£81m cost of botched gov't shared services

Botched government plans to introduce shared services for human resources, payroll and finance could cost the Department for Transport (DfT) £81m by March 2015 - instead of the £57m saving that was originally intended.

The figures were revealed in a scathing report by public sector spending watchdog the National Audit Office (NAO), which slammed government efforts to introduce shared services.

So far, parts of the DfT to have adopted a shared service approach are the Driving Standards Agency, Driver and Vehicle Licensing Agency and the central Department, with the Maritime and Coastguard Agency coming on board later this year.

The NAO report points to inadequate contract management and poor initial implementation within the department and says the DfT was over optimistic in setting its timetable and goals for the programme with its main IT supplier IBM.

The completion date for setting up shared services for a number of processes was originally set for last month at a cost of £55m to achieve savings of £112m.

But the inability to agree on a common set of business processes, a breakdown in supplier relations and inadequate testing led to what the NAO called "an unstable" IT system being implemented.

As a result the programme is set to go £65m over budget and projected savings have been slashed by nearly two-thirds.

The NAO said the department is making efforts to recoup savings in this area and could potentially increase gross savings up to £84.4m, less any additional cost in implementing new systems.

NAO head Tim Burr, said in a statement: "It is disappointing to see a programme which aimed to improve the efficiency and effectiveness of a department leaving it, on current projections, some £80m worse off. Departments need to be realistic about the challenges of implementing shared services and to manage suppliers effectively. Over the past year the department has made efforts to improve the performance of the Shared Services Programme and it cannot afford to fail."

Eric Woods, government practice director at analyst Ovum, said this is a "class A study" of the pitfalls facing shared services programmes.

He told silicon.com: "There have been some successful examples of shared services programme but this instance shows it's still possible to get it wrong. This is the first detailed critique of a shared service programme and there are definitely lessons to be learned here for other government organisations seeking to go down the shared service route."