Shared services in the Department for Transport and its agencies

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1 Shared services i the Departmet for Trasport ad its agecies REPORT BY THE COMPTROLLER AND AUDITOR GENERAL HC 481 Sessio May 2008

2 SummARy Itroductio 1 Shared services have the potetial to release savigs from icreased efficiecy ad effectiveess of corporate services but achievig these savigs requires efficiet ad effective implemetatio. I April 2005, after a 11 moth review, the Departmet for Trasport s (the Departmet) Maagemet Board approved a outlie busiess case to set up a i-house cetralised Shared Service Cetre i Swasea to provide the Departmet ad its the six executive agecies with support services for huma resources, payroll ad fiace. The Departmet aimed to streamlie processes, better meet its busiess eeds, reduce o-goig costs ad help the agecies ad the cetral departmet to work more closely together. 2 Key elemets of the Departmet s approach to the Shared Services Trasformatio Programme (the Programme) i April 2005 were to: build processes ad the supportig IT system o the existig processes ad systems i place i the Driver ad Vehicle Licesig Agecy ad the Drivig Stadards Agecy; use a existig framework agreemet betwee the Driver ad Vehicle Licesig Agecy ad IBM to deliver the IT system; set up a Departmetal Programme Board to oversee the Programme i which the Driver ad Vehicle Licesig Agecy had a substatial role; ad set a very demadig timetable for implemetatio, with the Driver ad Vehicle Licesig Agecy ad the Drivig Stadards Agecy expected to start usig the services i April 2006 with roll out to the whole Departmet 4 SHARED SERvIcES IN THE DEPARTmENT FOR TRANSPORT AND ITS AGENcIES

3 by April I April 2005, the Departmetal outlie busiess case estimated the total cost of settig up the Programme at 55.4 millio, with gross savigs (before costs) expected of millio up to March I practice, the Departmet delivered a desig blueprit but could ot agree a commo set of uderpiig busiess processes ad the resultig customisatio (some of which was essetial for the operatio of shared services) cotributed to icreased costs ad complexity ad some of the iitial estimates were optimistic. These factors made use of the framework agreemet expesive. The Programme Board failed to maage these problems; ad the first two agecies were ill prepared for implemetatio. I cosequece, there have bee delays i implemetatio with the Drivig Stadards Agecy ad the Driver ad Vehicle Licesig Agecy begiig to use the Shared Service Cetre i April 2007, ad the cetral Departmet joiig i April The Maritime ad Coastguard Agecy is expected to begi usig shared services i October Forecasts at March 2008 show total costs of millio ad gross savigs of 40.1 millio by March 2015 (Figure 1), but savigs here reflect oly 215 posts while the Programme Board still has the objective of savig 309 posts. 4 I Jue 2007 the Driver ad Vehicle Licesig Agecy prepared a lessos leared paper outliig the pricipal successes ad weakesses of the Programme to date. The Departmet has sice take actio to: improve goverace of the Programme ad stregthe its staffig; establish clear priorities; reshape its implemetatio plas; put greater emphasis o the cotributio that shared services ca make i improvig overall resource maagemet; improve maagemet cotrols, cotai expediture ad stregthe its maagemet of suppliers; ad idetify the potetial to maximise beefits. 5 Agaist this backgroud, we examied the factors that led to the icreasig costs of the Programme ad delays i implemetatio ad the steps take by the Departmet sice the to put the Programme back o track. I doig so, we have also idetified lessos for other govermet departmets cosiderig itroducig shared services iitiatives i the future. 1 Summary of cost beefits revisio through busiess case/forecast estimates Busiess case iteratio: Outlie Busiess Case Iterim Busiess Case Forecast costs ad beefits idetified to April 2005 Jauary 2006 March 2008 Cost/beefit item Gross beefits ( m) Set-up costs (excludig severace) ( m) Severace costs ( m) Total costs (55.4) (70.4) (121.2) Overall Net Preset Value ( m) (81.1) Full Time Equivalet staff reductios: Forecast 377 staff 376 staff 215 staff Full Time Equivalet staff reductios: Target 377 staff 376 staff 309 staff Source: Natioal Audit Office aalysis of data provided by the Departmet for Trasport NOTES 1 All figures are cumulative to March 2015 ad discouted to terms. 2 The Overall Net Preset Value (NPV) shows the overall et beefit/(cost) of the Programme to the Departmet but the fial colum oly represets savigs idetified so far. 3 The Departmet s Maagemet Board i Jauary 2008 revised dowwards the target for Full Time Equivalet staff reductios to 309 after they made the decisio to reduce the umber of agecies movig fully to shared services. Shared Services i the Departmet for Trasport ad its agecies 5

4 Coclusios 6 Sigificat chages to the assumptios uderpiig iitial estimates of costs, iadequate cotract maagemet ad poor iitial implemetatio of the Programme have meat that the Programme as origially evisaged will ot achieve value for moey. The Programme would, uder the terms of the Departmet s iitial fiacial appraisal, represet a et cost to the Departmet of 81.1 millio up to 2015 ad assumig o improvemets i the Shared Service Cetre s curret productivity or the achievemet of target savigs i each agecy, both of which the Departmet is actively targetig. Sice April 2007 the Departmet has improved cosiderably the maagemet of the Programme. It has also developed a strategy to achieve further beefits by improvig maagemet iformatio, ad by addig a facility to support routie procuremet ad thereby achieve ecoomies of scale. It has also rescheduled whe idividual agecies joi shared services. Both the beefits ad the developmet costs of the procuremet fuctio still eed to be quatified. If the Departmet were to achieve additioal savigs of 50 millio per year there would be a et beefit of 84.4 millio up to 2015, less ay additioal set-up costs. Eve the the Departmet would oly break-eve by at the earliest, some seve years after the Programme s iitiatio. Mai fidigs 7 The Departmet s origial pla for shared services has proved to be urealistic. It was over-optimistic to expect that the Shared Service Cetre could become operatioal oly oe year after the Departmet s Maagemet Board approved the outlie busiess case i April 2005, give that the Programme ivolved agreeig a commo set of processes across eight disparate orgaisatios, purchasig, customisig, testig ad implemetig a IT system, fidig ad fittig out a buildig to house the facility ad recruitig ad traiig staff. The time ad cost for each agecy to stadardise their processes was also uderestimated. I additio, the first two agecies had to chage may of their busiess processes to use the Cetre. 8 There were also problems with implemetatio, ad eve though risks to Programme delivery such as the optimism of the timetable were recorded at the start of implemetatio, the Programme Board took isufficiet actio to maage these risks, may of which subsequetly materialised. The Departmet s Maagemet Board defied roles for both the Driver ad Vehicle Licesig Agecy ad the cetral Departmet but, i practice, there was uclear accoutability ad commuicatios were slow. The Programme Board did ot implemet sufficiet cotrol of the desig of the systems supportig the Shared Service Cetre, which resulted i less stadardisatio of busiess practices ad cotributed to icreased costs ad delays. The Programme had isufficiet time to test the system rigorously by the date set for delivery which led to the deferral of some items such as e-recruitmet ad time maagmet. The system proved ustable whe it wet live. 9 There was also isufficiet maagemet of IBM, the mai cotractors to the Programme. Poor specificatio of requiremets by the Departmet, ad a failure to take advatage of cheaper bulk day rates as a cosequece of the basic uderestimate of the amout of work required resulted i icreased costs. A lack of checks ad cotrols o authorisig ad payig for IBM s work also ecessitated subsequet recovery of overpaymets. To the ed of March 2008, the Departmet has paid over 72 millio to cotractors o the Programme, over 54 millio of which was paid to IBM. 10 Had the Departmet subjected the developmet of the supportig IT system to a full competitive process, they would have had to produce a more robust specificatio. This would have give them a better uderstadig of the costs ivolved (which i April 2005, were estimated at 16.5 millio for techical delivery); a clearer framework for maagig the cotractor ad the related costs; ad subjected the supplier to the disciplie of competitive pressures. I the Departmet s view, however, a full competitive process would also have delayed delivery of the Programme. The Driver ad Vehicle Licesig Agecy is ow reviewig its framework agreemet with IBM as part of a pre-agreed break poit discussio, ad the Departmet has yet to select a cotractor to deliver the remaider of the Programme. 11 Sice April 2007, the Departmet has made cosiderable efforts to correct existig deficiecies ad to ehace Programme performace. It has brought i experieced civil servats ad cotractors to trasfer the Maritime ad Coastguard Agecy ad the cetral Departmet oto shared services. The Departmet eeds to retai ad build o this experiece through the life of the Programme up to The Departmet has clarified goverace, with the Director of Shared Services, who is also the Programme Director ad has a wider coordiatio role, ow reportig to the Departmet s Director Geeral Corporate Resources who is the Seior Resposible Ower for the Programme. It created a beefits realisatio team i Jue 2007, which is icreasig the focus o securig effectiveess gais ad efficiecy savigs. The Departmet is also reviewig its requiremets for maagemet iformatio from shared services. Better maagemet iformatio should eable the idetificatio of further efficiecies across may aspects of the busiess. The Departmet has put i place more rigorous cotrols 6 Shared Services i the Departmet for Trasport ad its agecies

5 for maagig its suppliers ad is re-egotiatig the terms uder which it uses IBM for the Programme. I September 2007, the Seior Resposible Ower also reistated the previously deferred pre-productio eviromet to support system testig. The Departmet is also workig to demostrate to stakeholders the beefits that shared services will brig i terms of improved busiess processes ad orgaisatioal effectiveess. 12 The Departmet has also chaged the Programme s scope: oly the payroll fuctios of the Vehicle Certificatio Agecy ad the payroll ad huma resources fuctios of the Highways Agecy will move to the Shared Service Cetre i Autum 2008 ad April 2009 respectively. The Departmet iteds to review the busiess cases for the remaiig agecies ad fuctios that are scheduled to migrate after April 2009 ad aims to achieve the best performace possible from the Shared Service Cetre s relatively small customer base. 13 The performace of shared services, as measured by the Shared Service Cetre, has improved sice Jue 2007, but still does ot meet the majority of the key performace targets, icludig those for prompt paymets ad resolvig customer equiries. It met oly four of its 18 key performace idicators i Jauary Performace i some areas, such as prompt paymet targets, remais worse tha before the agecies joied shared services, with agecies strugglig to implemet the full purchase order process. 14 There are still sigificat challeges for the Programme. Some users remai sceptical about the beefits to them ad to their orgaisatios. For example techical problems with the system have meat that may users maitai duplicate reports, such as aual leave ad sickess absece, ad the Shared Service Cetre has ot doe eough to show users that it takes their cocers seriously ad is resolvig techical problems. Busiess maagers withi the agecies have also failed to commuicate effectively iformatio about the Cetre to users. The move of the Maritime ad Coastguard Agecy oto shared services has bee deferred to October The Departmet has deferred the module to add exteral recruitmet because of outstadig issues with the techical system desig which will require further security accreditatio. 15 We recommed as follows: Actios to be take by the Departmet immediately a At the momet there is oly a broad estimate of the potetial beefits of addig a routie procuremet facility, based o aalysis coducted i November There is curretly o estimate of the costs ivolved i makig routie procuremet part of shared services. The Departmet s beefits realisatio team should carry out sufficiet checks o the procuremet returs from agecies to assure the Departmet s Maagemet Board that addig a routie procuremet facility to shared services would be justified by the beefits to the overall Programme. The Departmet also eeds to develop robust estimates of the costs of icorporatig routie procuremet ito shared services, before decidig whether to proceed. b Existig users of shared services do ot have sufficiet cofidece i the system to use it to its full potetial. The cetral Departmet, the Drivig Stadards Agecy ad the Driver ad Vehicle Licesig Agecy eed to educate users of the idividual ad busiess beefits of maximisig the use of the Shared Service Cetre. The Departmet should give ew users adequate iductio courses coverig the beefits of the system as well as practical traiig, ad refresher courses for those already usig shared services. c Curret users of shared services expressed frustratio that Shared Service Cetre staff were ot addressig their cocers with the system. The Shared Service Cetre should develop better ways of idetifyig potetial user problems earlier ad the act quickly to resolve them, ad give advace otice of maiteace work ad future upgrades. The Shared Service Cetre should establish regular feedback sessios for user groups to: share best practice across user groups; idetify areas for improvemet; allow users to otify ad articulate problems; ad eable the Shared Service Cetre to iform users of upcomig maiteace ad upgrade issues. Shared Services i the Departmet for Trasport ad its agecies 7

6 Issues to be addressed i the medium-term d Havig decided to use the framework agreemet with IBM for developmet of the supportig IT, the Departmet has ot secured the best terms available withi the framework agreemet. The Departmet should reegotiate the commercial terms ad coditios of the framework agreemet that supports the Programme, so that the Departmet receives best value for moey. e The Departmet has a dedicated beefits team located withi the cetral Programme, but ot withi the wider Departmet. The Departmet should require the Shared Service Cetre ad its idividual busiess uits to idetify ad realise beefits as a matter of routie busiess. The cetral team should cascade its skills ad experiece to clearly idetified persos/roles resposible for idetifyig ad realisig beefits i the cetral Departmet ad agecies. g Experieced cotractors ad Departmetal staff workig o the Programme are o short-term cotracts, some of which are edig. The Departmet eeds to establish a successio pla for all key posts workig o the Programme ad i the cetral Departmet. The Programme Board should idetify all key posts (particularly those o short-term cotracts) to trigger prompt idetificatio of suitable replacemets. Loger-term, as the dedicated Programme team reduces, it eeds to trasfer key skills ito the Shared Service Cetre ad the agecies. h The Departmet oly cosidered a limited rage of optios for the provisio of shared services. Private idustry ad local govermet have adopted a umber of delivery models for shared services, icludig the use of private compaies. The Departmet should cosider all optios i ay future strategy for the provisio of shared services, icludig buyig i such services. f Util late 2006 the Programme Board did ot eforce stadardisatio sufficietly o the agecies, ad there was isufficiet time to egotiate chages with the trade uios to persoal terms ad coditios of service. The Programme Board ad the Desig Authority (who are resposible for esurig progress reflects a agreed set of processes) should establish a pla to stadardise processes i areas such as travel ad subsistece claims ad aual performace appraisals, ad if ecessary impose best practice o the user commuity. 8 Shared Services i the Departmet for Trasport ad its agecies

7 Lessos for other govermet departmets implemetig shared services 16 The recommedatios i this list are ot iteded to be comprehesive but arise from our aalysis of the Departmet for Trasport s experiece, icorporatig both positive ad egative lessos draw from the iitiative. All departmets cosiderig itroducig shared services should: a b c establish a busiess case that: is based o a rigorous prior aalysis of the busiess process ad sufficiet levels of cosultatio with those ivolved i the work; cosiders all delivery optios, icludig the purchasig of services from a established exteral provider; ad makes a realistic assessmet of all associated costs ad beefits for each optio, without over-reliace o bechmarks to estimate costs ad savigs; collect data o the existig support system to provide baselie performace before movig to shared services; demostrate to staff at all levels how shared services will beefit the orgaisatio as a whole ad idividuals ad why workig practices eed to chage, for example by poitig out the cost beefits of stadardisig procedures ad the merits for staff of beig able to cofirm the accuracy of payroll, overtime, travel claims ad other fiacial details olie before paymet is made; d e f g h i j set out i Service Level Agreemets that ay ostadard busiess processes required by busiess uits will cost more; uderpi the implemetatio timetable with realistic plaig (which might iclude stretch targets) rather tha drive it by a desire to itroduce shared services arragemets by a o-egotiable date; appoit high calibre persoel with relevat experiece of implemetig shared service trasformatio programmes to key maagemet ad operatioal posts from the outset, while maitaiig a level of civil service staff o implemetatio teams so that kowledge ad skills ca be trasferred; trasfer idividual busiesses to shared services icremetally to allow lessos to be leared from each trasfer phase; provide adequate resources for data cleasig, migratio plaig ad testig of data prior to service migratio ad provide realistic ad timely staff traiig; egage closely with prospective shared service cetre users prior to migratio ad sustai such liaiso for a reasoable period after migratio to resolve system glitches ad to esure sufficiet buy-i by users of the shared services systems; ad itroduce clear audit trails for the validatio, approval ad paymet of ivoices withi arragemets for maagig exteral cotractors resposible for deliverig the shared service systems. Shared Services i the Departmet for Trasport ad its agecies 9

The roll-out of the Jobcentre Plus Office network

The roll-out of the Jobcentre Plus Office network Departmet for Work ad Pesios The roll-out of the Jobcetre Plus Office etwork REPORT BY THE COMPTROLLER AND AUDITOR GENERAL HC 346 Sessio 2007-2008 22 February 2008 SummARy What is the Jobcetre Plus roll-out?