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Efficiency and Reform in Government Corporate Functions Through Shared Service Centres

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Efficiency and Reform in Government Corporate Functions Through Shared Service Centres House of Commons Committee of Public Accounts Efficiency and reform in government corporate functions through shared service centres Third Report of 2012–13 HC 463 House of Commons Committee of Public Accounts Efficiency and reform in government corporate functions through shared service centres Third Report of 2012–13 Report, together with formal minutes, oral and written evidence Ordered by the House of Commons to be printed 27 June 2012 HC 463 (incorporating HC 1944 of Session 2010-12) Published on 9 July 2012 by authority of the House of Commons London: The Stationery Office Limited £0.00 Committee of Public Accounts The Committee of Public Accounts is appointed by the House of Commons to examine ‘‘the accounts showing the appropriation of the sums granted by Parliament to meet the public expenditure, and of such other accounts laid before Parliament as the committee may think fit’’ (Standing Order No 148). Current membership Rt Hon Margaret Hodge (Labour, Barking) (Chair) Mr Richard Bacon (Conservative, South Norfolk) Mr Stephen Barclay (Conservative, North East Cambridgeshire) Jackie Doyle-Price (Conservative, Thurrock) Matthew Hancock (Conservative, West Suffolk) Chris Heaton-Harris (Conservative, Daventry) Meg Hillier (Labour, Hackney South and Shoreditch) Mr Stewart Jackson (Conservative, Peterborough) Fiona Mactaggart (Labour, Slough) Mr Austin Mitchell (Labour, Great Grimsby) Chloe Smith (Conservative, Norwich North) Nick Smith (Labour, Blaenau Gwent) Ian Swales (Liberal Democrats, Redcar) James Wharton (Conservative, Stockton South) The following Members were also Members of the committee during the parliament: Dr Stella Creasy (Labour/Cooperative, Walthamstow) Justine Greening (Conservative, Putney) Joseph Johnson (Conservative, Orpington) Eric Joyce (Labour, Falkirk) Rt Hon Mrs Anne McGuire (Labour, Stirling) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the internet via www.parliament.uk. Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/pac. A list of Reports of the Committee in the present Parliament is at the back of this volume. Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee is Adrian Jenner (Clerk), Sonia Draper (Senior Committee Assistant), Ian Blair and Michelle Garratty (Committee Assistants) and Alex Paterson (Media Officer). Contacts All correspondence should be addressed to the Clerk, Committee of Public Accounts, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5708; the Committee’s email address is [email protected] 1 Contents Report Page Summary 3 Conclusions and recommendations 5 1 Background 7 2 Recent performance 8 3 Implementing the new strategy 10 Formal Minutes 12 Witnesses 13 List of printed written evidence 13 List of Reports from the Committee during the current Parliament 13 3 Summary Sharing services offers the public sector the chance to secure significant efficiency savings and improvements in the quality of administrative functions. Since 2004, central government has sought to reduce the cost of administering finance, human resources and procurement services through sharing back-office functions. In previous examinations we found that the Government had not yet realised the potential to save taxpayers’ money. We welcome the renewed focus on improving shared services provided by the Cabinet Office’s ambitious new strategy. The strategy contains risks, and has a particularly challenging timetable for implementation, but we look forward to seeing real progress this time round. The recommendations we make in this report are designed to help the Cabinet Office succeed with its new strategy and learn from the mistakes of the past. We expect the Cabinet Office to engage constructively with our recommendations and not, as happened following our 2008 report, to ignore recommendations which, if implemented, would have left them much better placed today. In this examination we considered five of the eight shared service centres established for central government. Whilst performing adequately, they had cost £1.4 billion to build and operate compared to an expected cost at the start of the project in 2004 of £0.9 billion. These five centres were also expected to have saved £159 million by the end of 2010-11. In the event, the Ministry of Justice centre broke-even, the Department of Work and Pensions and the Department for Environment, Food and Rural Affairs centres did not track their total savings, and the two centres that are tracking savings, the Department for Transport and Research Councils UK, have reported a net cost to date of £255 million. The current strategy will only be effective if the Cabinet Office demonstrates strong leadership to deliver greater value for money and gets buy-in from departments. So far it has been left up to individual departments and their arm’s length bodies to decide whether they use shared service centres. This has led to low take-up and so the centres are unable to achieve the economies of scale necessary to deliver savings and value for money. Those bodies which have become customers of shared service centres have retained their own processes rather than adopt those of the centre, resulting in over-complicated systems which also undermine the scope for efficiency. The Cabinet Office must drive cultural change to secure the intended savings. The Cabinet Office should also develop comparable data on the cost and quality of services provided by the shared services centres, which should allow it to establish a baseline for current performance and set benchmarks for improvement. It should consider whether it can extend its shared services strategy to include other common functions needed by central 4 government departments. On the basis of a Report by the Comptroller and Auditor General,1 we took evidence from the Cabinet Office, Department for Education and the Department for Work and Pensions on the provision of shared service centres in central government. 1 C&AG’s Report, Efficiency and reform in government corporate functions using shared service centres, Session 2010- 12, HC 1790 5 Conclusions and recommendations 1. Shared service centres have provided poor value for money in the past. The Cabinet Office has failed to implement fully the recommendations from our 2008 report on Improving corporate functions using shared services, which are still relevant today. In this Inquiry, the centres we considered have cost more to set up and operate than initially planned, and not delivered the expected savings, so the Government has failed to meet its stated objective. It is frustrating that government has not learnt lessons from the past and there is a risk that the Cabinet Office’s new strategy will repeat similar mistakes with, for instance, over-optimistic timescales and a lack of performance data. The timescale for the new strategy seems particularly ambitious. The Cabinet Office should prepare an implementation plan for the new shared services strategy which identifies key milestones and target savings, and explicitly addresses the recommendations in both this and our previous report. An update on progress against the milestones should be provided to the Committee by the end of December 2012. 2. The Cabinet Office did not provide the strong leadership required to get buy-in from individual departments. When shared service centres were first introduced, it was not mandatory for departments to sign up and they could opt to retain their own functions or to set up their own centres. Shared service centres ended up with fewer users than anticipated and therefore have not delivered the expected economies of scale. Under the new strategy, the Cabinet Office will still not be mandating the use of shared service centres by departments. The Cabinet Office should appoint a suitably empowered Senior Responsible Owner and seek the authority to ensure that all departments and their arm’s length bodies use shared services and stop providing their own back-office functions. If this does not happen, the strategy will again fail to deliver the expected savings. 3. Overly complicated systems at the shared service centres have arisen because departmental users are unwilling to change their ways of working. Streamlining processes is key to gaining the type of efficiencies that the private sector has achieved through sharing services. But most departmental customers have not streamlined or standardised their back-office processes, leading to overly tailored services and complex systems. The lessons from those customers who are acting more intelligently, such as the Department for Education, have not been widely shared. The Cabinet Office should ensure that lessons from ‘intelligent customers’ are captured and shared, in particular on standardising processes, and that they are always applied when departments join the new independent shared service centres. 4. The Cabinet Office lacks comparable data on the cost and quality of corporate services provided by shared service centres. Without good data, the Cabinet Office cannot compare performance between the centres, with no baseline for current performance or relevant benchmarks against which to assess
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