German business process outsourcing (BPO) provider Arvato has been selected to operate the first independent shared service centre (ISSC1) on behalf of the government.
Financial terms of the deal were not disclosed.
The firm will provide back-office services to The Department for Transport (DfT) and its executive agencies.
The deal sees Arvato tied up in a seven-year contract with an optional three-year extension, and also includes a framework under which the firm could compete for additional outsourced central government business.
The Cabinet Office said the centre would expand to provide HR, procurement, payroll and finance transactional services to multiple government departments and associated bodies.
As part of the contract, the DfT's existing shared service centre in Swansea will be acquired by Arvato, the first site of its kind to be operated by the private sector.
The contract award builds on the government's Civil Service Reform Plan to achieve savings of between £400m and £600m per year from back office costs, by creating a market for shared services within central government.
The government said that the centre would deliver "significant savings" that would come from "economies of scale [which] will enable Arvarto to drive down costs and improve service levels by sharing expertise across customers, adopting common processes and systems, and investing in new tools".
"This is a significant milestone in Arvato's BPO growth strategy in the UK, where we have extensive experience in delivering continued improvements, efficiency savings and better outcomes for the public and private sector. The acquisition also complements our existing UK footprint with a flagship shared service centre in an important economic region," said CEO of Arvato UK&I, Matthias Mierisch.
Avarto will also replace the existing SAP platform used in DfT's shared services centre with UNIT4's Agresso Central Government ERP Platform.
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