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Whitehall shared services failing - NAO

Whitehall shared services failing - NAO

Shared service centres running well over budget

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Despite investing large amounts, the government has failed in its attempts to make its departments share back office functions, according to the National Audit Office (NAO).

Cutting costs through shared back offices was a key plank to the government's strategy of cutting IT and organisational costs when it took power 21 months ago. But the NAO report also covers the time of the previous Labour administration, which also looked to shared services to cut costs, and is critical of that government.

In a report today the NAO said that "despite significant cost and effort, the planned benefits of the initiative have not been achieved".

In fact, said the NAO, "by creating complex services overly tailored to individual departments, government has increased costs and reduced flexibility". In addition, "there has also been a failure to develop the benchmarks necessary for measuring performance".

Amyas Morse, head of the National Audit Office, said: "The initiative for government departments to share back-office functions has suffered from an approach which made participation voluntary, and tailored services to meet the differing needs of individual departments. The result was over complexity, reduced flexibility and a failure to cut costs."

Morse added: "The new Cabinet Office strategy on shared services acknowledges these issues but, if it is to achieve value for money, it must learn the lessons from past implementation. Only in this way can the sharing of back-office functions have a realistic prospect of contributing towards the government's drive to cut public spending in the long term."

In 2004, the Gershon Review recommended that the government pursue the sharing of services, including human resources, finance, procurement and payroll, to achieve cost savings. It has been up to individual departments to establish their own arrangements, and between 2004 and 2011 eight major shared service centres have emerged.

The five centres examined by the NAO were expected to cost £0.9 billion to build and operate but, to date, they have cost £1.4 billion. They were also expected to have saved £159 million by the end of 2010-11.

While, in one instance, says the NAO, the government "has achieved break-even in a time consistent with the private sector, its overall performance has been varied", and "the two centres that are still tracking benefits report a measured net cost of £255 million".

Among other findings in the report are that the software systems used in the centres "have added complexity and cost", and that "departments have struggled to roll-out shared services fully across all their business units and arm's length bodies".

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  • Richard Thomas Whilst the top-line financial savings may have appeared very attractive to these departments operationally theyve gone backwards in terms of efficiency and effectiveness not to mention public confidence Nor have they saved on expenditure The real issue is that these projects are too wide ranging in scope and become overly complex covering a multitude of back office functions including Finance HR and Pay procurement CRM and much more thus becoming difficult to implement Tax payers money need not be spent on overly complex and costly IT systems that require extensive tailoring and then do not stand up to close inspection The key is to break down the solution into smaller specialist areas and procure specialist solution designed for maximising return on investment within a specific line of business such as HR and Payroll Unfortunately Big is Beautiful seems to be the order of the day but it just doesnt deliverAs a specialist IT supplier we have direct evidence that sharing of back-office functions does bring efficiencies and cost savings providing the software and technology platform meets requirements Kent County Council for example shares an HR and payroll service for the East Kent region including four District and Borough Councils and benefits from the economy of scale Furthermore the Greater Manchester SWiTch project shares HR and payroll records for over 30000 employees across the Trafford Stockport and Wigan authorities Savings of around 260000 annually were realised as a result of the joint procurement exercise and a total return of 22m is anticipated over the life time of the project for a relatively modest investment It is not acceptable to see hundreds of millions of pounds spent on all-encompassing enterprise resource planning systems that do not deliver the savings anticipated when there are proven British-owned alternatives with a strong track record of delivering measurable improvements in efficiency and significant reductions in costs
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