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Shared service centres cost more than they saved

20/05/16

NAO report on central government back office initiative says it has not provided value for money

Two back office shared service centres set up by the Cabinet Office have provided savings, but not as much as has been spent in doing so, according to a report by the National Audit Office (NAO).

NAO_HQ_Victoria_LondonThe government makes some harsh criticisms of the department’s performance, following warnings two years ago that the Next Generation Shared Services strategy was not on course.

It says the centres established in 2014 have delivered £90 million in savings to their customers, but costs in the first two and a half years of their operation totalled £94 million.

The performance is well short of the forecast of £128 million a year in savings, although the Cabinet Office is now estimated that by 2023-24 the savings will total £484 million against costs of £159 million.

The centres, initially known as ISSC1 and ISSC2, have been run under contracts with arvato UK and Steria, the former taking on staff from the Department for Transport’s shared service centre and the latter from other departments.

They were set up to provide back office services for up to 14 departments and their arm’s length bodies, but a number of shortcomings have undermined the effort to provide value for money.

One has been the delay in moving to a single operating platform, with only two of 26 planned customers doing so, and others continuing to use ageing legacy systems. This has increased the costs to customers and the suppliers running the centres.

The creation of standardised processes was not well managed, with the Cabinet Office introducing the requirement for a single operating platform into the ISSC2 contract too late, and contractors for both centres did not have the in-house capability to design one.

In addition, there was no integrated business case for the programme, the Cabinet Office did not obtain sufficient support from other departments early on, it failed to respond well to risks that arose, and it has not clarified its role in managing the programme.

Improvements

While the NAO acknowledges the Cabinet Office is now dealing with some of the problems, introducing new governance and leadership arrangements over the past two years, it says this will take time to have an effect.

Amyas Morse, head of the NAO, said: “The Cabinet Office’s failure to manage the risks around the move to two independent shared service centres from the outset means that the programme has not achieved the significant anticipated savings and benefits to date. 

“The Cabinet Office has begun to find its role in leading the programme but the delays have meant that technology has moved on significantly. The programme will only achieve value for money in future if the Cabinet Office shows clear leadership, and government accepts the need for collaborative and flexible behaviours from all departments involved.”

Image: NAO headquarters, modified from Tagishsimon, CC-BY-SA-3.0 via Wikimedia Commons

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