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Shared service centres

Government’s programme to transfer back-office functions to two shared service centres has made savings but has not achieved value for money to date, according to the National Audit Office.

The NAO reported on the Cabinet Office’s Next Generation Shared Services strategy in 2014, which 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. Today’s report found that while the two centres have led to some cost savings, the programme is not progressing as planned.

Most departments which planned to outsource functions to one of the two centres have successfully done so. The centres have delivered overall savings of £90 million to customers in the first two and a half years of operation with costs of £94 million. These savings are less than the £128 million a year originally forecast because some departments have not outsourced and transformed their back-office functions as planned. The Cabinet Office currently estimates that the two contracts will generate savings of £484 million in total by 2023-24 at a cost of £159 million.

In order to achieve the planned savings, departments were required to transfer their existing back-office functions to one of the two independent shared service centres, along with a migration of all customers to a single operating platform where systems and processes would be standardised. The report found that due to delays in designing, building and testing the systems, only 2 of the 26 planned customers 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. The increased cost to customers owes mainly to maintaining and extending 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 estimated to be in the region of £172 million to £272 million a year.

Today’s report has found that weaknesses in the programme design undermined its success. 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. Today’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. According to the NAO, it 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. It has also more recently ensured that the programme has an SRO with experience in implementing shared services. The programme, however, has encountered such delays that the current plan and system designs may be out of date. The Cabinet Office has recognised this and is exploring options within the current arrangements to ensure financial savings and improved functionality.

“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.”

Amyas Morse, head of the National Audit Office

Notes for Editors

£90m
Estimated savings made to date by outsourcing and transforming back-office functions

£94m
Estimated total investment costs of the programme to date

2
Of 26 organisations which planned to adopt single operating platforms by April 2016 have done so

0
Organisations met their target date for adopting single operating platforms for their shared services

11
Government departments now receive services from a shared service centre under the government’s Next Generation Shared Services strategy

888
Requests for change are currently outstanding across the two independent centres

14
Months is the average delay to completed and agreed migrations to single operating platforms

  1. Government set up the two independent shared service centres as planned. The government signed contracts with two private sector companies (arvato UK Ltd and Steria Ltd) to operate the centres which began providing outsourced services to participating departments and arm’s length bodies in 2013.
  2. Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
  3. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO, which employs some 810 people. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.15 billion in 2014.

PN: 32/16