Q31 Mr Williams: Nearly double, and yet they were willing to contemplate it. So much do they care for looking after their licence payers' money-
Mr Smith: I am sorry to interrupt, but I need to argue about this because it is just not right. Forgive me, Chairman, but I do feel the need to make sure the Committee is clear about this. This is a point in the Report which is comparing the bid from Land Securities Trillium with the bid from the other organisation. We have already explored at the start of the meeting why the Land Securities bid overall was better. It is also describing a situation where there was an absolute cap on the return that Land Securities could earn versus the bid from the other company, where there was less clarity about what the absolute return was. Irrespective of that provision, separately, as the Report says elsewhere, a very specific price was agreed with Land Securities for the building of the building. In the re-financing of that building recently, £321 million, their return was agreed at £23 million. So that tells you what the actual return was. It is just not right to say that because there was an absolute ceiling on it of 30% that was the return that they were getting. They were not.
Q32 Mr Williams: It is unbelievable that you even contemplated it. Why did the figure arise? If it arose, it was something you were obviously willing to consider. Let us move on, because we are time limited; let us move on to the next point. One of the consequences of not having done the design section properly, particularly in relation to the company which was going to carry out the construction, is that you build an energy centre which takes up a substantial amount of space. You then decide you cannot afford to go ahead with the project of using that energy centre, so that space now remains unused and to some extent is unusable in any practical sense, is it not?
Mr Peat: May I just give a first response on that? The first point to note is that at the time of the initial construction there were proposals for the use of these buildings by BBC Broadcast, which would have involved much greater use of energy, in which context the energy centre would have been well utilised. That changed over the construction period. Subsequently, when occupation began it was not entirely clear where we were going next on the White City area and therefore the capability to produce a combined heat and power plant or whatever has been retained for the next few months to determine whether it is needed in the new context which now arises.
Q33 Mr Williams: But as a result of this failure to design the project properly in relation to your need, you now have extensive basement areas and large places for plant and machinery, which cannot be used at the moment, or are not being used at the moment, and that also means that a lower proportion of the building can be used for office space than would be the case in a typical office development. That is a fact, is it not?
Mr Thompson: No. That figure I quoted, the figure of 6.5% of vacant space across the site, includes the energy centre.
Q34 Mr Williams: So what is the space being used for?
Mr Smith: Car parking. It is a car park.
Q35 Mr Williams: I see. That is a very high rate of return on your investment, is it not?
Mr Smith: It is very important to have it in an area where there are not any car parks.
Q36 Mr Williams: But it was not intended to be a car park.
Mr Smith: Yes, of course it was intended to be a car park.
Q37 Mr Williams: If you needed a car park, why did you not have one designed in in the first place?
Mr Smith: We did.
Mr Peat: There are two elements. One is the basement, which was designed for car parking. The other is the other space, which was the energy centre, part of which, we accept, is unutilised. It may be used for additional office accommodation when we know the future better but at the moment we are waiting to see what is needed, given what happens next on the overall site. As I said earlier, at the time of the initial design, the energy centre would have been needed in the context of BBC Broadcast and that requirement changed during the construction process.
Q38 Mr Williams: May I say, Chairman, in conclusion, that I hope when we draw up our Report that we will include in it a recommendation to the Chancellor or whoever is the appropriate person, that this is a clear case which vindicates our claim that the National Audit Office should have full access, because the BBC does not seem to be capable of controlling its finances adequately itself.
Mr Peat: May I just make one further comment? As the Report states, the project was completed on budget and on time; indeed one of the three buildings was completed ahead of time and none of them was late. It is flexible in delivery of value for money, slightly above average cost because of the requirement for additional flexibility, it has won awards, it is environmentally friendly and it is much enjoyed by the staff; they very much appreciate it. I do not think it is all negative.
Q39 Mr Williams: Despite the fact that attention had been drawn previously to the need to provide for shares in re-financing, you did not make an initial arrangement to have re-financing. You then made a purchase in order to get access to some of the re-financing benefits, but you would almost certainly have had to pay a premium price, because they were expecting the high rates of interest.
Mr Peat: I do not think that is right, with respect. At the initial time, it was not possible to go down the route we have now gone down.
Q40 Mr Williams: Why was it not possible? You just have negotiations, as every other Department has done?
Mr Peat: We did not have the credit rating which was essential in order to go down that route. Indeed the bond market conditions would not have made sense.