The Department for Work and Pensions’ decision to outsource the Synergy shared services contract was partly driven by headcount controls, the Cabinet Office has said.
The contract – to deliver back-office services for around 250,000 civil servants in DWP, the Ministry of Justice, the Home Office and the Department for Environment, Food and Rural Affairs – was awarded to Capita in March, a decision that has been criticised due to the crisis in the Civil Service Pension Scheme since Capita took over its administration in December.
It includes HR, payroll, recruitment, finance, procurement and service-desk support for the departments, which are part of a shared services cluster. The contract runs for seven years, with the option of three one-year extensions.
Valuations of the contract vary. Capita has stated it is worth £370m over 10 years, with the rider that this “excludes additional change and expansion services expected over the term of the contract”. An award notice on the government’s Find a Tender website gives a figure of £606.6m for the first seven years of the contract alone.
In a letter to the Public Accounts Committee, Jerome Glass, the Cabinet Office’s director general for the future civil service, has outlined the factors that led to the Synergy cluster being outsourced.
Glass made an appearance before the committee on 14 May, where MPs requested a note justifying the decision to outsource to Capita rather than bringing services in house.
Following up on this in a letter sent on 3 June, Glass said an extensive assessment of delivery options was undertaken, including insourcing, in 2020-21.
He said this concluded that “maintaining an outsourced model offered the best value for money, building on existing benefits”. He said this approach “continued to be evaluated and refined through to full business case in December 2025”.
Glass said the assessment was informed by a number of established factors, including “Cabinet Office and Treasury controls on civil service headcount”.
“Full insourcing would have required over 1,600 additional FTEs,” he said.
The contract was already being administered by Sopra Steria – another factor in the decision.
Glass said there was “an existing, well-established outsourced shared service model which had already delivered substantial savings and efficiencies to the government over the previous decade”.
He said the other factors were “a mature supplier market with expertise in delivering high volume, transactional services, offering further efficiency gains through new technology” and a “government strategy which required the separation of the technology delivery from transaction service delivery”.
The Treasury has committed £1.15bn to shared services since 2021, when the programme’s delivery model was refreshed. Under this model, departments will migrate their human resources, finance, commercial and grants functions to one of five shared services clusters – Synergy, Unity, Matrix, Defence and Overseas.
In the letter, Glass also explained the reasons behind the different models chosen for the Unity and Matrix clusters.
For the Unity cluster – providing for civil servants in HM Revenue and Customs, the Department for Transport and Ministry of Housing, Communities and Local Government – Glass said insourcing was chosen in 2021 based on “HMRC’s established in-house shared services capability”. He said it was "shaped by the end of the Arvato contract supporting Department for Transport business as usual (BAU) shared services in January 2023".
For the Matrix cluster – providing for officials in the Cabinet Office, Department for Culture, Media and Sport, Department for Science, Innovation and Technology, Department for Business and Trade, Department for Energy Security and Net Zero, Department for Education and HM Treasury – the departments chose a semi-outsourced model.
Glass said UK Shared Business Services – a shared service provider wholly owned by DSIT and UK Research and Innovation – was chosen as the cluster's preferred delivery model “following a rigorous delivery model assessment and subsequent comparative analysis”.
“The final decision to utilise UKSBS was driven by qualitative factors, particularly strategic fit and comparative achievability and timeframes, which ultimately led the chief operating officer programme steering group to select it over the full outsource option,” Glass said.
“Choosing UKSBS was strategically aligned with transforming the organisation using modern SaaS ERP technology, ensuring the value of the service remains within HM government and enabling it to grow and take on future cross-government programmes.”
Departments are expected to onboard onto the five shared services clusters by 2029, with the Cabinet Office and DCMS planning to "go live" on the system this year.
Glass said government has estimated benefits from the five clusters to add up to around £4.3bn over 15 years. Up to this point, the strategy has saved £168m.
The National Audit Office warned in a report in March that the government’s Shared Services Strategy was "unlikely to reach its full potential" because of IT compatibility, governance and funding issues.