Shared services project might not recoup set-up costs

20 Oct 11
A disastrous back-office shared services project by the seven academic research councils has led to a massive overspend, the National Audit Office has found.

By Mark Smulian | 21 October 2011

A disastrous back-office shared services project by the seven academic research councils has led to a massive overspend, the National Audit Office has found.

In a report published today, the NAO said the project, to share finance, human resources, procurement, grants and information technology, had spent £130m against an initial budget of only £65m.

Although the project is estimated to have cut running costs by £27m, this falls at least £73m short of the projected savings.

The report, Shared services in the research councils, said the project had ‘so far not been good value for money’ and warned that the research councils might not recover their investment.

The fiasco began in 2006 when the seven research councils – for arts and humanities, biotechnology and biological sciences, engineering and physical sciences, economic and social studies, medicine, the natural environment and science and technology facilities – agreed to harmonise their back office services by 2009.

‘The original business case, which led to the decision to opt for the shared service centre, was flawed,’ the NAO found.

‘A proper financial analysis should have prompted a re-evaluation of the available options, but this did not happen.’

Complex governance arrangements, slow decision making and the lack of a clear vision caused delays and extra costs.

A contract with Fujitsu to supply IT systems, ‘was terminated, wasting £13m’ and the Department for Business Innovation and Skills failed to intervene even when it should have become obvious the project had gone awry.

NAO head Amyas Morse said: ‘This is yet another example of a project embarked upon without the necessary planning.

‘Once it did start to go wrong, proper governance or intervention from the department should have rectified the problems, but this did not happen until a great deal of taxpayers’ money had been spent.’

The project completed its development phase only in March 2011 and may prove to have a negative net present value when it is finally completed, since the councils have calculated its payback ‘based on a number of unsound assumptions’, the report said.

It added: ‘The uncertainty of the targeted savings means there is a risk that, without tight management, the councils may not recover their investment.’

The NAO told the councils to ‘improve service performance quickly, harmonise end-to-end processes and drive genuine savings across all functions’.

And it warned that their intention to achieve greater efficiencies by finding new customers for the shared service centre was fraught with danger.

‘Expanding client numbers without stabilising the service and adequately addressing the cultural change needed among the new clients would carry significant risks,’ it said.

A BIS spokeswoman said: ‘There were problems with the management of theproject particularly in the period leading up to late 2009.These now are being resolved and the shared service centre is now on track to deliver savings which will maximise the money available for investing back into science and research.’

Spacer

CIPFA logo

PF Jobsite logo

Did you enjoy this article?

AddToAny

Top