctiveness? Second hurdle Does it create public value, at an acceptable cost? Third hurdle Is there a clear margin of net public value? 2.1.3 Role of the PVT The PVT is a structured, evidence-based, decision-making tool which aids, but does not replace, judgement on the part of the Governors. During the development of the PVT, various options were developed and considered. Ultimately the Governors considered that option 2, shown in Figure 2 below, was the most appropriate. Figure 2: Options for the Board of Governors’ assessment of investment proposals Option 1 Fundamentally qualitative assessment Option 2 Structured, evidence-based framework Option 3 Quantitative algorithm Option 4 Financial algorithm Where judgement is a subjective assessment of indicators. The actual decision- making approach varies from case to case. The credibility of decisions rests critically upon trust in the decision-making body Where judgement is based on an evidence- based, structured, framework that marshals quantitative data and qualitative information to inform balanced judgements. Approach does not force quantification, where this would be unhelpful or misleading. Where judgement is based on primarily “quantitative results”, taking into account the surrounding qualitative indicators. Analogous to a highly quantitative “scorecard” approach. Where judgement is based around central “financial results”, taking into account the surrounding nonfinancial quantitative and qualitative indicators. Analogous to a Net Present Value business case analysis. Source: Spectrum Strategy Consultants for BBC Governors, 2005 Governors believe that use of a structured, evidence-based framework appears most likely to avoid the risks of either: • the inconsistency, lack of transparency and lack of credibility that would accompany an unstructured, qualitative process (option 1), or • the likely distortion to evidence and decision-making that could result from relying on either a quantitative or financial algorithm to quantify evidence which is fundamentally non-quantifiable (as with option 3), or even converting all data to monetary values (as with option 4). 2.1.4 The proposed approach to the PVT The Governors’ proposed approach to the PVT is described in further detail below. 2.1.4.1 Public Value Assessment (PVA) In future, BBC Management will have to submit a Public Value Assessment (PVA) to the Governors for every investment proposal related to a new service or a significant change to an existing service which requires the Governors’ approval. The PVA assesses the gross public value which would be delivered by an investment proposal. The assessment is both in absolute terms and a comparative judgement. For example, the service would have to demonstrate its potential reach, but also indicate how this compared to any other similar services. The cost of the service would also be considered, both in absolute and relative terms, in order to consider whether the service offered value for money. The PVA is based on the BBC’s new performance measurement framework which is already being used to standardise performance monitoring by BBC Management and performance appraisal by the Governors. The framework includes the BBC’s six public purposes and the four drivers of public value (Reach, Quality, Impact and Value for Money into which the Green Paper’s six Public Service Broadcasting characteristics -widely available, high quality, challenging, original, innovative and engaging are incorporated). The Governors would use a published set of guidelines for a PVA and then determine, case by case, the evidence they would require from BBC Management. It would then be the responsibility of management to deliver that evidence in a PVA submission (described below). The Governors would then reach their judgement on the outcome of a PVA, involving external expert scrutiny as appropriate. For a completely new service proposition (such as the suggested MyBBCPlayer), there would need to be appropriate tests, pilots and other research in order to generate valid evidence for a PVA. 2.1.4.2 Market Impact Assessment The issue of Market Impact Assessment (MIA) on BBC services has been subject to considerable public debate. The Green Paper states that MIAs on new services should be conducted by Ofcom. In its Green Paper response, the BBC suggested that MIAs on new services should be jointly commissioned from an independent source by Ofcom and the Trust, while the Trust should commission MIAs on existing services alone. The Governors do not believe that the new Trust should be excluded from an integral part of the PVT. The Governors recognise that this is ultimately a matter for the Government to decide. For this reason, the following proposals may be subject to some change, following the publication of the White Paper. All new BBC services would require a full PVT, including an MIA. When a PVA process is initiated for proposed significant changes to existing services, the Governors would conduct a preliminary assessment of the market impact of the proposed change. Based on this assessment the Governors would take a view on whether a full MIA might be needed. Governors believe that an MIA would only not be required if the initial assessment of market impact showed that the impact would be broadly equivalent with the impact of the service before it was changed, or that the impact would be broadly positive for the wider market with little potential for wider negative effects. For example, this would probably apply if a BBC television service wished to alter the mix of its output in terms of genre, while the overall nature of the service was unchanged. Governors would initiate an MIA if it was at all likely that there would be a negative market impact. In cases where the Governors, with independent advice from the Governance Unit, considered there is unlikely to be significant market impact, there would be a 28 day public consultation on the conclusion of the PVA and the Governors’ view of whether or not a MIA was required, together with the basis for this view. If significant objections were raised, then a MIA would be launched and incorporated into a full PVT. If not, then the Governors would come to their final decision. The methodology for the MIA will be developed in agreement with Ofcom but Governors currently expect the MIA process to last around three months. The MIA would include a call for representation from interested parties. 2.1.4.3 Public Value Test (PVT) The PVT would be the Governors’ ultimate assessment of the net public value delivered by an investment proposal. The PVT would be a judgement which balances the findings of both the PVA and MIA and represents the third and final hurdle an investment proposal must pass if it is to be approved by the Board of Governors. The Governors would only approve proposals where they believed there was a clear margin of net public value. The Governors would consult publicly on their interim conclusions, including findings from the PVA and MIA, before coming to a final decision on whether to approve the proposal, to approve with certain conditions attached, or not to approve. The Governors’ decision would be final, subject to an appeal to the Secretary of State for Culture, Media and Sport on grounds of breach of process only, in line with the policy proposed in the Green Paper. 2.1.5 When a PVT is used As detailed above the Governors would have a number of ways of handling BBC Management’s investment proposals, both for new services and changes to existing services. These options are set out in Figure 3, below. Figure 3: Governors’ use of the PVT for consideration of investment proposals Is it a new service? Yes MIA PVT Yes PVA PVA PVA MIA PVT Is it likely to have significant market impact? 2 1 3 No Is it a significant change to an existing service? No Yes No Separate process The options are described in Figure 4 below. Figure 4: Options for Governors’ handling of investment proposals Proposal Type Outcome 1 The investment proposal requires a new Service Licence Governors would commission a full Public Value Test (PVT), including market impact assessment (MIA). 2 The investment proposal requires a change to an existing Service Licence and likely to have a significant market impact. Governors would commission a full PVT, including MIA. 3 The investment proposal requires a change to an existing Service Licence but is unlikely to have a significant market impact. Governors would commission a Public Value Assessment from Management and would consult externally on possible market impact implications. 2.1.6 Handling of any new service proposals by the Board of Governors during the current Charter period When the PVT is finalised, following this consultation and a decision on the handling of MIAs, the Board of Governors will approve a final version of the test. This would be used by them, prior to the new Charter period, to handle any proposals for new services or significant changes to existing services. The Secretary of State’s approval would still be required in some instances, under the terms of the current Charter. The Board of Governors will not approve, or submit for the Secretary of State’s approval, any investment proposals for new services or significant changes to existing services prior to the finalisation of the PVT. 2.2 Contents of a PVA This section provides more detail on the proposed contents of a PVA, as proposals for this part of the PVT are now well developed. We would expect to be able to provide similar level of detail on the content of an MIA in due course. 2.2.1 Approach to a Public Value Assessment The PVA should demonstrate a service’s contribution to the BBC’s public purposes and its potential performance against the drivers of public value. These become a five stage process for the PVA. The first two stages would enable the Governors to determine whether or not the proposed new service (or significant change to an existing service) is aligned with the BBC’s purposes, and whether or not it would meet the required characteristics of quality: (i) Fit with one or more of the BBC public purposes. Would it significantly improve the BBC’s overall ability to contribute to its purposes? (ii) Its quality. Would it offer sufficient quality? Would it be distinctive in its market? These two criteria would be the bare minimum which an investment proposal should fulfil. If it cleared this hurdle, then three more assessments would be made, in order to assess whether the service created public value at an acceptable cost. (iii) Impact: would the service create value for people as “consumers” or “citizens”? For example, would users find it informative (consumer value), or would they appreciate its provision to others in society, by recognising that it contributes to one of the BBC’s public purposes? (An example of citizen value is that many people support current affairs programmes being scheduled in peaktime on the BBC’s main TV channels even if they do not wish to watch them themselves, as they recognise their importance to the purpose of Sustaining citizenship.) (iv) Reach: what reach is projected with the service? How would this impact on the BBC’s overall reach, or reach within a particular audience group? (v) Cost and value for money: how much would the service cost to deliver? Does it represent good value for money, compared to any similar or alternative services? These three criteria would form the second hurdle a service proposal must clear and they would complete the PVA. If the result of the PVA was positive – that is, if the proposal demonstrated that the service would deliver public value at an acceptable cost, then the service would normally be subject to a Market Impact Assessment. 2.2.2 Questions used to answer each step The PVA aims to answer a series of questions based around the BBC’s public purposes and drivers of public value – see examples in Figure I below. This helps to establish the degree to which it creates public value. Figure 5: Examples of questions asked in each stage of the PVA First hurdle: Is the proposed service aligned with the BBC’s purposes and does it meet the required characteristics of quality? 1. Fit with BBC purposes 1a. Purpose alignment • Which BBC purposes is the service aiming to address? • What is the service proposition? • At what audience is the service targeted? • Given the service definition and target audience, how will it address the BBC’s purposes? 1b. Strategic positioning • How will the service fit into the BBC’s strategic positioning? • Will the service be consistent with the BBC’s Public Purpose Remits? • Will the service complement the BBC’s delivery of its purposes through its other services? • How will the service compare to relevant known alternatives – either existing services or other ways of achieving the same objectives? 2. Quality • Will the service meet the required characteristics of quality – eg. innovative, original, high quality and excellent? • In what way, and to what degree will it be distinctive? • To what extent will the service be adequately distinctive from any existing or potential commercial services? Second hurdle: Does the service create public value at an acceptable cost? 3. Impact 3a. Individual impact • Will the service create individual/consumer value? • How much will people appreciate/enjoy the service? • Will the service be challenging to its users? • Would it engage its users? • How much value will the service create in consumer terms? 3b. Citizen impact • Will does the service create citizen value? • Will people recognise the service as delivering social/civic value in accordance with the BBC’s purposes? • How much value will the service create in citizen terms? 4. Reach • How far will the service extend the BBC’s reach and usage, particularly among “under-served” audiences? • Will the service be widely available, especially to its intended audience? • What will be the reach for the BBC’s audience groups generally and for specific audience groups targeted by the service? • What will be the usage for the BBC’s audience groups generally and for specific audience groups targeted by the service? 5. Value for money and cost • Will the service provide good Value for Money? • How will the service compare to selected existing BBC services? • How will the service compare to any available commercial services? • How will the service compare to relevant known alternatives eg. Alternative incremental investments in existing services? Alternative means of delivery (eg. using new / different platform) Please note that this gives examples of the generic questions which a PVA would seek to answer, but that in all actual PVAs, there will be questions which are specific to the proposal under review. 2.2.3 Types of evidence used for the Public Value Assessment The PVA assesses service proposals against the public purposes and the BBC’s four drivers of public value: Reach, Quality, Impact and Value for money. In order to measure a service against these drivers, the PVA uses a number of different types of evidence. For new service proposals, there will have to be rigorous consumer trials or pilots, on which audience research surveys can be based. Inevitably, in order to complete a PVA, a mixture of quite robust data (such as actual usage of an existing service) will have to be combined with data which requires a greater quality of judgement in assessment. There will also be areas, such as in measuring Consumer and Citizen Value, where it will be important not to try to quantify or monetise data (such as audience perceptions) where this might distort it or make it spurious. Figure 6: Types of evidence used for a PVA 1. Fit with BBC purposes Content analysis: genre, scheduling; production type (original, regional, independent). Mostly quantitative data 2. Quality Content analysis. Expert opinion – eg. independent and objective peer reviews and judgement. This is qualitative data 3. Impact Mix of audience research data – from regular or bespoke surveys and research. May include audience share measures. This is both quantitative and qualitative data And audience usage data (to be extrapolated from pilots for new services). Mostly quantitative data 4. Reach Audience usage data 5. Value for money and cost Cost analysis – eg. of total costs, cost per hour, cost per user/listener/viewer hour etc. Mix of financial and other data 2.3 Questions for this consultation We would welcome your views on the areas covered in this chapter, on some of which the Government’s White Paper may have more to say. In particular, you may wish to consider the following questions. 1. Are there circumstances, other than those described in this document, in which the PVT should be used? 2. Is the proposal for a “structured, evidence-based framework” the best option for the PVT? 3. Does the PVA consist of the right components? Could it be improved or made more effective? 4. Do the respective roles of the Governors and BBC Management in undertaking the Public Value Assessment and PVT seem appropriate? 5. Do you agree that the Board of Governors should use the PVT for approving either new services or significant changes to existing services prior to the beginning of the new Charter period? 3. Service Licences Building Public Value proposed, and the Green Paper has since determined, that every BBC service should have a Service Licence. Governors are working on the assumption that the new Trust would aim to issue these as early as possible in 2007. This chapter provides the Governors’ view of how these might work, informed largely by its own recent experience of governing the BBC’s wide range of services. The White Paper and the new Charter and Agreement will provide more detail about Service Licences. However, the Governors believe that it would be useful to gather feedback on their thinking, in order that they can present a comprehensive body of evidence for the Trust. 3.1 How Service Licences might work 3.1.1 What role should Service Licences play? Commercial public service broadcasters and independent radio companies have long had licences, granted by the sector regulator, for each of their services. However, Governors believe that the role of BBC Service Licences is likely to be broader than it is for commercial licences. As proposed in Building Public Value and then stated in the Green Paper, they must allow the governing body to assess performance of a service. They should also provide transparency, inside and outside the BBC, about the purpose and remit of each BBC service. Given the Green Paper’s suggestion that the BBC should focus more on delivering its public purposes, Governors believe that each Service Licence should also make clear each service’s contribution to the public purposes and thereby to public value. It is also very clear to the Governors that Service Licences should go a long way to providing commercial media groups with greater certainty about the purpose and scope of the BBC’s activities, by establishing clear parameters for each service. Governors have sought to achieve the correct balance between giving the BBC’s governing body sufficient means to hold BBC Management to account, whilst still allowing each service sufficient creative freedom. 3.1.2 What should Service Licences contain? Building Public Value proposed that Service Licences would set out the budget, remit and performance targets for each service. Governors have since considered some further requirements for the licences, in order that first drafts of the licences can be developed for public consultation next year. Governors currently suggest that a Service Licence should contain: • a description of the scope of the licence: including its geographic scope, how it is delivered and accessed by its users. Also a statement covering prohibited activities; • the service’s budget in the first year of the licence, together with a parameter of maximum change; • a remit which can remain constant for several years. This includes the service’s editorial priorities and objectives, its target audience (if the service has one) and its distinctive role within its market; • details of the service’s contribution to each of the BBC’s public purposes (or as many as are of relevance); • conditions which would typically set minimum levels of certain types of output on the service (eg. minimum hours of Current Affairs programmes in peaktime); and • a framework for measuring the performance of the service, including Key Performance Indicators for Reach, Quality, Impact and Value for Money and incorporating the Government’s listed characteristics of public service broadcasting. New services would need to be set appropriate targets. (See section 3.2 below for a suggested Service Licence template.) 3.1.3 How should the BBC’s services be covered by the Licences? Governors believe that, in the first instance, Service Licences are a priority for the BBC’s licence fee-funded and BBC-operated services. Other governance arrangements may be appropriate for services operated by the World Service and BBC Worldwide or as joint ventures. They suggest the following criteria might be used to define which services should have Service Licences. Criteria Service Licences will be issued to licence fee-funded and BBC-operated services if they: • commission and aggregate (eg. schedule) content, and • are recognised as discrete services by licence fee payers as a principal means of accessing BBC content. On this basis, distinct operational parts of the BBC such as BBC News and the English Regions and the Nations, which currently have Statements of Programming Policy (SoPPs), might not have Service Licences or SoPPs in the future. However, their individual services, such as News 24 or Radio Scotland, would. A service should be defined by its primary distribution platform. That is, a radio network may also be accessed via digital television or the internet, but would still be defined as a radio service. Governors currently support the idea of a single licence for bbc.co.uk as preferable to creating a number of separate licences. This would fit better with the BBC’s current management structure and so offer greater accountability. Governors recognise that it will be critical how the broadband services which the BBC is piloting, including catch up and archive services, are captured by Service Licences. That has yet to be determined but the new services currently being explored by BBC Management (including MyBBC Player, Local Television and the Creative Archive) would be subject to the PVT process described in this document. 3.1.4 How should services be reviewed? Building Public Value proposed that the Board of Governors would have a rolling cycle of independent reviews of each of the BBC’s services, with each service being reviewed at least every five years. Governors still support this suggestion and have since committed, in their response to the DCMS review of BBC Online by Philip Graf, that bbc.co.uk should be reviewed at least every three years. They believe that this frequency would be necessary for most of the BBC’s newer digital services. Building Public Value proposed that the periodic reviews would include audience research and consultation and that they would take account of public value and market impact. The Governors continue to support this proposal. The Governors currently draw on the Governance Unit for independent reviews, and commission external advice where necessary.6 The Green Paper determined that the Trust would have expert support staff, and Governors suggest that they should hold primary responsibility for undertaking periodic reviews but commission external advice as and when necessary. The Board of Governors has requested BBC Management to provide an annual assessment of each service’s performance at the end of each fiscal year. Governors scrutinise this performance assessment, with the support of the Governance Unit, and publish their own conclusions in the Annual Report. Statements of Programme Policy (SoPPs) are an annual requirement for many BBC services under the BBC Agreement. Governors have agreed that, for the next fiscal year (2006/07), BBC Management will publish its own Statements of Programme Policy, subject to the Board of Governors’ approval. Governors have proposed that the BBC’s Statements of Programme Policy will become more focused on the priorities for each service in the coming year, in the context of the previous year’s performance. The Trust may wish to carry forward these practices for annual reviews and Statements of Programme Policy. 6 You can see copies of the reviews the Governors have recently completed at www.bbcgovernors.co.uk/docs/reviews 3.1.5 What should be the consequences for poor performance against a licence? When Building Public Value was published, the BBC Chairman made it clear that Governors would in future hold BBC Management to account against Service Licences. The Governors believe that there should be a set of sanctions, understood by BBC Management, that the Trust would draw on as a consequence of poor performance against the terms of a Service Licence. Governors do not support the notion of a financial penalty for poor performance because of the risk that licence fee payers suffer as a result. The purpose of any set of sanctions is that BBC Management is encouraged to do its best to fulfil the stated remit for each service. To this end, the Governors believe that appropriate sanctions would include the Trust commenting publicly on performance in their Annual Report, making a public request for proposals to rectify the situation (as the Governors have already begun to do), requiring regular reports on any specific issues which might be published and, in the case of a serious or ongoing problem, requiring the Director General to identify where there are management issues and take steps to deal with them. It is always possible that a periodic service review may result in budget reallocation, but this would be for strategic reasons, rather than as a penalty for poor performance. 3.1.6 When should Licences be varied? The Governors support the role of Service Licences in creating a more transparent and stable framework for the BBC’s activities than has existed in the past. The Governors believe that it is neither appropriate nor necessary for Service Licences to have a fixed duration, but suggest that they could run for the duration of the next Charter and Agreement. The periodic service reviews by the Trust would provide an opportunity for BBC Management to request a licence variation. The Governors recognise, however, that it is inevitable that, as patterns of media consumption change, there will be circumstances in which BBC Management might need to request a change to a Service Licence between periodic reviews. Examples which would probably require approval for licence variation would be changes to the service’s editorial remit, the way in which it is delivered or the audience it aims to serve. The Trust might wish to insist that any requests for licence variation are made at a fixed point each year. At a lower level to the major changes described above, the Governors suggest that Service Licences should allow a level of flexibility for BBC Management to make some creative and strategic changes, consistent with the framework of the licence. 3.1.7 How should licences be varied? The Governors suggest that the process for Service Licence variation should be formal and transparent, in order that it provides good accountability. The Governors also believe that it is crucial that the Trust does not receive a constant stream of requests for variation, as this would undermine the aim to create a stable and transparent framework for oversight of the BBC’s services. The Governors suggest that requests for licence variation should be made in the form of a Public Value Assessment (as described in Chapter 2), which would ensure that their foremost consideration when judging a request is its contribution to public value. There should clearly also be consideration of market impact implications and, where necessary, a full Public Value Test might need to be run, before the Trust would be able to approve a licence variation. It would also fit with the aims of reformed BBC governance that any licence variation be made public. 3.1.8 How should compliance with the licences be monitored? The Governance Unit is currently responsible for monitoring performance of the BBC’s services, on behalf of the BBC’s Board of Governors. The Governors suggest that this duty should be carried forward, so that the Governance Unit monitors compliance with Service Licences and addresses any concerns to the Trust. The Trust could then initiate a service review and/or variation process if it considers that there is a need to do so. On the basis that Service Licences will be in the public domain, the media industry and public will be able to express any concerns they may have about noncompliance to the Trust and the Trust should have mechanisms to ensure that these are given due consideration. 3.2 Service Licence template BBC [XYZ] Service Licence Scope of this licence This will define the nature of the service (television/radio/online, etc), its scope (national, local, etc) and its availability (24/7 or otherwise and platforms). It will state whether it covers National or Regional opt-outs and whether it also includes any interactive and online services in addition to the broadcast output. Remit The service remit will be around 60 words. It will describe the service’s editorial priorities and objectives (mentioning any key genres), its target audience (if it has one, this must be properly defined) and the distinctive role it plays in its market. The remit will be similar in format to those used in BBC Statements of Programme Policy, but will be expected to remain constant pending a review every five years, unless the service applies to the Trust for licence variation. How the service delivers its remit This section will be a few paragraphs which describe in greater detail how the channel delivers its remit. Budget The Service Licence will state the budget of the service in the first year of the licence. It will state that the service may increase or decrease its budget by a given margin (eg. +/- a specified percentage, in real terms), without recourse to the Trust. (Any proposal to change the budget in excess of this will require a request to the Trust for the formal process of licence variation.) Contribution to public value This section will describe the service’s expected contribution to public value, via its role in delivering the BBC’s public purposes. Under each description of the service’s contribution to each purpose, there may be one or more Conditions of service, which are aimed to ensure that the service is focused on delivering its remit and contributing to the BBC’s purposes. These set annual levels for the service (eg. hours of output of a particular genre), which have been agreed between the Trust and BBC Management. Overview This will be a generic statement that the service will, by fulfilling its own remit, and by working with other BBC services to enable them to deliver theirs, contribute to the BBC’s achievement of its general remit, as described in the BBC’s Agreement. Contribution to the BBC’s public purposes Promoting education & learning Stimulating creativity and cultural excellence Sustaining citizenship Bringing the world to the UK and the UK to the world Reflecting the UK’s Nations, regions and communities Building digital Britain Delivery of each purpose to BBC XYZ’s audience Very high High Significant Moderate None Contribution to each individual public purpose This section would include – separately, for each public purpose - a few paragraphs describing the contribution of the service to this public purpose – including the type of output which is relevant to the delivery of that purpose and a description of the outcome the service expects to achieve amongst its audience – i.e. raising awareness, encouraging people to take action, etc. For purposes where the service makes a major contribution, there will be a greater level of detail and more Conditions and Key Performance Indicators to underpin it. Conditions These will include output-related commitments which underpin the delivery of this purpose, such as… §the provision of a certain number of hours of a particular genre each year §a commitment to maintain (or increase, in real terms) levels of investment in particular genre or types of output §defining the musical output of a radio network (eg. % of which is new, UK-origin, or of a particular genre, etc) §a commitment to serve adequately a particular audience demographic. KPI For all purposes to which the service claims to make a significant contribution, there will be an outcome-related KPI, such as audience recognition of its contribution, for example… §Around x% of the service’s audience should recognise the educational benefits of this service, relative to other BBC and commercial services This framework will be used for each of the BBC public purposes to which the service contributes. Annex to Service Licence Performance measurement framework The framework against which the Trust would monitor the service’s performance could be set out in an Annex to each licence. The metrics would be structured around the four generic drivers of public value for the BBC’s public services: Reach, Quality (which includes the Green Paper’s characteristics of original and innovative), Impact (which includes the Green Paper’s characteristics of challenging and engaging) and Value for money. They would be used as the basis for assessment, but any final judgements by the Trust would be likely to take a range of qualitative factors into account, including those over which the service does not have any control, such as market context. These metrics and the Key Performance Indicators (KPIs) based on them would need to be reviewed periodically, in light of changing audience expectations and behaviour and changes to other drivers of performance. Quality [Example text: the service should be perceived to be of high quality by most of its users. Its strength in [type of output] should form the basis of its distinctiveness (from other BBC channels and other broadcasters).] The following KPIs will be used to assess BBC XYZ’s performance in terms of Quality §At least x% of BBC XYZ’s audience should rate it favourably – at least 7/10 §x% of BBC XYZ’s audience rating it strongly as a provider of the following genres: x, y, z §x% of BBC XYZ’s audience perceiving it to be innovative §x% of BBC XYZ’s audience should perceiving it to be original (Metrics likely to be drawn from internal BBC tracking survey data) Reach [Example text: the service’s remit and funding mean that the channel should aim to reach the majority of licence fee payers every week/that it should reach a certain proportion of a particular audience group. The service is expected to work together with the BBC’s other channels to support the overall reach of BBC Television. The service may be expected to maintain reach amongst its audience to certain genres or types of output.] The following KPIs will be used to assess BBC XYZ’s performance in terms of Reach §The service is expected to maintain its weekly reach at around x% of the audience. This will be assessed in the context of the overall fragmentation of viewing/listening and consequent downward pressure on all channels’ reach §Reach to key genres by the service Impact [Example text -BBC XYZ should achieve impact amongst its audience in a stated way. ] The following KPIs will be used to assess BBC XYZ’s performance in terms of Impact §Proportion of programming with an Appreciation Index (AI) over x [level TBC] §Proportion of programming which is Memorable §[Other metrics to be drawn from new BBC survey; TBC but to include audience recognition of its programming values: engaging, intelligent, challenging] §Examples of evidence of post-broadcast impact Value for money [Example text: like all BBC services, BBC XYZ should aim to offer licence fee payers the best value for money, while investing strategically in the highest quality content. As part of this commitment, BBC XYZ should ensure that its major programme investments are showcased, in order to maximise reach and impact.] The following KPIs will be used to assess BBC XYZ’s performance in terms of Value for money §Cost per viewer hour: overall and benchmarked against other television channels and other BBC services. 3.3 Questions for this consultation We would welcome your views on the areas covered in this chapter, on some of which the Government’s White Paper may have more to say. In particular, you may wish to consider the following questions. 6. Do the suggested structure and contents of the Service Licence seem appropriate? 7. Do you believe that Service Licences, as described here, will provide sufficient clarity about the nature of each of the BBC’s services and their contribution to the BBC’s public purposes? 8. Do you believe that Service Licences, as described here, will ensure that the BBC offers to commercial broadcasters sufficient clarity over the activities and intentions of each of its services? 9. While the Charter and Agreement may provide some qualifying criteria for which services receive a Service Licence, what factors do you think ought to be taken into account by the Trust? 10.Do the suggestions for the Trust’s performance reviews seem adequate? 11.Do you agree with the Governors’ view on the principles which should underpin the Trust’s sanctions? 12.Do you believe the principles outlined by the Governors regarding duration of licences, and grounds for varying a licence, are broadly suitable? 13.Are there any particular considerations the Trust should take into account when assessing a request for licence variation? 4. The Performance Measurement framework The BBC’s new performance measurement framework was first announced by the BBC in Building Public Value. It aims to provide a standard, evidence-based approach to measuring the performance of each of the BBC’s services. This chapter provides some more detail on the framework. 4.1 Background The new performance measurement framework is based on four types of evidence which can be used to measure the public value of BBC services. These are: o Reach o Quality o Impact o Value for money. This framework has since been independently reviewed by the National Audit Office. The Government’s Green Paper has since stated that BBC output should display at least one of five characteristics. These are that programmes should be: o High quality o Challenging o Original o Innovative o Engaging. The BBC has now incorporated these characteristics into the metrics it will use in its performance management framework, as shown below. Figure 7: Example metrics used for RQIV performance measures Driver Components Reach (includes widely Reach (eg. 15 minute reach to a TV channel) and available) audience usage Quality (includes high quality, original and innovative) Audience perceptions and peer review. Perceptions of impartiality Impact (includes challenging and engaging) Audience size, memorability, approval. Tangible post-broadcast impact Value for money Actual cost. Cost per hour/per viewer/listener hour/per use, etc. Audience perceptions of value for money 4.3 Types of evidence used for measuring public value The RQIV performance measurement framework is dependent on the availability of robust data. The main sources used currently used are: • Audience usage: both industry-standard surveys, such as BARB and RAJAR, Nielson Netratings and BBC-commissioned surveys, such as BMRB surveys of online usage • Audience perceptions: BBC-commissioned tracking surveys, including a new daily survey of around 5,000 people, measuring different aspects of service and programme quality and impact; regular surveys of impartiality; also bespoke ad- hoc surveys and research, linked to particular services or programmes • Content analysis: types of content, range and scheduling. Based on internal BBC audit of actual output and/or research commissioned from independent sources, such as radio output analysis • Financial analysis: based on internal BBC financial data, and on publicly available benchmark data from other broadcasters and media companies • Expert opinion: including peer review and industry awards won. 4.4 The BBC’s public purposes The BBC Governance Unit is now developing a remit for each of the BBC’s six public purposes (to be known as the Public Purpose Remits). These describe the objectives of the BBC in delivering this remit and the scope of its activities, and its priorities over the next Charter period. Each of the purposes is described below, using the Government’s Green Paper as a source for the definition. Greater detail on the BBC’s intentions in contributing to each of these purposes can be found in Building Public Value, the Government’s Green Paper and the BBC’s response to the Green Paper7. Sustaining citizenship Informing ourselves and others and increasing our understanding of the world through news, information and analysis of current events and ideas. Promoting education and learning Stimulating our interest in, and knowledge of, a full range of subjects and issues through content that is accessible and can encourage either formal or informal learning. Providing specialist educational programmes and accompanying material to facilitate learning at all levels and for all ages. 7 The BBC Response to A Strong BBC, independent of government is available from www.bbc.co.uk/thefuture Stimulating creativity and cultural excellence Enriching the cultural life of the UK through creative excellence in distinctive and original programming. Fostering creativity and nurturing talent. Promoting interest, engagement and participation in cultural activity among new audiences. Reflecting the UK’s Nations, regions and communities Reflecting and strengthening our cultural identity through original programming at local, regional and National level, on occasion bringing audiences together for shared experiences. Making us aware of different cultures and alternative viewpoints, through content that reflects the lives of other people and other communities within the UK. Bringing the world to the UK and the UK to the world Making UK audiences aware of international issues and of the different cultures and viewpoints of people living outside the UK. Bringing high-quality international news coverage to a global audience through radio, TV and online media. Building digital Britain Helping to bring the benefits of digital services to all households and providing high- quality content to drive take-up of those services. In particular, taking a leading role in the process of digital switchover in television. 5. How to respond to this consultation Useful information The BBC Governors are inviting response to this consultation between Tuesday 25 October and Friday 16 December 2005. If you wish to respond to this consultation, you can send your response to: Governing Services Consultation BBC Governance Unit Room 211, 35 Marylebone High Street London W1U 4AA Or by email to governing.services@bbc.co.uk Please complete the Confidentiality statement, shown overleaf, when you make your response. The final date for receiving responses is Friday 16 December 2005 Audio and Braille translations of this document are available upon request by calling BBC Information on 0800 056 6424 How we will use your response Responses to this consultation will be published on the BBC Governors website www.bbcgovernors.co.uk soon after the consultation has closed. Please copy or sign the Declaration overleaf to signal that you are prepared for some or all of your response to be made public. If you would prefer that all or part of your response is treated as confidential, please make this clear in your submission. The Governors will consider carefully proposed changes to the Public Value Test, and take these into account before it begins to use the test in 2006. They will also ensure that any feedback on Service Licences is taken into account as the first drafts of each licence are developed for consultation in 2006. PLEASE PRINT OFF AND SIGN THIS DECLARATION IF YOU ARE SENDING A HARD COPY OF YOUR RESPONSE. IF YOU ARE SENDING AN ELECTRONIC RESPONSE, PLEASE COPY THIS STATEMENT INTO THE RESPONSE AND COMPLETE IT. If you would prefer that all or part of your response is treated as confidential, please complete the confidentiality section below. What do you want the BBC Governors to keep confidential? Nothing Whole response Part of the response Which part? • • • [please indicate] Name Position/job title Organisation Address Other contact details (telephone, email) Please note that we may still refer to the contents of responses in general terms, without disclosing specific information that is confidential. We will exercise due regard to the confidentiality of information supplied. DECLARATION I confirm that the information I have submitted is a formal consultation response. It can be published in full on the BBC Governors’ website, unless otherwise specified, and I authorise the BBC Governors to make use of the information in this response to meet its legal requirements. If I have sent my response by email, the BBC can disregard any standard e-mail text about not disclosing email contents and attachments. Name Signed (if hard copy) ………………………………………………………………………………..