Shared Service Centres inquiry
Closed
What the inquiry looked at
“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 (NAO). 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. The NAO have found, 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 increased "as a direct result of delays" 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. The NAO 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.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
In 2012, we reported on the Cabinet Office’s attempts to reduce costs by sharing back-office functions and, at that time, identified the need for the Cabinet Office to learn from past mistakes, show strong leadership and get buy-in from departments. Yet four years later, the Government’s latest attempts are failing for much the same reasons:
a failure of governance and leadership by the Cabinet Office; departments acting independently rather than collaboratively; the absence of a realistic business case; a failure in the management of the transfer of risk to suppliers and a failure to develop standardised processes. The result is that the two shared service centres considered as part of this inquiry have only delivered £90 million of ‘savings’ in the first two and a half years of operation but at a cost of £94 million and, therefore, a net cost to the taxpayer of £4 million. The Cabinet Office now estimates that the centres will deliver savings of around £484 million in total by 2023–24, which compares unfavourably with the anticipated £300 million to £400 million a year savings set out in the Next Generation Shared Services Strategy in 2012. The Cabinet Office acknowledged that the programme had not gone well but stated that the ambition to create shared services across government remains intact.
We recognise the recent positive changes introduced such as the appointment of senior individuals from the finance and HR professions to design standard processes within their professions. There needs to be an agreed set of standard processes as soon as possible. We also expect the Government to produce a realistic, and complete, business case for the centres and to set out clear governance procedures by the end of 2016. It is essential that, for the success of this and other cross-government programmes, the Cabinet Office demonstrates effective leadership to ensure departments are signed up and act collaboratively.
What the government said
No government response is linked to this report.
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 7 June 2016 to its close on 4 January 2018.
- Oral evidence 27 Jun 2016
- Report 19 Oct 2016
What it recommended
The committee's recommendations are not listed here yet. Read them in 20th Report - Shared service centres ↗ on parliament.uk.
Evidence
Oral evidence sessions 1
- 27 Jun 2016No witnesses recordedparliament.uk ↗