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Financial benefits of government’s shared services strategy remain unclear, says NAO

Cabinet Office needs to do more to avoid previous failings, as several barriers remain to a successful implementation of the strategy to deliver shared back-office services for government, according to National Audit Office report

The government’s shared services strategy is currently not on track to deliver value for money, according to the National Audit Office (NAO).

An NAO report on the shared government services strategy, which aims to refresh back-office services, has found that the financial benefits of the plan still remain unclear.

The strategy was launched in 2018, hailed as helping the civil service to achieve greater value for money from its IT systems by giving users access to standardised human resources, procurement, finance and payroll applications through a common platform.

The original strategy aimed to deliver value and efficiency by moving to cloud-based technology by 2025 at the latest. But in 2021, the government reshaped its strategy, going from the idea that every single department would procure its own enterprise resource planning (EPR) system to moving to five shared service clusters covering 17 departments.

The five clusters are of varying sizes, named Matrix, Synergy, Unity, Defence and Overseas, and will use central frameworks as the route to procurement, with a new target date of 2028.

So far, only three of the clusters have obtained business case approval, “which will allow them to access the requisite funds for their shared services plan”, said the NAO report.

“Clusters described the strategy as ‘exceptionally ambitious’ and the timeline as ‘challenging’. Progress is also being made in developing common data standards and processes, but there is also still a long way to go to ensure data and process standardisation across government,” the report added.

The NAO also said it is not clear why the Cabinet Office, which is responsible for the strategy, chose to create five clusters and that departments were not consulted on which cluster they were allocated to.

“The Cabinet Office told us that it considered several factors in allocating departments to clusters, including the primary focus of each department and what operating platform they used. The departments who are less convinced by the cluster model mainly come from the Matrix cluster,” said the report.

“This cluster faces several issues, which stem from the large number of departments (eight) expected to work together and the lack of rationale behind their grouping. However, these departments told us they remain committed to making the cluster model work.”

Another issue faced by the departments and clusters is that some departments have old legacy systems that will soon be unsupported.

Departments with legacy systems where contracts are due to expire shortly are putting in place contingency plans should the shared services not be up and running by the time their current contracts expire, said the NAO, adding: “The current uncertainty around when departments will move systems increases the complexity of working at a cluster level.”

Because the shared services project is a strategy and not a programme, the Cabinet Office did not need to submit a business case to HM Treasury for approval. Instead, it published a “case for change”, which the NAO said “lacked detail on important areas such as cost, benefits and risks” and was not subject to any external scrutiny.

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“While there is a balance to be struck between time spent planning and moving quickly, we do not consider this to be a sensible trade-off in a programme of this scale,” said the NAO. “The Cabinet Office did not obtain the independent assurance that we would have expected to see for a programme of this scale and complexity.”

There have also been delays to the funding of the clusters’ shared services plans. In 2021, the Treasury rejected all three spending review bids from the clusters, because of concerns about the Cabinet Office and the clusters not having done enough work to develop robust cost estimates or consider fundamental elements of the strategy.

“Although the submitted bids were rejected, HM Treasury approved a funding envelope of up to £300m to support these three clusters to deliver the shared services strategy and to address the risk that departments could be left with unstable and unsupported systems in the interim,” said the report. “However, access to this funding was contingent on the approval of cluster business cases, which clusters only obtained in autumn 2022.”

This is not the government’s first venture into shared services. In 2013, Whitehall announced plans to save £600m a year through two shared service centres providing back-office functions for 14 departments. A 2018 NAO report found that the programme failed to achieve value for money, produced a faulty business case and simply added to the complexity of government IT systems.

The NAO described the new shared services strategy as “highly ambitious”, and said there are several “fundamental elements yet to be put in place that are jeopardising the success of the strategy”.

It added: “For example, the Cabinet Office is still unclear on the extent of the benefits this programme can be expected to bring. It is difficult to judge what progress has been made on enablers such as process and data convergence.

“We are concerned that these gaps cause uncertainty for departments and mean that the Cabinet Office will repeat past failures. We therefore cannot conclude that this programme is on track to demonstrate value for money.”

NAO head Gareth Davies said that departments working in clusters need to demonstrate how they have taken on board lessons from previous strategies, and the Cabinet Office needs to stagger the timings of clusters going to market for new systems to ensure capacity and capability are available.

“Efficient back-office functions are key to delivering front-line services and reducing costs, but at present, the strategy is not on track to deliver value for money, and it remains unclear what level of financial benefits it will bring,” said Davies.

“Several fundamental elements of the government’s latest shared services strategy need to be put in place to ensure it is successful delivery.”

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