Select Committee on Public Accounts Minutes of Evidence

Copy of a letter and Appendix to the Director of the Millennium Exhibition Unit of the Millennium Commission from Deloitte Touche Consulting Group

  We are pleased to set out details of our appraisal of the Millennium Exhibition Business Plan in line with your terms of reference detailed in your letter of 8 May 1997.


  In order to undertake this appraisal we have reviewed the business plan and held discussions with certain key individuals from Millennium Central (MCL). Our work has been particularly constrained as we have not had sight of the creative content proposed for the exhibition. As there is so little information available on content and as this is the main business driver, our review is consequently limited. We have also made comments on the quality of business plans and the general state of readiness based on the limited information provided. Whilst our work has been undertaken conscientiously and to our best endeavours, the review has, at your request, not involved substantive new work or detailed scrutiny of all of MCL's background material and as such we can in no way underwrite, guarantee or otherwise endorse our findings.


  You have asked us to review four specific areas of the business plan as follows:

    1.  the estimated operating costs, covering all the projected revenue consequences of running the exhibition the site and the structures;

    2.  forecast ticket income; having regard to exhibition content demand factors, marketing, pricing policies, ticketing technology, and site related throughput constraints;

    3.  forecast income from private sector sponsorship—in cash and in kind;

    4.  forecast income from other sources, (catering, retail, hospitality, media and merchandising.

  In relation to the above four points you have stated that the appraisal will be required to satisfy the commissioners that MCL's proposals are likely to be deliverable to timetable and within the maximum level of grant already agreed. We have summarised our findings in the form of a matrix at Appendix 1 with an executive summary set out below.


Content & Revenues

  This scheme is totally driven by the content of the exhibition and is dependent on creating a significant "WOW' factor. As we have not been able to see details of the content and have received only a vague indication of the basic concept—an audience based show set in a 10,000 seat auditorium within the dome and with timed ticket admission—we have had to make one overriding assumption, that the content of the exhibition will be of such a high standard that it satisfies the build-up of press and public expectation. However, given that the content is so critical to all of the revenue streams, including sponsorship we have identified the potential risk to revenue should the high quality of show content not be achieved (appendices 1 & 2).

Visitor Numbers

  On the basis of the limited information made available we believe that the estimate of 12 million visitors is at upper end expectations. The dwell time of 5 hours is at the lower end of our expectations for a traditional exhibition or expo but may be appropriate for an audience based show format. However there is a risk that with an audience based format with undeveloped content, the estimate of an average ticket price of £17.50 maybe too high.

Demand Management

  In the absence of sight of detailed demand management plans our provisional view is that it may prove difficult to achieve the target of 12 million visitors given the restriction of two admission sessions a day for 140 days plus one session a day for the remaining days. We would therefore regard the target as the very upper limit at this stage.


  In terms of costs, MCL have provided us with a detailed breakdown of staff costs which represents over 57 per cent of the total operating costs. Included within this cost is a significant sum (approximately £8.9 million) for contingencies. Whilst we lack details on Drum Show labour costs, the sum allocated together with the contingencies appear to be adequate.

Exhibition Readiness

  We express concerns regarding the readiness of the exhibition. Whilst we understand that a great deal of effort has been focused on the physical structures, we believe this may have been to the detriment of some of the "soft" issues such as pricing policy, demand management, marketing, sponsorship strategy and ticketing technology. We would have expected that some of these activities would have been initiated and some completed. Again, we have identified the potential risk to revenue should these activities fail to be implemented adequately or on time.

  We believe that it may be almost too late for the project to be delivered on time but with a significantly strengthened management resource and a very clear focus on the most pressing activities, the added momentum may enable the project to be brought back on timescale.

Additional Contingent Sum

  Overall we have calculated that in the worst case scenario, the additional net risk could be in excess of £122 million (appendix 2) but we have seen very little evidence of risk sharing or risk shedding strategies which would spread this liability amongst private sector partners.

Scheme Changes

  We have noticed that the latest submission of the business plan has now moved a long way from the scheme originally proposed in December 1995 including:

    —  fundamental change from exhibition based event to an audience based event;

    —  changes to the national programme which from the limited papers we have seen, no longer give a clear link to the Exhibition;

    —  no transport inclusive ticket available;

    —  undeveloped proposals for the use of the site as a landmark venue during millennium year.

  At the same time as all of these changes have been made to the scheme, there have only been limited revisions to the scheme costing. We are therefore concerned that if the scheme were being proposed in this format for the first time, the basis on which the scheme is costed and evaluated is likely to be significantly different. For example, as the project is now an audience based scheme supported by a limited exhibition, this has physical implications for the site structures. As such the Commission will need to consider whether the Dome structure delivers value for money for this project.

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