Select Committee on Public Accounts Minutes of Evidence


APPENDIX 4

Supplementary memorandum submitted by the Millennium Commission (PAC/2000-01/13)

  The Committee's questions to me focussed, understandably, on visitor number projections.

In my evidence I attempted to draw a distinction between the fact that 12 million visitors will not visit the Experience and the assertion that it was unreasonable for the Commission to judge in July 1997 that 12 million visits was achievable. The Commission's support for NMEC's business plan was based on expert advice and I would argue that supporting the ambitious visitor number targets in NMEC's business plan on this basis was not imprudent. That is why my predecessor as Accounting Officer did not seek a direction when his advice that the Commission should ask NMEC to plan on the worst case, as identified by Deloitte and Touche, was not accepted. If one accepts that 12 million was achievable in principle, then questions arise, many of which were asked by the PAC, of why it was not achieved in practice.

  However the decision to plan on the basis of 12 million was critical and in an effort to help the Commitee I will set out the history of this estimate in some detail. The history is complex. There were three estimates based on research.
DateProduced for Produced byEstimate
February-May 1996Imagination ERA10.9-16 million
November 1996MCLERA/MORI 10.9-16 million
July 1997Commission Deloitte & Touche8-12 million

  Against these estimates a number of decisions setting visitor number targets for the project were taken by the Commission, NMEC and MCL (NMEC's predecessor).
DateMade by Target
May 1996Commission10 million
December 1996MCL13.5 million
January 1997MCL10 million
May 1997NMEC12 million

  In May 1996 an Economic Research Associates (ERA) study was carried out for Imagination (a design company contracted to the Millennium Commission). The ERA research was intended to identify the likely range of visitor numbers for certain scenarios. The content of the Experience was unknown at that time and a number of caveats were attached to the findings. In summary the report found that at a ticket price of £20, demand would range between 10.9 and 16 million visits, whereas at £30 a ticket, the range would be between 9 and 13 million visits.

  In May 1996, the Commission adopted a plan for the experience involving temporary buildings with no arena or national programme and a visitor number assumption of around 10 million. This target is not given in the NAO report because the target is not explicitly adopted in Commission minutes and the NAO would not therefore accept that we had planned on this basis. Our view is that the adoption of the 10 million visitor target was implicit in the Commission's decision to plan a more limited exhibition. At that time the Commission time was still hoping that a private sector operator could be found.

  The ERA research was current throughout 1996 and was revisited in November 1996 when Millennium Central Limited's (MCL) business plan was prepared. ERA commissioned MORI to carry out dome research in greater detail regarding demand sensitivities. MCL's business plan was based on 13.5 million visitors, The Commission rejected this business plan, primarily because it required a high level of cashflow funding.

  In January the Commission considered a plan with an assumption of 10 million visits, Whilst recognising that it required considerable further work, a grant of up to £200 million was offered to the company, This offer enabled the Commission to make interim payments to MCL whilst they staffed up and developed a full Business Plan and budget, which was produced in May 1997, It was the plan produced by NMEC which assumed 12 million visitors.

  In May 1997 the Millennium Commission engaged Deloitte and Touche to assess the viability of the 12 million visitor assumption on which the May 1997 NMEC business plan was based. As requested by Mr Davies (q 328) I enclose 22 copies of the 27 May report by Deloitte's.

  Deloitte's carried out work on the ticketing and demand management aspects of the December 1996 business plan. This exercise required them to determine whether and how a median target of 13-5 million visits could be accommodated at the Dome. This work informed much of thinking in producing the May 1997 report and I enclose a single copy of it for your information.

  Mr Campbell asked (q 147) whether the MORI research investigated preferred methods of transport, 1 can confirm that it did. Asked for their initial views on transport to the site, half of the respondents replied that they would prefer to travel by car—although the research also reported that there were concerns over possible congestion and crowding.

  Mr Murphy asked (q 297) why the visitor number projections had varied so much over time and made reference to a chronology produced in a memorandum of evidence for the Commons Culture, Media and Sport Select Committee in July 2000. I hope that this letter explains the variations. Mr Murphy drew attention to February-May 1996 and the range of 10.9 to 16 million visitors identified by an Economic Research Associates (ERA). I stated that I believed that this figure might have been produced in November 1996, when indeed the figure was re-validated. My staff have checked the information in the chronology and, as is shown above, Mr Murphy was correct as to the date this figure was produced. 1 must apologise for inadvertently misleading the Committee—I am afraid I was momentarily confused by the reference to a submission made to another Committee of the House. My briefing was based on the more simplified, but wholly accurate, summary of visitor numbers contained in the NAO Report.

  I am copying this letter and enclosures to Sir John Bourn.

Mike O'Connor

Director


 
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