NAO Verdict on UK Government’s Shared Service Centres – A Fiasco

We will come back to the NAO report on Government’s commercial performance later this week, but another NAO report issued on Friday deserved an immediate airing, we felt!

The NAO report on the UK government’s two central shared services centres is one of the most damming and critical we’ve seen in a long time. “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”.

That is the beginning of the summary from NAO – but I’ve never seen a page 1 of the actual report that is quite so damming. Here are the seven facts quoted by NAO on that page, pretty much summing up what has clearly been a fiasco of the first order.  You have to laugh, otherwise you would cry.

£90m - estimated savings made to date by outsourcing and transforming back-office functions

£94m - estimated total investment costs of the programme to date

2of 26 organisations that planned to adopt single operating platforms by April 2016 had done so

0 organisations met their target date for adopting single operating platforms for their shared services

11 government departments now receive services from a shared service centre under the government’s Next Generation Shared Services strategy

888 requests for change are currently outstanding across the two independent centres

 14 months is the average delay to completed and agreed migrations to single operating platforms

We love the precision of the “888 requests for change”! And given that costs are generally under-stated and savings over-stated, the NAO figures of £90M savings against £94M costs are not exactly good news. Indeed, the report says, “The Cabinet Office has not collected full information on the extent of all of these costs” and there are clear suggestions that the real costs are much higher.

Of the two shared service centres, set up to handle finance, HR and other back-office services, the absolute basket case is the arvato-run centre. The Department for Transport is still a customer, but “other government customers that planned to join arvato’s centre (the Department for Culture, Media & Sport, the Department for Communities and Local Government, HM Treasury and the Civil Nuclear Constabulary) did not outsource any services to arvato and have subsequently withdrawn from their arrangements”, and arvato itself gets a good kicking from the NAO in the report for various failings. There was some amazement when arvato – a division of the German Bertelsmann corporation – won the contract, given their lack of UK experience in this sector, and those fears seem to have been justified.

In the case of SSCL, there are customers, but there has been very little migration to the single Oracle-based operating platform, which was the basis for much of the potential savings – “organisations that have not yet agreed plans to migrate are currently behind schedule by an average of 19 months”. The report is hardly a ringing endorsement of Steria, who run and own 75% of SSCL, or Oracle either.

So, who is responsible? Can we lay it at the door of the Minister responsible for the grand strategy, Lord (Francis) Maude of Horsham, whose “legacy” seems to be unwinding with some haste, given recent issues also with Crown Commercial Service and MyCSP. Or the Cabinet Office ex-COO, Stephen Kelly, who shot across the civil service firmament like a very tall, square jawed comet, achieving a few headlines but in retrospect little of sustainable value, before disappearing back to a mega-bucks private sector role.

When we get into the causes, perhaps most unforgivably, there was no business case for this whole initiative. Maude has some form in that regard. Perhaps he did not believe in business cases, he seemed to think that certain things were so obvious (to him, anyway), that only a boring non-visionary managerial type would ask for such details. Interestingly, there was no business case for the creation of the Crown Commercial Service either.

Here are a few other headline quotes from the NAO report.

  • The Cabinet Office did not secure sufficient support from departments at an early stage of the programme.
  • The Cabinet Office has not managed the programme effectively.
  • The Cabinet Office has not responded adequately to programme risks as they have arisen.
  • The Cabinet Office has struggled to clarify its role in managing and leading the programme.
  • Five different senior responsible officers have overseen the programme so far. They and others in key programme roles have often not held relevant experience in shared services.

The problem going forward is that, as the report says, “the current plan and system designs may be out of date”. Whilst this disaster has been unfolding, innovation around “cloud” and “software as a service” has moved apace, and leading organisations are increasingly questioning the old on-premise, massive ERP system model. Other influential thinkers have long challenged the economies of scale assumptions around shared services. Basically, this may never work, and we would take the future savings projections with a positive mine-full of salt.

Voices (2)

  1. Effwhitt:

    £90m cost? It may not have been in scope of the NAO review but surely the “sunk” cost of in-flight ERP programmes forced to cancel in favour of ISSC1/2 must be taken into account.

    Functionality – the resulting SOP1 (and undefined SOPII) will deliver less functionality from a more capable version than was implemented by the preceding instances they replace.

    Fiasco is an under-statement.

  2. bitter and twisted:

    Is the NAO able to say “Shared Services Dont Work. Stop It !” or is that sort of policy/strategy/ideology/mass delusion level conclusion outside their remit?

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