Government’s shared services strategy failing, says NAO

The government’s £1.4bn shared services centres have failed to achieve value for money, according to a report from the National Audit Office (NAO).

Whitehall's shared services centres were designed to reduce the cost of back-office functions.

But by creating complex services overly tailored to individual departments, government has increased costs and reduced flexibility, said the NAO. Government has failed to develop the benchmarks to measure performance and the software systems used in the centres have added complexity and cost, said the NAO report.

The five centres examined by the spending watchdog have cost £500m more to build than originally forecast. They were expected to have saved £159 million by the end of 2010-11, but  only one centre reported break-even costs, while the two centres tracking benefits report a measured net cost of £255m.

The absence of clear management by the government in the past has been a factor in the historic poor progress in implementing value for money shared services.

But the Cabinet Office is in the process of developing a new shared services programme and is working with government departments on its implementation.

Amyas Morse, head of the NAO, said today: “The initiative for government departments to share back-office functions has suffered from an approach which made participation voluntary and tailored services to meet the differing needs of individual departments. The result was over complexity, reduced flexibility and a failure to cut costs.

“The new Cabinet Office strategy on shared services acknowledges these issues but, if it is to achieve value for money, it must learn the lessons from past implementation. Only in this way can the sharing of back-office functions have a realistic prospect of contributing towards the government’s drive to cut public spending in the long term.”