Government, SSCL and arvato all to blame for shared services centres failing to achieve value for money

Lack of leadership at the Cabinet Office the problem, says National Audit Office

The government's programme to transfer back-office functions to two shared service centres has made savings but not yet achieved value for money, according to the National Audit Office (NAO).

The Cabinet Office's Next Generation Shared Services strategy included the creation of two independent shared service centres to provide back-office functions for up to 14 departments and their arm's-length bodies. One centre would be run by Slough-based business process outsourcing specialist arvato, and the other by Shared Services Connected Limited (SSCL), a joint venture 75 per cent owned by Steria and 25 per cent owned by the Cabinet Office.

The NAO found that the centres had delivered overall savings of £90m to customers in the first two-and-a-half years of operation, with costs of £94m. However, this is less than the £128m a year originally forecast because some departments have not outsourced and transformed their back-office functions as planned.

In fact, due to delays in designing, building and testing the systems, only two of the 26 planned customers have joined the single operating platform. At one of the centres, four customers have terminated their contracts. Meanwhile, costs have increased significantly for both the customer departments and the suppliers of the shared service centres as a direct result of the delays, the NAO said.

The NAO blamed both arvato and SSCL, as well as the government, for many of these issues.

It said that SSCL has struggled to produce migration plans at key moments and with sufficient detail to the approval of the customers. The plans it did produce didn't show clear priorities and the potential consequences of delays across work relating to different customers.

The NAO suggested that the government believed that SSCL failed to develop an offshoring solution, in line with the accreditation requirements of the contract. The government felt that those requirements were clear, but SSCL believed that there were changes in the requirements, which meant that a previously approved plan was no longer fit for purpose.

It said the increased cost to customers is mainly due to maintaining and extending the life of existing, ageing systems for the arvato centre. The NAO said that avarto's planning and project management was partly to blame, and that the supplier had encountered significant issues with data migration. It cited problems with extracting data from existing systems that it owns and managed under the contract.

Meanwhile, arvato had also frequently failed to respond to change requests within the time specified.

The NAO said that the commercially focused negotiations with suppliers will dictate what the programme will look like in the years to come. Currently, the Cabinet Office estimates that the two contracts will generate savings of £484m in total by 2023-24 at a cost of £159m.

The NAO set out eight recommendations for the programme, and suggested that the Cabinet Office should ensure that all parties are transparent and clear about the state of the programme, are realistic about timescales and benefits, and understood each other's concerns.

"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," said head of the NAO, Amyas Morse.

"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," he added.