Plans to increase the efficiency and effectiveness of services such as human resources, payroll and finance could cost the Department for Transport £81 million (by March 2015) rather than saving £57 million as originally expected. There will need to be substantial improvements in the shared service centre’s productivity if the Department’s original targets are to be met.
According to today’s NAO report to Parliament, changes to initial cost estimates, inadequate contract management and poor initial implementation mean that the Programme, as originally envisaged, will not achieve value for money.
The Department envisaged building on existing processes and IT systems as the basis for developing shared services for the whole Department. It also decided to use an existing contract with IBM to deliver the IT system and set a very demanding timetable for implementation, with rollout to the whole Department set for April 2008. It forecast that the Programme would cost £55 million and achieve gross savings of £112 million.
In practice, the Department could not agree a common set of business processes and the initial estimates proved optimistic. Supplier relations could have been better and inadequate testing of the system led to an unstable IT system being introduced.
The Programme is now forecast to cost over £120 million against the gross savings currently identified of £40 million over its lifetime to March 2015. To date, the Driving Standards Agency, Driver and Vehicle Licensing Agency and the central Department are using the services with the Maritime and Coastguard Agency moving later in 2008.
Since April 2007, the Department has made considerable efforts to improve its management of the Programme and to resolve problems with the system stability and the performance of the Shared Service Centre. It is also focusing on extending the functions available from the Centre to include routine procurement so as to increase benefits and improve the quality of management information so that it can identify further savings. Illustratively, if the Department were to achieve additional savings of £50 million per year, there would be benefits worth £84.4 million up to 2015, less any additional set-up costs.