Consolidating departments’ back-offices is not delivering value for money
The National Audit Office (NAO) has given a damning assessment of the government’s shared service centre programme, saying its savings have been less than expected and has not achieved value for money to date.
The NAO also criticised the Cabinet Office’s management of the programme and pointed out that the savings to date have come at a considerable cost to those participating in the programme, obliging them to transfer back-office staff to privately owned companies and move to a standardised operating platform that was out-of-date by the time it came online.
Savings outweighed by costs
The programme has saved £90 million to date, with investment costs of £94 million, the NAO said.
The comments are likely to be seen as more broadly critical of the value for money of shared services programmes, which the government has emphasised as a way of cutting back-office costs and reallocating resources to front-line services.
“The Cabinet Office’s failure to manage risks has resulted in the programme failing to achieve the significant savings and other benefits set out in the 2012 strategy,” the NAO said in its report.
“Therefore, the programme has not achieved value for money to date… The future shared service programme will only achieve value for money if the Cabinet Office shows clear leadership, sets realistic expectations and manages risks, and government accepts that change requires collaborative and flexible behaviours from all departments involved,” the NAO said.
The Cabinet Office said it welcomed the report and would consider the NAO’s recommendations.
“We are pleased that the report notes the success that the government has had in establishing shared service centres to deliver business services to multiple organisations at a significantly lower cost to the taxpayer,” the office stated. “We accept that we need to go further, and we will.”
Private sector shift
Under the programme, the government has established two shared services centres, signing contracts with private firms Arvato and Sopra Steria to operate them.
Staff working in the Department of Transport’s existing shared services centre were transferred to Arvato and back-office staff from other participating departments joined Shared Services Connected Limited (SSCL), a new joint venture company 75 percent owned by Sopra Steria and 25 percent owned by the Cabinet Office. The centres began providing services in 2013.
The investment costs for the centres included £69 million for business change activity and £25 million for the development of a common operating platform to replace individual departmental systems.
Due to delays in designing, building and testing the platform, only two of the 26 planned customers have joined the system, the NAO said. The delays meant higher costs for participating departments that were obliged to maintain and extend the life of existing systems.
Such issues contributed to the £90 million in savings falling short of the £128 million per year originally forecast, the NAO said.
In addition, the delayed system is now outdated, meaning the Cabinet Office must reconsider its programme plan going forward, the NAO said.
“The delays have meant that technology has moved on significantly, and new options should now be considered and evaluated as part of revising the programme plan,” the NAO stated.
The Cabinet Office said it believes the programme is on track to generate savings of £484 million overall by 2023-24 at a cost of £159 million, and Sopra Steria said it was confident that investment costs would fall.
“We are confident that we are making good progress and that these savings will accelerate as we move clients onto a single technology platform and continue to grow our business,” the company stated.
The NAO’s recommendation included that the Cabinet Office provide clearer leadership for the programme and show more responsiveness to problems as they arise. The report also found that the Cabinet Office needed to be more realistic about how much government departments’ back-office activities could be consolidated, given the devolved nature of departmental accountability and funding.