“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. 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.”
These are powerful words, and ones that should be a wake-up call to politicians, senior public officials, public service contractors and the advocates of ever more public service outsourcing. Public sector leaders, including ministers and council leaders. ignore the Comptroller and Auditor General and the outcome of the NAO enquiry at their peril.
There are many lessons to be drawn from this Whitehall programme and its abject failure to achieve its original objectives and realise public value. To miss these lessons and to plough on with more and more outsourcing without reflecting and acting on the NAO’s recommendations would be folly and an abdication of good government and governance. And be clear – this applies just as much to local government, the NHS, the police and other public sector bodies as it does to Whitehall.
The NAO report (https://www.nao.org.uk/report/shared-service-centres/#) contains many examples of the under-performance of the programme and explains in stark and clear language why they occurred.
The programme was originally set up to create two shared service centres to provide back-office functions for up to 14 departments and their arm’s-length bodies. The NAO found that whilst the two centres have delivered ‘some’ cost savings, the programme is not progressing as planned. This programme was many years in gestation with costs being incurred over years as it was explored and slowly brought to birth.
In fact, the centres have delivered overall savings of £90 million in their first two and a half years of operation, but have also incurred costs of £94 million. Further, these savings are less than the £128 million a year originally forecast because some departments have not outsourced and transformed their back-office functions as planned.
In order to achieve the planned savings, departments were originally required to transfer their existing back-office functions to one of the two independent shared service centres, along with a migration of all customers to a single operating platform where systems and processes would be standardised. Incredibly, the report found that due to delays in designing, building and testing the systems, only two of 26 planned customers have joined a single operating platform; and worse, four customers have since exited their contracts from one of the centres.
Costs have also increased significantly for both the customer departments and the suppliers of the shared service centres as a direct result of delays. The increased costs have arisen primarily from the need to maintain and extend the life of existing and ageing systems (systems which were meant to have been updated and/or replaced). Departments have also been unable to deliver further efficiencies from improving their back-office processes, which the original plan had estimated to be in the region of £172 million to £272 million a year.
The Government awarded two outsourcing contracts for these shared service centres – the contractors being arvato UK and Steria. Staff working in the Department for Transport’s existing shared service centre were transferred to arvato, whilst staff in other departments joined a new joint venture company (Shared Services Connected Limited or SSCL), 75% owned by Steria and 25% owned by the Cabinet Office.
Whilst the contractors cannot be exonerated from the overall impact (and failure) of the Shared Services programme, the client performance of the Cabinet Office is clearly the main contributor to what can only be described as a debacle of the first magnitude.
This project was championed personally and in a high-profile fashion by the then Cabinet Office Minister Francis Maude. As David Walker has written for Guardian Public Leaders “Francis Maude’s legacy on shared services is looking shaky”. http://www.theguardian.com/public-leaders-network/2016/may/23/francis-maude-legacy-public-sector-shared-services, one has to ask how much political zeal and instruction over-rode more prudent professional thinking. The Public Accounts Committee should seek to find out.
Some of the key findings from the NAO enquiry include, and I quote:
• the lack of an integrated and agreed business case for the programme made it difficult for the Cabinet Office to take decisions. The Cabinet Office did not develop an integrated business case for the underpinning strategy
• the approach to creating standardised processes was not well managed
• due diligence on the contractors was inadequate and they lacked the capability in-house to design and implement the single operating platforms. They also had varying degrees of experience in managing transformation projects
• the Cabinet Office did not secure sufficient support from departments at an early stage of the programme
• several departments were unhappy not to have been sufficiently consulted on key elements, such as the appointment of Steria, which they consider to have been undertaken too quickly
• the Cabinet Office has not managed the programme effectively and has not responded adequately to programme risks, and the Cabinet Office did not act in a timely and effective manner when problems with the programme emerged; the Cabinet Office has struggled to clarify its role in managing and leading the programme
• the Government is currently in dialogue with both arvato and SSCL on the future of their respective independent shared service centres.
For arvato, government department customers other than the Department for Transport have withdrawn from their shared service centre contracts and will seek other arrangements. For SSCL, delays and changes in scope have led to significant costs for the Government and SSCL, and while committed to the future of shared service centres, both parties are discussing how the plans need to evolve
As a result of its enquiry, the NAO has made a series of recommendations. A read of this well-written and highly accessible report leaves one with the impression that both the analysis and recommendations all make great sense.
Sadly, however, there is real and genuine sense of ‘deja vu’ in those of us who have read previous NAO reports on underperforming or disastrous major government programmes and outsourcing. This is both deeply disappointing and, quite frankly, inexcusable.
Government, the civil service and the wider public sector must change behaviours and start learning the lessons, and not simply noting and then forgetting/ignoring them post-publication, or following the inevitable Public Accounts Committee (PAC) hearing. Indeed, one can anticipate the utter exasperation of members of PAC as they prepare to ‘invite’ key players to give evidence and offer up yet more tired and re-hashed excuses, along with usual ‘pass the buck’ blame game, with nobody at the Cabinet Office being prepared to take responsibility, apologise and offer to resign.
For me, one key recommendation in particular stands out and should henceforth become a commandment for every leader and decision maker in the public sector … that Government should “reiterate existing guidance that any large-scale transformation project should have a programme business case with clear buy-in from all stakeholders.”
As a professional working in related areas, as a commentator and writer on these matters for many years, and indeed as a public service user and taxpayer, my personal view is clear: whenever there is no such business case and/or where it has not been fully consulted upon, then no waffle and no excuses – those responsible, be they politicians or officials, should be held directly and fully to account.
In addition, personally, I would add two more recommendations:
• there should be a moratorium on further major public service outsourcing pending an evidence-based enquiry of the impact of outsourcing and the conditions when it works and when it does not, and a template developed and agreed of what best practice looks like
• every senior public official should be required to study and understand the lessons from successive NAO reports on major public service transformation and outsourcing projects; and politicians similarly
Despite the relatively mild media reporting on this matter to date, be under no illusion that this programme has been a shambles. The lessons of why it happened including the role of ministers and how to avoid a replication must be learned, and applied across all public services. I most fervently hope that PAC will act robustly and bring all possible pressure to bear to that end.