Cabinet Office privatisation of Whitehall functions cost £4m more than it saved
The Cabinet Office's privatisation of a number of Whitehall functions has not delivered value for money, costing £4m per year more than it saved, according to the National Audit Office (NAO).
Most departments successfully outsource functions to one of two independent shared service centres, delivering overall savings of £90m to customers in the first two and a half years of operation, but with costs of £94m.
The savings are a far cry from the £128m a year originally forecast to be saved, because "some departments have not outsourced and transformed their back-office functions as planned", the NAO said.
The two independent shared service centres were designed to provide back-office functions, such as human resources and accounting, for up to 14 departments and their arm's-length bodies. The report today found that while the two centres have led to some cost savings, the programme is not progressing as planned.
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"The Cabinet Office’s failure to manage the risks around the move to two independent shared service centres from the outset means that the programme has not achieved the significant anticipated savings and benefits to date," said Amyas Morse, head of the NAO.
"The Cabinet Office has begun to find its role in leading the programme but the delays have meant that technology has moved on significantly. The programme will only achieve value for money in future if the Cabinet Office shows clear leadership, and government accepts the need for collaborative and flexible behaviours from all departments involved."
The Cabinet Office is a bit more optimistic. It thinks that the two contracts will generate £484m in savings in total by 2023-24 at a cost of £159m.
But the NAO said that delays in designing, building and testing the systems resulted in disruptions to the migration of customers.
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Meanwhile, the delays also led to increased costs, and confidence in the entire project is now "low", as more costs in drawing up contingency plans and dealing with delays have meant some elements of the new system are obsolete.
The report added that the Cabinet Office did not ensure buy-in from departments at an early stage, stating it didn't act in a timely and effective manner as problems emerged with the programme, in part because it did not have a clear mandate to act on behalf of customers.
The contracts were signed with Arvato and Steria, two private sector companies to operate the centres.