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The Public Accounts Committee (PAC) has called on the Cabinet Office to “produce a realistic and complete business case” for its shared service centres programme after delays and increased costs.
The programme, which was originally forecast to save up to £400m a year, has so far only delivered savings of £90m, short of the £94m programme costs to date. The total savings have now been reduced to £484m by 2023 to 2024 – a far cry from £400m a year.
The idea of consolidating services for back-office functions such as human resources (HR), finance, procurement and payroll was originally born more than a decade ago as a way of improving efficiencies and cut costs, however the programme failed to get buy-in from departments and lacked leadership.
The current programme came to life under the coalition government in 2013 when Whitehall announced plans to introduce two shared service centres – one provided through the divestment of the Department for Transport (DfT) Shared Service Centre to Arvato, the other provided by Shared Services Connected Limited (SSCL), a joint venture between Steria and the Cabinet Office.
As part of the move to shared services, government organisations were due to adopt a single operating platform by April 2016 to standardise processes. However, only two out of 26 have done so.
The PAC report said the government has failed to “effectively manage the risks of delays and poor supplier performance”, which has led to increased costs for taxpayers.
“The risk of departments failing to migrate to the single operating platforms lay contractually with the suppliers. However, in practice, this risk was not fully passed on to the suppliers, who argued that some of the reasons behind the delays and requests for changes were down to the departments,” the report said.
“The Cabinet Office was ineffectual in managing this risk because of its inability to force departments to take crucial decisions and an unwillingness to hold the suppliers to account as delays arose.”
Lack of buy-in
The programme has also struggled with getting departments on board with the programme, which the PAC blamed partly on the Cabinet Office failing to create “an environment of collaboration” among departments. The report added that there were also reports from departments that “they felt pressurised to join”.
“Furthermore, the Cabinet Office did not intervene in a timely and effective manner when things began to go wrong with the programme, in part because it had no clear mandate, for example, to instruct departments to keep to the migration timetable but also because it did not see this as its role,” the report said.
Another issue was that it was “too easy for departments to pull out of the programme and put at risk the significant benefits that shared services can deliver”.
“All departments receiving services from the two shared service centres have saved between 20% and 25% on the cost of back-office functions. However, some departments have pulled out of the programme and sought other arrangements to protect their own interests,” the report said.
Poor governance and business case
One of the main issues with the programme has been the lack of a “realistic and complete business case”.
An NAO report into the programme published earlier in 2016 found that the Cabinet Office “did not develop an integrated programme business case to include both independent shared service centres and the customer departments” and failed to manage the risks around the move.
The PAC report echoes the NAO report, saying that the department only had “various partial business cases for each of the service centres but they were either incomplete, out of date or both”.
“As a result, some important aspects of the programme, such as governance and how funding would be shared and benefits monitored, were not properly set out,” the report said, and called on the government to produce a business case by March 2017.
It added that the failure to put in place “effective governance” has had long-term consequences.
“While the Cabinet Office managed the framework agreements between government and suppliers, departments had individual call-off contracts with the suppliers,” the report said.
“As a result, the Cabinet Office did not always have clear authority as to when and how it could step in to resolve problems when they arose.”
This meant that departments weren’t able to express concerns they had regarding the programme, and the governance boards “failed to take appropriate strategic decisions in a timely manner”.
As with many large government IT projects, the programme also suffered from a series of leadership changes, with five different senior responsible officers in four years.
Commenting on the report, PAC chair Meg Hillier said the programme was launched with “critical flaws, which Whitehall then failed to address”.
“Each department was able to request multiple changes, which led to big cost increases. The result has been a net cost to taxpayers and a significant scaling back of ambition for the savings likely to be achieved in the years ahead,” she said.
“If government is serious about making a success of shared services and future projects running across departments, it must act on the serious concerns set out in our report before any more public money is wasted.”
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