Whitehall shared services failing - NAO

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".

Copyright © 2012 IDG Communications, Inc.

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