National Audit Office slams Cabinet Office over shared services “failure”

Spending watchdog criticises Cabinet Office for oversight of plan to merge back office functions, as delays and lack of buy-in lops millions off savings target

By Jim Dunton

20 May 2016

A Cabinet Office-led programme to transfer the back-office functions of most departments and agencies to two independent shared services centres has failed to achieve its anticipated savings targets because of delays and poor leadership, the National Audit Office has said.

The centres, which were part of the Next Generation Shared Services Strategy, were originally forecast to save government departments £128m a year, but the public spending watchdog said they had only delivered £90m in efficiencies during their first two and a half years — at a cost of £94m in investment. 

The latest estimate is that the programme will save departments £484m by 2023-24.

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The service centres, one operated by Avarto, the other by Shared Services Connected Ltd — a joint venture between the Cabinet Office and IT firm Steria — were due to take on back office services for 14 government departments and their related arms-length bodies. The Department for Health, the Ministry of Defence and HM Revenue & Customs are served by different back-office centres. 

As part of the Next Generation deal, departments were supposed to migrate to a single operating platform, where systems and processes would be standardised. However, the NAO found that delays in designing, building and testing the systems meant only two of the 26 planned customers had so far joined a single operating platform.

The report said four customers of the Avarto-run centre — the Department for Culture, Media & Sport, the Department for Communities and Local Government, HM Treasury and the Civil Nuclear Constabulary — had chosen to exit their contracts, meaning only the Department for Transport remained.

The NAO said insufficient consideration appeared to have been given to matching departments’ needs with the systems they were required to migrate to, and that delays in migration made the earlier-projected efficiencies impossible to realise.

“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” - NAO head Amyas Morse

It said the Cabinet Office had failed to develop a proper business case for the independent shared services centres and had not been proactive enough when problems with the programme emerged, partly because it did not have a clear mandate to act on behalf of customer departments.

In its recommendations for improvement, the Cabinet Office called on the government to consider the “role of the centre” in delivering cross-government programmes, in the light of the devolved nature of departmental accountability and funding.

The NAO also urged the Treasury to reiterate existing guidance that any large-scale transformation project should have a programme business case with clear buy-in from all involved.

NAO head Amyas Morse said the programme had so far not delivered value for money and said his organisation’s report exposed the challenges Whitehall needed to master in order to drive forward real efficiencies.

“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,” he said. 

“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.”

Cab Office: "We know we need to go further"

Mark Serwotka, general secretary of the Public and Commercial Services union, said the shared services project was “in tatters” and had been rushed to suit a political timetable.

“This is an all-too familiar story of Tory ministers cutting and privatising, only to find they have wasted money and damaged services,” he said.

“We opposed the privatisation of shared services because we did not believe it would deliver the savings that were promised and we have been proved right.”

Repsonding to the NAO, the Cabinet Office said the project would deliver savings in the long term and that lessons would be learned.

“The report recognises that the Cabinet Office is addressing the challenges involved in managing digital transformation, but we accept that we need to go further, and we will,” a spokesman said.

He added that with the inclusion of the Metropolitan Police, the centres would generate a futher £504m in savings by 2023-24. The Met has joined the shared services deal, but its involvement was outside the NAO’s remit for the report.

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