Act now before more money wasted on shared service project

• Read the report summary
• Read the report conclusions and recommendations
• Read the full report: Shared service centres

Report findings

Members conclude that, four years after the previous Committee examined the Cabinet Office's attempts to cut costs by sharing back-office functions, "the Government's latest attempts are failing for much the same reasons".

These include a failure of governance and leadership by the Cabinet Office; departments acting independently rather than collaboratively; the absence of a realistic business case; a failure in the management of the transfer of risk to suppliers and a failure to develop standardised processes.

The Report states: "The result is that the two shared service centres considered as part of this inquiry have only delivered £90 million of 'savings' in the first two and a half years of operation but at a cost of £94 million and, therefore, a net cost to the taxpayer of £4 million."

Poor supplier performance led to increased costs for the taxpayer

The Committee concludes the failure to set up effective governance at the outset of the programme "has had long-term consequences" and urges the Cabinet Office to set out "what steps it will take to make sure it has, by March 2017, effective leadership and sufficient expertise in place".

It finds the absence of a realistic business case undermined the programme's chances of success and the Cabinet Office failed to secure sufficient buy-in from departments.

Government's failure to manage effectively the risk of delays and poor supplier performance led to increased costs for the taxpayer.

Cabinet Office must demonstrate "effective leadership to ensure departments are signed up and act collaboratively"

The Committee recommends that renegotiations and future programmes should set out clearly whether suppliers or government will bear such risks and urges that "where the risk sits with the supplier, the supplier should meet the cost of the failure to manage the risk".

It calls on the Cabinet Office and Heads of Professions to agree, by March 2017, a set of standardised processes for the programme; by the end of 2016, Government should produce "a realistic, and complete, business case" for the centres and set out clear governance procedures.

More broadly the Committee concludes: "It is essential that, for the success of this and other cross-government programmes, the Cabinet Office demonstrates effective leadership to ensure departments are signed up and act collaboratively."

Chair's comments

Meg Hillier MP, Chair of the PAC, said:

"The Government set out to save money with this programme but it launched with critical flaws Whitehall then failed to address.

Each department was able to request multiple changes which led to big cost increases.

The result has been a net cost to taxpayers and a significant scaling back of ambition for the savings likely to be achieved in the years ahead.

If Government is serious about making a success of shared services, and indeed future projects running across departments, it must act on the serious concerns set out in our Report before any more public money is wasted."

Report summary

In 2012, we reported on the Cabinet Office's attempts to reduce costs by sharing back-office functions and, at that time, identified the need for the Cabinet Office to learn from past mistakes, show strong leadership and get buy-in from departments.

Yet four years later, the Government's latest attempts are failing for much the same reasons: a failure of governance and leadership by the Cabinet Office; departments acting independently rather than collaboratively; the absence of a realistic business case; a failure in the management of the transfer of risk to suppliers and a failure to develop standardised processes.

The result is that the two shared service centres considered as part of this inquiry have only delivered £90 million of 'savings' in the first two and a half years of operation but at a cost of £94 million and, therefore, a net cost to the taxpayer of £4 million.

£484 million in savings by 2023–24

The Cabinet Office now estimates that the centres will deliver savings of around £484 million in total by 2023–24, which compares unfavourably with the anticipated £300 million to £400 million a year savings set out in the Next Generation Shared Services Strategy in 2012.

The Cabinet Office acknowledged that the programme had not gone well but stated that the ambition to create shared services across government remains intact.

We recognise the recent positive changes introduced such as the appointment of senior individuals from the finance and HR professions to design standard processes within their professions. There needs to be an agreed set of standard processes as soon as possible.

Government expected to produce realistic business case for centres by end of 2016

We also expect the Government to produce a realistic, and complete, business case for the centres and to set out clear governance procedures by the end of 2016.

It is essential that, for the success of this and other cross-government programmes, the Cabinet Office demonstrates effective leadership to ensure departments are signed up and act collaboratively.

Further information

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