The National Audit Office (NAO) is sharply critical of the government’s programme to transfer back-office functions to two shared service centres, which it says has not resulted in anything like the anticipated cost savings due to problems with the way it was managed
The cabinet office’s next generation shared services strategy included the creation of two independent shared service centres to provide back-office functions for up to 14 departments and their arm’s-length bodies.
In an assessment of progress so far, the NAO says the centres have delivered overall savings of £90m in the first two and a half years of operation with costs of £94m. These savings are less than the £128m a year originally forecast because some departments have not outsourced and transformed their back-office functions as planned.
The report found that due to delays in designing, building and testing the systems, only two of the 26 planned customers for the service have joined a single operating platform. On one of the centres, four customers have exited their contracts.
Costs have also increased significantly for both the customer departments and the suppliers of the shared service centres as a direct result of the delays, largely because of the need to maintain and extend the life of existing and ageing systems.
Departments have also been unable to deliver further efficiencies from improving their back office processes, which the strategy had originally estimated to be in the region of £172m to £272m a year
The NAO report lays the blame at the feet of cabinet office, saying it showed poor programme management. The cabinet office did not develop an integrated programme business case to include both independent shared service centres and the customer departments. This meant it has been difficult to show customers how their decisions impact on the programme, and therefore the importance of making decisions with the programme’s objectives in mind.
In addition, the cabinet office did not secure sufficient buy-in from departments at an early stage of the programme. Departments varied in the extent to which they believed in the merits of the shared service centres and some said that they were pressured into joining the programme.
The NAO’s report found that the cabinet office did not act in a timely and effective manner as problems emerged with the programme, in part because it did not have a clear mandate to act on behalf of customers. The watchdog says the department must take a more proactive role if such programmes are to be a success in the future.
The cabinet office introduced new governance and leadership arrangements in 2014 and 2015, which have received some positive response from customers and suppliers, the NAO says. The programme, however, has encountered such delays that the current plan and system designs may be out of date.
Current cabinet office estimate suggest that the two contracts will generate savings of £484m in total by 2023-24 at a cost of £159m.
Amyas Morse, NAO head, 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 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.’
