In 2020-21 £525m was spent on back-office functions © NicoElNino via Getty Images
In 2020-21 £525m was spent on back-office functions © NicoElNino via Getty Images

Whitehall shared services savings plan 'not on track to deliver value'

Will Green is news editor of Supply Management
30 November 2022

A watchdog has cast doubt on a Whitehall aim to achieve savings of up to 15% by consolidating central government back-office functions.

In a report the National Audit Office (NAO) said the financial benefits of the Shared Services Strategy – in which functions such as procurement and finance across 17 departments are due to be moved to five service centres – “remain unclear”.

“The Cabinet Office (CO) aims to achieve broader savings of between 10% and 15% in operating costs across the programme. However, it is unclear how these figures have been calculated or what evidence supports them,” said the report.

The report said the CO published a 10-year Shared Services Strategy in 2018 with a target to move to cloud-based technology by 2025, with individual departments procuring their own enterprise resource planning (ERP) systems.

In 2021 the plan was updated so departments were grouped into five “shared service clusters” and plans for individual ERP systems dropped, to “minimise inter-departmental competition and maximise the buying power of government”. 

There is now a goal to have five cloud-based shared service centres by 2028.

The report said in 2020-21 the costs of providing back-office functions – covering HR, finance, procurement and payroll – was £525m.

This was up 16% on 2019-20, “resulting mainly from greater spend on transformation programmes, such as new technology”.

The NAO said “some progress” had been made in delivering the strategy since 2021 but the CO “has yet to start monitoring overall progress on data and process convergence and does not know how much implementation has cost to date”.

The NAO said clusters predicted they need £382m-£403m to deliver their preferred options but the Treasury has only approved funding of £300m.

The report also said the CO expected clusters to use the central Digital Procurement Framework to buy new ERP systems, but the standard contract length under this framework is 5-7 years and some clusters have said they may not break even within this time period.

“The government’s previous shared services strategies failed to deliver their intended cost savings and other benefits,” said the NAO. 

Gareth Davies, the head of the NAO, said: “Efficient back-office functions are key to delivering frontline services and reducing costs but, at present, the strategy is not on track to deliver value for money, and it remains unclear what level of financial benefits it will bring.”

A government spokesperson said: “Ministers have made finding efficiencies a priority so we will be going further to modernise and share back office services in government to deliver better services at the lowest possible cost to the taxpayer. 

“We welcome that the NAO have recognised the progress made in our Shared Services plan.”

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