Shared services hit by cuts

31 January 2011

1 February 2011 | Lindsay Clark

Government cuts are creating difficulties making savings from some shared service deals across local authorities, one head of procurement has said.

Sharing procurement functions between councils and other public bodies could offer millions in savings. But a fall in expected volume in certain categories was creating problems in meeting savings targets, said Ian Conner, CPO of Southwest One, a shared services joint venture set up between IT firm IBM, Somerset County Council, Taunton Deane Borough Council and Avon and Somerset Constabulary.

While Southwest One has signed deals to save about £66 million over its 10-year lifetime, and has projects in the pipeline to save £70 million more, a shared services deal to save on temporary labour costs was not meeting expected levels because of budget cuts, Conner said.

“We’ve put a deal in place for a managed service for temporary labour that then sub-contracts out to the other providers,” he told SM. “That’s generating a significant discount over what we had been paying individual providers.

“But of course it requires you to go out and bring in temporary labour and, with the spending cuts, there have been recruitment freezes and restrictions in place for a while now. This has reduced the volume we’re putting through that contract against the original business case, which is impacting on our ability to deliver in accordance with the individual programme,” Conner said.

In December, Eric Pickles, secretary of state for communities and local government said on BBC Radio 4's Today programme: “We are suggesting local authorities look towards sharing chief executives, sharing back offices including procurement.”

Southwest One has been seen as a trailblazer in shared services since it was formed in 2007, but has also had to answer criticism on recorded losses and lower-than-expected savings levels. In December, an Audit Commission report revealed Somerset council had made £3.3 million cashable savings from the arrangement.

Conner said these savings, which are recorded by a robust month-by-month benefits tracking system, were ramping up. Southwest One was on target to achieve £200 million savings over its lifetime, given the contracts signed and those planned, he added.

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