Government shared services increased costs and reduce flexibility, says NAO

Shared services are certainly not a new thing but the public sector cuts have certainly given them a new lease of life.

Sharing back office processing is surely going to lead to savings. Not so for central government says the National Audit Office (NAO).

The five Whitehall shared services centres examined by the NAO have cost £500m more to build than originally forecast. They were expected to have saved £159 million by the end of 2010-11, but only one centre reported break-even costs, while the two centres tracking benefits report a measured net cost of £255m.

The NOA said: “The initiative for government departments to share back-office functions has suffered from an approach which made participation voluntary and tailored services to meet the differing needs of individual departments. The result was over complexity, reduced flexibility and a failure to cut costs.”

Read more here.

Local government and services such as the NHS and police have reported more success of shared services.

These groups are more like families and as a result can benefit from shared services.
The NHS Shared Business Service, for example,  uses an Oracle platform and a single set of processes to run the back offices of NHS trusts. Over 100 NHS trusts now use the service.
It has been a success. It promises trusts up to 30% cost savings and has even paid millions of pounds back to the NHS.

Ruth Ormsby, who headed up the NHS SBS and now works in Accenture’s public sector business, told me a couple of years ago that there is a shared services opportunity across government but that she thinks that it will gain momentum in parts of the public sector “where there is a family.”

She is referring parts of the public sector such as the police and education, which are similar to the NHS in that they are made up of lots of local organisations. “These organisations have the same back offices but do it differently.”

A shared service set up by Cleveland Police and Steria, aimed at providing back office services such as finance, HR, payroll, commissioning and fleet management to police authorities has also made savings of over £50m. These will increase as more police authorities join the service.

Professor John Seddon, managing director of Vanguard Consulting, believes shared services are a waste of time. Read a blog post by him here. Given the NAO report he has a point.


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