Dome was badly run, risky and doomed from start

Severin Carrell
Friday 10 November 2000 01:00

After all the anger and recriminations, the story of the most disastrous public project in a generation has now been told in the dry, factual language of a slightly bitchy accountant.

After all the anger and recriminations, the story of the most disastrous public project in a generation has now been told in the dry, factual language of a slightly bitchy accountant.

In its detailed investigation of the Dome's financial debacles, the National Audit Office limits itself to comments about "a likely shortfall in income", "weaknesses in financial management", "broad brush estimates" and, at its strongest, talks of "significant risks".

Despite the understated language, the NAO's exhaustive report into how the New Millennium Experience Company came to need an extra £178m in lottery money and slashed its visitor target by more than 50 per cent reveals a project doomed from the start by over-ambition and inexperience.

The report reveals that the financial crisis, which has seen its total cost to the lottery leap from £399m to £638m, first began to surface last year.

By November last year, the NMEC board privately knew it would have to ask for additional lottery money by April. It had only £7m left of its revised Millennium Commission lottery grant of £449m and used all but £5.7m of its £88m contingency budget. Building costs had over-ran, money was plundered for the publicity budget and sponsors were slow to pay up.

The unfolding crisis, hidden from the public until the NMEC asked for its first emergency loan of £60m in February, is rooted in several key issues:

Lack of vision

In the NAO's judgement, theDome's failures can be traced to just one figure: its target of 12m annual paying visitors. It was immensely ambitious and involved "significant risk".

After the then Tory government had spoken of 15m to 30m visitors, the final 12m target was agreed in May 1997, just after Labour had won the election but before the new Government had formally given the project the all-clear.

As the NAO points out, this figure was reached without any final decisions on the Dome's contents, on ticket prices, on marketing strategies or on public car-parking. In short, the NMEC were putting the cart before the horse.

Even Millennium Commission officials were privately worried about this figure. After originally suggesting in January 1997 a 10m target, they said in June 1997 it should be 8m "for the sake of prudence". This, after all, was the "worst case" figure suggested by its consultants, Deloitte & Touche.

The commissioners, headed by Chris Smith, the Secretary of State for Culture Media and Sport, decided instead to support the NMEC's headline-grabbing target figure. In June, despite the strong reservations of most ministers, the Cabinet voted narrowly to give the Dome the go-ahead.

This meant quadrupling the total visitors achieved by Alton Towers, Britain's most popular paying attraction. "And with only one year of operation, that large number of visitors would have to be attained from a standing start," the NAO said.

But the NMEC had not commissioned detailed opinion polls, and assumed that "short-lived, once-in-a-lifetime attractions stimulate exceptional interest". This was "a broad brush estimate, and was not based on a clear vision of the Dome's content".

Disastrous ticket sales

The warning signs came early, and steadily grew. Up till the Dome's chaotic gala opening night on 31 December, the company had received just £3.9m of the £18.9m in advance ticket sales it had expected - a 79 per cent drop. Tickets went on sale to the travel industry in April 1999 and the public in September, to be met with apathy.

Deepening the crisis, the Government insisted the Dome admit one million schoolchildren for free. NMEC executives warned this could cost them £7m in lost revenue, plus a further loss of up to another one million visitors, particularly parents of school free visitors.

Nevertheless, the NMEC was still forecasting a total ticket income of £59.7m for the first three months - more than double their previous estimate. In November 1999, the NMEC still believed it would sell 43 per cent of its tickets for the entire year - more than 5m - before the end of March.

The actual figures reflect the public disinterest. By the end of March, only 1.5m had visited, compared with the expected figure of 2.2m. The target for paying visitors was slashed to 10m in January, and in May to 6m.

The financial impact on the Dome was devastating. In May 1997, the original projection for ticket sales was £136m. The revised budget released in September this year disclosed expected ticket income to be closer to £47m.

The struggle for sponsorship

The Dome's record-breaking level of private-sector sponsorship was, it appeared, one of its few success stories. As Dome executives and Lord Falconer, the "minister for the Dome", consistently claimed, the NMEC had attracted £160m from world-leading firms, such as Ford, Boots, BT, Tesco, Manpower, Marks & Spencer and McDonald's. This, they said, broke their £150m target.

The NAO, however, paints a very different picture. In reality, the NMEC had originally set a £175m target in 1997 for direct and "value in kind" sponsorship. That was quietly revised downwards to £150m, but even that figure may never actually have been met.

NAO officials said they were unable to calculate exactly how much sponsorship the Dome had been given, despite claims by NMEC officials that Ford and BT had spent roughly £40m "in kind" by building their Journey and Talk zones themselves.

The NAO insisted, however, that in cash terms, the sponsorship was limited to £115m, knocking another £45m away from the Dome's income. This left a £45m hole in the NMEC's accounts - plugged by lottery players' money.

Not only was the sponsorship income lower than expected, it was slower. Monthly income from sponsors was consistently below forecasts. "The company had struggled to achieve its timetable for converting sponsorship commitments into contracts," the NAO said. By 31 December 1999, only £74.1m of the planned £125.5m had been received - a shortfall of 41 per cent.

Weak management

All these "acute financial difficulties" put "sound financial management at a premium".

Everybody involved in the Dome, from the Millennium Commissioners, through to Lord Falconer, and civil servants at the Department of Culture, Media and Sport are in part blamed for failing to control the spiralling costs quickly enough and draft a Plan B in case the project collapsed.

The lines of responsibility between them were too complex and confused. However, the main responsibility rests with the NMEC. "The company lacked senior staff with experience of running a large visitor attraction," said the NAO.

In short, someone like Pierre Yves Gerbeau, the former Disney executive appointed as Dome chief executive in February, should have been running the show from 1999.

As external auditors began to discover over the summer, poor accounting systems at the Dome "hindered" its ability to produce reliable financial forecasts. It was unable to track and quantify its contractual liabilities, such as £5m worth of unforeseen debts which came to light early in 2000. The NMEC was also unable to quantify its full debts at the end of this year.

The NAO supports the commission's claims it had sought to raise these problems with the NMEC in February. Correspondence released yesterday shows that Bob Ayling, the then NMEC chairman, had refused to accept these criticisms.

According to David James, the "company doctor" appointed as the NMEC's executive chairman in September, the Dome was, with hindsight, trading insolvently since February.

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