Government plans second shared service centre worth £2bn

The Cabinet Office is searching for a private sector partner to take up to a 75 percent stake in its second of two independent shared services centres, in a contract that is worth up to £2 billion and will see a range of business services delivered to various government departments and public sector bodies.

An online tender reveals details of the centre, which forms a key element of the Cabinet Office’s strategic plan for next generation shared services. It is hoped that the latest plan will create savings of up to £600 million a year, despite a number of failings in the past in delivering value for money shared services to the public sector.

The National Audit Office (NAO) said last year 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.”

Business process outsourcing firm arvato recently secured a seven year contract to operate the government’s first independent shared service centre, which will provide back office services to the Department for Transport (DfT) and its executive agencies.

DfT’s centre, which is based in Swansea, had been using an SAP ERP platform. However, this will be replaced with second tier ERP provider UNIT4’s Agresso Central Government platform.

Vendors interested in bidding for the second shared service centre have until the 9th May to engage with the Cabinet Office.

Despite the unwavering optimism in the Cabinet Office, the government’s strategic plan recognises that the predicted £600 million savings figure for the centres is very much at the upper end of what savings can be expected. It says: “Key to the success of the programme is the positive involvement of the departments which will benefit from the strategy.”

Depending on this engagement from departments, the lower end of the savings spectrum could be just £128 million – not the £400 million to £600 million quoted frequently elsewhere. In fact, to reach £300 million to £400 million of savings per year the Cabinet Office “assumes that all ISSCs (independent shared service centres) and departments using them reach upper quartile performance across transactional and retained functions”.

To then reach the highest possible savings of £400 million to £600 million, the Cabinet Office “assumes that all ISSCs and departments, including the standalone SSCs (shared service centres), reach upper quartile performance across transactional and retained function”.

Achieving optimum success within shared services projects is notoriously difficult, not only from a technical consolidation point of view, but from a political and collaborative stand point. This is likely to be a barrier for central government, which has a history of not being able to engage siloed departments that are used to working independently from the rest of Whitehall.

Copyright © 2013 IDG Communications, Inc.

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